Justin’s note: My friend E.B. Tucker is many things: a gold industry expert, speculator, world traveler, big-picture thinker, former money manager, trend spotter, and successful real estate investor who still profits off the 2008 housing crisis.
He’s also the editor of Strategic Investor and our brand-new letter Strategic Trader, which pinpoints the world’s most explosive securities… with the least amount of risk.
But one thing E.B.’s not is a worrier. He doesn’t lose any sleep over volatile market conditions because he has a strategy to bullet-proof his portfolio… and he sticks to it.
This strategy can help you, too… no matter what happens in the markets. Read on to see how it works…
By E.B. Tucker, editor, Strategic Trader
I spend 0% of my time worrying about – or preparing for – a crash. Here’s why.
I run a “barbell strategy” with my personal assets.
Picture a metal bar with weights on it.
On one side, I have real assets. These are physical gold, unleveraged property (if you owe on it you don’t own it), and cash value on whole life insurance. These assets are incredibly boring, but they represent real wealth. I think it’s also fair to include some stalwart stocks on this end of the barbell. I also own world-class, dividend-paying stocks. These blue-chip stocks are so boring, I don’t even look up the quotes – they’re not about making huge gains… they’re just equity in big, stable firms.
The other side of the barbell is much more exciting and carries more risk. I’m in tons of private placements. I must have done six to eight recently… I have a massive position in a Canadian-listed gold royalty firm where I’m on the board and chair of the executive committee. The takeaway here is I have a lot of very high-risk investments that are paying big for me right now.
But these two ends of the barbell must be balanced to avoid catastrophe. When I have ABC mining stock shoot up 300% after I do a placement, I sell half of it, or more. I take that money and split it between the ends of the barbell. I want to keep the real asset side balanced, then keep taking risk with the other side.
Real assets are real wealth. That’s why in December 2017, I advised my readers that if they had excessive crypto profits to sell at least the cost basis and buy real assets with it. When the tokens return to their actual value, $0, you’ll have the real assets. In some cases, this could be $50-$100 million for young guys. They should consider buying a massive apartment complex with cash… this can always generate income through rent. As people age they learn real assets are more important than speculative fliers.
There are always speculations out there – real assets are much harder to get control of.
Over time, you’d be surprised how good this strategy feels. If the stock market takes a 20% dive overnight, I don’t care. I probably won’t buy more… I’d sit back and see what happens in the ensuing weeks, then make a buying decision when everyone is panicking.
Keep in mind that in 2009 I liquidated my retirement accounts (modest funds here as I was 29 years old) and bought single-family rental homes in Ybor City, Tampa. I paid $10,000 for one home that had a mortgage on it for $165,000 the year prior. I paid $25,000 for a seven-bedroom home that had a $250,000 mortgage default judgment on it. My point here is… people were panicking and nobody was buying – that’s a market bottom.
If I didn’t have some cash then, I would have just been a guy who watched the real estate rot until someone started buying it a year or two later.
The third piece of my barbell strategy is the bar. That’s me… My job is to determine what will generate new capital. I have to decide where to put new weight on the bar.
I have an office in Tampa shared with two of my friends. They worked at logistics company DHL years ago and came up with an idea related to cross-border shipping fulfillment. They took $20,000 in savings and started a company… seven years later selling it to FedEx for $45 million.
The funny thing is, these guys have no clue what to do with money. Worse yet, they’re resistant to any guidance.
To be clear, I do not offer guidance to anyone, ever. If people ask, I tell them what I think, which usually makes them uncomfortable. That’s a sign I’m right.
One terrible trade my suitemates can’t get enough of is shorting the S&P 500. Their logic is they’ll get a huge payday soon and be able to roll that payday into index funds for the next upcycle.
In the meantime, I’m running my barbell strategy producing returns laughably higher than theirs.
With so much money, you’d think they’d have a plan, but they don’t. They’re blown around from idea to idea, trying to outsmart the market… Over time, this ends in tears.
So, in closing, I’d encourage you to consider my barbell management strategy.
Knowing you’ll still be wealthy no matter what the market does will help you sleep soundly in 2019.
Editor, Strategic Trader
P.S. Right now, I believe it’s a great time to speculate if you have a proper plan.
This is exactly the kind of market where “premium shares” thrive. Most average investors have never heard of them. Think of them as a way to capture future gains in a stock (as far out as a decade) without having to fork over a high price for shares.
What I find is people who don’t think it’s a good time to speculate just aren’t doing it correctly. A great speculation gives you the chance to turn a small stake into something meaningful. In the case of premium shares, time is on your side. I explain exactly how they work – and how they can hand you gains 10 times bigger than options – here.
Do you spend any time preparing your portfolio for a crash? How do you do it? Let us know at [email protected].