The Ultimate Portfolio to Protect Yourself from the "End of America" Scenario
March 18, 2011 by Dan Ferris
Now that my colleague Porter Stansberry has made national news with his dire "End of America" video, I’m hearing a major question over and over…
To paraphrase a hundred emails, the question goes:
If you guys are right about the "End of America" prediction and a currency crisis, why on Earth would you recommend investing in U.S.-based stocks?
Just in case you’re not familiar with the "End of America" scenario, know that it isn’t off in the future. It’s right here, right now.
What you read and see every day is what the End of America looks like. It’s not a Mel Gibson post-apocalypse movie…
It looks more like this: The Fed keeps interest rates at 0 percent, prints $1.5 trillion in one year, and then decides to become the biggest holder of Treasuries. A scam-oriented financial system penalizes savers and rewards the biggest risk-taking speculators. Home prices plummet. The government takes over the car manufacturing, home mortgage, financial services and health care industries. The dollar is worth 35 percent less than nine years before.
Unemployment is 17 percent, but the government reports it as 9 percent. Inflation is causing food prices to spike, but the Fed reports inflation is under control. Moving money around in any amount is risky. Leaving the country and reentering it is risky. Huge protests take place (like in Wisconsin) when politicians propose spending cuts. The protesters can’t stand the thought of not riding on the taxpayers’ gravy train.
The End of America isn’t "out there." It’s right here, right now. The question isn’t what will you do if it gets here, it’s what are you doing now that it’s here?
For most folks, the thought of owning U.S. stocks in this sort of environment doesn’t make sense. For me, it does… But you have to own the right stocks. And the right stocks are a group of companies I call "World Dominators."
World Dominators are big companies that are No. 1 in their industries. They dominate their markets, obliterate competition, gush cash, pay rising dividends year after year, and—since they probably aren’t going to rise 300 percent in a week—are generally underappreciated by the average investor.
World Dominators ought to be the core of your stock portfolio, the anchor that performs for you over the long term, providing safe, steady returns (mostly via relentless dividend growth) and providing you with an income that will beat inflation better over a lifetime of investing than all the gold stocks in the world. They are the ultimate "armor plated" wealth-preserving vehicle for the "End of America."
World Dominators are so hard to compete with they sometimes get sued for it, like when the Justice Department sued Microsoft and the European Union sued Intel.
Of course, it didn’t matter to either company. Microsoft still has 90 percent of the personal computer operating system market. It’s got $40 billion in cash and securities and less than $12 billion in debt. It still has 80 percent gross profit margins. Intel lost its $1.25 billion lawsuit. The result: It is one of the financially strongest companies on the planet, stronger than most U.S. banks. It has $21 billion in cash and less than $3 billion in debt, and it makes 44 times its interest expense in pretax profits. It has 50 percent-plus gross profit margins.
World Dominators are so good at what they do, regulatory bodies often try to prevent them from putting other, higher-cost providers out of business, like when Walmart was denied a license to start a bank. All the big Wall Street bankers knew it would put them out of business by not charging super-high fees.
When World Dominators get cheap enough to buy, they are the only "sure thing" in the stock market. We bought Intel in April 2009. Less than two years later, we’re up 50 percent. Likewise, my 12% Letter readers are up 76 percent in just over two years with cigarette giant Altria, which they bought in November 2008 (26 percent of that gain is from dividends alone). Payroll dominator Automatic Data Processing is up 51 percent since we bought in October 2008.
World Dominators are not frauds. They’re not financially weak. They’re not losing money. Their businesses aren’t shrinking. They might have laid a few people off and had lower sales in 2008 or 2009… But for the most part, the crisis left them untouched compared with almost every other business in the world.
You want to know what the greatest investor in history owns? His name is Warren Buffett and he owns World Dominators. His company, Berkshire Hathaway, is Coke’s biggest shareholder. He also owns Procter & Gamble, Johnson & Johnson, Walmart, UPS and ExxonMobil. Warren Buffett buys World Dominators because he knows they’ll continue to beat the competition for many years to come.
If you’re concerned about defending your wealth from the End of America, absolutely own some gold, silver, energy and agricultural assets. But keep a good chunk of your portfolio in World Dominators.
Bought at the right price they are the greatest stock investment idea ever. They offer safety. They offer large and growing income streams. They offer huge profit potential. And right now, many of them are as cheap as you’ll ever see. It is truly a once in a lifetime opportunity to get started.
Editor, The 12% Letter
PS: For more insight and actionable investment advice on protecting your wealth in a difficult market, please click here.