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Weekend Edition

This may be the most important book you'll read all year...
Saturday, July 5, 2014

 It's a bull market... There's nothing else to say.
 
The Dow and the S&P 500 are both at all-time highs, flirting with 17,000 and 2,000, respectively. The Volatility Index (the "VIX") – the market's "fear gauge" – is nearing a seven-year low.
 
The Federal Reserve has once again assured the markets it will remain accommodative for the foreseeable future... Federal Reserve Bank of San Francisco President John Williams said in a speech in Sun Valley, Idaho, "We won't raise interest rates for some time." He claimed the Fed "can control short-term interest rates as needed to stem any inflationary pressures down the road."
 
 This week marked the 1,000th day in a row where the S&P hasn't had an official correction, (a 10% drop). The 1,000-day mark is the fifth-longest streak without a correction since 1928, according to financial research firm Bespoke Investment Group. (The longest, most recent run without a 10% correction was 1,127 days between July 1984 and August 1987.)
 
Remain cautious... But don't fight the trend. Stay conservative and mind your trailing stops.
 
 The good news keeps coming...
 
Payrolls at U.S. companies increased 281,000 in June to the highest number since November 2012, according to payroll firm ADP. That's on top of a 179,000 increase in May. It shatters the estimates of 205,000 jobs.
 
 People are also buying more cars...
 
U.S. auto sales rose 1.2% to 1.4 million in June, bringing the annualized rate to nearly 17 million – the highest pace since July 2006, according to market-research firm Autodata. Carmakers sold 8.2 million vehicles in the first half of the year, up 4.3% from a year ago.
 
Much of the increase is thanks to easy financing and record-low interest rates. I spoke to some friends in the car business last month who said car companies are essentially financing everybody.
 
 Regardless, it's another sign the economy is marching higher. And it's a good sign for platinum and palladium prices. Both metals share similar industrial uses and are usually mined together. Most of the world's platinum and palladium production is used for catalytic converters in automobiles. But those aren't the only reasons we like platinum and palladium.
 
They're also a way to profit from political instability in South Africa and Russia. Russia is in the midst of its crisis with Ukraine. And South Africa is just ending massive mining strikes that decimated both precious metals' production.
 
 The strike recently ended. Daily production of palladium has already increased by 5,000 ounces. But more protests are expected... And there's a new worry that 220,000 workers may go on strike.
 
In addition to a supply crunch, the market fears Russia's palladium stockpile is waning... And the country may face further sanctions over Ukraine. As a result, palladium is expected to reach a deficit of 1.6 million ounces this year... the highest ever, according to metals firm Johnson Matthey.
 
 Palladium has quietly been the best-performing precious metal during the last five years. Since July 2009, the metal's spot price is up 240%, far outpacing the gains in silver (58%), gold (43%), and platinum (27%).
 
 In January, S&A Global Contrarian editor Kim Iskyan recommended his favorite way to profit off rising platinum and palladium prices – through shares of the Sprott Physical Platinum and Palladium Trust (SPPP). His subscribers are already up nearly 10%.
 
 Practically everything is up lately. In the second quarter, just five stocks in the S&P 500 posted a loss... They were: Darden Restaurants (down 0.1%), Jacobs Engineering Group (down 0.1%), VeriSign (down 0.3%), Express Scripts (down 0.4%), and Urban Outfitters (down 1.2%).
 
 Like we said, it's a bull market. But we know the source of these gains is the massive amounts of money central banks have printed around the world. Eventually, these boom times will end. The question is how. Governments are battling deflation by printing trillions of dollars.
 
Still, one of the world's top experts on this, Wall Street veteran Jim Rickards, says deflation is still a possibility.
 
Rickards has served on the front lines of many financial crises... He was general counsel for hedge fund Long-Term Capital Management (LTCM), which collapsed and nearly brought the economy down with it... Rickards led the bailout talks for LTCM with the Federal Reserve.
 
He has also worked on Wall Street for 35 years. Rickards knows so much about finance that the government asks him for help. He has a rare insider perspective to what we're experiencing today. That's why we were thrilled to hear that he wrote a new book titled The Death of Money.
 
Steve Sjuggerud wrote about Rickards' new book this week in a pair of DailyWealth essays titled "The Coming Death of the Dollar" and "The World's Most Important Financial Battle Is Coming to a Head." On Tuesday, Steve wrote of the possibilities of inflation or deflation:
 
Inflation is the easy one to understand... For the most part, the government creates this one... by "printing" trillions of dollars.
 
Deflation is less easy to understand... For starters, we "have no living memory of it." The last episode of persistent deflation was in the Great Depression. Rickards calls deflation "the Federal Reserve's worst nightmare." For one, deflation "increases the value of government debt, making it harder to repay."
 
Because of fear of deflation, the Fed can't stop its money printing. If it did stop, "deflation would quickly dominate the economy, with disastrous consequences for the national debt, government revenue, and the banking system."
 
Which will win – inflation or deflation? Rickards explains that "the most likely path of Federal Reserve policy in the years ahead is the continuation of massive money printing to fend off deflation." The Fed assumes it can later deal with inflation that it might create.

 If you're concerned about what's happening in today's economy, The Death of Money is required reading. In fact, we think it's so important, we're giving you a free copy. (We simply ask you to pay the $4.95 it costs to ship you the book.) To learn how to get your copy of what could be the most important book you read this year, click here.
 
Regards,
 
Sean Goldsmith




This Week's Winners
S&P 500 Symbol Change
Vertex Pharma VRTX +44.2%
Iron Mountain IRM +18.2%
Integrys Energy TEG +15.5%

Countries Symbol Change
Hong Kong EWH +0.9%
Canada EWC +0.8%
Malaysia EWM +0.7%

Sectors Symbol Change
Gambling BJK +2.3%
Big Pharma PJP +1.8%
Media PBS +1.6%

Commodities Change
Nickel +4.3%
Palladium +3.3%
Copper +3.0%
Date Range:6/26/2014 to 7/3/2014
From The Crux
This Week's Losers
S&P 500 Symbol Change
Marathon Petroleum MPC -9.7%
Valero Energy VLO -8.4%
Bed Bath & Beyond BBBY -6.6%

Countries Symbol Change
Italy EWI -2.8%
Austria EWO -2.6%
France EWQ -1.9%

Sectors Symbol Change
Defense PPA -1.9%
Semiconductors PSI -1.3%
Water PHO -1.3%

Commodities Change
Corn -5.7%
Cotton -4.6%
Coffee -3.8%
Date Range:6/26/2014 to 7/3/2014
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