There will be another chance to make 20% this year. Trump is not a concern.

Successful investing isn’t that hard! You just need to wait for good opportunities, recognize the good opportunities when they arrive, and then profit from them.
The current “small rally” in the U.S. stock market has lasted 231 trading days. By the end of this month, this small rally will have lasted 233 days. Out of all 79 historical small rallies since 1962, only 6 have lasted longer.

  1. 249 days
  2. 248 days
  3. 255 days
  4. 284 days
  5. 297 days
  6. 335 days

In other words, the current small rally has lasted longer than 92% of all historical small rallies. This is why we are sitting on 100% cash. A small 6% correction can happen at any moment. Historically, small corrections did not need any news or fundamental reasons to happen.
Yes, the S&P might continue to rally before a small correction begins. But we are not afraid of missing out on any of the S&P’s gains.

  1. By the end of June 2017, this small rally will have gone on for 254 trading days.
  2. By the end of August 2017, this small rally will have gone on for 296 trading days.
  3. By the end of October 2017, this small rally will have gone on for 338 trading days!

Assuming that the length of this small rally doesn’t set a new record (i.e. >335 trading days), the S&P will make a small correction some time this year. 
When the S&P falls 6%, UPRO (3x S&P 500 ETF) will be down 18%. Most small corrections don’t last more than 2 months. It usually takes even less time for the S&P to make a new all time high after a small correction has bottomed.
If we buy UPRO when the S&P falls 6%, our portfolio will be up almost 20% when the S&P merely makes a new all time high! And when the S&P continues to rally after making a new all time high, we will outperform the S&P by 3x.
So at worst we’ll wait until Q4 2017 for the S&P to fall. Then perhaps the S&P will rise on the seasonal year-end rally. A 20% gain is a pretty good Christmas gift ontop of our current year-to-date 17% returns.
Easy money indeed, as long as our model does not foresee a big correction. The big money is made by being right and being patient.
Our model does not use political events to make predictions. Some people think that the ongoing Trump-Russia investigation will cause a significant/big correction. We disagree.

The Jared Kushner “bombshell”

It’s so hard to find a reliable news source nowadays.
Leftists media sites like the NYTimes and Washington Post will do anything to paint Trump as the bad guy. Who knows if half of the allegations, rumors, “anonymous tips”, and reports from “unidentified sources” are true. It’s kind of sad how these once-great media outlets have become so biased nowadays.
On the otherhand, conservative media companies will probably give Trump a free pass if he killed someone. They selectively present the news to paint Trump in the best light possible.
Welcome to the era of #fakenews, when it’s hard to separate the fact from the fiction from the lies from the BS.
We think that Reuters is one of the best sources. On Friday, the Washington Post revealed a “bombshell” which revealed that Trump’s son-in-law and advisor Jared Kushner “allegedly” tried to set-up a secret Trump-Russia back channel that intelligence networks couldn’t tap into.
This allegation has leftist news networks screaming to incriminate and impeach Trump. Why don’t we all calm down and look at the facts. Read the Reuters piece here.

  1. Before the election, Kislyak’s (Russian ambassador) undisclosed discussions with Kushner and Flynn focused on fighting terrorism and improving U.S.-Russian economic relations, six of the sources said.
  2. After the Nov. 8 election, Kushner and Flynn also discussed with Kislyak the idea of creating a back channel between Trump and Russian President Vladimir Putin that could have bypassed diplomats and intelligence agencies, two of the sources said. Reuters was unable to determine how those discussions were conducted or exactly when they took place.

The FBI is investigating whether or not Trump’s team colluded with Russia before last year’s election. In addition, the FBI cannot incriminate Trump for setting up a back channel with Russia. Setting up a back channel with other countries is normal procedure for Presidents, although it is uncommon to setup a back channel with Russia.
Let’s assume that Trump really did collude with Russia. Why would he need to set up a back channel after he won the election? He’s already won! He has no need for Russia’s help anymore!
The Reuters article continues:

  1. FBI investigators are examining whether Russians suggested to Kushner or other Trump aides that relaxing economic sanctions would allow Russian banks to offer financing to people with ties to Trump, said the current U.S. law enforcement official.

This is what we’ve been stressing. Trump probably did not collude with Russia during last year’s election. Instead, perhaps Trump is trying to cover up some of his less-than-savory business deals with Russia. A President cannot be impeached for making gray area business deals. Gray area deals are commonplace in the international real estate business. That’s why they’re called gray areas – not ethical or 100% clean, but not illegal either.
The last piece of the Reuters article is important:

  1. Officials familiar with intelligence on contacts between the Russians and Trump advisers said that so far they have not seen evidence of any wrongdoing or collusion between the Trump camp and the Kremlin.  Moreover, they said, nothing found so far indicates that Trump authorized, or was even aware of, the contacts.
  2. There may not have been anything improper about the contacts, the current law enforcement official stressed.

So can the mainstream media please dial down the outrage? Flashy headlines are great for subs, pageviews and ad sales. But they don’t do rational investors any good.
The FBI has been investigating Trump’s camp for almost a year, and they still have no solid evidence of collusion. We think that if there really was anything that could incriminate Trump in clear black-or-white terms, the FBI would have found it already.

2 comments add yours

  1. I’ll be keeping an eye on your blog for that 6% correction. Then will look at making some cash when its on its way up again.

    • Yes, it’s much safer to buy on the correction right now. “Buying on the dip” isn’t always a good formula (because you might miss out on a big rally), but it’s a good strategy right now.

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