This Key to Future Profits Isn’t What You Expect

Colin’s Note: Our usual beat here at The Bleeding Edge is how to profit from the world’s most powerful tech trends. But from time to time, I like to share engaging insights on how to build wealth from around the business.

That’s why, today, you’ll hear from Wall Street veteran Mason Sexton.

In 1987, he told his clients to short the stock market – 11 days before the infamous Black Monday crash. It took the Dow down about 22% in a single day.

After that, everyone from CNN to Time magazine deemed him an oracle. And The Economist said he could be the “next guru.”

Then, Mason disappeared from the public eye. For years, he’s reserved his market calls for hedge funds that have paid him as much as $10,000 a month for his insights…

But tonight at 8 p.m. ET, he’ll reveal his latest market warning to the public.

He’ll show you how a market event later this month will take most investors by surprise. But for folks who are prepared, Mason says it could be a highly lucrative trading opportunity.

You can register for tonight’s event with one click here. Then, read on below to learn more about Mason’s unusual strategy…

If memory serves, Stan ordered a bowl of fruit.

It was 1985. And I was having breakfast at the Racquet and Tennis Club in Manhattan with Stanley Druckenmiller.

You’ll likely recognize that name. The legendary hedge fund manager has gone 30 straight years with an average annual return of 30% or more.

Today, he is known as one of the all-time greats. But at the time, he was unknown outside of Wall Street.

During the breakfast, we talked about markets, our work, and where stocks might go next.

I came away from the breakfast with a profound respect for the man.

It’s why I’ve followed his work so closely ever since. And it’s why a recent comment of his caught our attention.

You Can Have Your Head Handed to You

In a recent interview with Bloomberg, Druckenmiller said:

If I look back over the last 40 years, I’ve never had a down year, but I’m not sure I’ve ever made money in shorts. I like it. It’s fun, but you can have your head handed to you.

Short selling is when you borrow shares from your broker and sell them with the intention of buying them back at a lower price. It’s a way to profit from a falling stock price.

As Druckenmiller alluded to, it’s a practice that most investors will avoid altogether. And under normal circumstances, that would be sound advice.

But I’ll respectfully disagree on one point. Short selling is not necessarily the risky proposition most think it is. When done correctly, it can be very lucrative.

Let me show you what I mean…

Repeat Winners

From January to mid-July, shares of Elon Musk’s electric carmaker Tesla (TSLA) soared 138%.

The bulls must have been cheering. After a harrowing 2022, it seemed the boom times had finally returned.

I have no doubt that plenty of mom-and-pop investors piled in near those highs. And they’re likely regretting it now.

TSLA has fallen about 30% since those mid-July highs. Folks who bought near the top have lost about one-third of their stake in four months.

My subscribers took a different route.

I recommended a series of short trades starting in June. Here’s how they turned out…

• June 16–June 26: 7.7%

• June 16–July 6: -3.1%

• July 7–August 15: 16.8%

• July 7–August 16: 18.9%

• September 15–September 22: 10.2%

• September 15–September 25: 13.7%

Of the six trades, five were winners. The average gain was 10.7%.

Buy-and-hold investors lost between 25% and 30% on TSLA over the same time.

I’m proud to say that my subscribers had the chance to make these returns with no leverage and a strict risk management system. (Note that the only loss was a small one – just 3.1%.)

Short selling isn’t always the best way to see returns. But it can be a useful weapon in your arsenal.

And if my long-term forecast is right, short selling will be one of the best ways to profit in the years ahead.

Treacherous Time

For the past decade or so, investors could comfortably ignore short selling.

From the depths of the 2008 global financial crisis, the stock market went on a bull run.

Over the past 10 years, for instance, the blue-chip S&P 500 returned 149%.

In such an environment, the strategy was simple.

Buy stocks. Hold them. Forget the shorts.

This was a formula for stock market success. But sadly, those days are ending.

I got my start in finance after graduating from Harvard Business School in 1972. I couldn’t have picked a more treacherous time to begin my journey as a professional investor.

From January of 1973 to the end of 1983, the Dow climbed about 30% in nominal terms. But adjusted for inflation, it got cut in half.

For buy-and-hold investors, that’s a decade of heartbreaking losses. For many of us, it’s unthinkable today.

Living and investing through this time, I remember the countertrend rallies and the cautious optimism they instilled. I also remember the dashed hopes when the rallies would falter and then reverse.

Most of all, I remember the persistent sideways-and-down movement of the stock market that massacred many portfolios.

It’s my firm belief that markets move in cycles. And I believe we’re about to see a replay of this treacherous time.

Can you afford to go an entire decade with nothing to show for it?

Four Commandments of Short Selling

If I’m right, buy-and-hold investors will be sorely disappointed in the years ahead.

Meanwhile, nimble traders will prosper.

I understand this will be a new idea for most. Even in our research service, New Paradigm Research, several readers wrote to us saying they had never sold short a stock. Many more were hesitant to do so.

I’ll tell you what I told them.

When done responsibly, short selling can be highly lucrative. But with all things, you must have a strategy. Here are our four commandments for short selling…

1. Shorts are always a trade, never a long-term hold.

2. You must identify a near-term catalyst that will push a stock lower. This might be important resistance levels in either price, time, or both. We share this type of analysis in our service.

3. You must manage your downside risk with stop losses.

4. You must know your profit-taking objective before ever placing the trade.

If you can’t follow these commandments, then you have no business shorting stocks. But if you can stick to these rules, you’ll be pleasantly surprised by the results.

One more thing before you go…

My research shows that we’re entering a new paradigm for the stock market, and it will require a new strategy. The strategies that served investors well for decades will not perform in the difficult years ahead.

That’s why I’m hosting a special event tonight at 8 p.m. ET. I’ll share my full market prediction – including specific dates you need to prepare for.

The first is November 22. That’s when I expect a market event to kick off that will catch everybody by surprise.

What is this event? And how do you prepare for it?

I’ll reveal everything tonight. So please go ahead and reserve your spot with one click right here.

Regards,

Mason Sexton
Editor, New Paradigm Research