Turns out, my seatmate on a flight home last week is not only an avid reader of our work here, but also a huge "Varney & Co." fan and recognized me when we sat down next to each other.
We proceeded to have a terrific and very exciting conversation about the markets in general as we settled in for the nearly six-hour flight. Then, he asked the one question I couldn't resist answering any more than I could wait to share with you...
"Gimme five of the most outrageous opportunities you're tracking in 2017."
Here's what I shared with Roger.
Why a Plan Is So Important
"First, you've got to set the stage," I began...
That means having a rough idea of where you're going and why. The vast majority of investors never bother, which is why they have trouble turning great ideas into cold, hard cash.
For example, millions of investors bet the wrong way headed into the elections and got caught flat-footed when Trump won. They simply couldn't see the alternative, let alone position their money for the possibility. Now they're in the unenviable position of having to play catch-up, which means there's an estimated $2 trillion - perhaps even $3 trillion - on the sidelines.
At the same time, central bankers around the world refuse to give up the proverbial ghost. Despite a mountain of evidence that their policies don't work, they're still in an "accommodative" mood. That means free money for the masses, or at least damn cheap money and upward price pressure on the markets.
Plus, even if Yellen puts in all three of the planned increases she's talked about for 2017, the Fed Funds rate will still be a staggering 66% below its historic average. What's more, it'll still be the slowest interest rate normalization on record.
I think that's good for between $500 billion and possibly even $1 trillion over the next 12 months coming directly into the markets, and all of that has to go to work somewhere. What that means is that you're going to have a lot of money chasing relatively few quality stocks. So you want to own the "quality" stuff they'll be after.
The situation reminds me of the 1950s when markets enjoyed a decade-long run.
I know this is counter-intuitive. The "Legion of Doom" - that's what I call the perma-bears who have been as wrong as the day has been long since 2009 - can't grasp this.
Think about it this way, I urged Roger.
If there are 1,000 eggs in the grocery store and only 10 buyers, the price of eggs goes down. But if there are 10 eggs and 1,000 buyers, the price shoots higher. Not all in a straight line, mind you. But higher nonetheless. It's Econ 101.
And, finally, the market has pivoted. Four decades of terrible fiscal policy have come home to roost, and millions of investors are angry as hell. That's why populism is sweeping our planet and smart politicians are now building on hope rather than punitive financial policy.
President-elect Trump is a good example of this. Love him or hate him, he's proposed spending programs that I think could be worth $250 to $500 billion to the right companies.
And what does that look like?
In a word... outrageous opportunity.
Technically speaking that's two words, but who's counting?
Here's my thinking as it relates to five of the most outrageous opportunities I'm watching in 2017.
The "Unstoppable Trends" Will Play a Huge Role
Bear in mind that what I am about to share with you is not a forecast per se; I'll have that thinking for you as we head into January. Roger asked specifically about five of the most "off the radar" profit plays I can think of as they related to the Unstoppable Trends we follow.
Scarcity/Allocation: Mergers and acquisitions will flourish as rates rise, with some unlikely pairings that will catch traders by surprise. Amazon.com Inc. (Nasdaq: AMZN) could buy Barnes & Noble Inc. (NYSE: BKS) in a "mercy killing" acquisition that preserves the brand. Or, FedEx and UPS team up because it's the only way they can defend themselves against Amazon, which wants to get into the shipping business. Meanwhile, DHL and the USPS get left out in the cold. Or, FedEx, which recently reported wishy-washy numbers, could very simply sell out to Amazon, effectively falling on its own sword.
Technology: The Internet itself will come under attack thanks to a toaster... or a garage opener... or any of thousands of devices now being heralded as part of the Internet of Things coming online. Unbeknownst to most investors who can't wait to turn them on, many are shipped with lackluster default security because there is no single set when it comes to connecting devices to each other safely. Companies like Samsung Electronics Co. Ltd. (005930.KS) and Sony Corp. (NYSE: SNE) are particularly at risk as hackers attack. The recently reported Yahoo Inc. (Nasdaq: YHOO) breach of 1 billion accounts going back to 2013 is but a warm-up.
Medicine: Healthcare stocks lose 50% when President Trump injects "yuuuge" business-oriented reforms that make it better for - gasp - patients instead of insurance companies. Companies like Jazz Pharmaceuticals Co. (Nasdaq: JAZZ) and Horizon Pharma (Nasdaq: HZNP) are especially at risk because jacking prices accounted for 58% and 63% of their total sales growth above inflation, according to Jami Rubin of Goldman Sachs earlier this year.
Demographics: The euro rallies when EU leaders create EU bonds that fund more than $1 trillion in infrastructure investment intended to quell the masses, put people to work, and draw capital in. That tells me the lowest of the low - Italian banks - could be the biggest winners. I'm tracking two at the moment that I'll be sharing in the weeks ahead when I complete my analysis.
War/Terrorism/Ugliness: There's an unexpected (and very uneasy) three-way détente between Russia, China, and the U.S. that drives a fundamental shift in defense contracting away from counterinsurgency warfare that has consumed it for the last 25 years to large-ticket items and high-end, high-capability systems. That means a return to high-value capital assets including heavy bombers, capital ships, and weapons systems that boost conventional capabilities. Cyber and electronic capabilities will, of course, grow concurrently, as will the need for precision munitions. I figure that's good for nearly half a trillion dollars. Raytheon of course, stands at the head of the class, but many of the half a dozen or so smaller companies I'm tracking for paid subscribers are coming up fast.
I hope you've had as much fun reading today as I've had sharing my thinking.
Speaking of which, I'm tracking dozens of opportunities just like the ones I've shared with you today, and I can't wait to share them with you in the months ahead.
As good and as profitable as 2016 has been, 2017 could be even better!
I'm thrilled you're here and that we're going down this path together.
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