The Coming Bubble and What’s Inflating It

In a previous report I discussed the phenomenon that is serving as the primary driver in an explosion in the U.S. stock market. And it is this explosion that I believe will take the Dow on to 30,000 before 2020. That phenomenon is the impending implosion of both the European and Asia markets which is forcing investor dollars to seek the only remaining refuge: the American market, the ultimate “safe haven” for the planet’s wealth when fear drives the owners of money to flee up to all other markets (including their own).

With the United Kingdom on the tail-end of its membership in the European Union, the EU is already reeling from the leading effects that investors foresee in trade and currency. Couple that ripple effect with the under-reported economic collapse of Southern Europe and what we’re looking at is a slow-motion death spiral.

The Asian market, which has been historically propped up by China and Japan, is undergoing a death-spiral of its own. Because both of those nations are suffering a demographic free-fall, there simply is not enough growth in population to sustain the sort of taxation that is required to maintain the social benefits that come naturally to socialist and communist regimes.

So when those investment dollars come to realize that there’s little to no upside in an entire market, they bail. And that’s why those regimes are getting so creative with currency manipulation in hopes that a devaluation strategy will encourage a larger trade imbalance to offset the void created by investor exodus.

And that will work for a while… but only for so long. As money from abroad continues to flood the American market, a false sense of expansion continues to feed the growth both U.S. investments and consumer spending. That spending is largely on imported goods, much of which is imported from Asia.

The problem with that is that the growth in exports from Asia simply cannot keep up with the rate of decline due to demographics. As the delta between those numbers grows, the exodus of investment dollars accelerates. And that’s when things in Asia get dire and American markets explode.

But wait, there’s more. What is also driving the growth in the U.S. stock market is the artificially low interest rates maintained by the Federal Reserve. Though the Fed raised the rate earlier this year, the rate is still nowhere near pre-Great Recession levels.

The effects of this policy are two-fold. First, it fuels growth in the very sector that caused the Great Recession in the first place: the housing market. Second, it creates a disincentive for investors to put their money in treasury bonds because there is simply no return. In short, what we’re creating is another massive bubble. How’s that for irony? A new and bigger bubble is forming precisely due to the mechanism put in place to ensure the previous bubble never happens again.

As they say, those who fail to learn from history are doomed to repeat it. And so we will. The question for us as investors is how we’re going to take advantage of this inevitable trend rather than being destroyed financially like so many folks in the Great Recession.

That’s why I’m so big on options. Among my trades in stocks is one that has seen an 80% growth in recent weeks. The option on that same stock has seen gains of over 2000%. In other words, a- say-

  • $10,000 investment in a stock that spikes 80% becomes $18,000… for a nice, quick $8,000 profit.
  • $10,000 investment in a specific option on that same stock spikes 2000% and becomes $200,000 for a $190,000 profit in the same amount of time.

Both opportunities are basically playing the very same bullish stock idea. The option on that stock just amplifies the gains. Every time, I’ve very, very bullish or bearish on a stock or index in the short-term, I take a good look at the options I can use to play the same opportunity.

In the recent trade, $8,000 is a nice return for such a short amount of time. Who can’t make good use of a sudden gain of $8,000. But $190,000 is game-changing. Where $8,000 might be able to help with a few mortgage or rent payments or pay for a portion of one of your children’s tuition fees, $190,000 might pay off the mortgage and/or cover ALL of the present & future tuition for up to all of your kids.

Now, not every trade works out so well but, modesty aside, I am pretty good at spotting stocks ready to move fast and move big. And that’s a formula for exciting stock investments and windfall options trading. I mean just think about it: one day, you invest a little money in a position and only a few weeks later you harvest $8K or $190K in profits from it. THAT’s trading that can really make a difference… without having to wait & hope for years and years, trying to get a whole account to show that much growth.

Where does options trading have the greatest potential? At times when stocks or even whole markets are making big moves up and down. Fast & big gains or losses are the options trader’s friend. The street name for that is volatility. And wow, do we have plenty of volatility in play now… and plenty more to come.

In the overall trend, I stand by my forecast of DOW 30K in the next few years. But between now and then, I expect great volatility. European & Asian market meltdowns will scare most investors but be lucrative opportunity for put buying option traders. The effects of those meltdowns on our market will cause spikes & crashes as the system absorbs them. Spikes & crashes are synonyms for the formula: big + fast = options profits.

I admit options trading isn’t for the faint of heart. The amplification effect on the underlying stock movement goes both ways, meaning upside & downside is amplified when stocks rise & fall. Just as those that take advantage of options expertise can enjoy much greater profits than investing in the stock itself ($190K > $8K), there’s always many more that try to play some kind of guess & hope game and realize steep losses.

Experience really counts with options. It’s because of the expertise I’ve built over many decades that I’ve been able to take advantage of those kinds of gains… again and again. As we move headlong into the coming American explosion (and ultimately the crash) and all the wild volatility between here & there, the opportunities are literally bigger than I can put into words…for those who know what they’re doing.

If you have some interest in learning how to use options, email me at and I’ll be in touch about that very soon. If you have a desire to make more than you are making investing in funds or stocks, you owe it to yourself to at least take a look at how options can help you. Email me and I’ll help paint that picture well!