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Business/Finance See other Business/Finance Articles Title: The Rule of Threes in 2015 The week is off to a rocky start for stocks. Falling oil prices are dragging down energy shares, which are dragging down the rest of the market. At last check, crude has slipped below $46 a barrel for the first time since April 2009. Thus is the S&P 500 adding to Friday's losses, down nearly 1%, to 2,026. "Most investors would be much better heading for the hills in 2015," says Zach Scheidt -- weighing in with the latest of our team's forecasts for the year. Zach is the newest member of the Agora Financial editorial team, specializing in income. We'll tell you about his background in a bit. But with a forecast this bold, we figure we should cut to the chase. Understand, within his own sphere of expertise, he's feeling serene about 2015 -- heck, almost euphoric: "I can't tell you how excited I am about this upcoming year." Just not for the majority of stock, bond and mutual fund investors, heh... "There are three key market shifts that will occur this year," he explains, "that will make life extremely challenging for most investors. But these market shifts will actually work out to our favor because of the unique income opportunities that we're involved in." "First, interest rates will rise," Zach asserts. "We've been living with interest rates near zero for years now. When the Fed allows interest rates to rise in 2015 -- and they will allow rates to rise -- it will be a major shock for income investors. "Most blue chip dividend stocks like utilities and consumer staples will get crushed, but our income strategy will be hitting its stride. "Second, the U.S. dollar will continue to strengthen," Zach forecasts. "We've already seen this trend start in 2014. "As the U.S. dollar rises," Zach goes on, "companies with profits in other, weaker currencies will be hurt. This includes large multinational companies" -- the kind conventional income investors have chased after in recent years. The pain they're feeling now is only starting... "Third, volatility will re-enter the market," says Zach. "Stock prices will bounce up and down like a 6-year-old on a pogo stick." We'll interrupt just long enough to point out this is what Zach said at the end of 2014. Here's a snapshot of the S&P 500 so far in 2015 -- about an hour into the seventh trading day of the year... "This action," Zach said, "will give most investors ulcers. After all, no one wants to see their net worth swing up and down like a yo-yo. "But ironically, this gyration in market prices will give you plenty of opportunities to make money from the crazy stock market action." But not in income-oriented energy plays. Just in case you were wondering. "At this point, the oil industry doesn't look bad," says Zach. "it looks horrible. "Saudi Arabia has declared war on U.S. oil producers by turning its oil spigots on full blast. They don't care how low oil prices go, as long as they go low enough to put U.S. producers with higher production costs out of business. "Some oil stocks should go low enough to become tremendous buying opportunities. But I don't think we're there yet. Oil stocks are still too risky. Wall Street and Main Street are just now becoming aware of the long-term effects of Saudi Arabia's oil war." Again, we'll interrupt and point out Zach wrote this to his readers on Friday. This morning as we write, XLE -- the big energy ETF -- is down nearly 3%. "For now, I recommend that you enjoy the low gas prices," he concluded. "But stay away from oil stocks. I'll continue researching the oil sector for opportunities. I'll be sure to let you know when it's time to start scooping up bargains. "My first priority when picking out income opportunities is to make sure that our investments are safe," says Zach. Zach cut his teeth at a boutique hedge fund in Atlanta. "My job was to help high-net-worth clients generate income while minimizing risk." His mentor racked up more than 20 straight winning years -- not always knock-your-socks-off performance, but consistent. "Bill knew the secret to keeping his clients happy," Zach recalls. "He would tell me repeatedly: 'Zach, our clients don't care if we shoot the lights out. But they absolutely require us to protect the money that they have trusted us with.'" It's that mentality he brought to the newsletter business, racking up several years of success -- enough success that he made the cut to come join us. "When researching income opportunities," he says, "I have three criteria that absolutely must be met for me to recommend a position: •There must be a low level of risk. I want you to buy stocks that are unlikely to trade lower • We must have room for growth. I want to buy into companies with growing dividend payments and stock prices •Our investments must pay an attractive amount of income. "This investing methodology has served my readers well over the years. I'm devoted to bringing that same success to you." Zach's entry-level publication is Lifetime Income Report. Caught on Camera (SHOCKING!) You won’t believe what we caught these five ordinary people doing on camera. CLICK HERE to see for yourself. >> About the volatility so far this year, which Zach expects to continue: Sophisticated investors can make it work to their advantage. "When stocks are bouncing around, option prices move higher," he explains. "Why? Because investors buy options to profit on swings in stock prices. "When markets move quickly, option buyers push the prices of options higher. And if you sell options to collect income checks, higher option prices mean larger checks for you. "There are big issues moving stock prices, including a massive decline in oil prices, a strong U.S. dollar and economic uncertainty in Europe. As the stock market rises and falls this year, you should have numerous chances to pocket some fat income checks." [Ed. note: Don't let the word "options" scare you off. Zach walks you through his trading recommendations step by step. Soon you could be pocketing $74 in two minutes... $144 in 59 seconds... or $260 in just over a minute. But don't take our word for it: We have compelling video evidence proving how people just like you are doing it... and growing their retirement nest egg. Seeing is believing, so click here.] Once again, frightened money is moving into Treasuries today -- sending yields down. At last check, the 10-year yield is 1.93%. Gold is little moved from its price on Friday afternoon, now $1,226. "I'm sure we're never going to see $100 [oil] anymore," says Saudi Arabia's Prince Alwaleed bin Talal. The prince held court with Maria Bartiromo from Fox Business over the weekend. He admits his country has been hurt by oil's steep drop since June... but "the decision to not reduce production was prudent, smart and shrewd. Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others." Asked if prices would keep falling, he said, "If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there's some growth in demand, prices may go up." Just not to $100, apparently. Fair enough. But Ms. Bartiromo failed to ask perhaps the most important question. Last July as oil had begun its fall, the prince said his nation needs $90 oil because 90% of the government budget depends on oil revenue. Less oil revenue means less money to buy off the restive masses. So it's up to The 5 to ask questions to the wind: How's that going to work if prices continue to fall? And what if King Abdullah's health takes another turn for the worse? Imagine a succession battle at the same time mobs take to the streets. That's not a forecast, but it's a distinct possibility. Heck, it might even send oil back to $100. "As bad as it looks, it's really even worse," a reader writes after we explored the labor force participation rate on Friday. "Back in 1977, the demographics of the job sector were much different. If you look at the graph of the participation rates of women versus men, there is a far higher percentage of women in the workforce today than in 1977. Back then, 25-54-year-old men had just under 95% participation, but women of the same age made up just over 55% participation -- 40 percentage points. Today, those participation percentages are much, much closer together -- about 15-20 percentage points apart. "With all due credit to women's lib, that was also because many (most?) households back then could function on a single income. Not so today: Most households NEED two incomes. I wonder if we could get those participation numbers as a percentage of households." The 5: Yes. The family that enjoyed a middle-class lifestyle on one income in the '50s and '60s needed two incomes by the '70s... needed to raid its savings in the '80s and '90s... needed to take on debt in the 2000s... and is trying desperately to climb out of that hole today. "If the Bureau of Labor Statistics said wages rose 1.7% for all of 2014," another reader writes, "I wonder how much of that was from pay raises to government employees?" The 5: Average hourly earnings in the private sector grew from $24.17 in December 2013 to $24.57 in December 2014, according to the BLS. That's a 1.7% increase, so the increases appear to have been evenly spread between the private and government sectors. Go figure... "Is deflation really bad for everyone all the time?" a reader muses on the inflation-deflation debate. "For an export-driven economy like Japan, I agree, because it makes their goods more expensive to the rest of the world. Yet for a country like the USA that is net importer and consumer, it makes everything we import cheaper. Sure, manufacturers might hate it, but won't the Wal-Marts love it? If a person is retired and on a fixed income, they will love it too, as their purchasing power keeps going up. "Personally, I think the problem with both deflation and inflation is the same. Neither is properly managed. On the inflation side, wages never keep up with inflation, so purchasing power of the individual is in constant decline. On a deflationary side, the same is true, only in reverse. Wage decline does not keep up with deflation, so individual purchasing power goes up and business profits go down. "I would think that in an ideal economy, you would have neither deflation or inflation, but human nature (greed) makes that impossible. People never believe they have enough and always want more. They also believe they deserve more than the other guy. That will always lead to inflation. Enough on that, as I could spend all day on this topic." The 5: The problem is inherent in the notion experts can somehow "properly manage" inflation and deflation. Absent the interventions of politicians and central bankers, the value of money would be stable and the general price level would slowly decline as production methods became more efficient. This is what happened for the most part in the United States during the period between the end of the Civil War and the start of World War I -- perhaps the most rapid advancement in people's standard of living anytime, anywhere. "There is," a reader writes, "a relatively new substance called 'graphene' that may revolutionize products from computer chips to airplanes. "Can you do some in-depth research on this and the companies developing this technology?" The 5: Uhhh.... You must be a newer reader. We were on the graphene beat as early as mid-2011. Can't say we're not cutting-edge around here. As an investment theme, it's been something of a disappointment to date. But we still have our eyes open for possibilities.... Best regards, Dave Gonigam The 5 Min. Forecast P.S. A program note: Jim Rickards' live online briefing exclusively for Agora Financial readers has been rescheduled for today at 4:00 p.m. EST. If you can't take part while it happens, you can always check out the rebroadcast. These events are free for subscribers to Rickards' Strategic Intelligence. Access here. click.dailyreckoning.com/...UzMSZyPU1DJmc9MA./AQ/AmXd Poster Comment: Take the hint. At the end of this article, they offer a trip to Nicaragua for their symposium. What's been going on there since the Sandinista's have bugged out? Post Comment Private Reply Ignore Thread
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