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For
six years, SmartKnowledgeU has been revealing dirty
secrets about the global commercial investment and banking industry and
building considerable wealth for our clients at the same time. The key to
earning positive returns in your portfolio during a horrible month for global
developed stock markets around the world in August was to concentrate, not
diversify, your assets. In fact, this has been the key to earning positive
returns in your portfolio for years on end now. From the very first day I
launched my newsletter in June of 2007, I have chosen to concentrate, not
diversify, my newsletter portfolio in very few asset classes for my analysis
for the past several years has told me that only a few asset classes will
return significantly positive returns and that diversification is not only a
waste of time, but a poor investment strategy. The commercial investment
industry calls concentration short-sighted, risky, and foolish, but only
because this means that the financial consultants that they hire actually
have to be able to allocate portfolios intelligently rather than just
spending the bulk of their time dialing-for-dollars to bring in the most
fee-based income possible. In my world, concentration of assets is not only
an intelligent strategy but one that is far more solid and far more rewarding
to my clients.
In
2008, I publicly predicted that US markets would crash just 18 trading days
before US markets started a slide that saw it lose about 50% of its value.
That year, when major developed markets ended up losing 38% to 40%, we still
returned positive returns to our investment newsletter clients precisely due
to our strategy of concentration and our aversion towards diversification.
For six years now, I’ve said that diversification is a sell-side
strategy that fattens commercial investment firm executive’s wallets at
their clients’ expense even as commercial investment firms continue to
sell this rubbish strategy to their clients. My claim has drawn the ire of more
than a handful of commercial investment financial consultants. However,
convincing clients to believe in the “intelligence” of a
diversification strategy that simply has ceased working for years is what
puts food on the tables of many financial consultants and keeps food off of
yours. Ask yourself, when was the last five-year period that diversification
strategies helped you achieve a significantly positive cumulative return?
Can’t remember the last 5-year period in which this has happened, can
you?
Since
I launched my investment newsletter, I have concentrated my
newsletter’s portfolio in hard assets and commodity-based stocks every
single year. Some years, my newsletter portfolio may contain almost nothing
but gold and silver based assets while in other years, I may choose to hold
some agricultural and energy based stocks as well. This type of strategy is
anathema to all commercial investment industry financial consultants and
advisers who are trained to believe that diversification is an absolute must.
Of course if you choose to concentrate a portfolio in the wrong assets, you
will lose the bulk of your clients’ money every year. This is precisely
why nearly all commercial investment industry consultants and wealth
“advisers” choose not to concentrate. Diversification serves as a
cover for the fact that the great majority of commercial investment industry
employees know little more about markets than you do and are nothing but
glorified salesmen and saleswomen in fancy suits and expensive cars, thanks
to the large fees their clients pay them every year. Think about it. Did you
really need a Private Wealth Manager to lose 35% to 40% of your
portfolio’s value in 2008? I’m sure most people could have done
that on their own and saved the fees associated with
being a client of a “prestigious” investment firm.
When
I used to work for a commercial investment firm before I walked out on the
immorality of the industry, I was actually instructed to prime my clients to
expect a portion of their portfolio to underperform every year. I was trained
to parrot to my clients that it was impossible to know what sectors would
rise and what sectors would fall in the coming year and to support my dog and
pony show with charts and data that would illustrate this point in order to
legitimize it. But statistics can often be manipulated to prove a point, even
when that point is wrong. Of course, in reality it was impossible for me to
know what sectors would rise and what sectors would fall every year. Why? Not
because I couldn’t do it, but because the firm I worked for wanted me
to spend all my time meeting with prospects and closing deals. Consequently,
where in the world would I actually find time to analyze markets and
formulate an intelligent opinion about which assets would rise and which assets
would fall? When I worked for the commercial investment industry, I probably
spent 95% of my time marketing and 5% of it studying markets. Since I left
the industry many years ago to start my own firm, this ratio has completely
reversed. Now I probably spend 5% of my time marketing and 95% of my time
analyzing markets to ensure my clients stay very profitable throughout this
deepening global economic and monetary crisis.
Diversification
is the big fat lie that the commercial investment industry desperately needs
you to believe in, even as your portfolio size continues to shrink. Even
famed investment guru Jim Rogers agreed with me two years ago and publicly
declared that the diversification strategy, in his words, was a
“scam” designed to bilk clients of money and enrich the
executives of commercial investment firms. The job of anyone that works in
the investment industry should be to determine what sectors will be up every
year, what sectors to avoid every year, and how to maximize our client’s
profits. This is what our clients pay us to do. However, this is not the goal
of the commercial investment industry. The goal of the commercial investment
industry is to maximize their bottom line even if it minimizes yours. This is
why my investment newsletter has outperformed all diversified major global
developed stock market indexes by 20% to 45% every single year. This is why
from the launch of my newsletter until August 30, 2011, my newsletter has
yielded a cumulative +226.61% return to my clients while the diversified
S&P 500 index has yielded a negative 20.89% loss to its clients during
the exact same investment period (in a tax-deferred account).
I
realize that the level of brainwashing from the commercial investment
industry regarding the “intelligence” of diversification is quite
strong. I still, on occasion, receive emails, from a potential customer that
chooses not to buy our investment newsletter after reading a couple of sample
issues, due to his or her shock regarding our concentration strategy. A
typical response from someone that has been brainwashed by the commercial
investment industry would be the following: “I can not justify buying
a newsletter that is so risky and so heavily concentrates its portfolio. When
gold and silver crash, your portfolio will be wiped out. I will continue to
diversify. Thanks but no thanks.” The lie the commercial
investment industry continues to spread about concentration is that it may
lead to enormous gains at times, but the enormous gains are only achieved
with great risk. If this were true, then the most positive years I’ve
achieved (a +63.32% yield in 2009) should have been offset by enormous losses
in 2008. For if one is taking great risk to achieve very significant gains
then during negative years, that great risk should
translate into much worse performance as well. Instead, in 2008, when all
developed global stock markets lost 35% to 40% for the year, I was still able
to achieve positive gains that year as well. So much for the concentration is
risky lie.
For
four years, I have chosen to heavily concentrate my newsletter’s
portfolio in gold and silver assets among a few other very select asset
classes. If one looks at the below chart of the AMEX HUI Gold Bugs Index, an
index of gold mining stocks, one may wonder how in the world one could ever
achieve enormous returns by investing in gold and silver mining stocks.
From
June 15, 2007 until August 30, 2011, the HUI, despite all the volatility that
is evident in the above chart, the HUI has still returned a positive
cumulative return of +81.69%, outperforming the S&P 500 and other various
major global stock market indexes by more than 102% over the same time
period. Take a look at the chart of the diversified US S&P 500 over the
same time period. The commercial investment industry has worked their hardest
to brainwash you to believe that diversification equals safety.
Does
the chart of the very diversified S&P 500 index
below look any less volatile to you than the chart of the gold miners index?
Furthermore, if you have to endure such volatility, would you not rather
endure such volatility and be sitting on a cumulative +81.69% gain (the HUI
Gold Bugs Index returns) versus a -20.89% loss (the S&P 500 returns)?
Furthermore,
the commercial investment industry fails to inform you that the very firms
they work for deliberately create periods of massive volatility in gold and
silver to the downside at times for the very purpose of confusing investors
and preventing them from concentrating in the only assets that will save
their financial well-being. For example, due to my understanding of banker
manipulation of gold and silver prices, I have predicted intra-day price
declines and rises in gold very accurately on my twitter account even though
the information I provide through my tweets is only about 1% of the
information I provide to my clients on a regular basis. Because much of the
downside volatility in gold and silver is artificially induced and engineered
by bankers to scare investors away from this asset, the commercial investment
industry fails to inform its clients that one can actually leverage this
volatility, as long as it is understood properly, to further enhance gains.
Just check my
article here, written just a few weeks ago, where I posted the below
chart and informed all my blog readers that gold and silver stocks were a
great buy because they were heavily undervalued. Since my post, gold and silver stocks have strongly risen.
For
example, had you bought any number of gold mining stocks at the point I
advocated buying on the chart above, as of yesterday’s market close,
Newmont Mining has risen +12.91%, Barrick Gold by
+10.89%, and Royal Gold by +20.77% in just the past several weeks just to
name a few of the gold stocks that really took off higher in price. And had
you entered gold mining stocks at the point I advocated just a few weeks ago,
you would now be able to weather any subsequent correction in price in the
mining stocks, should it develop over the next week, with little worry.
Artificial
banker manufactured downsides in gold and silver assets always provide an
opportunity to buy assets on the cheap at various points throughout the year.
By using the volatility as an opportunity rather than being fearful of it, I
was able to produce a +226.61% cumulative return to my clients during the
same four-year period that the HUI Gold Bugs index returned a +81.69% return.
So please don’t continue to be fooled by the commercial investment
industry propaganda about gold and silver. Ensuring that you correctly view
its volatility as an opportunity to enhance gains instead of viewing its
volatility as a negative, and ensuring that you transform your belief about
gold and silver from an erroneous belief that they are risky assets into a
correct belief that they serve to protect your wealth may very well save your
financial life in the next few years.
Justice
Litle
Taipan
Publishing Group
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