Three Bulletproof Investment Strategies for 2020 and Beyond

In this video, George Gammon shares his three investment strategies that he has developed through trial and error and learning from the greats in the industry. He emphasizes the importance of buying when things are cheap and selling them when they're expensive, playing by using probabilities, setting up a purposeful and structured portfolio, portfolio construction, money management, and the mental game.

Buy When Things Are Cheap And Sell Them When They're Expensive

• This strategy allows us to play by using probabilities.

• It allows you to set up a purposeful and structured portfolio.

• Portfolio construction is what most investors pay the least amount of attention to.

• Retail investors get caught up on trying to decide what stock to buy or trying to time a top or bottom in the market.

Invest In What You Understand

• Invest in what you understand.

• Don't invest in something just because someone else is doing it.

• Do your own research before investing.

Focus On Cash Flow

• Focus on cash flow instead of capital gains.

• Look for investments that generate passive income.

• Real estate is a great way to generate passive income.

Conclusion

George Gammon's investment strategies are easy to understand but hard to execute. By following these strategies, investors can increase their chances of long-term success.

Portfolio Construction

In this section, George discusses the importance of capital preservation and how buying cheap and selling expensive can help achieve that objective.

Buying Cheap and Selling Expensive

• Buying cheap and selling expensive gives us a distinct edge in the mental game.

• Focus on preserving the capital you have right now as your number one priority when making an investment or speculation.

• A real-life example of buying cheap and selling expensive is oil. When oil is under $30 a barrel, it's relatively low, so buy oil or oil producers. When it gets over $80, start thinking about selling.

Real-Life Example: Oil

In this section, George uses a chart going back to 1950 to explain how buying cheap and selling expensive works in real life using oil as an example.

Oil Chart Analysis

• Commodities are extremely cheap right now relative to stocks.

• If we drew a green line at $30 a barrel and a red line at over $80 a barrel, historically speaking, when it's over $80, it's relatively high; when it's under $30, it's relatively low.

• Keeping it simple: buy oil or oil producers when oils under thirty dollars a barrel and when it gets over 80 start thinking about selling.

Buffett Indicator

In this section, George explains the Buffett indicator or market cap to GDP ratio using charts from 1980 to 2020.

Market Cap to GDP Ratio Analysis

• The blue line represents the market cap of the stock market compared to gross domestic product of the United States.

• Since quantitative easing, the market cap of the stock market has gone completely parabolic and is higher than GDP.

GDP and Stock Market Analysis

In this section, the speaker discusses the relationship between GDP and the stock market.

GDP vs Stock Market

• The chart shows that GDP has crashed even more than it did back in the GFC but the stock market has gone up to all-time highs.

• The probabilities are against you if you're going long on the S&P, Dow or broad market.

• The speaker's strategy is not to buy an S&P Index Fund because it is not cheap.

Commodities Analysis

In this section, the speaker talks about why he thinks commodities are cheap right now.

Money Supply and Gold Prices

• Adding M2 money supply to analysis is important when looking at gold prices.

• Although gold isn't cheap, it isn't as expensive as it was back in 2011 when it was at the top of its last bull cycle.

Oil Prices

• As nominal oil prices have gone down, M2 money supply has gone parabolic. Therefore, using this metric oil has never been cheaper relative to the supply of money.

• The speaker's strategy is to wait for oil to get under $30 a barrel before buying again.

Value Investing Strategy

In this section, the speaker talks about his value investing strategy.

Buying Cheap and Selling Expensive

• The main takeaway from his strategy is buying a dollar for 50 cents.

• Value investors have more probabilities on their side over time.

Example of Buying Cheap

• The speaker bought coal ETF in March, which was way out of favor due to the push towards climate change and green energy. However, he thought it was cheap and went in to buy.

• The ETF that he purchased is up over 30% since March.

Best Performing Stock and Sector

In this section, the speaker talks about the best performing stock and sector.

Tobacco Industry

• The best performing sector overall since the mid-1990s has been tobacco.

• The best performing stock when you reinvest dividends going back to 1968 is also from the tobacco industry.

Portfolio Strategy

In this section, the speaker discusses his portfolio strategy and how he allocates his investments.

Allocation of Portfolio

• The speaker uses a 1080 10 allocation strategy for his portfolio.

• He allocates 10% to insurance (physical gold), 80% to investments (dividend-paying stocks, rental properties, or bonds that pay interest), and 10% to speculation (commodities with high upside potential).

• The speaker defines investments as assets that pay you to own them, providing peace of mind and reducing stress.

• He cites Altria as an example of a stock that has performed well due to its high dividend payout.

Speculation

• The last 10% of the portfolio is allocated to speculation.

• The speaker defines speculation as something with a lot of asymmetry in risk-reward ratio.

• Commodities such as uranium, copper, oil, coal, Bitcoin, gold miners, silver miners or silver itself are all examples of speculative assets.

Recap

• To summarize, the 1080 10 portfolio would look like this:

• 10% allocated to Gold

• 80% allocated to things like dividend-paying stocks, rental properties or potentially Bonds in jurisdictions outside the United States Japan and Europe

• Speculation maybe Bitcoin silver miners gold miners uranium copper or even coal

The Dragon Portfolio

In this section, the speaker introduces the concept of the Dragon Portfolio and explains why it is superior to a traditional 60/40 portfolio.

Introduction to the Dragon Portfolio

• The Dragon Portfolio was created by Chris Cole and is explained in his paper "The Allegory of the Hawk and Serpent."

• The portfolio consists of equities, gold, fixed income or bonds, long volatility, and a commodity trend following strategy.

• The speaker believes that the 2020s will be a time frame of deleveraging and that having a portfolio like the Dragon Portfolio will be essential for capturing upside during this period.

Components of the Dragon Portfolio

• Equities make up most of the portfolio at 24%, followed by gold at 19% and fixed income or bonds at 21%.

• Long volatility makes up 21% of the portfolio while a commodity trend following strategy makes up 18%.

• While these two components require more management than traditional portfolios, they are vital for capturing upside during a deleveraging event.

Diversification

In this section, the speaker emphasizes the importance of diversification in investing.

Why Diversify?

• Diversifying your portfolio is important not just to spread out risk but also because we live in an imperfect world where unforeseen events can affect our investments.

• COVID-19 is a perfect example of how unpredictable events can impact our portfolios.

• Even if you are bullish on one asset, such as gold, having it make up 100% of your portfolio can lead to wild fluctuations due to factors you may not have considered.

• It is impossible for any one person to understand the entire global economy perfectly and predict what will happen in the short and mid-term.

Reasons to Diversify Your Portfolio

In this section, the speaker discusses the importance of diversifying your portfolio and provides reasons why it is necessary.

Eliminating Emotion

• Emotions can affect investment decisions.

• Having one position in a portfolio can lead to emotional attachment and anxiety.

• Examining whether a position is too big for a portfolio is important.

Dry Powder

• It's important to have cash on the sidelines for when asset prices drop.

• A cost-benefit analysis should be done to determine if having cash on hand is worth losing purchasing power due to inflation.

Political Risk

• Diversifying political risk means having assets outside of one's jurisdiction.

• Having a plan B, such as getting a second passport or owning an RV, can provide options in case of social unrest or other issues.

• Banking should also be diversified to avoid risks like bail-ins.

Introduction and Market Update

The speaker introduces himself and gives an update on the market.

Speaker Introduction

• No bullet points with timestamps available.

Market Update

• No bullet points with timestamps available.

Investing in Gold and Silver

The speaker discusses investing in gold and silver as part of a diversified portfolio.

Benefits of Gold and Silver

• Gold and silver are tangible assets that hold their value over time.

• They are a hedge against inflation and currency devaluation.

• Gold and silver have historically performed well during times of economic uncertainty.

Risks of Investing in Gold and Silver

• The price of gold and silver can be volatile.

• There is a risk of theft or loss when holding physical gold or silver.

Real Estate Investing

The speaker discusses investing in real estate as part of a diversified portfolio.

Benefits of Real Estate

• Real estate provides cash flow through rental income.

• It is a tangible asset that holds its value over time.

• Real estate can provide tax benefits through depreciation deductions.

Risks of Investing in Real Estate

• Real estate requires significant upfront capital investment.

• There is a risk of vacancy, which can lead to negative cash flow.

• Property values can fluctuate based on market conditions.

Stock Market Investing

The speaker discusses investing in the stock market as part of a diversified portfolio.

Benefits of Stock Market Investing

• Stocks provide potential for high returns over the long term.

• Diversification within the stock market can reduce risk.

Risks of Stock Market Investing

• No bullet points with timestamps available.

Investing in Cryptocurrencies

The speaker discusses investing in cryptocurrencies as part of a diversified portfolio.

Benefits of Cryptocurrencies

• Cryptocurrencies provide potential for high returns.

• They are decentralized and not subject to government control.

• Cryptocurrencies can be used for international transactions without currency conversion fees.

Risks of Investing in Cryptocurrencies

• The price of cryptocurrencies can be highly volatile.

• There is a risk of hacking or theft when holding cryptocurrencies.

Diversifying Assets Outside of California

In this section, George Gammon discusses the importance of diversifying assets outside of California and suggests ways to do so.

Getting Assets Outside of California

• Take out a fixed-rate loan against the equity in your home and buy a property in a more friendly jurisdiction.

• Sell your home and buy a more modest one in California, then move additional equity to another state or jurisdiction.

Diversifying Currency Risk

• Determine what expenses are denominated in. For Americans, it's usually dollars.

• Don't have 80% of assets denominated in currencies like the British pound, Euro, or Colombian Peso.

• Variety is important but make sure that the majority of assets are denominated in the currency where bills need to be paid.

• Consider holding physical gold as it helps maintain purchasing power.

The Importance of Fixed-Rate Debt

In this section, George Gammon explains why having fixed-rate debt is important for taking advantage of inflation.

Benefits of Fixed-Rate Debt

• Allows taking advantage of any type of inflation by paying back loans with cheaper dollars in the future.

• If inflation rate runs higher than interest rate, there's a transfer of wealth from bank to borrower.

• Example: Locking in a 3% fixed-rate mortgage over 30 years while experiencing 10% inflation results in a transfer of wealth from bank to borrower due to the difference between actual inflation rate and interest rate.

Hyperinflation Scenario

In this section, George Gammon provides an example scenario for hyperinflation and how it affects mortgages.

Hyperinflation Scenario

• Example scenario involves taking out a $100,000 mortgage with 30-year fixed-rate at 3%.

• In 10 years, a loaf of bread costs $100,000 due to hyperinflation.

• The borrower can pay off the entire loan with the same amount that it would cost to buy the loaf of bread.

• The underlying asset (home) could still buy the same amount of goods and services as it did when bought.

Three Bulletproof Investment Strategies for 2020

In this section, George Gammon provides an overview of his three bulletproof investment strategies for 2020.

Three Bulletproof Investment Strategies

• Diversify assets outside of California by taking out a fixed-rate loan against equity in home or selling home and buying more modest one in California then moving additional equity to another state or jurisdiction.

• Diversify currency risk by holding physical gold and making sure majority of assets are denominated in currency where bills need to be paid.

• Take advantage of inflation by having fixed-rate debt.

Introduction to George Gammon's Rebel Capitalist Pro

In this section, George Gammon introduces his Rebel Capitalist Pro membership program and offers a one-dollar trial for interested individuals.

Introduction to Rebel Capitalist Pro

• George Gammon introduces his membership program called Rebel Capitalist Pro.

• The program is designed to provide members with exclusive access to investment strategies and insights from experts in the field.

• Interested individuals can sign up for a one-dollar trial at georgegammon.com/pro.

• The trial provides access to the program's forum where members can interact with each other and ask questions.