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AMD Is the Tech Bargain You’ve Been Waiting For

Everyone loves a bargain.

We love that feeling of uncovering a hidden gem that everyone else has overlooked. The mispriced vintage Corvette with the small scratch in the quarter panel that you could easily buff out. The big-screen HD TV in the open-box area of your local electronics shop.

You get the picture.

But even your most savvy bargain hunters have nothing on investors looking for “the next big thing.” In fact, this speculative drive to “get in early” often leads investors sorely astray.

Their emotions get the better of them, as they inflate what are essentially short-term market trends into major stock-trading drivers

This leads to unreasonable expectations and equally unreasonable stock prices.
It leads to irrational trading.

 One of the best examples of irrational expectations this year is Advanced Micro Devices Inc. (Nasdaq: AMD).

Cryptocurrency Craziness

If you remember the last time I checked in with AMD, the stock was riding high on an influx of revenue from the growing cryptocurrency mining market. Ethereum was the “next big thing,” and investors were speculating heavily with AMD’s value despite signs that this fad wasn’t going to last.

Even Wall Street analysts were guilty of pumping up AMD stock amid the Ethereum fad, with several boosting their ratings and price targets to, honestly, unsustainable levels. AMD stock quickly shot into overbought territory, driven by a fad and a wild surge in emotional investing.

Back then, I warned investors that AMD was due for a correction as “profit-takers emerge, and the more bearish contingent in the brokerage community begins to sound off on valuation concerns and cryptocurrency pitfalls.”

This week, Morgan Stanley did just that. The brokerage firm said that “cryptocurrency mining-driven sales for AMD’s graphics chips will decline by 50% next year, or a $250 million decline in revenue.” Morgan Stanley also noted that video game console sales would drop by 5.5% in 2018, but that’s a drop in the bucket for AMD, and investors were likely already expecting this given the age of the current generation of consoles.

You could almost hear cryptocurrency speculators’ hearts break as AMD stock plunged 9% following the report.

The Real AMD

To remember the real reason you should be investing in AMD, we have to look back to 2016. The company caught fire early last year when it previewed several new chips, including its new central processing unit (CPU) chipset, Ryzen, and its new graphics processing unit (GPU), Vega. Both products held considerable promise, and AMD was expecting strong sales once the chips launched.

But both Ryzen and Vega blew analyst expectations out of the water. When they hit the market earlier this year, Ryzen and its sister chip, dubbed Threadripper, not only outperformed competing chips from Intel Corp. (Nasdaq: INTC), they beat them in pricing as well. At the same time, Nvidia Corp. (Nasdaq: NVDA) was touting its Titan Xp GPU as the fastest in the world, but AMD’s top-of-the-line Radeon Vega Frontier Edition GPU quickly stole that title.

As a result, AMD saw its market share in the desktop PC market rise roughly 45% to its highest level of that past 10 years at 31%, while Intel’s fell to 69%. It is also stealing server-side and data center market share from Intel via the increasingly popular Threadripper CPU.

And that is just AMD’s core business operations. When we get to areas like virtual reality, driverless vehicles and artificial intelligence, AMD is already on the cutting edge and poised to be a market leader.

Many of you at this point may be asking: “But what about AMD’s weak earnings report last week?”

And I would counter with: “What weak earnings report?”

Just look at the numbers. AMD earned $71 million, or 7 cents per share, last quarter on revenue of $1.64 billion. Not only did this top Wall Street’s expectations, it put last year’s loss of 50 cents per share on revenue of $1.31 billion to shame. What’s more, AMD boosted its full-year revenue growth forecasts from mid- to high-teens to above 20%.

So why did AMD stock plunge roughly 20% after such a stellar report? Because the company said that fourth-quarter earnings would fall 15% sequentially (even though that’s still a 20% increase year-over-year). Once again, it all comes down to an irrational level of bargain hunting, and an excess of emotional trading.

Investing in Advanced Micro Devices

But you are in luck! This emotional storm has left AMD trading at a considerable discount … and quite a bargain given its considerable growth potential — AMD is expected to see sales grow about 17% next year, compared to 12.3% for Nvidia and a measly 2.3% for Intel.

Back in July, I said I would be a buyer at about $13.25. That still holds true, making AMD at below $11 a steal. AMD could easily be worth its earlier valuations north of $15 as Ryzen and Vega continue to add market share and as AMD moves deeper into profitable deals in artificial intelligence (AI) and data centers.

Putting a $15 price target on AMD means the stock has more than 30% upside through next year. How many other large companies, aside from Alibaba Group Holding Ltd(NYSE: BABA), can you say that about?

So, ignore the cryptocurrency hype and focus on AMD’s core products and its potential with leading technologies like AI and data centers. I won’t promise you a smooth ride, but at bargain prices like these, it should be quite a profitable one.

Until next time, good trading!

Joseph Hargett
Assistant Managing Editor, Banyan Hill Publishing

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Source: Banyan Hill

Sports Betting Is a Smart Investment

Just about everybody watches sports. And putting some money (responsibly, of course) on the line can make the games a little more interesting.

Fantasy sports, especially football, have taken America by storm. Every football fan is, or knows somebody who is, in a fantasy football league. Personally, I love the thrill of having my own set of players to root for competitively week by week. It creates interest in teams that I would otherwise never pay attention to.

But there’s an entire industry out there that’s being covered up. And that’s simply betting on sports matches themselves.

Back in 1992, the Professional and Amateur Sports Protection Act banned sports betting in just about every state. The only ones that have legalized it are Nevada, Oregon, Montana and Delaware.

Of course, this hasn’t done much to stop people from continuing to bet on their favorite teams. All it has done is shifted the way that it’s taken place. Now that people can’t easily make legal sports wagers, they’ve simply turned to illegal, underground methods.

Just about everybody watches sports, and may even play fantasy sports. But there’s an entire industry out there that’s being covered up: sports betting.

Obviously, there’s no good way to tell how much is being gambled illegally. As you can see, the chart above projects a $15.8 billion industry for this year.

And that’s just in the United States. Eilers & Krejcik Gaming, the firm behind those estimates, states that Americans could be betting as much as $60 billion per year using offshore websites as well.

But that’s on the very low end of estimates. In 2015, an estimated $95 billion was gambled on college and professional football games in the U.S. $93 billion of that, or 98%, was done illegally. Adam Silver, commissioner of the NBA, has stated that $400 billion is wagered on sports each year.

Even sports websites and channels like ESPN and CBS Sports regularly post the favored teams and the amount of points or runs that they are projected to win by, based on Las Vegas odds. It’s not a secret that a large percentage of the population is finding a way to bet on these games.

There’s an ongoing initiative taken by several states right now to legalize sports gambling. Sparing most of the details, the next big step in this process takes place on December 4. On that day, the Supreme Court will hear arguments for legalizing sports betting across the country.

There are 14 states waiting to hear the Court’s verdict that are willing to offer legal sports gambling within just two years. Another 18 are expected to make it legal within five years.

Obviously, this makes a good investment opportunity … if you look in the right places.

Remember, the smart money gets into trends before they become popular. Investing in an industry a couple of years before it hits its potential is not unreasonable.

The best way to take advantage of this potentially groundbreaking industry before it begins is by buying large casino stocks such as Wynn Resorts Ltd. (Nasdaq: WYNN)Las Vegas Sands Corp. (NYSE: LVS) and MGM Resorts International (NYSE: MGM).

People may not physically show up at these casinos to place their bets. But casinos will make new, easy ways to bet, whether it be through easy-to-use apps, websites or even through texting. They will be the ones taking all of the newly legal bets.

Regards,

Ian Dyer
Internal Analyst, Banyan Hill Publishing

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Source: Banyan Hill

Less Than 10% of Millennials Would Keep Paying Back Student Loans: Here’s Why

How’s this for a business proposition? I owe you $17,000. If you forgive my debt, I won’t use Uber or Lyft for my transportation needs. Or, how about I agree to give up texting and mobile messaging for a year in exchange for debt forgiveness? Doubt I’d get any takers.

I received an email about a recent survey,“Survey Reveals What Millennials Would Rather Deal With Than Paying Student Loans”. The sender suggested, “The insights would be a great fit with your audience.”

They questioned 500 millennials, age 18-34. At first, I thought it was a joke:

“We’ve … compiled some key findings:

  • A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
  • Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much… According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
  • Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
  • Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
  • Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt”

I asked the sender, “… My generation was faced with a choice. The rich kids went to college, the poor kids joined the military (gonna get drafted anyway) and then came out and used the GI bill to help fund their college. Were there any questions about trading military time for debt reduction? I received a polite response saying that was not part of the poll. Did it even dawn on them to ask?

The survey sponsor appears to be in the loan business, promoting refinancing student loans.

While I passed on the idea, I soon changed my mind. The survey appeared on Facebook, generating some brutal feedback. Many called respondent’s snowflakes and much worse. They felt the respondents had no clue about sacrifice and the real world.

Might part of the problem be the survey itself? If respondents were only given those silly choices, they would check the ones they felt most appropriate. Perhaps student loan debt is not that much of a problem. They are not willing to sacrifice much to make it go away.

Here’s one example. Survey says…49.8% would give up their right to vote in the next two elections to have their debt forgiven. The article also mentions less than half of the millennials voted in 2016.

What some consider sacrifices doesn’t cut it with many Americans.

OK Millennials, listen up!

When you took out a student loan, you entered into a contract, borrowing money to complete your education. You felt your education would lead to a better job and you could repay the debt from your earnings.

The government was a co-signer, guaranteeing repayment of the loan. By doing so, the banks offered YOU very low interest rates.

Today, paying off your debt is an inconvenient challenge. In my article, “Student Loans – A Multigenerational Curse” I outlined you are not alone:

“Since the 2008 recession began student loans have skyrocketed to over $1.4 trillion.

The Wall Street Journal reports, “Revised Education Department numbers shows that … at least half of students defaulted or failed to pay down debt within 7 years.” Many young people (not all graduated) owe several hundred billion dollars they have been unable or unwilling to repay.”

The survey says, “…The Federal Reserve puts the median student loan debt balance at $17,000, with monthly payments of $222.” More than half are failing to honor their contractual obligations.

Government guaranteed student loans are a deal with the devil.

With some very limited exceptions, you cannot discharge student loans in bankruptcy court. As a taxpayer, I LOVE that provision. In 2012 Marketwatchreported:

“According to government data … the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds.”

What is debt forgiveness?

Unlike bankruptcy, debt forgiveness is when a lender voluntarily agrees to allow the debtor to forego payment of the remainder of the debt. It’s a gift, plain and simple. If student debt is forgiven or defaulted, the government pays off the bank.

Unfortunately some politicos, pandering for votes, are promoting the concept, willingly giving away billions of our tax dollars.

Let’s cut to the core. Asking for debt forgiveness is asking taxpayers, your friends and neighbors, to pay for decisions YOU made for YOUR benefit.

The Student Loan Debt Clock tells us the current total is over $1.5 trillion.Reference.com says there are approximately 138 million US taxpayers. If all student loan debt were forgiven, the cost would be approximately $10,870 per taxpayer.

Its no wonder the feedback on Facebook was so negative. Taxpayers work hard and don’t want to pay off someone else’s debts.

What to do?

Student loans should be a last resort when it comes to financing an education. Students should be educated about debt and the consequences before they take out the loan.

As I outlined in my previous article, college costs should be minimized. Four-year graduation should be expected, 36% of incoming freshmen get it done! Students are making adult decisions, many times at an early age, and parents need to guide them so they don’t end up with a huge debt burden.

I checked out the Army ROTC website:

“Scholarships and stipends in Army ROTC help you focus on what’s important. Namely, getting that college degree – not how you’ll pay for it.”

A college degree and a few years as a military officer have worked well for many young people. If you are not willing to do so, that’s fine, just be responsible and honor your contractual obligations.

27% of the respondents said they would be willing to move in with their parents for student loan debt forgiveness. That’s a bass-akward solution for sure!

A recent US Census Report tells us:

“More young people today live in their parents’ home than in any other arrangement: 1 in 3 young people, or about 24 million 18-to 34-year-olds, lived in their parents’ home in 2015.

… At 24.2 million people, the population of 18- to 34-year-olds living at home is a large and diverse group. …About 81 percent are either working or going to school.”

If you are going to live at home, do it while you are going to a local junior college, saving a tremendous amount in educational cost. The goal is to transition into adulthood easily with no debt burden.

While many parents want to help their children, having them move back home after college for extended periods of time is an economic and emotional burden. Parents must move ahead and get their retirement in order.

Plan B

Based on the survey and available choices, it’s easy to conclude that student loan debt is more an inconvenience (average $222/month???) than a real burden. If debt consolidation will help reduce monthly payments, investigate the option. However $222/month is not the case for many millennials.

My granddaughter and her husband married in their senior year in college. Their combined student loan debt is significant. They both work, husband got a second job and they are responsibly working to pay off their debt and raise a family. Yes it is difficult.

Debt Forgiveness

There are ways to legally obtain some debt forgiveness. Military.com highlights many Student Loan Forgiveness and Discharge Programs. It involves more sacrifice than promising not to text. Here are some options:

“Public Service Loan Forgiveness Program

Under this program, members of the military who have been employed by the military or a qualifying public service job for the last 10 years may have their federal student loans FULLY discharged.

Public service qualifying occupations include:

** Emergency management
** Military service
** Public safety
** Law enforcement
** Public interest law services
** Early childhood education (including licensed or regulated childcare, Head Start, and state-funded pre-kindergarten)
** Public service for individuals with disabilities and the elderly
** Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
** Public education
** Public library services
** School library or other school-based services

You need to be employed in these positions at least full-time, which is considered to be at least 30 hours a week or what the employer considers to be full-time.”

If you have student loan debt, sacrifice and do what it takes to get the loans paid off as quickly as you can. If you are in college, or headed in that direction, get a good education in four years with minimal student loan debt. Work your tail off so you can easily transition to your next step in life.

Decisions and behavior have consequences. Welcome to the adult world!

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How My Algorithm Beat the Market 10 Times Over

On October 19, 1987 — 20 years ago last Thursday — the Dow Jones Industrial Average (DJIA) lost nearly a quarter of its value in a few hours.

Back then, that was 508 points. A similar drop today would be almost 6,000 points.

Imagine that, if you will … if you dare.

On that day, traders watched in horror as wave after wave of selling ratcheted the index downward. Like a ball bouncing down a hill, each wave seemed faster and bigger than the last.

They looked at each other blankly, since none of them seemed to be doing any of the selling. They weren’t … computers used by big institutional investors were executing automated trades based on incoming price data.

In 1987, market technology was in its infancy. Today’s computerized trading is as far ahead of that as an F-35 Lightning II is ahead of the Wright Brothers.

Should you be worried? Yes … or no … it all depends on how you use today’s technology.

Do you do it the market’s way … or my way?

Warning Signs

On Wednesday, October 14, 1987, the DJIA dropped 3.8%. It fell another 2.4% the next day. On Friday, the DJIA fell another 4.6%, on record trading volume.

All eyes were on Monday.

Now, a 10% drop in three days is significant. But it’s always worse when markets end the week down. Depending on how after-hours options trading goes … and events over the weekend … traders are often poised to sell on Monday morning.

Black Monday began with a wave of selling in the Hong Kong market. Normally, London-based bargain hunters might have counteracted this, but the Great Storm of 1987 had led London’s markets to close early on Friday; most traders were told to stay home on Monday. With nobody on watch, the London FTSE 100 had fallen over 136 points by 9.30 a.m.

That was all the newfangled computers installed at large U.S. investors needed to initiate selling orders. “Portfolio insurance” algorithms started short-selling U.S. stocks and index futures.

As other computers detected this, they started selling automatically as well. The few algorithms that were programmed to suspend trading did so, decreasingly liquidity and increasing the speed of price drops.

U.S. markets soon recovered, but those who had sold in a panic on Black Monday lost a great deal of money.

Lessons Unlearnt

Black Monday wasn’t the last time algorithms have been blamed for sudden market drops. Here are some of the more prominent examples:

  • The August 7-10 “quant quake” of 2007. Funds specializing in algorithmic investment strategies suffered massive losses.
  • In the “flash crash” of May 6, 2010, the Dow dropped 9% and the S&P 500 fell 7% in just 30 minutes, as bids and offers for stocks moved far away from previous levels — in some cases leaving bids down as low as a penny and offers as high as $100,000.
  • On August 24, 2015, the S&P 500 plummeted 5% and the Dow dropped by 6.7% in just five minutes after the opening.

How Now?

In every one of these cases, researchers have blamed the “stampede effect” of automated algorithm-based trading systems. Unattended programs designed to cut losses reinforced each other in a downward spiral that only ended when humans intervened.

Such systems now account for more than 75% of U.S. stock market volumes. One reason is that much trading now occurs in penny intervals.

That makes trading less lucrative for market makers, who profit by playing the “spread” between the highest bid to buy and the lowest offer to sell. As they have retreated from the market, algorithms have stepped in to replace their essential liquidity-providing function.

The shift to automated trading now includes actively managed mutual funds. In March, BlackRock announced it would fire human traders and rely more on stock-picking algorithms, triggering other traditional asset managers to follow suit.

Not All Algorithms Are Created Equal

Computers now manage trillions of dollars in global stock markets. But there are two ways to use them.

The first way is as I’ve described above. Big institutional investors use automated algorithmic systems because they reduce costs and the time-wasting “friction” of human decision-making. Trades can be executed in milliseconds by the millions, generating tiny profits from each that add up to a lot.

The other way is the way we use algorithms in trading services such as Alpha Stock Alertand the Smart Money portfolio in my Bauman Letter.

In those services, we use algorithms to remove only one part of the human role in trading: emotion. We make a zen-like commitment to let the rules call the shots. Empirical back testing shows that this a true market-beater — excess gains of 600%, even 900% are possible over time.

But the Alpha and Smart Money algorithms incorporate three things that the big boys don’t.

One is a hedging strategy that tells us to short the market before it corrects.

The second is algorithms that include fundamental and sentiment analysis at the company level. Using those, we don’t sell just because a stock goes down along with the market. We keep otherwise healthy positions because we know they will rebound, as markets always have after a crash.

But the third feature of our systems is the most important: Computers running our algorithms may make the calls, but we — humans, not computers — push the button to trade. Always.

That way, when a true “black swan” event arises … one that no algorithm can possibly predict … we can step in before it’s too late.

Consider it the best of both worlds.

Kind regards,

Ted Bauman
Editor, The Bauman Letter

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Source: Banyan Hill

This Technology Could Lead to the Downfall of Amazon

As part of being somewhat of a contrarian investor, I like to look for possible investments in areas where the Wall Street hype machine went crazy, but then the ‘hot air balloon’ was punctured.

One such area in technology has to be 3D printing, which is also known as additive manufacturing. Valuations in this sector soared into the stratosphere in 2013 as Wall Street pitched the story that there would be a 3D printer in every home and on every desk. But then reality set in and valuations collapsed in 2015.

The very same Wall Street touts are now saying this nascent industry is dead. And guess what? They’re wrong again! The long-term growth story for the 3D printing is alive and well as the industry shifts its priorities to focus more squarely on industrial applications.

3D Growth Story

Revenues in 2016 for additive manufacturing rose to $6.1 billion, a gain of 17.4%. About 60% of that figure was linked to production applications, up from about 50% the year before. The two industries leading the way were healthcare and aerospace. Research firm Gartner goes as far as saying that 3D printing of hearing aids and dental devices have become mainstream.

That $6.1 billion number is forecast to approach $40 billion by 2020. That seems reasonable. As I stated before, the industry is nascent and has barely penetrated one percent or so of the $500 billion total addressable market.

Related: 3 Stocks on Apple’s ‘Hit List” to Buy Next

Longer range forecasts show the possibilities for additive manufacturing. According to research from ING Group, atcurrent growth rateshalf of all manufactured goods will be 3D printed in 40 years. Using more aggressive assumptions, says ING, would move that date up to 2040.

This will have vast economic implications. ING says if its scenario comes to pass, one-quarter of world trade will be eliminated. That will put a smile on the face of certain politicians around the globe.

The ING research report also made quite clear the industries it sees as being most affected: “Automotive, industrial machinery and consumer products are the industries that will take the lead in suppressing cross border trade. These industries are top investors in 3D printers and are large players in world trade.”

Not Hype This Time

More Wall Street-type hype? I don’t think so this time. I’m seeing too many industrial applications already. Let me tell you about just a few.

One company that is a believer in additive manufacturing is General Electric (NYSE: GE). In 2016, it introduced additively manufactured metal parts into an aircraft engine – the inside of fuel nozzles. The company says one-third of its new turboprop engine will also be produced using 3D printing, with 12 major 3D-printed parts for the engine section instead of 855 parts. Needless to say, that is a great way to gain control of your supply chain.

One company in the consumer sector that is moving toward additive manufacturing is German athletic shoe and sportswear maker, Adidas AG (OTC: ADDYY). Earlier this year, it said it would produce 5,000 pairs of running shoes with 3D printed midsoles by year-end. Adidas plans to raise that number to 100,000 pairs of running shoes in 2018.

The applications of 3D printing are almost endless, extending even into regenerative medicine. A team of Chinese scientists announced last November that they had successfully implanted 3D printed blood vessels made from stem cells into rhesus monkeys. The results were verified by scientists from the U.K., opening the possibility someday of having 3D printed human organs made to order.

3D printing has also invaded the world of racing. At the Bahrain Grand Prix this past April, the McLaren-Honda Formula One team added a 3D printing to its team of engineers and mechanics. That gave its aerodynamic engineers the ability to make ‘tweaked’ parts literally overnight. Of course, none of the parts exposed to high aerodynamic forces can yet be 3D printed. It’s mainly parts such as a hydraulic line bracket.

Three 3D Printing Investments

So how can you invest into the Lazarus-like resurrection of the 3D printing industry?

Normally, I do like to tell you to consider buying a broad-based ETF. And indeed, there is the Ark Invest 3D Printing ETF (BATS: PRNT), which is up 23% year-to-date and 14% over the past 52 weeks.

This fund’s portfolio contains 43 stocks, both on the hardware and software side of the industry. I love its top position, which is the U.K. firm Renishaw PLC. This company not only makes 3D printers, but also is a major supplier of high-tech measurement tools.

The portfolio also includes two companies that I will talk about in a moment as well as some solid holdings including MGI Digital Graphic and Materialise NV. But there are some real clunkers in the portfolio that will hold back its long-term performance. Therefore, I would stick with a leading player or two in the sector.

No discussion of printing technology would be complete without mentioning the ‘gorilla’ in the space, HP Inc. (NYSE: HPQ), although only 38% of its business is from printers and related businesses. The rest is from PCs, notebooks, etc.

HP did make a big move to boost its printer business last year with its $1.05 billion acquisition of the printer business of Samsung Electronics, with its more than 6,500 patents. And even though it has been in the 3D printing business for about five years, HP just trails the leaders in the field. It hopes its Jet Fusion 3D Printing Solution will be a winner. HP has collaborative efforts in the 3D printing space with the likes of BMWNike and Autodesk.

Despite lagging in 3D, HP’s stock has outperformed its sexier sibling Hewlett Packard Enterprise (NYSE: HPE) and has risen nearly 40% year-to-date and 33% over the prior 12 months. But I prefer a purer play. . . . .

The aforementioned 3D printer used by the McLaren racing team was made by the world’s largest manufacturer of 3D printers, Stratasys (Nasdaq: SSYS). I consider it to be the leader in the sector.

The company is working with Boeing (NYSE: BA) and Ford (NYSE: F) to advance 3D printing technology to make 3D parts, not only quickly and reliably, but on a much larger scale than has been possible. The goal is to soon have the ability to print an entire aircraft interior panel or a car dashboard.

Stratasys’ Infinite-Build 3D Demonstrator isn’t quite there yet, but its potential for the disruption of a number of industries is definitely there. In the meantime, I like the fact that Stratasys has also inked deals with other large companies including European giants SiemensAirbus and Schneider Electric.

The company’s potential is not reflected in the stock price, which although it is up 43% year-to-date, is up only 1.5% over the past year. Stratsys is just beginning to reap what it has sown over the past several years, and gathering a growing number of industrial giants as its clients. This should continue to propel its stock higher in the months and years ahead.

3D printing is just one component to a quickly changing world. The changes we’ll see over the next five to 10 years will make the last 25 look like they moved at a snail’s pace. Technology and the human application of it will change how you work, where you live, what you eat, how you communicate, how you get from A to B, even how you sleep. And it will pressure government and society to adapt quickly or fall by the wayside and risk irrelevance. I call this monumental shift “The Singularity”: the convergence of everything – all driven by the rapid ascent of technology and profit motive.

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This Early Warning Sign Shows That All Is Not Well

On Friday, the employment report for September will be released. This report often moves the stock market. On average, daily volatility is three times more than normal.

But not all employment report days see large moves. The big days tend to follow unexpectedly good or bad data.

Stocks can rally on bad news, or they can fall on good news. The news isn’t as important as how it compares to expectations.

This month, analysts are expecting a small gain in employment and no change in the unemployment rate. Payroll tax receipts growth confirms that outlook. Given the data, there’s likely to be little movement on Wall Street this week.

Stocks can rally on bad news, or they can fall on good news. The news isn’t as important as how it compares to expectations.

(Source: Mathematical Investment Decisions)

Payroll taxes are a leading indicator of the unemployment rate. When businesses hire more workers, they pay more taxes. Declines in hiring, or replacing high-wage workers with lower-paid workers, result in less money for the government.

The growth rate of payroll taxes started declining even before hurricanes destroyed businesses in Texas, Florida and Puerto Rico.

For now, there is no sign of a recession. But this indicator could be an early warning sign that all is not well.

It’s important to watch the economic news. In the long run, that will warn us before there’s a bear market.

In the short run, stocks have run up pretty fast in the past month. Like a runner after a sprint, they need a rest. Friday could be a day for stocks to rest after the employment report shows the economy is growing slowly.

Next week, after reading the details of the report, the uptrend in stocks should continue.

Regards,

Michael Carr, CMT
Editor, Peak Velocity Trader

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Source: Banyan Hill

3 Crash-Survival Tips Every Investor Should Know

It’s a question I’m hearing from a lot of investors these days, and it just came up again a few days ago:

How should I prepare for the next market crash?

It’s not hard to see why folks are worried about their nest eggs, with the S&P 500 bubbling along at 24 times earnings and the Fed talking about faster rate hikes.

So today I’m going to dive into 3 simple strategies I use to protect and grow my own money, starting with…

“Crash Insurance” Tip No. 1: The Best Defense …

When I’m looking for stocks that hold their own in a crash or snap back for big gains when the dust settles, I zero in on three things: hefty discounts, share buybacks and quick dividend growth.

And a little over a year and a half ago, Boeing (BA) certainly qualified: it was a bargain at less than 12 times free cash flow, and management knew it: they’d been ramping up BA’s buybacks for nearly two years!

Buybacks Rise …

That was enough for me: I urged members of my Hidden Yields dividend growth service to buy Boeing on December 18, 2015. As if on cue, worries about Chinese stocks sent the S&P 500 into an 11% tailspin from January 1 to February 11.

How did we do?

Boeing did fall further than the market, but it wasn’t long before its share price caught up with its rising earnings per share, which got a nice assist from management’s timely buybacks. Today, shareholders are sitting on an 85% total return since the trough of the selloff, tripling the market’s gain in that time!

… and Boeing Ignites

As you can see above, BA really hit the afterburners starting in late 2016. That’s when it hiked its dividend by a monster 30%, yanking in new investors and setting us up for a nice 4.1% dividend yield on our original buy today—nearly double the 2.2% you’d get if you bought Boeing now.

“Crash Insurance” Tip No. 2: Buy Cheap in Your Sleep

My next strategy is as boring as its name suggests: dollar-cost averaging.

But that masks its power, because this savvy move not only lets you survive the next wipeout but use it to snap up great stocks at terrific prices.

It couldn’t be easier: all you have to do is buy a fixed-dollar amount of a particular stock on a set schedule. That way, you’ll be locked in to buy more shares when they’re cheap and fewer when they’re pricey.

Here’s how it works: let’s rewind to 2007 and say you decided to “gradually” invest in Pfizer (PFE), one of the 3 buy-and-hold “forever stocks” I just recommended. And let’s say you invested $7,000 annually in PFE on the last trading day of the year for the following decade.

On December 31, 2008, in the depths of the meltdown, Pfizer closed at $17.71, so your $7,000 would have gotten you 395 shares (excluding commissions). But on your priciest “buy” day (December 30, 2016, when PFE traded at $32.48), you would have automatically tempered your purchase, adding just 215 shares to your holding.

This is hands-down my favorite way to “time” the market—and you can do it with no extra legwork at all!

Which brings me to…

“Crash Insurance” Tip No. 3: No Withdrawals

Of course, the best crash-survival strategy is to be able to ignore the crash completely!

That’s where my “No-Withdrawal” plan comes in—especially if you’re retired or leaning on your portfolio for income. All you have to do is buy stocks (or funds, as I’ll show you in a moment) paying high, safe dividends … and hold for the long haul.

How high are the dividends we’re talking about here?

How does a 7.5% yield sound? That will send a nice $37,500 our way on a modest $500,000 nest egg. It’s also where my plan gets its name, as an income stream like that lets you live on dividends alone—without being forced to sell into a downturn.

And you might be surprised to hear that there are plenty of “unicorns” out there throwing off safe 7.5%+ payouts. We just have to go where other investors aren’t.

A great example is the Nuveen Tax-Advantaged Dividend Growth Fund (JTD), a closed-end fund my colleague Michael Foster analyzed on May 1.

Funny thing is, despite its gaudy yield, JTD’s top 10 holdings don’t look much different than those of any other equity mutual fund.


Source: Nuveen

However, it throws in three smart twists to squeeze that 7.5% payout out of household names like Apple (AAPL), owner of a 1.6% yield, and JPMorgan Chase & Co. (JPM), at 2.4%.

First, it devotes about 19% of the portfolio to preferred shares, many of which boast higher yields than common stocks.

Management then adds its own secret sauce: a modest amount of leverage (currently 29.9% of the portfolio) borrowed cheaply to reinvest in higher-yielding common stocks and preferreds. JTD also uses a savvy call-option strategy to smooth out volatility and protect its portfolio from a downturn.

As an extra bonus, it minimizes your tax bill by focusing on long-term capital gains and qualified dividend income, both of which are taxed at lower rates than short-term capital gains.

And this stealth income play is just the start. Because now I’m going to show you 6 other “unicorns” that combine to hand you a payout that’s even safer than JTD’s—and higher, too!

Your Own Personal 8% “No-Withdrawal” Plan

What I’m about to reveal is a 6-stock portfolio I spent months crafting for one purpose: to hand you a solid 8% income stream no matter what the market does.

That’s enough to generate a $40,000 a year on your $500,000 nest egg (with plenty of room for more payout hikes, to boot).

And with just one click, you can get all the details on these 6 income wonders now.

This 8% “No-Withdrawal” portfolio is far safer than making an all-in bet on a fund like JTD because it spreads your cash out across 6 investments—CEFs, real estate investment trusts (REITs) and preferred shares.

Here are just a few of the retirement lifesavers you’ll discover:

  • A CEF that’s the brainchild of one of the top fund managers on the planet and pays 8.6% every year in cash.
  • This REIT is a dividend machine! It pays 8% now and has boosted its dividend for 20 quarters in a row!
  • A preferred fund that gives you an extra layer of protection because it doesn’t move in tune with the stock market. It pays a reliable 7.3% and can easily keep that up no matter what the market does.
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When This Chart Changes, All Markets Will Crash

This is a chart of what investors believe inflation will average over the next 10 years. It’s based on what the current interest rates are.

It’s always close to the current rate of inflation. In other words, investors believe inflation will stay about the same.

That’s a surprisingly accurate assumption. Inflation generally does stay within a narrow range.

But when it unexpectedly jumps, like it did in 1968, the stock and bond markets fall.

The Federal Reserve calls this important metric “inflation expectations.” It understands that if expectations are stable, markets are fine.

But if inflation jumps, expectations will jump. The Fed’s goal is to manage expectations.

When inflation jumped in 1968, expectations stayed high for more than 20 years. Stocks suffered four distinct bear markets from the next 15 years. A bear market in this case is a decline of at least 20% in the S&P 500.

If inflation and inflation expectations jump, that will happen again.

Investors will see volatility and declines more often. Consumers will suffer as prices rise at stores. Overall, it will simply be terrible.

And it’s likely to happen within the next few years.

Regards,

Michael Carr, CMT
Editor, Peak Velocity Trader

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The State of Blockchain in Five Charts

It’s been a busy few months for all things blockchain. (If you’re interested in learning more about how blockchain works, I suggest you read my article to quickly get up to speed.)

CoinDesk captures the key trends and events with its just-issued “State of Blockchain Q2 2017” report. Click here to read the full 115-page report, which has dozens of charts and graphs.

For a quicker review, read my commentary below on some of the report’s most noteworthy findings.

600%-Plus Returns, and It’s Only September

This hyperbolic rise is not bitcoin-driven. Bitcoin has “only” risen by 320%. Earlier in the year, its share of the total cryptocurrency market was around 80%. Now it’s 40%.

It’s the other currencies – like Ripple, Litecoin and Ethereum – that have ignited cryptocurrency’s price explosion.

Historically, cryptocurrency prices have featured large swings in both directions. It’s obvious we’re in a big upswing right now, with Irma-like tailwinds pushing prices higher and higher.

It’s also obvious a correction is coming.

A Correction: How Soon? How Much? Everybody Has an Opinion…

A majority (58%) of those surveyed in the report believe we’re in a bubble, while 30% think we’re not. These are “blockchain enthusiasts” being surveyed, so there’s a bias toward optimism at play here.

A slew of ICOs is coming down the pike this month and next. They could very well drive prices much higher… or restrictions out of China could initiate a correction in the very near future.

Look, I’m no fortune-teller. Nobody knows how much longer this current climb will continue. Nor does anybody know what the extent of the correction will be.

But here’s the thing: It’s not something I’m losing sleep over. The cryptocurrency market will correct and then begin a new climb that will reach new highs. That’s the historic pattern. Nothing changes.

I’m not nearly smart enough to time the peak or the bottom. I’m keeping it real simple. As far as I’m concerned, the trend is your friend, and this trend is still pointing upward. So I’ll continue to invest.

And, post-correction, I’ll make sure to have cash on hand to take advantage of some nice price points as the market begins its next climb up the charts.

We should all remember this is no silly fad. Some of the most successful venture capital firms – including Andreessen Horowitz, DFJ, Sequoia Capital and Union Square Ventures – have made large investments in blockchain and digital currency companies.

Hundreds of potentially transformative new blockchain technologies are being developed, but perhaps none are generating as much excitement as Ethereum’s “smart contract” blockchain technology.

Don’t Ignore Ethereum

It’s hard to ignore Ethereum’s 3,800% price jump since the beginning of 2017. This period also saw an explosion of ether usage. (Ether is the currency that runs the Ethereum network.)

Transactions involving ether coins have come significantly closer to bitcoin transaction volume, but ether still has a ways to go. Bitcoin averages 291,000 transactions a day.

A big reason for ether’s rise? The explosion of recent ICOs, many of which raised money using the ether currency.

ICO Funding Starting to Outpace VC Firms

ICO funding in the second quarter easily exceeded money from venture capital firms. But look at the above chart (on the right) and you’ll see that VC funding still dominates blockchain fundraising.

ICOs can be volatile. And they’re not easy to participate in. But without them, regular everyday investors would be completely shut out of investing this early in exciting blockchain companies.

ICOs are like startup crowdfunding. Both allow you to invest very early. Likewise, in both cases, most of these young companies will fail. But the ones that get over the hump and put themselves in a position to experience hypergrowth?

They can hand – and already are handing – investors unbelievable returns.

But What About the Government?

The SEC will impose regulations. It’s just a matter of time.

The question is will they be fair or – and this is my great fear – overly restrictive?

If the regulations are balanced and fair, it would be a good thing that would provide much-needed regulatory certainty. If not…

Then the U.S. government would be putting itself on the wrong side of history, clamping down on capital investment flows to technologies that could grow into massive businesses and wealth generators.

In July, the SEC ruled that the Decentralized Autonomous Organization’s coins were securities and thus subject to the agency’s regulation. But the SEC offered no “bright-line” test as to what constitutes a security.

The SEC said each ICO must be considered individually.

So we’re waiting for more guidance from the government.

If this follows the same path as crowdfunding regulations, the government will be cautious, but it’ll allow ICOs to continue under certain conditions and as long as certain rules are followed.

It’s a big test for the government. And it needs to get it right.

Good investing,

Andy Gordon
Founder, Early Investing

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