Economy

When “Recession” Spells “Opportunity”

By John Del Vecchio  |  August 19, 2019

Recession… it might just as well be a four-letter word.

Last week, when the yield curve inverted, the market sold off hard. The Dow Jones Industrial Average plummeted 800 points. Investors fear that a yield-curve inversion always signals a recession.

“Big deal,” I say.

Recessions happen. At first, they may be painful. Then, they go away. In fact, there might be 10 or more recessions in my lifetime.

Also, the yield curve has been inverting for a while. Earlier this year, I wrote a report about stock clunkers for 2019 and beyond. The action in the yield curve made me bearish on banks, foreign banks especially. Indeed, many of those stocks have been taken to the woodshed.

But, again, so what? Stocks go down, too.

I think we’re focusing on the wrong things right now. Sure, a recession looms — they always do!

A much bigger deal, when it comes to the problem I like to think I’m helping you solve, which is how to build sustainable wealth over time, is the fact that you’re earning next to nothing on your savings.

How To Get Paid While You Wait

Imagine you’ve been comatose for the last 10 years but have just snapped out of it. I tell you we’re in the longest bull market ever. Where do you think you’d think interest rates would be?

There’s no way you’d say we’d be cutting them…

And, when we do get to a recession, the Federal Reserve will have little ammunition to fight it.

Meanwhile, central bankers are stealing trillions of your hard-earned dollars by paying you no rate of return. It’s the biggest theft in the history of the world. And nobody will ever do time for this heinous.

We can sit there and do nothing. We can let these pesky pickpockets take our money. Or, we can sharpen our pencil and refine our approach.

I chose the latter.

The Secret To Wealth

After I fired up my computer programs and ran some analyses, I stumbled on a secret…

If I start with the 300 highest-yielding stocks in the market and then run them through my Forensic Accounting Stock Tracker (FAST) model, the returns go up dramatically. And the yields are juicy, too.

Not all dividends are the same. Some companies have a high yield for a reason. The stock price is imploding. When the dividend gets cut, your portfolio goes with it. FAST helps weed out the poseurs from the payers – those stocks that pack the quality to sustain and grow their dividend over time…

That’s the kicker. You really want to get rich? Find stocks that consistently raise their dividends.

You get paid while you wait for the share price to rise. It’s a delicious double-play: more income and more capital gains. What’s more, your risk is reduced relative to the broader market.

When the recession comes, all stocks will get hit, at first. That’s the nature of these things. At that point, dividend growers are simply “on sale”; they’ll make better buys at these initial lower levels. They’re perfect way for investors like you and me to deploy our “dry powder” when things get… interesting.

As such, beginning with the September issue of Hidden Profits, I’ll be highlighting this refined approach. I’ll also recommend two stocks a month instead of one.

More income and more capital gains: That’s what we’re after in Hidden Profits. Click here to give it a “no obligation” test drive…

 

John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Profits newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR