Capital Waves
Capital Waves Investing: How to Profit From the "New Normal"
[Editor's Note: As a former hedge fund manager and Wall Street insider, Shah Gilani made a living tracking - and profiting from - capital flows. Now his "Capital Wave Forecast" newsletter has kicked off 2011 with 17 straight winners. These winning stock picks have racked up a stunning 554% in combined gains in a matter of months. And you can become a part of Gilani's next success story by clicking here.]
Buy-and-hold investing is dead.
In the aftermath of the global financial crisis, the fact is that there are far too many strong financial institutions and armies of traders manipulating the financial markets. And that has relegated buy-and-hold investing – a hands-off strategy that for decades was a mainstay for retail investors – to the rubbish heap.
Today's investor has to employ a hands-on approach that uses so-called "capital waves" – the huge swaths of cash that flow from one market to another around the globe – to generate quick profits, says Money Morning Contributing Editor Shah Gilani, a former trader and hedge-fund manager whose trading service, the Capital Wave Forecast, has kicked off 2011 with 17 straight winners.
"Trading is the new normal," Gilani said in an interview. "Capital movement is the benchmark of normalcy."
Gilani recently sat down with Money Morning Executive Editor William Patalon III to discuss the recent successes of his trading service – and to give readers a glimpse of what's to come in the financial markets.
"There were several capital waves that ebbed and flowed in the first quarter that created opportunities for us," said Gilani. "There was money moving in and out of Treasuries, the euro, stocks, and commodities."
Identifying and understanding "capital waves" is the first step to unlocking massive amounts of wealth and not getting beached by Wall Street, according to Gilani. The second step is to avoid trying to fight the tides of investment capital that are swirling from market to market in the modern world. Instead, investors should ride their momentum to big-time gains.
What follows is a full transcript of Gilani's Money Morning interview. In it, he discusses the areas in which he's had success predicting profit-making opportunities this year, as well as his current investment prospects.
To read about what market strategies Gilani is using, please read on…
The Seven Golden Rules That Will Keep You Safe in Today's 'New Normal' Markets
[Editor's Note: Capital-wave-investing proponent Shah Gilani practices what he preaches. In his new advisory service The Capital Wave Forecast, Gilani notched triple-digit gains in less than two weeks on each of three recommendations to subscribers: a short play on the euro, a long trade on the VIX, and another short trade on Goldman Sachs Group Inc.]
Pundits are talking about the "New Normal," a not-so-subtle hint at the sub-par growth that's expected from the U.S. economy.
Those pundits have picked the right book. But as far as investors are concerned they're reading from the wrong chapter. The "New Normal" isn't just about the economy. It's an epic story about not-so-great expectations – for the financial markets.
And – unlike its Dickensian counterpart – this tale doesn't have an especially happy ending.
For the seven rules that will let you profit in "New Normal" markets, please read on…
Capital Wave Investing: How to Transform These Four Global Threats Into Portfolio Profits
[Editor's Note: Capital-wave-investing proponent Shah Gilani practices what he preaches. In his new advisory service The Capital Wave Forecast, Gilani notched triple-digit gains in less than two weeks on each of three recommendations to subscribers: a short play on the euro, a long trade on the VIX, and another short trade on Goldman Sachs Group Inc.]
U.S. investors can be excused for feeling as if the sky is falling right now. After all, there are a lot of falling objects crushing investor sentiment, consumer confidence, financial portfolios – and any hope that the U.S. stock market can generate the kind of returns that will ever make investors whole again.
But take heart: Even during a period that seems to be this dark, investors need to remember that all is not lost. Even with the threats that seem to dominate, the world now offers a new investing horizon – filled with new opportunities. Instead of staring into the abyss of an unknown future, investors can profit handsomely by identifying the key capital waves and macro trends and then using that knowledge to rebuild their portfolios from the top down.
Before that portfolio overhaul can begin, however, investors need to understand the specific challenges that they face in today's global stock markets.
To understand the top capital-wave-investing plays – read on…
Dramatic Drops and Short-Covering Rallies Illustrate How Capital Waves Lead to Profits
[Editor's Note: Capital-wave proponent Shah Gilani practices what he preaches. In his new advisory service The Capital Wave Forecast, Gilani notched triple-digit gains in less than two weeks on each of three recommendations to subscribers: a short play on the euro, a long trade on the VIX, and another short trade on Goldman Sachs Group Inc.]
The Greece rescue package is signed and sealed, but is still far from being delivered. It took three tries, but this time global investors believe the EU got it right. Investors celebrated yesterday (Monday) with a relief rally that touched virtually all of the world's key financial markets – and that served as a strident counterpoint to the near-freefall that gripped the U.S. stock market on Thursday.
So is it finally time to shelve our fears of financial contagion, meaning the financial shocks that start with one nation or market and spark a conflagration that spreads through interdependent entities in plague-like fashion?
Definitely not. In fact, hang onto your hats: We have just entered the brave new world where a butterfly flapping its wings in China can fan a market fire on the other side of the world. There are more contagions to come. But because of forces known as "capital waves," the same heat that burns some investors can also generate substantial profits for those who understand how to position themselves.
To understand how capital waves bring profits, please read on…
How to Stop Greedy Banks From Killing U.S. Capitalism
A white paper on bank reform delivered to Congress and regulators last week by the Association of Mortgage Investors – the powerful lobbying group that represents huge institutional investors – warns that if the securitization market isn't radically reformed "it will be difficult if not impossible for capital market investors to return to funding economic activity."
What the report doesn't say is that banks – standing in the way of bank reform – don't want a simplified, standardized, and transparent securitization market, because that would revitalize free-market disciplines and undermine the control they exercise over the credit markets.
Right now, the stock market is discounting news about tight credit conditions. But analysts worry about an increasing disconnect between rallying stock prices and the hoped-for rebounds in consumer-driven growth and the U.S. housing market – both of which are struggling with a lack of access to credit. This disconnect is fostering fears of a stock-market correction.
Investors need to understand exactly what's at stake here. And they need to know how to protect themselves and – even more important – how to profit from the volatile-but-powerful capital waves that will result from this fundamental battle over our future.
"Capital Waves" Point to High-Tide Profits for Commodities, Tech and Emerging Markets
[Editor's Note: After Shah Gilani's recent essay on "capital-wave" investing generated our biggest response in months, we sat down with the retired hedge-fund manager and Money Morning columnist to find out about the profit opportunities he's looking at right now. Here's what Gilani had to say.]
It was November 2008, and a global financial crisis that started in the U.S. credit markets had already leveled such one-time corporate stalwarts as Lehman Brothers Holdings Inc. (OTC: LEHMQ), Fannie Mae (NYSE: FNM) and American International Group Inc. (NYSE: AIG). The U.S. economy was in an apparent freefall, and stock prices wouldn't hit bottom until early the following March.
In the midst of that chaos, Money Morning's Shah Gilani made five predictions, anticipating five looming "aftershocks" he said were certain to come true.
He was correct on all five counts – every prediction came true.
This wasn't the first time Gilani has made such bold predictions – and been proven right. In July 2008, for instance, when crude oil was trading at a record high of $145 a barrel, he predicted that the "black gold" was destined for a major fall – even though many pundits were calling for prices to spike as high as $200, $250, $300 and even $500 a barrel.
Once again, Gilani was right.
Gilani, a retired hedge-fund manger, Money Morning columnist and noted expert on the global credit crisis, has been able to do this time and again for one simple reason: He understands the power and profit potential of the global financial market's "capital waves."
"Capital waves create some of the biggest trading opportunities in the markets today," Gilani said in an interview last week. "Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't."
And the profit plays that loom are shaping up as the biggest and best, yet.
For the full transcript of Gilani's detailed question-and-answer session, please read on.
Money Morning Mailbag: A Look at the Past Shows Us the Profit Opportunities Now Headed Our Way
[Editor's Note: We want to hear from you! Do you have a comment, a suggestion or story idea, or a question? Let us know at mailbag@moneymappress.com (**). And be sure to check back for responses to reader questions and comments.]
Question: Recently, several readers have questioned the significance of the removal of the Glass-Steagall Act in 1999, the current financial meltdowns and the similarities between now and the short period leading up to the Great Crash of 1929. In my readings a number of years ago, I came upon the testimony of Mr. Robert Kuttner, who appeared before the U.S. Committee on Financial Services on Oct. 2, 2007. Would you consider reviewing that testimony and sharing your thoughts with our readers?
| - Michael R. Scott |
Answer: Thank you for pointing me to Robert Kuttner's October 2007 testimony (which readers can access by clicking here.)
Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery
[Editor's Note: If you missed Shah Gilani's recent essay on "capital-wave investing," you might want to go back and take a look. We've been deluged with upbeat comments from readers wanting to learn more - including this reader query asking if the banking sector's reluctance to lend will blunt the U.S. rebound. Read Gilani's response ... and make sure you don't miss Gilani's free video report on capital-wave investing, which will be released to readers at 2 p.m. EDT today (Thursday).]
Question: How can banks justify not giving out mortgage money in light of the fact that they can now qualify their applicants to a level not previously seen? I am talking about literally millions of people applying for loans with 800-plus FICO scores and Loan-to-Value (LTV) Ratios that are better than ever before.
How can banks and lending institutions take our money and then turn around and shut nearly everyone out – which simply prolongs this recession? Can anyone explain why the present administration and regulatory bodies are not forcing the banks to loan monies to qualified applicants?
At this rate, we will be dead soon. Without borrowing, we will die.
• (Signed) Living in Costa Rica
Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays
[Editor's Note : If you missed Shah Gilani's recent essay on "capital-wave investing," you might want to go back and take a look. Frankly, we were blown away by the enthusiastic response from readers, many of whom included some terrific follow-up questions. One query in particular - from a reader named Barbara - was especially impressive for its depth and detail. The question - and Gilani's equally detailed response - is posted below.]
Question: Shah, your article on capital-wave investing was outstanding. In fact, I would love to see a follow-up piece for those of us who are not traders and who are not out and about following the current short-term market trends.
For example, when you talk about the Obama administration's determination to keep interest rates low – this has consequences. What will those rates be in, say, a three-year to five-year time frame? What if the European countries keep having implosions like Greece – meaning that countries like Portugal, Spain and Italy follow suit?
In your opinion, will that eventually sink the euro, or does the Eurozone have to bail out those countries with a plan that's similar to the one that it is developing for Greece? What happens to other currencies in either of these scenarios?
Finally, is it your opinion that China is trying to curtail its growth to keep itself from overheating? Can Beijing successfully continue to do this – or will this blow up in China's face? If you look down the road, say, three to five years, what do you believe the consequences, if any, will be?
Again, Shah, this was a really informative article. I would love to hear your views on what you actually see playing out in each of these areas during the next few years.
Answer: Thank you for your kind words about the article and for taking the time to pose your questions – which are excellent ones, by the way. Let's take a look at them, one at a time…
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