Investing

Prepping for World War III

By Adam O'Dell  |  July 11, 2018

Everyone was talking about “World War III” in January 2017.

Trump was just being inaugurated. And former Soviet leader Gorbachev was quoted in a Time magazine article saying, “It all looks as if the world is preparing for war… the nuclear threat once again seems real.”

Yikes!

Fast-forward 18 months… and now everyone’s talking about the threat of a global trade “war.”

*Sigh…*

Can’t we all just get along?

I’m no geopolitics expert. And I’ve long realized just how difficult and foolish it is to even attempt a prediction about the outcome of highly complex scenarios such as these.

I have my opinions, like everyone. And yes, I’m concerned about our future.

But frankly, my guess at what could trigger the next global economic crisis – “World War III,” “Trade Wars,” or otherwise – is as good as anyone else’s (hint: only a guess).

However, I DO know which investment strategy I’ll be going to war with whenever, and wherever, calamity strikes.

That strategy is… trend following!

Long-time readers know well my love affair with trend following. I’ve written and talked about it for eight years now!

The trend-following philosophy underpins my Cycle 9 Alertservice, which I’ve been running successfully since 2012. And I’ve incorporated trend-following principles into my 10X Profits market-timing model.

But the reason I’m talking about trend-following today – alongside growing fears of a global trade “war” – is that it’s the ONLY strategy proven to provide protection (and profits) during times of extreme crisis.

And here’s the chart that proves it…

This chart from an AQR white paper titled, A Century of Evidence on Trend-Following Investing. It shows the 10 worst performance periods for a conventional “60/40” portfolio (60% stocks; 40% bonds). The drawdowns of that 60/40 portfolio are shown above in purple.

As you can see, each of those periods of sharply negative performance coincided with notable financial or geopolitical events.

World War I…

The Great Depression…

Stagflation…

The oil crisis…

The dot-com bubble…

The Great Financial Crisis…

Each of these major world events triggered significant losses in most investors’ portfolios – even the “conservative” portfolios that dutifully held 40% in bonds.

In contrast, the diversified trend-following strategy was not only immune to each crisis, it was able to provide strong positive returns – acting as the perfect hedge to traditional stocks-and-bonds portfolios.

Kathryn Kaminski – MIT Ph.D. and trend-following expert – coined the term “crisis alpha,” to describe the profit potential that trend-following uniquely provides during major, lasting crises.

The trend-following strategy’s ability to provide strongly positive returns during times of crisis is perhaps its most notable and persistent feature.

During World War I, everything was down, but trend-following was up.

The same thing happened during the most recent Global Financial Crisis, in 2008.

Everything was down, but trend-following was up.

Given the fact that the trend-following strategy has a 100-plus year track record of positive returns, and given that it’s one of the only strategies I know that performs best in times of crisis… I’m convinced that a trend-following investment strategy will be the only place to hide during the next global crisis – whether that comes from a trade war, a nuclear war, or otherwise.

One of the easiest ways to invest in a truly diversified trend-following strategy is through the Guggenheim Managed Futures Strategy Fund (Nasdaq: RYMFX), one of the biggest and longest-running trend-following funds readily available to retail investors.

Shares of RYMFX gained 20% between September and November of 2008. This was when Lehman Brothers was going bankrupt and everyone thought all financial assets were destined for a dirt nap.

Most markets were spiraling lower, indeed. U.S. stock sectors were down between 21% and 54% during the September to November timeframe.

Really, everything was down.

Everything except for U.S. Treasury bonds (up 5%)… and trend-following funds, like RYMFX, which was up a more meaningful 20%.

I’m no worrywart or fear monger. I’ve had a lot of success finding great investments in up, down and sideways markets, alike. And we’ll continue to home in on the very best “bright-side” opportunities, here, and in my trading services, Cycle 9 Alertand 10X Profits.

But for anyone who’s at least a bit concerned about the next “war,” or financial markets crisis, a small allocation to the Guggenheim Managed Futures Strategy Fund (Nasdaq: RYMFX) should help you sleep a little better at night.

That’s why RYMFX is our featured pick this month…

Action to take: Buy shares of the Guggenheim Managed Futures Strategy Fund (Nasdaq: RYMFX).

Like any “insurance policy,” we shouldn’t expect much from this “crisis alpha” strategyduring the good times. But it’ll be a saving grace when things get rocky.