One of the best trades of my career did not involve stocks at all.
In 2001, the European Union was beginning its full rollout of its new currency, the euro.
Now, the euro was a currency you could use to trade. But until 2001, it was not widely used for day-to-day transactions like buying a cup of coffee.
The new euro's value had been plummeting for nearly two years and had now crashed. In dollar terms, it had plummeted from $ 1.20 in 1999 to $ 0.82 in 2000. That's a fall of almost 50%!
Everyone was bearish on the euro. I was not. And the reason I was not something something simple … and so important to any kind of investing … that I made it the cornerstone of my investing system.
Supply and demand – that was my basis for doing this trade. There was huge demand demand waiting for the euro from big-money investors. My research showed that big-money investors were holding their cash in dollars, waiting to see if the rollout was going OK.
In addition, the European Central Bank (ECB) wanted to see the euro go up from its crashed level. If the euro stayed too low against the dollar, people might lose confidence in it. That's not good, especially when you're talking about a new currency.
The euro was also cheap against the dollar when you evaluated it in terms of interest rates. So you knew the ECB would keep supply of the currency low so that the euro's value would rise against the dollar.
Bottom line: The stars were aligned for the euro to soar higher because the potential demand was big and supply was limited.
I bought my euros for about $ 0.85 in 2001 and sold out at $ 1.20 in 2004. I made a profit of 40% from just swapping dollars for euros … and then back again.
For me, these gains were a nice plus. However, the real value was seeing the astonishing power of using supply-and-demand analysis and applying it to the financial markets for big gains.
Since then, I've used supply-and-demand analysis on numerous big blockbuster trades. For example, buying the Google IPO. And buying stocks during the 2008 financial crisis as well as generating mind-blowing gains of 2,539% on Sarepta Therapeutics.
Heart of the Next Tech Revolution: The Internet of Things
Supply and demand works in any environment, and it's the surest way for anyone to hit big winning trades in the choppy stock markets of today.
Recently, I've found another potential blockbuster trade that is part of the massive trend that's unfolding in the tech sector called the Internet of Things.
Networking giant Cisco Systems estimates the total value from this trend to be $ 19 trillion, while General Electric estimates that the opportunity in its industrial businesses will be worth $ 225 billion by 2020.
Now, the key to this tech trend is a little device called microelectronicmechanical systems, or MEMS. The picture to the right shows what one looks like.
For the Internet of Things to work, companies are going to put MEMS into everything – pipes, electric wires, doors, windows, locks, every part of your car and in every airplane engine and medical devices. In short, you'll see it go into everything.
These devices can measure and transmit data, which can then be used to make our lives easier. No more worrying about leaky pipes or short-circuited electric wires. Our cars will able to talk to each other and avoid accidents. You can lock your house down from your phone. And these are just a few examples.
Poised to Soar 356%
Now you could get general exposure to some of the companies that are participating in the $ 19 trillion Internet of Things revolution by owning the VanEck Vectors Semiconductor ETF (NYSE: SMH) . However, the exchange-traded fund (ETF) will not give you the phenomenal upside of owning companies that are laser-targeting the Internet of Things.
The next tech revolution is set to become a trillion-dollar explosion, and knowing which companies are best positioned to take part in that revolution could result in massive profits.