How to Survive the Next Market Collapse

My father has a green thumb. He comes by it naturally through his father. With me, it skipped a generation.

But that doesn’t mean that I don’t love wandering around my father’s property as he points out his various plants and new projects.

From spring through fall, nearly every time I visited, he would have something new to show me as we walked the yard. Or “toured the lower 40,” as he calls it.

“Why all the moving around?” I asked him when he pointed out a set of hostas that had been split and spread to a new shaded bed.

“It’s about balance, Joce.” The giant blue hostas had spread and were threatening to take over their previous flower bed so that nothing else could grow.

While my father might have been talking about rebalancing his green space, that same idea can be extended to your own investment portfolio. And it’s more critical than you might realize. Rebalancing could mean the difference between surviving the next market collapse…

Your Gains Have Changed the Game

The stock market has put in a solid performance in 2017 despite endless talk of stocks being overvalued (which they very likely are) and bubbles expanding in several sectors (and they are).

The fact is that if you stuck with stocks in 2017, you are sitting on some nice gains.

The Dow Jones Industrial Average has gained 20% this year, and the tech-laden Nasdaq Composite is up roughly 19%. Even the small-cap Russell 2000 Index has rallied 12%.

In the commodity space, oil has tacked on 7%, and gold has grown an impressive 12% despite strength in stocks.

But those nice gains have created a serious problem within your portfolio, and it’s important that you address it sooner rather than later before a market collapse. It’s a good time to take a hard look at all those eggs you’ve gathered and figure out exactly how you’re going to redistribute them across many baskets.

It’s called rebalancing, and it’s going to be the key to keeping your wealth growing in the new year.

Rebalance and Stay Safe During a Market Collapse

We’ve all heard the old adage time and time again: “Don’t put all your eggs in one basket.”

And you haven’t.

You’ve wisely distributed your investments across a variety of sectors, investment vehicles, and possibly even countries and currencies.

Ted Bauman, editor of The Bauman Letter, has addressed the proper distribution of your investing portfolio across stocks, currencies, commodities and even rare tangible assets on numerous occasions in his newsletter. (He has also given tips on different asset protection strategies you can use for unique ways to grow your retirement nest egg. Don’t miss out!)

But the problem that occurs when you have different investments growing at different “speeds,” is that your distribution across many baskets becomes more lopsided than you intended.

Let’s look at an example.

Say you started with a portfolio of $100,000, and you distributed as follows:

  • Aggressive tech stocks — 50% ($50,000).
  • Blue-chip stocks — 20% ($20,000).
  • Foreign stocks — 20% ($20,000).
  • Gold bullion — 5% ($5,000).
  • Commodities — 5% ($5,000).

Now keep in mind, I’m not saying this is how you need to distribute your portfolio. I’m just using nice, round numbers to keep the math easy. You should really check out The Bauman Letter for tips on how to balance your investments.

But let’s assume that you’ve had a great year of stock picking and your tech stock positions are up 65%, your blue-chip stocks are up 20%, gold is up 12% and commodities are up 7%. Foreign stocks struggled a bit for you and are flat.

That means your portfolio is now worth $137,450.

  • Aggressive tech stocks — $82,500, or 60% of your portfolio.
  • Blue-chip stocks — $24,000, or 17.5% of your portfolio.
  • Foreign stocks — $20,000, or 14.6% of your portfolio.
  • Gold bullion — $5,600, or 4.1% of your portfolio.
  • Commodities — $5,350, or 3.9% of your portfolio.

As you can see, by just being a great stock picker and riding the rally in the various sectors, your portfolio has shifted over the past year to favor aggressive tech stocks more than you had intended. What’s more, your exposure in safe haven areas such as blue-chip stocks and gold have shrunk significantly. That could put your portfolio in dangerous territory should the market collapse in 2018 with tech stocks once again leading the way lower.

A Time to Explore New Investments

The end of the year is a great time to step back and examine your investment portfolio. If you’ve enjoyed some stellar gains this year, then you might need to take some money off the table and move it to other investments so that you remain protected against an unexpected turn in the market.

Rebalancing your portfolio keeps you in the game longer. It also gives you a chance to explore new investment avenues that maybe you didn’t have the capital to invest in a year or two ago.

Is it time to potentially move some of your funds out of stocks and into rare tangible assetssuch as stamps, art or rare coins?

Is it time to look in to real estate as a way to protect and grow your wealth?

Or maybe you need to add more income to your portfolio? Matt Badiali has just released a special report that offers an easy way to add a steady flow of income to your portfolio without using options. (You can check out his special report here.)

As we head into the final month of 2017, closely examine your portfolio. Take the time to rebalance. Don’t let it run wild. Prune it back in the right places and reap the benefits year after year.


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Here’s Where to Invest in The Promise of Quantum Computers

Nothing has changed the world more than technology, or to be more specific, the ability to compute. Computers today are helping you in nearly every facet of your personal and business lives. And everyone else too – a large portion of the world’s population now carries a computer in their pockets (smartphones).

All of this has been possible because of the capability to manufacture billions of silicon computer chips every year. Each one of these of these chips is composed of billions of transistors, the basic building blocks of a computer. Today, these transistors are mere dozens of atoms across.

Technological progress has moved steadily forward because of our ability to shrink the size of transistors regularly. That trend is known as Moore’s Law – which at its core says, that every two years, the number of transistors we can cram into a computer chip will double, and it has for decades now.

But guess what? Scientists agree that Moore’s Law is now kaput. It is believed the number of transistors we can cram into a computer chip is slowing and will likely reach its limit at about seven nanometers circa 2020. That view was backed earlier this year by the CEO of Nvidia (Nasdaq: NVDA), Jensen Huang.

Quantum Computers

So what happens then? What’s next?

I found the answer to those questions in the course of my research for the Singularity project. It is a technology so advanced that even Microsoft founder Bill Gates says he doesn’t understand it. And he’s a pretty bright guy.

The technology in question is the coming next age in computing… quantum computers.

The physics behind this is extremely complex, thus stumping Bill Gates even with his knowledge of physics and math. My physics background helps, but I’m no expert on quantum mechanics… so here is the simplest explanation for you I can come up with…

Current conventional computers represent each ‘bit’ of information – the logical zero or one – in the on/off state of a transistor. However, by exercising control over sub-atomic particles known as Majorana fermions, quantum computers will instead work with “qubits”. Unlike a standard bit, a qubit can adopt a uniquely quantum superposition of the two logical states. However, quantum states exist for only a short period of time (a process called coherence). In other words, quibits revert extremely quickly back to a classical computing stage – zeros and ones.

One interesting aspect is that, because of the basic properties of quantum mechanics, a quantum computer will be more prone to errors than a conventional supercomputer. In a Financial Times article, Jeremy O’Brien of the University of Bristol’s Center for Quantum Photonics estimated that to create a quantum computer with 100 ‘logical qubits’, a system with about a million actual quibits would be needed.

Once quantum computers reach the 50 quibits level, they will be superior to every existing conventional computer in existence. And when that happens, quantum computers will be exponentially faster than current computers. And even more importantly, quantum computers will able to solve problems beyond the capabilities of our current machines. Tasks such as designing complex molecules – new drugs or advanced materials – will then be within reach.

The Battle for Quantum Computing Hardware Supremacy 

In his recently published book, Microsoft CEO Satya Nadella called the battle over quantum computing an “arms race” as important as AI (artificial intelligence) that has “gone largely unnoticed”. Although not by Microsoft – it began development in the field more than a decade ago.

However, the technology behind quantum computing is now moving out of the science discovery stage and into the engineering phase. As with the very early days of semiconductors, what now is needed is to find ways to scale up a technology that scientists have proven does work.

Ironic that Nadella would that ‘arms race’ term. Because China is racing to beat the U.S. in this new technology and some say it is making great progress toward a 40-qubit machine.

Luckily, a number of the top U.S. technology companies are working hard on scaling up quantum computing technology. The companies involved in this ‘arms race’ include as I mentioned Microsoft (Nasdaq: MSFT) as well asAlphabet (Nasdaq: GOOG) and IBM (NYSE: IBM).  

Google plans to use a 50-qubit machine later this year as a demonstration of its problem-solving power.

IBM has been offering since last year quantum computing as a cloud service with a 5-qubit computer. Just a week ago, IBM announced it is releasing 20-qubit quantum computers – its first truly commercial offering.

You can see clearly here that the engineering scale-up of quantum computer technology has begun. The problem remains though as to how to keep the errors down. That’s because the more qubits there are, the more complex their interactions (a process appropriately named by scientists as entanglements) are.

IBM has also made progress on the aforementioned time problem. Its machines last year had coherence times of only around 50 nanoseconds. This year, its quantum machines are in the 90 microsecond range. Again, quite a leap forward.

And for Quantum Software and Chips

You may be wondering – so where does Microsoft fit in since it is not really a hardware company like IBM? Think about it – of what use will quantum computers be without software to run on them?

So beginning late this year, its Visual Studio, which is used to writing programs that run on Windows, will include tools to produce software that can run on its quantum machines as well. Through its Azure cloud service, developers will have access to simulations with machines of up to 40 quibits.

With the long time Microsoft has been preparing for the quantum computing age, I would not be surprised to see it dominate the next age of computing software as it did the prior age with Windows.

And despite the high-powered physics behind quantum computers, there will still need to be semiconductor chips to power them. For example, IBM has a quantum computing chip made from metals that become superconducting when cooled to extremely low temperatures. Its chip operates at a temperature a fraction of a degree above absolute zero.

Several types of controlled systems can be used to create qubits – superconducting circuits, trapped ions, and even single particles of light – photons.

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