Jeff Bishop’s Total Alpha Options Masterclass: Is Gold About To Blow Up Like Oil?

Jeff Bishop shares his thoughts with Total Alpha members about gold. We don’t have enough gold on hand to cover if everyone decided to exercise their futures contracts and take delivery of physical gold. And that, could be a disaster in the making, said Bishop

Market pundits are still trying to wrap their brains around what happened in crude oil last week— but there’s already talk of the next freight train…

I’m talking about gold…and get this…Jerome Powell knew about this!

A few Total Alpha members emailed articles asking me for my thoughts on gold.

And after looking into it for the better part of the weekend, I feel obligated to share them with you, because there is a risk that isn’t being discussed.

We’ve already seen gold prices charge higher to challenge its 2012 highs.

GLD Monthly Chart

Apparently, the lessons from the Great Recession didn’t make their way to every corner of the market.

Why do I say that?

Because we don’t have enough gold on hand to cover if everyone decided to exercise their futures contracts and take delivery of physical gold .

And that, my friends, could be a disaster in the making.


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How gold trading works

Gold works much in the same way that crude oil does. Most of it trades in futures contracts. They trade with different expiration cycles.

Unlike option contracts, futures contracts require you to take delivery of the item if you hold it at expiration, rather than if you choose to.

You might have noticed that there are two types of oil in the market – west texas intermediate and brent. Those are based on where oil is settled (U.S. vs U.K.). The same thing occurs with gold.

Most gold futures settle as cash. That means they never take delivery of the gold itself.

But what if you wanted all that gold? Could you get it?

That’s an interesting question and the crux of our potential dilemma.

Gold costs

Unlike oil that requires specialized storage, gold can pretty much sit wherever you want it to. On the other hand, getting it to where you want is tricky.

With oil, we didn’t have enough storage to meet the supply. In this case, there isn’t enough potential gold or gold in the right places to meet demand.

Despite the disconnect in markets recently, people hoard gold during times of uncertainty. You’ll see people start buying up the physical asset when and where they can.

Except, right now, you can’t do that.

In fact, if you try to buy gold bullion online, not only will you be paying a huge premium over the spot market value, you’ll be lucky to find any.

That means someone’s got to ship it to your location and that costs money…lots of money that isn’t necessarily being factored into everyday traders’ decisions.

The transport dilemma

As I mentioned, you’d have a tough time getting gold here in the U.S. That seems a bit nutty, but it’s also a large part of why we don’t use the gold standard anymore.

In fact, Jerome Powell alluded to this in his testimony last year as to why we don’t want to go back to the gold standard. There simply isn’t enough gold to cover all the contracts in existence.

Recently, the Chicago Mercantile Exchange (COMEX) and London markets changed their rules to allow 400-ounce bars in London to be substituted for delivery of 100-ounce bars on U.S. contract that was divided up four ways.

Seems reasonable right?

Here’s where the rubber meets the road.

Every time Chicago markets fall short on supply they need to do two things.

  1. Melt down 400-ounce bars into four 100-ounce bars
  2. Ship that to Chicago (during a Pandemic no less)

That’s a large reason why the difference between gold futures and spot prices has been wildly diverging.

Gold Futures (top) vs Spot Gold (Bottom)

We could already be in crisis mode

Initial rumors suggested that some bullion banks that were supposed to make physical delivery in Chicago essentially went under. In theory, that’s what led to this new fractional futures contract from the COMEX.

Congressman Mooney of West Virginia caught wind of the entire matter and demanded answers as to the change. As he eloquently noted, if there are widespread defaults, you don’t have nearly enough gold on hand to cover delivery, which could create financial chaos.

On top of all this, the delivery problems between the U.S. and London may be only part of the issue. Back in London, there could be an issue with delivery between banks.

London trades what’s known as ‘unallocated gold’ or ‘gold credit’ which is issued by the bullion banks. When market makers don’t believe the other can fulfill their obligations, the markets start to freeze up. This might be why gold trading volumes in London have fallen while gold futures volumes have skyrocketed.

How that impacts the ETFs

Thankfully, the GLD ETF trust holds its gold bullion in London, so any transport issues shouldn’t become an issue with the ETF.

However, if there really is a liquidity issue between the market makers, then the ETF could be in for a world of hurt. It derives its prices from the London markets, not gold futures. If participants really are afraid to trade with one another, then share prices of the ETF may get thrown out of whack.

Nonetheless, because the ETF is backed by physical assets, any dislocations from price would be temporary. AKA – you could find some cheap buying opportunities on some crazy news!

When in doubt…

…leave the heavy lifting up to me. I’ve been through this a time or two and know how to weave my way through traffic. You join me and get exclusive access to my live portfolio. There, you’ll be able to see exactly how I make my trades in real-time along with text alerts.

Why put yourself through the headache of figuring out the gold markets?

Click here to register for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop: This Chart Says Which Sectors Can Survive and Thrive

Real Estate Investment Trusts (or REITs) are publicly traded companies that own commercial real estate and generate massive amounts of cash flow from tenants. And they’ve crushed the market for decades.

I love real estate investment trusts for one reason.

They make gobs of money.

Now for those who don’t know…

Real Estate Investment Trusts (or REITs) are publicly traded companies that own commercial real estate and generate massive amounts of cash flow from tenants.

And they’ve crushed the market for decades.

Equity REITs were the top-performing asset class in the stock market dating from 1972 to year-end 2019.

NAREIT reports that equity REITs have returned 11.82% a year since the days of the Nixon administration.

Meanwhile, the S&P 500 has averaged 7.35% a year.

That’s nearly 50 years of outperformance.

It feels like a secret, doesn’t it?

Well, there’s a reason for that. Real estate doesn’t get a lot of attention because – let’s be honest – there’s nothing sexy about office space, storage buildings, or industrial centers.

But when you follow the money, you learn fast that this is where long-term investors build wealth.

NAREIT estimates that the value of the commercial real estate industry in 2018 sat between $14 TRILLION and $17 TRILLION.

And all of this property generates incredible amounts of money for investors from rents, tax benefits, and price appreciation.

But there’s one other benefit to REITs.

They can tell us what the markets think will thrive and what will survive in the COVID-19 crisis.

Check this out.

Ignore Earnings Season

“What companies will survive?”

That’s the question swirling across trading floors, media channels, and even Zoom cocktail parties.

The COVID-19 outbreak in the U.S. has peaked right at the start of the earnings season.

Over the next few weeks, we’re going to see some wild swings in stock prices. Companies will release earnings, offer mixed outlooks, and likely eliminate any forward guidance on financial expectations for 2020.

We’ll see dividends slashed. “At-home” stocks like Netflix (NASDAQ: NFLX) will likely rally.

But many GREAT retail and hospitality companies – which thrived before this outbreak – now face potential bankruptcies and defaults.

So, who does the market think will thrive during and after the coronavirus outbreak?

The answer is found inside this chart.

This chart highlights the performance of Real Estate Investment Trusts in March and since the beginning of 2020.

Now just to remind you, REITs own a variety of different types of properties that offer steady cash flow and provide steep appreciation upside. REITs also offer incredible tax benefits including pass-through income and the ability to deduct depreciation (you can write off about 3.6% of your property value every year against any income you’ve generated from property).

Now, some REITs own properties like warehouses or timberland.

And some own apartment buildings or office space.

Others like Tanger Factory Outlets (NYSE: SKT) own shopping centers, which are suffering due to social distancing guidelines and the shut down of the economy.

There are many different categories, and all of them offer a glimpse into real-time expectations for the economy, various industries, and their tenants.

Rising rent prices and occupancy rates suggest an expansion of a sector and expected success for companies in those industries.

Falling occupancy rates, rising delinquent rent payments, or lower rent prices suggest lower demand for products and services in a specific industry.

I track REITs to get a better sense of how big financial institutions – which own the lion’s share of these publicly traded stocks – feel about specific industries moving forward.

It also tells us who is surviving or even thriving.

For example, data centers – the companies that own storage facilities for technology companies, servers, and call centers – they were up more than 10% in March.

This makes sense.

The economy has shifted dramatically from large office space to work-from-home setups.

And more people have embraced e-commerce, a data intensive industry.

It’s honestly that simple. When you count companies like Amazon, Microsoft, and Google as customers, you have a sector that isn’t going to run out of demand.

That 10% gain for Data Center REITs indicates that Wall Street believes a lot of technology companies are safe right now.

Meanwhile, lodging REITs – which own hotels and conference centers – plunged. Retail REITs – particularly ones that own shopping malls – are trading at levels that suggest massive bankruptcies for their clients.

So, we will likely avoid hospitality companies and retailers until we start to see optimism about the real estate companies that count them as tenants.

Other sub-sectors that have held up well include industrial REITs – which are expected to see extraordinary demand as companies move their manufacturing back to the United States.

Also, we’ve seen higher demand from cannabis growers that use warehouses for cultivation to meet rising demand.

The market thinks a lot of deep-pocketed pharmaceutical stocks and supply chain companies are going to meet their rent agreements and rebound in the future.

Infrastructure REITs – which include cell towers – were also off just 1.7% in March. Shares have risen this month – as companies expect continued demand from their customers that include AT&T Corporation (NYSE: T) and Verizon Communications (NYSE: VZ).

Also, these REITs will see an explosion in demand from the widespread adoption of 5G technology.

Yet when I look at this chart – something really surprising stands out. I think that these big investors are overreacting with a 33% drop in March for one sector.

And that has created a unique long-term opportunity that might never return again.

Make Medical Real Estate a Long-Term Holding

While the REIT chart tells us a lot about equity REITs, it does reveal a somewhat surprising disconnect in a few different industries. I see some bottom-feeding opportunities right now.

Medical REITs – the firms that own hospitals – are still off sharply from their February highs.

Given that we are facing a health crisis, how exactly are hospitals going out of business or lacking the money they will need to pay rent? After all, the U.S. government has pledged unlimited funding to the hospital industry.

For example, Medical Properties Trust (NYSE: MPW), for example – owns acute care hospitals.

These are the same hospitals that are being overrun with patients. These hospitals are going to pay their rent and aren’t going out of business. Yet it’s trading about 29% lower than its 52-week high and pays a dividend of 6.2%. The dividend has effectively been guaranteed by the U.S. government over the next year thanks to funding efforts to keep hospitals running.

I’m going to dive into this opportunity tomorrow.

But more importantly, I’m going to show you how to make even more than 6.2% on that dividend and generate real money from a mispriced opportunity in the market.

If you’d like to learn more about my investment strategies then make sure you’re signed up for the Strategic Investors Summit. You’ll receive my brand new eBook, the 10X Portfolio Blueprint, hear interviews from industry experts. As well as, the main event when I go live April 21st at 8 PM ET. 

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Jeff Bishop Total Alpha: These Are The Stocks That Will Be Historic Buys

Jeff Bishop Total Alpha Strategy is starting to eyeball some stocks for his Total Alpha portfolio and even his personal retirement accounts.

Stocks are starting to get into rally mode—on the hopes the country has flattened out the curve.

And while we’ve seen a surge over the last two sessions.

There are still plenty of good companies which remain beaten up.

I’m starting to eyeball some stocks for my Total Alpha portfolio and even my personal retirement accounts.

Look, it can be difficult to buy these stocks when markets experience a freefall, and the global economy looks bleak.

But you have to stare fear in the eyes and just say: Not Today Pal. 

You see, this is when the savvy trader starts to load up.

However, some stocks won’t recover, while others will take a long time to.

Allow me to explain to you how I find value, and what compels me to buy a stock for the long haul.

The Three Keys To Survival

Do you know why most civilizations started near bodies of water? Location was the single most critical factor determining whether a society flourished. Large bodies of water provided a source of drinking water, food, and commerce.

So what is the equivalent to corporate bodies of water?

I see three main components that tell me whether a company will survive.

  1. Diversified Business Lines – For most of my life, I always looked at diversification as taking away focus from a company’s core capabilities. This epidemic is forcing me to rethink my ideas. Single-line businesses are the highest risk companies at the moment. Royal Caribbean isn’t likely to be around next year. However, Apple offsets hardware sales with music and content services, so at least they have some revenue generation right now.
  2. Minimal Operations – Many companies out there aren’t doing a lick of business. The Cheesecake Factory (CAKE) even said they wouldn’t pay rent this month on any of their locations. However, Wayfair (W) told the market that people stuck at home keep ordering furnishings. A fair amount of companies continue to operate at some level. That helps them retain both customers and talent, precious commodities in this market.
  3. Strong Balance Sheet – The U.S. government may have stepped up with loans to the business community. Yet, companies with large amounts of cash on hand will be able to fully take advantage of the same values we see as retail investors.

I understand that it may be tough to figure out who fits these criteria. That’s while I compiled a shortlist of some companies I want to own as they get cheaper.

Apple (AAPL)

Tim Cook faces a lot of obstacles at the moment. Supply chains have been disrupted. Customers may pull back spending. A huge portion of their workforce lives in Coronavirus hotspots.

Yet, the company has enormous amounts of cash to draw on. I’m talking $100b in cash and short-term investments. That’s more than the size of most major companies.

Regardless of the lockdowns, the company still ships orders to customers, and they continue to bring in money off their content services.

You can see how Apple’s services revenues have climbed over time to account for 20% of their total. Those revenues aren’t likely to disappear during this lockdown.

With such a strong balance sheet, I could easily see Apple picking up smaller startups for pennies that add to their long-term growth. They’ve got plenty of credit to pull on if they want to swing for the fences.

Southwest Airlines (LUV)

Airlines have been obliterated during this pandemic. Most states aren’t allowing for travel, while international flights have become virtually non-existent.

That’s why I like Southwest as they’re the best of the bunch. Southwest doesn’t have the international exposure that a lot of the other companies do. Their point to point business model seems much more likely to work as the patchwork of local economies start to reemerge.

I love the fact that they only have $1.85b in long-term debt, with over $4b in cash on hand. Compare that to Delta Airlines (DAL) with $2.8b in cash an$d 2.29b in long-term debt, and you can see why I like Southwest.

Visa (V)

Let’s be honest – we’re all shopping from home right now. If you haven’t bought something in the past week, you’re probably an outlier.

No one is working with cash right now for two reasons. First, most transactions are moving online. Second, no one wants to touch cash since it could carry the Coronavirus.

Visa is a great company that continues to work at reasonably full capacity. Yes, transactions are down overall, but they aren’t getting cut out like other businesses. We all need to buy groceries, even if that’s our one outing for the week.

Selecting My Entry

With any of these stocks, I don’t have a particular price in mind. Rather, I plan to scale into these trades throughout the next several months.

In the meantime, they’ll be plenty of plays along the way. One of the best ways to get on board is with my Bullseye Trade of the week. This is my highest conviction trade, where I aim to get 100%+ return on the trade.

Click here to learn more.