Ask Doc It's the biggest financial news of the week...
And if you're like me, you're already tired of it.
We've talked before about the traders who get their tips from Reddit and other social media sites responsible for driving price spikes in "meme stocks" like GameStop (GME) and AMC Entertainment (AMC). It doesn't take long for such stocks to fall after these traders artificially inflate the share prices.
And this week, it happened again... all because of one tweet.
Shares of video-game retailer GameStop ended last week around $18 before soaring to nearly $65 earlier this week. And as we write, shares have collapsed to around $30 and still falling... all within one week.
If the quick climb and subsequent crash doesn't tell you enough, it wasn't GameStop's great business that fueled GME's price jump. It was shortsighted investors who don't understand what makes a good investment.
Now, a lot of these investors say they want to one-up big Wall Street hedge funds... and I get it. As a former Wall Street trader, I can tell you professional investors aren't worried about helping the little guy succeed.
The truth is that investing in the stock market is a gamble. No matter what you invest in, you could lose 100% of your money. But there are smart gambles, and there are dumb gambles.
I've already seen people saying they bought into the recent GME excitement around $60... And it took just a few days for those folks to lose 50%.
Maybe you're the type of trader who likes the adrenaline rush you get from making huge, risky bets. But that's not how I want to invest for the long run.
Who really wants to sit in front of a computer screen all day staring at their trading account watching the wild swings of volatile stocks?
We've said before that we expect volatility to rise this year. And my colleague Greg Diamond agrees. But he has a way to profit from rising volatility...
Greg has developed a strategy that has been battle tested, both from his experience managing a billion-dollar hedge fund and his success as a Stansberry Research editor. It's not just for big institutions on Wall Street to use...
With Greg's system, you can learn how to not only avoid the huge losses that Greg says are on the horizon... but to actually make the next few months more profitable than ever.
Now, let's dig into the Q&A... As always, keep sending your comments, questions, and topic suggestions to [email protected]. My team and I really do read every e-mail.
Q: Do humans with higher levels of blood cholesterol have more heart attacks and strokes than people with lower levels? What is considered normal for most people? – D.T.
A: While modern medicine promotes cholesterol as the main cause of heart disease, it's really only one small possible factor. Some other, more important contributors include smoking... family history of heart disease... being overweight, especially carrying excess weight around the midsection... age (65 and older)... high blood pressure... inactivity... and stress.
What infuriates me the most is that many people fail to understand that having high cholesterol does not mean you will have a heart attack.
We know this from one simple fact: More than half the people who suffer heart attacks have perfectly normal levels of cholesterol.
In the most recent issue of my Retirement Millionaire newsletter, I went into full detail on the dangerous cholesterol myths that the medical establishment keeps holding on to. (If you're not already a subscriber, click here to join today.)
Still, elevated levels of low-density lipoprotein ("LDL") cholesterol – the so-called "bad cholesterol" – can be a troubling sign. If your LDL levels are above 99 milligrams per deciliter, it's time to consider a lifestyle change... like a diet that reduces your risk of cholesterol-producing inflammation.
Q: Doc, if the dollar is not backed by gold, what is it backed by... air? What is the value of a dollar based on? – D.S.
A: Before 1933, gold literally was money... gold coins could jingle in your pocket. But in 1933, President Franklin D. Roosevelt made it illegal for U.S. citizens to own gold or gold coins, upsetting two centuries of stable money...
For most of the 200 years prior (going back to England), an ounce of gold was worth $20.67. Major governments had actually committed to giving you gold for paper money if you demanded it.
FDR changed all that. A month into his new presidency, he ordered all U.S. citizens to immediately exchange all their gold for paper money. His next move was to issue an executive order raising the price of gold from $20.67 to $35 per ounce, which devalued the U.S. dollar by 69%. In essence, any savings that U.S. citizens had were then worth nearly 69% less, by government decree.
Americans were forced to liquidate their investment holdings. Those who failed to do so faced a 10-year jail term and/or a $10,000 fine, plus a penalty of twice their investment's value. This glitch in the gold system lasted 41 years. Americans were not allowed to invest in gold coins again until December 31, 1974, when President Gerald Ford finally re-legalized it.
Now, less than 100 years after FDR trashed the gold standard, we need more than $2,300 to buy an ounce of gold.
The dollar is a type of fiat currency. That term means it's not backed by any physical commodity like gold or silver. Instead, it's backed by the U.S. government. Some might argue that this isn't any better than being backed "by air" – as you put it.
This means that the value of the dollar does constantly fluctuate. And while I don't expect the dollar to collapse, I do always recommend readers hold chaos hedges – like gold and silver – in their portfolios. If the dollar falls, these assets can hold their value.
What We're Reading...
- Something different: Indian spice exports are in trouble.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
May 17, 2024