Saturday, September 6, 2014
The Weekend Edition is pulled from the daily S&A Digest. The Digest comes free with a subscription to any of our premium products.
It has been one of the biggest misunderstandings in our business...
For years, Porter has urged readers to proceed with caution – while still making his Investment Advisory subscribers a fortune in everything from the shale boom to insurance stocks. As longtime readers know, Porter is worried the massive amount of debt taken on by the U.S. government will eventually cause the world to lose faith in the U.S. dollar – a thesis he calls the "End of America," which he believes will lead to rising interest rates and falling stock prices.
Steve Sjuggerud, on the other hand, has been a raging bull. He predicted the Federal Reserve's quantitative easing would cause the "Bernanke Asset Bubble" – an across-the-board inflation of asset prices of all kinds. Likewise, his subscribers have made a fortune... including gains of 163% on private-equity company Blackstone Group, 299% in health care stocks, and 133% in technology stocks.
We dedicated the August 21, 2013 Digest to Porter and Steve's debate. To sum it up, Porter and Steve agreed on the fundamentals... They simply disagreed on timing. As we wrote in that Digest...
Steve further discussed the topic in Thursday's DailyWealth, titled "I Don't Like You, Steve." Steve is still worried about our government's debts... And he still thinks we have an opportunity to make big money in the market. As he wrote...
As Steve has explained many times, the big money is made just before the blow-off top... For example, in late 1999, the Nasdaq soared about 80% in five months before peaking in March 2000.
Steve is still finding pockets of value around the world... and making big gains for his True Wealth subscribers. He recommended small-cap Indian stocks and a gold company in January... They're up 53% and 39%, respectively.
He has also recommended readers move some of their portfolio into hard assets like precious metals and agricultural assets.
But Steve's biggest prediction this year is that the Bernanke Asset Bubble would cross the Atlantic... And Bernanke's European counterpart – European Central Bank (ECB) President Mario Draghi – would inflate European equities and destroy the euro.
Why the bold prediction? Well, Draghi told the world he was going to do everything in his power to boost the European economy and weaken the euro. We don't have much faith in central bankers... But when they say they're going to print money and lower interest rates to destroy a currency, it pays to get on board.
This week, we learned Draghi wasn't bluffing...
At its meeting in Frankfurt, Germany, the ECB announced it would cut interest rates by 10 basis points across the board. (A basis point is one-hundredth of 1%.) The benchmark interest rate is now 0.05%, down from 0.15%.
And now banks have to pay the ECB even more to park cash there... Deposit rates were already at -0.1%. Going forward, the rate is -0.2% (meaning banks pay 20 basis points for the safety of depositing rate with the central bank).
In other words, banks can borrow money even cheaper now... And they're even more incentivized (via negative deposit rates) to lend that money out.
Additionally, Draghi said the ECB will start purchasing asset-backed securities (bundled debt products) in October. He also said the ECB may start buying government bonds – outright quantitative easing (QE).
So the ECB is doing everything in its power to force investors to pour money into the European economy... The Draghi Asset Bubble is in full effect.
That money has already found its way into European government bonds (remember, as bond prices rise, yields decline)... Yields on Italian 10-year bonds fell 11 basis points to 2.36%. Spanish 10-year bonds dropped 11 basis points to 2.16%.
It's also moving into European equities... Steve's top way to play European stocks (which hedges out the euro's decline) was up more than 1.6% as of midday trading.
Draghi also caused the euro to fall to $1.2995 versus the U.S. dollar... its lowest level in more than a year.
For now, the market marches upward... And we still have gains ahead.
In the latest issue of True Wealth, Steve reiterated his call to "stay the course" and not fight the trend...
However, Steve has pinpointed a date early next year when he believes his investment script will change... It's the beginning of the "ninth inning."
If Steve is right, after this date, the easy money will be over... and the risks of staying in stocks will increase. However, after this date, Steve believes properly positioned investors will make their biggest gains yet... That's when the "blow-off top" will come.
But it's important to be in the right assets... And Steve has prepared a new report to share the details. We've made it available for the first time this week. To learn more, click here.
Date Range:8/28/2014 to 9/4/2014
Date Range:8/28/2014 to 9/4/2014