Three Easy Ways to Profit From a Downturn

It takes nerves of steel to profit from a market downturn. Here's how to do it. [Liberty Through Wealth]( SPONSORED [You Won't Believe Who We Found Inside This Dilapidated Warehouse]( [Abandoned Warehouse]( Two men were just found inside this abandoned-looking Long Island building. One is the most famous TV personality of all time. The other is a money legend. [More details here.]( Tell Us... Do you feel your portfolio is properly diversified? [Click here to answer.]( THE SHORTEST WAY TO A RICH LIFE How to Profit From a Bursting Bubble Nicholas Vardy | Quantitative Strategist | The Oxford Club [Nicholas Vardy] "The bull walks up the stairs. The bear jumps out the window." - Wall Street adage I've written a lot recently about [financial bubbles](... and how we may be in one. Several readers have also contacted me in the past few days with the same question. "Nicholas, if indeed we are in a financial bubble, how can I profit from it?" That's the question I will answer today... Let's start with the current state of the markets. [Set Stop At: Kroger]( [Click here]( to watch Nicholas' latest video update. [Tech stocks]( sold off sharply in the past two weeks, their worst pullback since the market bottomed in March. On the one hand, tech stocks may overcome their jitters this week. Seasonality is in their favor. The period between November and May is historically the strongest time of the year for the U.S. stock market. On the other hand, the sell-off in technology stocks may be the start of a sustained market move down. Even if this pullback isn't sustained, it does highlight your need for a strategy for when the market bubble does pop. Luckily, today there are more ways than ever to profit from a market downturn. Let me explain... SPONSORED [Gold Chart]( you own gold?]( Somebody just decided to buy a lot of it... And I think I know why. [Click here for details on a brand-new way to invest in gold.]( The Challenge of Making Money From a Bubble It's one thing to identify a bubble. It's another thing to profit from it. If you buy into a bubble, you risk buying at or near the top. If you sell short (bet on the price falling), you risk that the stock will keep going up. You can be wrong on both sides of the trade. And you wouldn't be alone. Many [brilliant people in history]( have gotten burned by bubbles. Sir Isaac Newton - the father of mechanical physics and calculus - lost a fortune by betting on the [South Sea bubble](. As Newton put it, "I could calculate the motions of the heavenly bodies, but not the madness of the people." How Sir John Templeton Made a Fortune on the Dot-Com Bust You don't need a Wharton MBA to make money from the popping of a financial bubble. Being a student of human psychology and financial history will serve you far better. Take the example of [Sir John Templeton]( the pioneer in global investing. Templeton is best known for investing in Japan in the 1950s. That was when "Made in Japan" was synonymous with cheap toys and shoddy merchandise. At one point in the 1960s, more than 60% of the Templeton Growth Fund's assets were in Japan. Templeton also had the savvy and discipline to exit Japan when it became overvalued. He sold his positions in Japan well before the stock market collapsed in 1989. Most importantly, Templeton had a grasp of [financial history]( - and the ebbs and flows of financial markets. In 1999, Templeton predicted that most internet companies would be bankrupt within five years. He then put his money where his mouth was and very publicly shorted the U.S. tech sector in December of that year. At first, his positions went against him. But by March 2000, Templeton's bet against the dot-com stocks turned profitable. He made $90 million in a matter of months. And with the benefit of 20/20 hindsight, his timing was almost perfect. It's a terrific irony that Templeton - a global value investor - made his quickest fortune by shorting U.S. stocks at the ripe old age of 88. How to Profit From a Looming Market Collapse Like Templeton, I've also made money betting against stocks. But I've had it easy. I have opportunities that Templeton did not have. Today, with the help of sophisticated software Templeton could not even dream of, I can track hundreds of [ETFs]( (exchange-traded funds) trading on U.S. stock markets. These ETFs track hundreds of different strategies for different types of markets. That makes today a special time in financial history. As recently as the global financial crisis of 2008, most investors were powerless in the face of a sharp market sell-off. Betting against the market by selling stock short required special permission from your broker. Shorting was also expensive. Trading futures was even further out of reach. That has all changed with the advent of specialized ETFs. Today, inverse ETFs allow you to [bet against the market]( as easily as buying or selling a stock. Say you're convinced tech shares are set to crash and you want to profit from that sharp downward move. You can bet against the Nasdaq-100 by buying the ProShares Short QQQ ETF (NYSE: PSQ). If the index drops 10% today, this ETF will rise by the same percentage. There are even leveraged versions of this short bet. Invest in the ProShares UltraShort QQQ ETF (NYSE: QID), and when the Nasdaq-100 drops 10%, the fund will jump around 20%. Finally, the ProShares UltraPro Short QQQ ETF (Nasdaq: SQQQ) offers triple-short exposure. A 10% tumble in the Nasdaq-100 could generate up to 30% returns. Invest in inverse ETFs at the right time, and you can make more money, more quickly, once that bear jumps out the window. (That said, understand that the pricing of leveraged ETFs is reset daily. That means they are for short-term speculators only.) The bottom line? Once you identify a financial bubble, there is probably an ETF that will allow you to profit from it bursting. But caveat investor! You are wading into treacherous waters. Betting against a bubble takes nerves of steel and a cast-iron stomach. Even Sir John Templeton had to endure three months of pain when his bets against dot-com stocks went against him. And when you're in the middle of it, this can seem like an eternity. As the great British economist (and failed speculator) John Maynard Keynes observed, "The market can remain irrational longer than you can stay solvent." Good investing, Nicholas [Leave a Comment]( For the latest news from Nicholas, connect on [Facebook]( and [Twitter](. JOIN THE CONVERSATION [Facebook]( [Facebook]( [Twitter]( [Twitter]( [Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0AIt%20takes%20nerves%20of%20steel%20to%20profit%20from%20a%20market%20downturn.%20Here's%20how%20to%20do%20it.%0A%0D [Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0AIt%20takes%20nerves%20of%20steel%20to%20profit%20from%20a%20market%20downturn.%20Here's%20how%20to%20do%20it.%0A%0D MORE FROM LIBERTY THROUGH WEALTH [Are Corporate Insiders Shouting "Buy"?]( [How to Eat Better, Live Longer... and Get Richer]( [Moody Mr. Market Gives Swing Traders an Opportunity]( SPONSORED [Hot IPO Stock Gets Business From 25 Fortune 100 Companies]( [60 Minutes]( Walk outside an Ikea, Walmart, Home Depot or Macy's and you might just see an unusual set of boxes. People wonder what in the heck they are - after all, the technology was developed for Mars. [Find out what's going on here.]( [The Oxford Club]( You are receiving this email because you subscribed to Liberty Through Wealth. Liberty Through Wealth is published by The Oxford Club. Questions? Check out our [FAQs](. Trying to reach us? [Contact us here.]( Please do not reply to this email as it goes to an unmonitored inbox. [Privacy Policy]( | [Whitelist Liberty Through Wealth]( | [Unsubscribe]( © 2020 The Oxford Club, LLC All Rights Reserved The Oxford Club | [105 West Monument Street](#) | [Baltimore, MD 21201](#) North America: [1.800.589.3430](#) | International: [+1.443.353.4334](#) | Fax: [1.410.329.1923](#) [Oxfordclub.com]( The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of printed-only publications prior to following an initial recommendation. Any investments recommended by The Oxford Club should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. The information found on this website may only be used pursuant to the membership or subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club, 105 W. Monument Street, Baltimore MD 21201.