It’s Time to Think Long Term

By Charles Delvalle

Dear Reader,

Today’s letter may be quite different from what you normally read.

Perhaps it’s because I’m writing to you from the Latin Quarter of one of the most beautiful cities in the world - Paris.  But even though this city inspires a passion I could never fully achieve back in the States, the letter will be different because of something else.

After taking a two-hour walking tour of Paris in which I saw Notre Dame, the Louvre, the Parthenon, Saint-Sulpice, the Eiffel Tower, and walking along the Seine River, I took a train out to the French countryside and stayed at the very last chateau built before the French Revolution.

There I met some of the biggest leaders in our industry.  And what they said had a profound effect not only on how I view a successful business, but also a successful investor.

I noted that every successful business in our industry was built with an eye toward the long term.  In other words, every decision made was well researched and thought out months, sometimes even years in advance.

This is because the leaders in our industry knew that if they kept coming up with short-term solutions, they’d continue to need short-term solutions all the time.

For instance, take our politicians.  They lower and raise taxes, patch up Social Security, patch up Medicare, and then they say that it’s fixed.

Meanwhile, all they’ve done is pass on the burden of fixing the problem to a younger generation, sometimes until the next year.  Why don’t they sit down, have a long discussion, and actually fix what’s wrong?

The United States Constitution wasn’t drafted in two nights.  It took a lot of arguing and time to finally get it right.  And with a topic as big as Social Security, it’s clear that it would take a long time to fix.  But it’s sad to not see our leaders trying to fix it.  All they want to do is patch it up again for a few years and hope it doesn’t break while they’re in office.

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I hope you see what I’m trying to say here.  When you focus on the short term, you’ll find that you’re constantly making big decisions.  When you focus on the long term, on the other hand, you’ll find less stress because a lot of the big decisions may have been made a long time ago.

This contrast between taking a short- and long-term approach has its implications toward investing as well.  Too many people focus on the short term, when they shouldn’t be.  They buy into a company with fantastic long-term fundamentals.  And then after they’ve made 20 percent, they sell the stock.

That usually ends up being a huge mistake.  And it’s one I was guilty of a few years ago.  I bought into a company called Inco, one of the largest miners in the world.  After making a cool 30 percent, I sold and bought something else.

Had I held on to Inco just a few more months, I would have banked a tidy 80 percent.  The other investment I made didn’t give me that return, that’s for sure. 
In other words, had I honed in on the long-term prospects of Inco, which were fantastic, I would’ve made a lot more money.

You see, successful investors make money by seeing long-term trends, and reacting to them before they take full effect.  Think of all the great commodity investors such as your Wednesday editor, Rusty, who has held on to some companies for 5-6 years, banking multi-thousand-percent profits on them.

That’s the mark of an investor who knows what he’s doing.

Currently, I hold a stock in my personal account that has shot up over 60 percent since I bought it.  Sadly, I can’t tell you the name for legal reasons, but just understand that the gain I have now is just a drop in the bucket.  Over the next year, I fully expect it to keep rising another 200-300 percent.

When I first learned how to trade options, I took a very short-term approach.  Most of my trades were done within 5-7 days.  That’s quick.  And while it worked at first, I found myself losing a lot of money in the end.

After fine-tuning my approach, I realized that if I just looked at weekly charts, I’d be able to take on bigger gains.  And that’s exactly what happened.  Suddenly, I was banking more triple-digit winners.  And the funny part was that it was happening in a relatively short amount of time (under 30 days).

A recent trade in my Global Profits Hotline trading service shot up 34 percent in seven days.  I sent an alert to my subscribers to sell off only a third of their position.  I did that because 1) I wanted to capture the gain and take some risk off the table, and 2) I know that this stock could go much, much higher in the next month.

My hope is that many of those subscribers actually listened to my recommendation to not sell their entire position.  There is just so much more room to grow for this amazing company.

In the end, we live in a fast-paced society.  We want our food in minutes, our gas pumped in quickly, and to go 0-60 mph in three seconds.

But if you take this approach to investing, you’re going to have a hard time making money.

Good Investing,

Charles

[Ed Note: On Wednesday, Charles told his subscribers of Global Profits Hotline to capture a seven-day gain of 34 percent.  While this stock’s option could easily rise another 100 percent in the next month or two, you won’t be able to capture this opportunity.  But in the next week, Charles looks to send out yet another recommendation with the same type of potential.  To find out how to get these recommendations, click here.]

Market Watch

Is a Recession in the Works?

By Charles Delvalle

That seems to be the question on everyone’s mind.  Well, let’s take a look at what the evidence tells us.  And it’s not reassuring.

We have consumer confidence that is quickly dropping.  We had a loss of jobs last month, a first in a very long time.  On Wednesday, housing inventories hit an 18-year peak.  The yield curve was inverted for more than a year.  We have a liquidity crisis that is now spreading to the UK.  The Fed is dropping interest rates rapidly.  And now expectations for a slew of economic reports have been drastically lowered.

And let’s not forget the fact that Christmas spending is projected to basically suck.

So what do you think?  Are we headed for a recession?  I would say the writing is on the wall.  If we don’t hit a recession sometime next year, I would be very shocked.

The best way to protect yourself in this type of environment is to get into income-bearing companies and give yourself flexibility to play short-term downdrafts.

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