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No-Spin Investment Ideas

Tune Out the Noise

Written by Nick Hodge
Posted November 2, 2012

Last week Nick Hodge was a featured speaker at the New Orleans Investment Conference. The speech he delivered there contains vital perspective and information for all investors, and I wanted to share it with you today.


Christian DeHaemer
for Wealth Daily

I want to start by saying I'm not really a talker. I'm a writer.

My thoughts and ideas come out best on a page, not from a podium...

It's on the page where I've presented investment ideas for the past six years — in the free newsletters Energy and Capital and Wealth Daily and through a paid advisory service called Early Advantage.

When I do that, it's a choppy process. I hop from report to report, from website to website, and from stock chart to stock chart. I refine, delete, and tweak until it's just as I want to say it.

It's important to note that what I publish are ideas. I write about investments I think make sense based on how I see the world. Some people agree with them. A lot of people don't. But the great thing about that is people are deciding for themselves.

They're taking in information and deciding if they agree with it — and if it fits their investment goals on an individual basis. Because getting caught up in groupthink or doing what society, Wall Street, and government tell you to do often isn't in your best interest.

For example, when I started in the investment business, alternative energy was my assigned beat...

It was 2007. I took the job in January and Al Gore won an Oscar for An Inconvenient Truth in February. Then he won a Nobel a few months later — October five years ago.

Solar stocks were literally up 1,000%. Pick any stock with solar in the name, and the chart looked like this:

First Solar Stock 2007

Today you can look at those same charts and see a totally different picture:

First Solar Stock Down 90%

It's almost laughable. Almost.

And take special note of where the Dow was then and now: same level today as it was in 2007. Five years. No net gain.

The entire world had bought into a panacea — and you can see how that turned out...

Investors and taxpayers alike have been burned, millions or billions lost while those on the inside — private executives and government officials — forge on unscathed. It's a pattern we've seen repeated time and time again.puppet love

But it's funny how it happens, isn't it? Investors love bandwagons.

The next big thing. The next hot stock. The next trillion-dollar industry. 

And then we scratch our heads when the bubble bursts, wondering how we couldn't see that was a terrible investment (it actually lost money on most of its sales), or that housing prices had gotten bit out of control (when couples making less than $100,000 per year were buying half-a-million-dollar homes).

Remember the puppet?

It conjures up the perfect imagery for this type of event, because insiders expect you to be a puppet and to buy into whatever they're selling. went from IPO to liquidation in 268 days. Home values are down 30% since that bubble burst in early 2006.

Yes, Wall Street needs, wants, and expects you to be a puppet.

Take the most hyped IPO of this century, Facebook...

Facebook IPO Shares Plummet

Retail investors have gotten hosed on it while company and banking insiders have made millions on the deal.

Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, and Barclays are all being sued for their involvement. But you know what the outcome will be... the same that it's been for Jamie Dimon and JPMorgan's $7 billion trading loss.... for Jon Corzine's stealing of clients' money... for the rampant manipulation of LIBOR... and for the laundering of money for cartels and terrorists by HSBC...


No bank or banker has been prosecuted for any of their criminal acts over the past five years — and make no mistake; these are criminal acts and these men are criminals.

As the late great George Carlin said, “It's a big club, and you ain't in it...”


"It's the same big club they use to beat you over the head with all day long. When they tell you what to believe. Beating you over the head with their media, telling you what to believe, what to think, and what to buy."

They expect you to be a puppet. To buy their hype. To play their game. And to be fine when house of cards collapses, leaving you and me with the cost of their lies.

So as I saw the financial crisis unfold in 2007 and 2008, I committed to never be a part of their game, to look at everything with a suspicious eye, and to trust my intuition when it came to investments — not to blindly follow the PR, propaganda, and spin of companies and governments.


I saw the retirements and nest eggs of millions of Americans wiped out while banks were bailed out. I saw hard workers crushed by foreclosure as the executives who held their loans floated down on golden parachutes...

Remember when Countrywide CEO Angelo Mozilo knew his company was going to collapse, said everything was fine, sold his shares for hundreds of millions in profit, and got to keep most of it?

I vowed to never be a part of or to play that game... to stay outside the system... and to do what was best for me on my own terms, not what convention said I was supposed to do...

And I've been showing people how to do the same ever since.

In fact, that's the reason I'm here today. Brien Lundin, who heads up the New Orleans Investment Conference every year, happened to come across a few of my essays. He enjoyed my perspective and ideas, and reached out to see if I would share them with you today.

So let's see if I can put weekly essays into presentation form...

It Starts with a Plan

You wouldn't believe how many people don't have one. You may even be one of them.

I can't tell you how many times I've heard investors say, “I want to be rich,” or “I want to be a millionaire,” or “I want to be financially independent.”

But none of that means anything... You can be rich or a millionaire and go bankrupt (just look at the long list of singers and athletes that's happened to) — and you can be financially independent by living in the woods and foraging for food, but I'm sure that's not what you want.

So you've really got to think about what your goals and expectations are — and about how you're going to reach them in the confines of the CURRENT MARKET REALITY.

Beating the Dow isn't a plan. Neither is investing in the next big penny stock.

For me the plan involves several layers, and not all of them have to do with investments. You might even consider the first few steps mundane or boring... but they're crucial if you don't want your financial destiny interfered with by Wall Street or the government.

The very first thing is to eliminate and limit debt. Investments can help do that. But even before you invest, it's crucial to limit your obligations.

Payoff student loan and credit card debt if you have any — or, better yet, don't accrue any to begin with.

Of course, this is tough to do. Our consumer economy is designed to function best when you're spending money. Every day of the past few years we've seen what happens when the country spends money it doesn't have.

You don't have to be a part of that herd. You don't have to do what the government and bankers tell you you should do (we've seen where that's gotten us)...

You only have to do what's best for you.

That means really honing in on your goals and creating a financial plan that allows you to reach those goals.

Some people are happy with less and others have enough but are never satisfied. Really think about what you want and need. You might even surprise yourself.

For me, I know I want my own home, no debt, and the ability to do the things that make me happy without worry. That means spending time with loved ones, going hunting and fishing, attending sporting events, traveling, and eating well.

I'll never own a Rolex. I'll never buy a high-end sports car. Those things are fine, but they aren't a part of my plan.

You have to create goals in order to pursue them. And you need a plan to avoid wandering aimlessly.

Both of these things can and should be done ON YOUR OWN.

I can't emphasize how important this is. The only thing a financial advisor is going to do is push you toward the funds he or she is incentivized to sell. But you can buy any of those funds or thousands of others on your own without giving them a cut.

Same goes for money markets, bonds, individual stocks, ETFs and funds, or income plays like REITs and energy trusts.

You can do it all on your own — and I think it's vital you do.

Take part in any matching plans your employer offers. Yes, you may have to buy some of those mainstream funds I just demonized, but the match is free money. And it's automatic. I think we can all agree automatic free money is a no-brainer... Max that puppy out every year.

Open another IRA and fund it as much as possible to take advantage of individual opportunities for retirement ($5,000 per year, $6,000 if you're over 50). Keep a standard brokerage account for any funds in excess of what you can annually contribute to IRAs, and use it for all your other investments.

You can do all this through one institution like Scottrade and Schwab, but do your own research and choose accordingly.

The main thing here is that you're managing everything yourself. Many insurance companies now offer all these options as well. You can have checking, brokerage, retirement, and credit accounts all with one institution.

It's not particularly difficult, either — but you have to commit to doing it, spend time doing it, and read and be interested in all things that relate to your financial life. You need to be your own CEO.

Like anything else, if you aren't committed, you won't succeed.

And now with that out of the way (and before I get too life coachy and preachy), let me show you how I've had success doing just that...

How Wall Street Fails You

I mentioned earlier how you have to reach your goals individually, and based on the current market reality where only those in the club profit.

I also showed you how the Dow is at the same level today it was in 2007 — basically a lost half decade.

Traditional approaches don't work in that kind of environment. But let me show you something else... something far more insightful than saying it's hard to make money in a sideways or rigged market.

Here's a chart of the Dow and S&P since September 2009 — the month I opened up a company-match IRA.

The market is up MORE THAN 40% since then.

Dow Jones September 2009

You wanna guess how much my diversified mutual fund approach has gone up in the same time?

4.9%. It's gone up 4.9% holding a professionally-managed mix of growth and value companies and emerging market plays.

I could've bought a Dow index fund on my own and been up 40%. I only stay in for the company match.Banker Chess

If you tangle with Wall Street like that for all of your financial needs, you'll never get ahead.

You've got to do it yourself. All you are to them is a pawn, a fee that funds their salary.

That's "the new normal," a phrase I'm sure you've heard tossed around...

On one side corporate profits are at record highs. The Dow is marching headlong to pre-Great Recession levels. On the other side, eroding middle and lower classes whose costs are rising (health care, education, food) while income remains flat or falls, but on whom America's consumerist economy continues to depend.

Much of this is being facilitated by the Federal Reserve, its chairman Ben Bernanke, and their plan of continued money printing.

But he's not printing money, per se — he's buying troubled assets from banks that no one else wants to buy (you know, things like mortgage-backed securities). He's doing it, as we learned last month, to the tune of $80 billion per month... and he won't say when he's going to stop.

Helicopter Ben 490 x 302

This is what's keeping the market and banks afloat. In a free market, they would be allowed to fail.

But in the new normal, the government will continue to prop them up at your expense.

The more they do it, the less your dollar is worth.

Precious Metals

It's why the first investment I recommend these days are precious metals. I even gave some to my godson for his 13th birthday.

You see, every dollar the Fed spends on “quantitative easing” makes the dollars in your pocket worth less. But it drives the price of precious metals higher.

It's the reason gold is outperforming the market twice over since 2009.

Gold vs. Dow Since 2009

You should be exposed to precious metals one way or another. You can own gold or silver bullion, a fund that tracks their price like the SPDR Gold Shares (NYSE: GLD), or iShares Silver Trust (NYSE: SLV)... or a fund that is backed by the metals themselves, like the Sprott Physical Gold (NYSE: PHYS) and Silver Trusts (NYSE: PSLV).

You can even own a fund comprised of various gold miners, like Market Vectors Gold Miners ETF (NYSE: GDX).

This is what insiders are doing with their money.

George Soros said in 2010 that gold was “the ultimate asset bubble” and that it was “certainly not safe” — yet this year he DOUBLED his gold holdings. He now owns $134.4 million worth of the SPDR Gold Shares Fund.

George Soros Gold

Hedge fund manager John Paulson, who made billions betting against subprime mortgages during the crash, is also increasing his stake in gold...

His Paulson & Co. fund owns 21.8 million shares of the same GLD fund. He now owns $3.53 billion worth of gold, or about 44% of the company's assets.

Paulson Buys Gold

I doubt you'll find any financial advisor or member of the insiders' club telling you to put 44% of your assets in gold.

In fact, Homeland Security reports have suggested those who gold or who are suspicious of centralized federal authority as terrorists. They want to keep you buying their preprogrammed plan that earns you 4.9% while the market goes up 40%.

But here we clearly see that's what some of the world's richest men and smartest investors are doing.

High Gas PricesThe next part of the strategy I want to talk about is energy.

All you have to do is look at a gas station marquee to understand why.

Let's look at some numbers without any politicians or oil executives here to spin them for us...

Both the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have said the world will consume between 89 and 90 million barrels of oil per day next year.

The only problem with that is the world has never produced that much oil.

The most oil the world has ever pumped is 74.05 million barrels per day. That's about 16 million barrels per day shy of what we'll need next year.

We've been making up the difference with natural gas plant liquids (NGPLs), other liquids, and the oil that's already in the system, either in pipelines or stored reserves. That why the price spikes at the tiniest supply hiccup or event in the Middle East.

Gas shot to $5.00 a few weeks ago in California because one refinery went down.

One refinery. If that doesn't tell you we're living on the margin, cutting it close, I don't know what will...


Now, I'm a simple guy. When I see demand higher than supply, I take it as a bullish signal. I'm bullish on oil and I'll be long until the production outpaces consumption, something I never expect to happen.

I buy oil using the ProShares Ultra Crude Oil ETF (NYSE: UCO). And I buy it any time oil heads below $85.00.

The other simple data I want to look at pertains just to the United States...

You may have heard that U.S. oil production is surging. And that's true. We're producing more oil now than we have in fifteen years, about 6 million barrels per day. This is mostly due to new ways to harvest our vast shale oil reserves, like the Bakken, and new drilling technologies like hydraulic fracturing, or fracking.

But it isn't time to rejoice just yet...

The U.S. consumes more than 18.5 million barrels per day — still leaving us with a 12.5 million barrel per day shortfall.

It won't be easy to fill that gap considering the U.S. has never produced more than 10 million barrels per day, and the closest we've come was back in the 1970s. We're just now getting back up to 6 mbpd after falling to five million a few years ago.

That trend should continue as new share formations are developed and new drilling technologies allow us to get more from each well.

And you can take advantage of this domestic energy boom — in both oil and gas — by investing in energy trusts that pass on oil income from properties in various formations. The Whiting USA Trust I and Trust II (WHX and WHZ on the NYSE) are paying quarterly dividends of $0.68 and $0.89, respectively.

For monthly distributions and more exposure to natural gas, check out the Enduro Royalty Trust (NASDAQ: NDRO), paying $0.14/share per month.

I'd also be looking at downstream plays for historically cheap natural gas, like transportation and infrastructure.

Westport Innovations (NASDAQ: WPRT) makes natural gas engines for big trucks, something energy billionaire T. Boone Pickens has been a champion of. Almost 70% of trash trucks and transit buses sold this year will run on natural gas, and Westport is one of the few pure plays in the space.

So I like gold and I like energy. Gold's the perfect hedge against dollar debasement and future uncertainty. And I like energy because it fuels all global economies and its use is only growing while production gets more expensive...

Land, Food, and Water

But I also like land, food, and water — because they're all essential, non-dilutable assets that will always be in demand. They're outside the grasp of the insiders.

In the market, you can do that with things like the:

  • Texas Pacific Land Trust (NYSE: TPL), which owns millions of acres of oil and farmland in Texas...

  • Or the PowerShares Deutsche Bank Agriculture Long Note (NYSE: AGF), so you can get access to corn, wheat, soybeans, and sugar. They offer a double-long option under the ticker DAG that's a great way to play negative agriculture news like the drought we had this year.

  • Same goes for water ETFs like PowerShares Water Resources (NYSE: PHO), or the global option PIO.

  • And Lindsay Corp. (NYSE: LNN) touches on all three, providing irrigation systems that increase crop yield while conserving water, energy, and labor.

But the very best way to get exposure to land, food, and water is to simply own land, food, and water...

As many acres as you can with a freshwater source if possible. It will grow in value and won't fluctuate with the stock market. I truly believe it's one of the best personal investments you can make.

Now we've covered some hedges, some income plays, and exposure to assets always in demand for a growing global population. It's an approach I use to manage my own portfolio.

High-Growth PlaysAlberta Helicopter Tour

I also explore high-growth opportunities, mostly in the materials space.

Already this year I've doubled readers' money on a few such plays...

One is a shale metal play. I went to tour its 600,000-acre property adjacent to the oil sands in Alberta. You can see me standing on the same soft shale formation as the tar sands.

But it isn't full of oil. The shale on this property is full of high-value metals and minerals like rare earths, uranium, vanadium, and lithium.

In fact, there are so many metals in the land here, you cans see them rusting right on the surface. The value of these resources are in the billions of dollars — several hundred times the stock's current price.

Another stock I've doubled on is an energy technology play.

It's a solar company, but not in the traditional sense. It doesn't make solar cells or panels...

It owns a special coating process called “Absolute Black” that all other silicon solar companies can use to make their products cheaper and more efficient. You can see the difference between traditional and absolute black solar cells in the picture:

Absolute Black Comparison

This company knows solar doesn't work without subsidies — and its technology promises to change that by doubling the efficiency and power output and cutting the cost in half while securing an ongoing revenue stream from companies across the globe.  

It's up over 200% since March, when I toured their R&D facility in Upstate New York. There is much more ahead.

The last high-flyer I'll mention is a Canadian graphite miner.Nick Hodge with Large Flake Graphite

It owns the largest high-purity graphite mine in the world, a material that sells for over $2,000 a ton...

And they have one-and-a-half million tons of it.

I went to visit the mine in Ottawa last December.

Since then, the bankable feasibility has been completed, the path to mine construction has been cleared, and the company is on the verge of a securing a partner to help finance mine construction in exchange for some of the graphite, which is used in batteries and steelmaking.

The resource is estimated to be worth over $3 billion, but the company is valued at less than $100 million.

It won't stay that way once the mine is constructed.

So there are many opportunities for the future. And you'd be smart to take advantage of them.

But there are also many challenges right now. And you have to prepare for those as well — by taking your finances into your own hands, managing everything yourself, and taking advantage of strategic opportunities that derive from the events and actions you see in the news every day.

Stay plugged in as much as you can by reading voraciously.

Make logical connections between what you see and how it bears out in the market.

Think for yourself. Stay as independent and self-reliant as possible...

Only you have your best interests in mind.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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