What If The Market Collapses?

We all remember the fable of Chicken Little running around screaming, “The sky is falling, the sky is falling”…

We also remember the ridicule she received for jumping to conclusions…

But, what if she were right? What if the sky really was falling? Would she have been considered a hero?”

That’s a question on a lot of traders’ minds these days… and it has to do with the possibility of a market collapse.

We’ve gotten very high, very quickly. And while that should be a time for rejoice and celebration, it’s embraced with a bit of skepticism and worry instead.

But why?

Why is it so high?

It’s not the economy. It’s not the jobs market. And it’s not the housing market.

It points back to the Fed and their policies to print money and quantitative easing. While this is touted as a great thing for the U.S, all it does is dilute the dollar, making everything more expensive…

Even stocks.

Think about that for a moment. Because the Fed is printing money, a stock could
be priced at $10 one day and $10.25 the next without any fundamental or monetary change in the company.

It’s because when cash is printed it makes your dollar go less. Look at oil, gas, silver & gold.

So what if the market falls?

Well, I for one recommend that you be in ADRs (American Depository Receipts). You more than likely already know what they are, but if not, here’s a rundown:

An ADR is basically a foreign stock that is traded on the U.S market. It eliminates the need for foreign brokerage platforms, high fees and currency differences. It’s a way for the U.S investor to buy shares in select foreign countries that he or she deems to be profitable.

ADRs are a great way to bet on a foreign country and to bet against the U.S markets.

For instance, I want you to have a look at Adecoagro (AGRO). It’s an agricultural company that is engaged in the agricultural, manufacturing, and land transformation activities in South America.

They operate through crops: Rice; Dairy; Coffee; Cattle; Sugar, Ethanol, and Energy; and Land Transformation segments. They’re involved in planting, harvesting, and selling grains, oilseeds, wheat, corn, soybeans, cotton, sunflowers, and others; and providing grain warehousing/conditioning, and handling and drying services to third parties.

AGRO is a solid ADR – with shares up almost 30% on the year. Have a look at the chart here.

Their most recent earnings report (March 2014) beat analysts’ EPS estimates by 100%.

Analysts have a high end price target of $12.90 on AGRO, which is roughly another 30% on the upside. And shares could easily reach this mark regardless of the domestic economy…

But add in a market crash, or bubble, and expect to see shares spike quickly and above estimates. This could easily be a $15-17 stock.

If the U.S market starts to shutter, there will be ADRs just like AGRO that will keep on chugging despite the sell offs. So keep an eye out. The Sky could be falling – might be smart to pay attention.