A few weeks ago, on stage in Miami, I called Chinese stocks The Trade of the Decade…
In front of hundreds of subscribers in person at the Fillmore Theater (and many more through a live webcast), I explained how local Chinese stocks are down by half in U.S. dollar terms since the end of 1993 – a colossal bust – and how they are incredibly cheap today.
I called Chinese stocks “The trade of the decade… I’m just not sure which decade.”
[ad#Google Adsense 336×280-IA]If you’re a subscriber of mine, you know that I have been a buyer of Chinese stocks in my True Wealth newsletter.
The brutal reality so far is, we have lost money…
When we entered our China trades, I explained to my subscribers that we could trade China with limited downside risk (through relatively tight stop losses), with incredible upside potential.
Our upside potential is literally hundreds of percent, as Chinese stocks are so cheap.
I am sad to report that we must cut our small losses on our Chinese stocks, now.
The trades are going against us. Our Chinese stocks have either passed their stop losses or are bumping up against them.
I hate to sell. But we have to. This is actually the way you make big money… You have to concede some battles to win the war.
Don’t believe me?
Consider the case of my True Wealth Systems newsletter…
The latest issue came out last week. We have 13 positions on our recommended list. They are up, on average, 77%. The worst performer is UP 10% – and that was recommended last month, so it hasn’t had time to catch up to the others yet. The oldest position is just over two years old, so I’m not cruising on past success.
We have no losers on our recommended list. That is not a misprint… We have no losers on our recommended list because we sold the few positions that went against us for small losses. So now we’ve ended up with a portfolio of winners.
As my friend Alex Green says, you need to think of your portfolio like a rose garden – trim your weeds and let your roses bloom to their fullest. In other words, get rid of what’s not working, and do NOT be in a hurry to cut your winners early.
I don’t want to sell my Chinese stocks. Chinese stocks will be the trade of the decade – someday. I just don’t know when.
At the conference in Miami, one of our subscribers came up to me and said “Steve, I’ve got you figured out… You are good at what you do. You’ve taught me a lot. And you’ve found some really cool ideas. But I’ve learned that you’re sometimes early with those ideas.”
I can live with that. I am surprised by how long it takes for some ideas to catch on in the mainstream… like gold/collectibles a decade ago, or U.S. stocks and real estate in the Bernanke Asset Bubble a few years ago.
Getting back to China… it appears that I am early, as my subscriber accused.
I would rather cut my losses now, and wait for a new day – wait for the start of a legitimate uptrend – before I consider getting back in.
I have been wrong so far. It is time to minimize the pain of being wrong, and cut those losses now.
This trade will deliver hundreds-of-percent returns someday… But it’s foolish to hang on and hope today.
I’m out… for now. I suggest you do the same… As our True Wealth Systems track record shows, cutting small losses and letting your winners ride works. It’s time to cut those small losses in Chinese stocks today…