Since 1998, the #1 way to become wealthy in the stock market has been by focusing on the biotechnology and gold mining sectors. Both have consistently gone on massive multi-year rallies of 500%-1,000%, at the exact opposite times of each other. If you invested $10,000 into the NASDAQ Biotechnology Index in 1998, shifted your capital to the HUI Gold Miner Index in 2000, and shifted back to the NASDAQ Biotechnology Index in 2011 – it would now be worth over $2.5 million!
Biotech stocks are up in 2015 for the 6th straight year and 7th of the last 8 years. In fact, 2014 was the 5th straight year of biotechnology being the #1 largest gaining sector in the S&P 500. Since August 2011, the NASDAQ Biotech Index has risen from 916 to 4,166 for a gain of 354.8% – while the HUI Gold Miner Index has fallen from 635 to 113.10 for a loss of 82.2%. NIA has created a ratio of the NASDAQ Biotech Index/HUI Gold Miner Index and it has increased from 1.51 in August 2011 to 36.84 today, which is a record high!
Only one other time in history has the NASDAQ Biotech/HUI Gold Miner ratio been above 30. On November 7, 2000, it hit a high of 34.39 – with the NASDAQ Biotech Index at 1,301.70 and the HUI Gold Miner Index at 37.80. It turned out to be the best ever opportunity to short biotech companies and buy gold miners: Over the following 20 months, the NASDAQ Biotech Index declined by 69% to 404 as the HUI Gold Miner Index rose by 270% to 139.70 – causing the ratio to crash from 34.39 down to 2.89.
Ultimately, the NASDAQ Biotech/HUI Gold Miner ratio would fall as low as 1.42 – and the HUI Gold Miner Index would gain as much as 1,580% to a high of 635 vs. the S&P 500 declining 17.2% during the same time period.
The NASDAQ Biotech/HUI Gold Miner ratio has a long-term median of 3.51, which is less than 1/10th of where it is today – and will inevitably crash back down to there.
The biotechnology sector currently has a record high total market cap of $1.189 trillion, up 347% from the biotech sector’s total market cap four years ago of $266 billion. Biotech stocks are now worth a record 5.34% of the total US stock market vs. a 10-year median of 2.26% (based on the Wilshire 5000). In comparison, gold and silver mining stocks are currently worth only 0.35% of the total US stock market vs. a 10-year median of 1.12%!
In 2011, US listed gold and silver mining stocks had a total market cap of $280 billion that exceeded the biotech sector’s total market cap of $266 billion. Today, the biotech sector is worth a record 15.09X more than the gold/silver mining sector. This compares to a median biotech/gold and silver mining sector market cap ratio over the last 17 years of 2.43.
If back on August 31, 1998 you invested $10,000 into the NASDAQ Biotechnology Index at 254.98 and sold on March 6, 2000 at its medium-term peak of 1,596.53 – you would’ve turned $10,000 into $62,614 for a gain of 526.14% in only 18 months!
If you immediately shifted those proceeds into the HUI Gold Miners Index on March 6, 2000 at 65.10 – you could’ve sold on September 8, 2011 at 635 – thereby turning $62,614 into $610,695 for a gain of 875.42% in 11 1/2 years!
If you then shifted your investment capital back into the NASDAQ Biotechnology Index on September 8, 2011 at 1,006.29 – you could’ve sold on July 20, 2015 at 4,165.87 – thereby turning $610,695 into $2,528,174 for a gain of 313.98% in less than 4 years!
All together, by simply shifting your investment capital back and forth between these two indexes, and making a total of only three round-trip trades – it would’ve been possible to turn $10,000 into $2,528,174 for a total return of 25,181.74% over a period of 17 years!
To take advantage of the stock market’s most profitable long-term trend and where things are at today, NIA suggests for its members to consider put options in iShares Nasdaq Biotechnology (IBB), an ETF that tracks the NASDAQ Biotech Index – as well as call options in Market Vectors Junior Gold Miners (GDXJ), an ETF that owns small/mid-sized gold/silver miners. It is safest to bet on long-term dated options for both.
NIA suggests the IBB January 20, 2017 $350 put, currently priced at $39.10. A 25% decline for the NASDAQ Biotech Index over the next 18 months would cause this put option to rise to $71 for a gain of 82%. A 33.34% decline for the NASDAQ Biotech Index over the next 18 months would cause this put option to rise to $102 for a gain of 161%. A 50% decline for the NASDAQ Biotech Index over the next 18 months would cause this put option to rise to $164 for a gain of 319%. A 66.67% decline for the NASDAQ Biotech Index over the next 18 months would cause this put option to rise to $226 for a gain of 478%.
NIA suggests the GDXJ January 20, 2017 $25 call, currently priced at $3.20. A gain for GDXJ of 75% over the next 18 months would cause this call option to rise to $9.16 for a gain of 186%. A gain for GDXJ of 100% over the next 18 months would cause this call option to rise to $14.04 for a gain of 339%. A gain for GDXJ of 150% over the next 18 months would cause this call option to rise to $23.80 for a gain of 644%. A gain for GDXJ of 200% over the next 18 months would cause this call option to rise to $33.56 for a gain of 949%.
Remember, after the NASDAQ Biotech/HUI Gold Miner ratio surpassed 34 in 2000 – biotech stocks plunged 69% vs. gold miners rising 270% within the following 20 months. With the NASDAQ Biotech/HUI Gold Miner ratio now up to a record high of above 36, a similar move over the next 18 months is not only possible, but extremely likely!