The Road to Wealth Is Paved with Sustainable Profits

I’m not as young as I used to be — and, sometimes, my back reminds me of that fact.

I first hurt it several years ago, when we were moving into a new house. Now, every year or two, I seem to re-aggravate the injury. It’s usually because I push myself too hard exercising, lifting things or pursuing crazy adventures like playing softball.

Coincidentally, many investors also seemed to suffer their own painful episodes this week.

The mad dash into all kinds of overheated, overpriced assets — including unprofitable, unproven “special purpose acquisition companies,” or SPACs — has reversed, sharply.

So, too, have rallies in many other stocks with even the slightest, most tenuous connections to whiz-bang technology subsectors like electric vehicles (EV) or artificial intelligence (AI).

What’s behind the move? How should you respond? Well, that depends ...

The thing is, the “Safe Money” approach is to avoid stumbles like these in the first place — while still stacking reliable and significant profits.

If you’re already with us, we might make some adjustments here and there; in fact, we’ve booked profits on recommendations that popped on recent speculation-driven volume.

If you’re not a Safe Money Report subscriber, we have a little more to talk about.

So, let’s dive in.

It’s no secret that red-hot stocks in red-hot sectors owned by red-hot fund managers have racked up red-hot gains over the past several months. But the problem with chasing these kinds of names too aggressively is that they can just as easily give significant chunks of them up in the blink of an eye.

One example is the ultra-hyped SPAC Churchill Capital Corp IV (NYSE: CCIV), which cratered more than 38% yesterday.

Its stock price had surged from around $10 to more than $64 amid hopes it would acquire the EV darling Lucid Motors, which wants to compete aggressively with Tesla, Inc. (Nasdaq: TSLA).

But the $11.7 billion deal came at a disappointing price, causing CCIV to plummet. Many other SPAC names dropped sharply too, largely because so much hot money has poured into the sector.

Consider this: More than 400 SPACs have come public since the start of 2020, raising a whopping $130 billion. That means we’ve had more deals raising more money in the last 14 months than in all the years combined since the modern SPAC industry emerged in the early 1990s.

Even sports stars like former New York Yankees third baseman Alex Rodriguez and current Golden State Warriors point guard Steph Curry as well as celebrities like the musician Ciara have jumped on the bandwagon. They’re serving as SPAC founders, investors, board members ... you name it!

But, now, at the height of the glitz, we’re seeing the sector stumble sharply.

I don’t know if this week’s smacking over the head is the beginning of something worse. And, thanks to phenomenal run-ups until this week, many of these incredibly aggressive stocks still have enormous accumulated gains.

But the crunch we’ve seen is just like the flare-ups I’ve experienced with my back: They remind us that we can’t take things too far, or get too aggressive, without exposing ourselves to painful consequences.

My advice? Stick with Safe Money stocks and Safe Money strategies for the lion’s share of your portfolio. They might not rack up double-digit percentage-point gains in a day or two. Neither will they collapse in the blink of an eye.

And “Safe Money” also means big profits are there for the taking.

I just recommended my subscribers bank a second round of gains in a favorite higher-yielding, higher-rated retail name. They had the chance to walk away with 56.9% profits in only eight months.

Click here to learn more about Safe Money.

Or, at the very least, be sure to focus on stocks and exchange-traded funds that merit high Weiss Ratings, support higher yields and feature other attractive attributes in this still-uncertain market environment.

Until next time,

Mike Larson