The market’s next move

Wednesday, 4 April 2018
Melbourne, Australia
By Ryan Dinse

  • Why it’s good to be unpopular
  • The only thing that matters

Hi there,

Ryan Dinse here, filling in for Bernd Struben, who’s currently busy exploring the southern beaches of New South Wales.

And given the state of the markets at the moment, it’s probably as good a time as any to take a holiday.

For the bulls that is.

Market sentiment has turned from greed to fear. Volatility is up.

Headline writers have the thesaurus out and are looking for alternate words for ‘plummet’, ‘shatter’ and ‘bloodbath’.

Though usually they end up regurgitating the same old fear-inducing classics anyway…

‘Sea of red’ is my favourite…

When the fear factory is in full flow, the natural urge is to sell everything and head for the hills. But that’s usually a mistake…

You see moments like this — moments of seeming flux and confusion — are the ones that also provide the best investment opportunities.

For some…

While the fearful freeze, the prepared profit.

And I think I’ve got the ideal system for you to gauge what happens next.

More on that soon.

But first, to the ‘plummeting’ markets…


Overnight, the Dow Jones Industrial Average closed up 389.17 points, or 1.65%.

The S&P 500 gained 32.57 points, or 1.26%.

Yesterday in Europe, the Euro Stoxx 50 index closed down 14.57 points, for a 0.43% loss. Meanwhile, the FTSE 100 was down 0.37%, and Germany’s DAX index fell 0.78%.

In Asian markets, Japan’s Nikkei 225 index fell 96.29 points yesterday, or 0.45%. China’s CSI 300 was down 0.63%.

In Australia, the S&P/ASX 200 closed steady yesterday, down only 7.5 points, or 0.13%.

On the commodities market, West Texas Intermediate crude oil is US$63.61 per barrel. Brent crude is US$68.12 per barrel.

Gold is trading for US$1,336.30 per troy ounce. Silver is US$16.39 per troy ounce.

The Aussie dollar is worth 76.73 US cents.

Bitcoin is US$7,462

Why it’s good to be unpopular

Here at Port Phillip Publishing, we’re never short of an idea of what the next big opportunity is.

Whether it’s Jason Stevenson’s prediction that we’re about to see an almighty bull run on gold, Vern Gowdie’s warnings of a gigantic credit bubble, or perhaps more optimistically Phil Anderson’s theories on cycles that say we’ve got a few more good years in us yet.

Yes, there’s an opinion for all.

You might think that’s not very useful. After all, most institutions — and certainty ones I’ve worked for in the past — have a company line that must be toed.

Blessedly, that’s not the case here.

In my nine months here, I’ve already seen that the only things that matters are the quality of your research, the conviction of your idea and the strength of your argument.

Ideas that you, as an independent investor, can then decide to act upon.

Or not.

After all, no one knows the future for sure.

History has taught us that the next big idea could come from anywhere.

But what marks us out from the mainstream is our focus on seeking out these big ideas first. Ideas that are off the radar of most other analysts.

That doesn’t mean anything goes. But it does mean anything is possible — as long as you can articulate why, and back it up with good research.

Here’s the unfortunate thing though…

You, dear reader, are more likely to sign up to an idea that is popular.

And usually that means part of the general public consciousness.

The dreaded ‘m’ word; mainstream.

I’ll give you a personal example…

When I launched my crypto trading service late last year, it went nuts.

If we launched today, while crypto is in a bit of a lull, it probably wouldn’t be half as popular.

But in a strange way, now is probably a better time to invest. Not that we knew that when we launched of course.

We didn’t know how long and far the bull run would go. Bitcoin might have went to $100,000 before it corrected…

Like I said, no one knows the future.

And to be clear, I’m a massive long-term believer in the fact cryptocurrencies are going to be a major part of the global economy.

A lot sooner than most think.

But my main point was that popular propositions are more likely to be more profitable for us, but unpopular propositions are more likely to be more profitable for you.

Weird, huh?

And thankfully that means our publisher Kris Sayce is always happy to put out a well-thought out idea. Popular or not.

Part of our job is to convince you about the idea we are promoting.

After all, if we believe strongly in something, we want you to benefit.

So, there’s no point being wishy washy in our argument.

In turn we have faith in your ability to make a rational decision — in your own interests — once you’ve weighed up our research.

We hope it sells of course. But it might not.

I’ve watched Greg Canavan’s oil theory play out perfectly over the last six months. His readers have had the chance to bank impressive profits. But again, not a huge amount of interest back when we produced the research last year.

I was part of Kris Sayce’s Crash Market Investor launching July 2017. Not the kind of thing that sold well in the monumental bull run we were (are?) in.

Though, it’d probably sell better this week!

To be clear, we get it wrong too.

No bones about that.

Not all unpopular ideas are good. And not all popular ideas are bad.

So why am I talking about this to you today?


The only thing that matters

I’m of the opinion that if you want to know where the market is going, opinions don’t matter.

Not yours. Not ours.  Certainly not the headlines writers at the Australian Financial Review or Bloomberg.

But here’s the thing…

It’s more likely an idea that isn’t mainstream and isn’t popular, is going to get you better results.

If you think about it, that makes sense.

Imagine being at a house auction in the depth of a recession and you’re the only bidder. You know the person has to sell.

You’d negotiate hard and get a good deal.

Then imagine 12 months later — the economy had recovered fast — and you put the same house back on the market with 20 bidders all eager to buy.

You’d expect to get a good price.

It’s just the basic laws of supply and demand.

When you’re buying it’s better for there to be less demand. Then as the idea becomes popular, you can let the thundering herd of buyers come in and bid prices higher and higher.

Of course, those buyers might never come.

That’s the main risk of investing in unpopular ideas.

For example, uranium prices have been down in the doldrums for about 10 years. The fact that it’s been unpopular doesn’t mean stocks in the sector would have been a good buy at any point.

(Editor’s Note: There are early signs this worm may be turning, though…)

But what if you could gauge the crucial point when an unpopular idea starts to turn?

What if you could see unusual money starting to flow in?

Smart money coming into off-the-radar ideas is a major alert for me.

That’s probably the biggest realisation I’ve ever come to in my investing career.

I love a well thought out idea as much as the next person. I love quality research. I love to try and work out how the economy works and what the next big stock is going to be.

But to make money out of it all, I reckon you just need to monitor one thing.

Money flow.

Where the money is heading will determine what the next big trend is.

Especially at potential turning points, like in today’s markets.

Will it be into gold? Money flow will tell you.

Will it be back into tech stocks as people buy the dip? Money flow will tell you.

Will it be into resources stocks as a huge infrastructure boom gets underway in China, India and the US? Money flow will tell you.

Or will there be a massive recession and cash will once again be king? Or maybe bitcoin? Money flow will tell you.

Opinions certainly won’t.

Sounds too simple?

Well check out this chart:

chart image

Source: Bloomberg
Click to enlarge

It shows the performance of the Us S&P 500 versus the Bloomberg Smart Money Flow Index over a 15 year cycle.

This index tries to measure what the professionals are doing rather than the ‘dumb’ money of retail investors.

As you can see, the smart money (the blue line) tends to lead the general market (the red line). They’re buying before peaks. And selling at them.

In other words, the pros invest before the fact!

Scary, eh?

How do they do it?

There’s lots of reasons they have this advantage. And I’ve just launched a small-cap investment service that will explain this in detail.

Including how you can invest alongside this smart money.

The system looks for small-caps with humungous potential just as smart money is starting to flow into them.

I think in this time of flux it will tell us where to start moving your hard-earned dollars. After all, no matter the market, there’s always a small business thriving somewhere.

If you can find them.

Watching money flow is the key to navigating through times like this.

You can access my research here.

Good investing,

Ryan Dinse,
Editor, Billion-Dollar Breakout Trader