This Critical Signal Says the Next Big Uptrend Has Started

 
A crucial indicator is telling us our favorite precious metals are ready to explode higher.
 
And it underscores why silver must make up a small – but critical – part of your portfolio.
 
This indicator has held true throughout history. And right now, it's showing that it's time to buy silver again… and that silver stocks could see even bigger gains.
 
Let me explain…
 
First, you should understand that silver acts like gold's volatile shadow. Whatever direction gold moves in, silver tends to follow… but its price action is much more extreme. When investors hate gold, they loathe silver. And when they're desperate for gold, they buy up silver even faster.
 
For example… in a little more than three years, from August 1976 to January 1980, gold soared 700% to $850 an ounce. But silver soared an incredible 1,100% over the same period. And the pattern has repeated for more than four decades… Silver has outperformed its more expensive cousin in each of the six bull markets of the past 40 years.
 
You can see this clearly in the silver-to-gold ratio. This indicator is simply a measure of how many ounces of silver you can buy with one ounce of gold. It's a rough guide that shows how cheap or expensive one metal is relative to the other. When the ratio is low, gold is relatively cheap. When the ratio is high, silver is relatively cheap.
 
Over the past 40 or so years, the ratio has averaged around 60:1… meaning you needed 60 ounces of silver to match the value of an ounce of gold.
 
Today, the ratio is 74:1. That means you need about 14 more ounces of silver to buy an ounce of gold than you would have needed, on average, over the past 40 years.
 
Like with most indicators, extremes in the silver-to-gold ratio present the best opportunities for us to profit.
 
For example, when both gold and silver sold off in 2008, the ratio jumped to more than 80:1. In other words, when people were selling gold, they were dumping their silver even faster. (The ratio hit as high as 83:1 again this past February.)
 
Then, as both metals rallied, the ratio narrowed to just more than 30:1 in April 2011. People were bidding up silver even faster than gold. Gold climbed more than 160% during that period. But silver soared by more than double that – 359%.
 
In both cases, silver crushed gold.

Silver outperforms gold in a bull market as investors pour in. But likewise, it underperforms gold dramatically in a bear market as investors dump silver faster than gold.

 
In the chart below, we've plotted the silver-to-gold ratio for the past 30 years. You can see that the ratio typically peaks around 80:1 when a bear market in precious metals is at its worst. The ratio has now dipped to about 74:1, which is why we believe we are in the early stages of the next bull market…
 
That's why we think silver is ready to explode again…
 
Silver's moves tend to lag gold. So when gold makes a move, it sometimes takes a little time before silver follows. But when it does… it can skyrocket.
 
During the first quarter of this year, gold climbed 16%. Silver was up, too, but only by 9%. So even though silver stocks soared along with gold stocks in the first quarter, the underlying metal still trailed gold.
 
Now, fast-forward to today.
 
Silver just picked up the pace. Through Friday's close, silver is now up almost 30% versus gold's 25% return. Both are great returns. But if history is any indication of where silver might be heading, it's time to buy silver stocks again.
 
Since both metals last peaked in 2011, silver has lagged gold. In that span, gold is down about 30%, while silver has fallen 58%.
 
Recent data suggest that the ratio is starting to narrow… It's another sign that the five-year bear market in gold and silver is over.
 
When silver takes off, it can soar. And silver stocks can soar even more. This powerful historical trend is coming around… and now is the perfect time to take advantage.
 
Regards,
 
Porter Stansberry
 
Editor's note: We launched Stansberry Gold Investor less than three months ago to take advantage of rising gold and silver prices, which could be entering their biggest bull markets ever. The results so far have been incredible. Subscribers are up 10%-plus on every single recommendation, including returns of 86%… 98%… and even 107%.
 
If you aren't reading Stansberry Gold Investor, you're making the biggest mistake of your life. Learn more here (without sitting through a long video).

Source: DailyWealth

The 10 Ways to Find Your Next Great Investment Opportunity

 
Finding great investment ideas is hard work.
 
They don't just drop from the sky and say, "Here I am!" You have to uncover them.
 
Today, I'd like to help you improve your odds of finding great investments by briefly reviewing 10 classic setups that consistently produce winning ideas…
 
1. Companies with operating leverage
 
The idea here is simple: Look for companies where profits are growing faster than revenue.
 
Apple (AAPL) provides a perfect example. When the company introduced its ground-breaking iPhone a decade ago, revenue tripled in just four years, compounding at a remarkable rate of 33% per year. But earnings grew even faster, compounding at 58% per year, pushing the stock up fivefold.
 
Apple didn't have to triple the size of its operations to triple sales. Instead, it scaled the assets it already had by leveraging the excess capacity of its component suppliers. This is what enabled Apple to grow profits faster than revenue and exhibit operating leverage.
 
In contrast, the restaurant industry rarely demonstrates operating leverage. Every time Chipotle Mexican Grill (CMG) or Buffalo Wild Wings (BWLD) builds a new company-operated store, it has to fully equip and staff it. There's little opportunity to leverage these substantial costs, whether it's operating one or 100 stores.
 
2. Turnarounds
 
The right new manager can turn around an underperforming business and bring a fresh perspective to a company's challenges. When you hear about a company hiring a new CEO, watch for a potential turnaround setup.
 
3. Secular trends
 
Sometimes the herd actually gets it right. Look for emerging trends with the power to become secular, like e-commerce. Identifying the winners of these big trends early on can be extremely profitable.
 
Keep in mind there is a huge challenge to investing in big, secular trends: The winners, like Amazon (AMZN), rarely get close to anything resembling "cheap."
 
4. Underappreciated growth stories
 
My personal experience tells me this setup is as rare as politicians practicing fiscal restraint. Investors almost always overappreciate growth stocks, pricing them as if their current high, double-digit revenue growth will somehow continue on forever. Those rare instances when growth turns out to be greater than expected usually translate into wonderful investments.
 
5. Mischaracterized businesses
 
Investors sometimes develop inaccurate, preconceived notions about what a business really is. For instance, the stocks of many companies with only modest exposure to the oil and gas industry have been hit just as hard as those of companies with heavy exposure the past two years.
 
When you uncover a mislabeled business, you'll often find it has been mispriced as well. (As you look closer, it's important to consider what management could do to alter investor perception.)
 
6. Strong competitive position
 
Entrenched industries and niche-market leaders present great, stable opportunities, and many of Extreme Value's top recommendations have exhibited this trait. For instance, nobody imports more beer to the U.S. than Constellation Brands (STZ) or earns more profits selling smartphones than Apple.
 
Strong competitive positions don't happen overnight. Consistent operating margins over a long period of time are a key sign you've found a company enjoying a strong competitive position.
 
7. Assets with greater value than the company's market cap
 
Investors often view companies owning a collection of disparate assets to be worth something less than the sum of their individual values. A common misconception is that the businesses or assets that aren't part of the "core" operation are somehow less valuable.
 
Look for companies with businesses in more than one industry… business segments generating different financial returns… valuable real estate holdings… and/or excess assets, such as a large cash position. Oftentimes, you'll discover that the sum of these individual assets exceeds the company's current market cap.
 
8. Spinoffs
 
Larger companies with diversified operations sometimes "spin off" a smaller division or subsidiary into a separate public company. These spinoffs often run better as independent companies and sometimes become great investments on their own. Buying Altria (MO) before it spun off Philip Morris (PM) worked out well for Extreme Value readers. So did owning ADP Dealer Services before it spun off CDK Global (CDK).
 
Be wary of spinoffs saddled with huge debt by the parent company – something we find to be a deal-breaker more often than not.
 
9. Emerging paradigms
 
Companies creating tectonic shifts in a particular industry have the potential to become life-changing investment opportunities. Apple's iPhone helped make the mobile communications industry what it is today. And Netflix (NFLX) obliterated the movie-rental business that Blockbuster dominated for years.
 
New ways of doing business come and go all the time. The challenge is recognizing which companies possess the right business model and management acumen to capitalize on the market opportunity.
 
10. Customer loyalty
 
My colleague Doc Eifrig wrote about this in the April 7 DailyWealth. Customer loyalty ensures continuous demand, insulates the business from upstart competitors, and is a leading indicator of financial performance.
 
Keep in mind, these 10 investing setups aren't mutually exclusive. In fact, the greatest opportunities tend to be businesses demonstrating multiple themes. For instance, Apple wasn't just a great operating-leverage story a decade ago. The company also experienced tremendous customer loyalty and investors generally underappreciated the iPhone growth story.
 
Stay on the lookout for these 10 successful investing setups, and pay particular attention to any business intersecting multiple themes.
 
Good investing,
 
Mike Barrett
 
P.S. In the April issue of Extreme Value, we recommended shares of a company that has several of the 10 characteristics I discussed today. Plus, it owns some of the most valuable real estate in the world and trades at a nearly 50% discount to the value of its assets. These types of opportunities are normally available only to billionaires, but you can buy it with one click. Learn more here.

Source: DailyWealth

Why China Is NOT an Emerging Market

“This is NOT an emerging market,” I said… apparently one too many times…
“You’ve said that enough, Steve,” my colleague said. “We get it. You can’t say that anymore.”

We got into Beijing – China’s capital – a couple of hours ago…
When I first came to China 20 years ago, 80% of the cars on the road were run-down, burgundy Volkswagen Santana taxi cabs. Today, high-end cars like Audis and Teslas were the norm.
The cars on the highway were no different from what you’d see on a U.S. highway – and were potentially even higher-end here in Beijing.
As we left our hotel at the China Central Place commercial district to find some dinner, we passed all of the world’s highest-end luxury shops… No kidding. We passed Chanel, Gucci, Prada, Rolex, Salvatore Ferragamo, Coach, Versace, and many more.
The restaurants were on the sixth floor… Incredibly, the luxury-brand shops covered all five stories as we rode the escalators up. No worries if your Tesla was running a little low on charge… You could charge it at one of the many charging stations in the parking lot while you shopped.
I live in Northeast Florida… and I can’t think of anywhere near home that is as high-end as where I am right now in Beijing. Back home, you’d have to travel hundreds of miles to find a place like this.
Of course, I know that all of Beijing isn’t like this. I’m sure we can (and will) find traditional rickshaws and traditional Mao suits somewhere in Beijing on our trip… But my point is this…
Beijing is a lot more futuristic than you can possibly imagine.
Take your opinions or mental images of Beijing, and throw them out the window. This is NOT an emerging market. Not in the classic sense, at least. When you compare where I am now to a country like India (where I’ve experienced regular power outages and zero infrastructure), this place seems to be working just fine.
The only preconceived notions that I’ve found to be true in my few hours on the ground in Beijing are the smog (my eyeballs hurt), the traffic, and the Internet censorship (forget about Facebook, Google, and Gmail – they don’t work here).
Our next few days are chock-full of meetings, both here in Beijing and in Shanghai. I will certainly learn a lot more. But these first couple hours on the ground – just getting settled in – have been eye-opening.
The conclusion is simple: China is no longer an emerging market… not in the classic sense, anyway. Don’t forget it…
Good investing,
Steve

Source: DailyWealth

A Place Where Dividend Yields Are Higher Than P/E Ratios

 
Greetings from Hong Kong…
 
I just had dinner with the Churchouses… It's one of my favorite things in the world to do.
 
There's hardly a man who's more knowledgeable about Asian investing than Peter Churchouse…
 
Peter has spent more than 35 years in Asia, including 16 years with Morgan Stanley (as the firm's head of research there at his peak). He then left the company and started his own hedge fund. Today, he writes the excellent Churchouse Letter (which I highly recommend).
 
"What's your favorite investing value in the world right now?" I asked.
 
He replied, "Did you know there's a place where the dividend yields are higher than the P/E ratios?"
 
If you're curious, that never happens…
 
No such place could exist. It's too extreme…
 
For example, today, the price-to-earnings ratio (P/E ratio) of U.S. stocks is 24. The dividend yield is 2%.
 
For the dividend yield on U.S. stocks to be higher than the P/E ratio, U.S. stocks would have to have their worst crash since the Great Depression. It's almost against the laws of nature for stocks to pay a dividend yield higher than their P/E ratio.
 
"This situation exists – today – in Chinese property-development companies listed in Hong Kong," Peter told me.
 
He isn't just looking at some spreadsheet of numbers… He knows what he's talking about… Peter has covered property in Hong Kong since 1980 (yes, 1980).
 
Before our dinner, he attended a board meeting of a multi-billion-dollar, Hong Kong-listed development company, where he serves as a director. This company pays a dividend in the 5% to 6% range. And it is safe… Its debt-to-equity ratio is a scant 3% – meaning it hardly has any debt at all.
 
When I got back to my room, I looked up what Peter said… Sure enough, there are a handful of developers paying 5%-plus dividend yields and trading at forward P/E ratios of around five.
 
That's just crazy. (The names I found include: Country Garden, Shimao Property, Agile Property, Guangzhou R&F Properties, and KWG Property.)
 
I asked, "What's the simplest way to play it?"
 
"Just own the big H-shares," Peter said.
 
And that is easy to do…
 
The iShares China Large-Cap Fund (FXI) holds "the big H-shares."
 
These aren't the speculative names… These are China's blue-chip companies. While many of the firms in this fund aren't household names in the U.S., they are in China.
 
According to the iShares website, this fund is currently trading at a single-digit P/E ratio, and has a distribution yield of 4.45%. It's not a play on China's ultra-cheap property stocks… But it is much safer and still very cheap.
 
"You just want to stick a handful of the big H-shares in a drawer, and not look at 'em, and come back in a few years. I expect you'll be a happy man," Peter said.
 
I agree. That's why we have FXI on our True Wealth recommended list today…
 
Good investing,
 
Steve
 
P.S. For more on Peter's excellent Churchouse Letter, click here.
 

Source: DailyWealth

My First Million-Dollar Investment Mistake

 
I was 22 and fresh out of college when my father gave me $5,000.
 
It was left over from a college savings account. The one condition was that I invest it.
 
Back then, newspapers (or if you worked on a trading floor, a Quotron) were the way to check stock quotes. And to buy a stock through a "discount" broker (they weren't cheap by today's standards), you had to call in and place the order.
 
Armed with a liberal arts education that was heavy on writing, politics, and history – and with a few months' worth of scanning the Wall Street Journal under my belt – I figured I was ready to invest.
 
At the time, shares of personal-computer companies (which today are about as exciting as auto stocks) were the tech darlings of the market. With this money burning a hole in my pocket, I thought I'd get in on them.
 
During a chat with my college buddy Simon, a technology whiz who ingested computer magazines like air, I learned about these companies.
 
One was Dell, which is still one of the industry heavyweights (it went private in 2013 and the stock is no longer traded). Back then, it was emerging as the industry leader. But it was big (at least that's what it seemed then) and boring. At the time, I thought it was "done" – and being an early stage contrarian, I wanted a stock that was a bit less obvious.
 
The other PC maker I was looking at, Zeos International, was a lot more exciting. The company made its first PC in 1987, and four years later, Fortune named Zeos the fastest-growing public company in the U.S. It beat Dell to the punch by rolling out laptops using the latest chip. Zeos even had a palmtop pocket PC on the market.
 
The clincher? Simon told me that Zeos was a huge advertiser in the computer magazines that he read. Everywhere he looked, there was another page blaring the benefits of Zeos laptops and desktops. Even better, it was the first computer company to offer round-the-clock customer service – exhibiting clear commitment to the customer. To my money-fevered brain, that could mean only one thing: an easy path to easy street once I multiplied my $5,000 through smart stock picking.
 
So what happened? In late 1991, Dell shares were trading at a (split-adjusted) $0.25 per share. By the end of the decade, they were changing hands at $50. Had I just invested in the obvious stock, my initial investment would have been worth $1 million by the end of the decade.
 
Things didn't go as well with Zeos.
 
The business had peaked by the time I bought shares. In late 1994, Zeos was put out of its misery when it was acquired by another computer company – after Zeos had lost $13 million on revenues of $229 million in its most recent fiscal year.
 
"Analysts said it was not clear how Micron [the buyer of Zeos]… would resurrect Zeos, which has high costs in a low-margin business," the New York Times reported at the time. Less than a year and a half later, Micron stopped making Zeos computers.
 
Zeos' underlying problem was that it made terrible computers. According to a February 1996 article, a computer-magazine survey had "named Zeos as one of the worst in overall quality and service and among the poorest in reliability… Among the survey's findings were that only a little more than half of Zeos customers responding to the survey said they would buy another Zeos computer… Zeos owners also said that, on average, it took more than 40 hours to get technical assistance via a telephone help line when they had trouble with their PCs." So much for 24/7 customer service being a good thing.
 
Months into my misadventure with Zeos – but before my $5,000 was turned into a much, much smaller number – Simon clarified his part of the investment thesis. The quality of the newsprint of the Zeos ads was inferior to the newsprint that other advertisers used in the industry magazines. So Zeos was advertising a lot – but taking the cheap way out.
 
I've learned a lot of expensive lessons in my life… And at the time, my Zeos loss was a huge blow. But I did learn a few things that I still have to remind myself of occasionally:
 
•   Sometimes, being a contrarian isn't worth the trouble. The opportunity cost of investing in Zeos rather than Dell was enormous. I thought I'd win by not doing the obvious thing. Sometimes, the obvious thing is the best thing to do.
   
•   Don't invest in an industry you don't understand. It's like skipping through a minefield. Either stay away from companies in sectors that you don't know as well as you know your spouse's name – or find a good analyst who does.
    
•   Rapid growth can be a bad thing. Zeos was growing fast, but quality suffered – and that was its downfall. Don't be taken in by big revenue or profitability growth, because the underlying quality of the company's product and operations is a lot more important.
   
•   Right-in-front-of-your-eyes indicators can be misleading. Just because there are lots of cars in the supermarket parking lot doesn't mean the supermarket is making money – it might mean that their prices are too low to make a good margin. And a lot of ad pages on cheap newsprint might mean that a poorly managed company is trying to grow out of its quality problems.
    
•   Quality matters. In the end, if you produce a lousy product, people won't buy it from you. That's all there is to it.
I've made many more mistakes since Zeos. But I hope I haven't repeated these.
 
And I hope you don't, either.
 
Regards,
 
Kim Iskyan
 
Editor's note: Kim and his Truewealth Publishing team in Singapore created a special report to show investors how to prevent their brains from getting in the way of making money. Find out how you can receive the free report right here. And if you'd like to sign up for their free daily e-letter, click here.

Source: DailyWealth

The Worst Commodities Bust in Generations Is Over… Time to Buy!

 
In June 2008, the main index of commodity prices stood at 10,600.
 
In January of this year, it fell below 1,900 – an 82% fall in less than eight years.
 
It's the worst eight-year return – by far – in the history of the GSCI Commodities Total Return Index (which goes back a half century).
 
Think about this for a second…
 
This isn't some speculative stock that's down 82%… This is the entire universe of commodity prices… like oil and gas… and wheat and cattle.
 
What has happened in the past after big falls in commodity prices?
 
It turns out, big gains happen…
 
Take a look at the GSCI Commodities Total Return Index over the past 20 years…
 
Commodity prices are prone to booms and busts. Importantly, after each of these big busts, commodity prices jumped impressively…
 
After each big bust, the median gain in commodity prices was 110%, and the median holding period was two years.
 
So there we have it. There's our blueprint: 110% gains in two years.
 
Ah, but could we do even better? It's possible…
 
You see, this hasn't been your garden-variety, 18-month fall in prices. This has been something greater… This is an 82% loss over eight years.
 
After such a sustained loss, investors have given up on commodities to a degree that I have never seen in my 20-plus years in this business. Investors have given up on inflation… and the fear of inflation is typically a massive driver of commodity prices.
 
The thing is, you can't do that… You can't assume inflation is dead…
 
My friend, we live in a world of zero-percent interest. And we live in a world where governments have nothing holding them back from printing money.
 
I think of these two things as "latent power" for an asset-price boom. Zero-percent interest rates are like a lit match… looking for a new fuse.
 
They have already lit up stock prices. And the same is true for real estate.
 
But commodity prices? They fell to 1991 prices earlier this year.
 
This is an ideal setup… We have an asset price that has crashed (commodities)… and we have a lit fuse in the form of zero-percent interest rates. Meanwhile, as you can see at the far right in the chart above, the uptrend has finally appeared.
 
It's time to get in!
 
Stocks and real estate have boomed. Commodities haven't.
 
Their time is now. Take advantage of it…
 
Good investing,
 
Steve
 

Source: DailyWealth

The 12 Easiest Ways to Make Everyone Like You

 
I like to think of myself as an amiable guy.
 
But I wouldn't claim to be charismatic. Charismatic is an adjective I would apply to someone like Jay Leno or Tony Robbins. Bill Clinton is supposed to be charismatic. I know die-hard conservatives who changed their views about him after speaking to him for just five minutes.
 
Wouldn't it be great to have that kind of effect on people?
 
Think about the advantage you'd have if you had the ability to make virtually everyone you meet like you and want to work with you…
 
Such a man came to my office once. He had just taken over managing my bond account after my longtime account manager retired. I didn't want to like this young upstart because I resented it when my old account manager left. I felt (irrationally) abandoned.
 
But within five minutes, we were talking about cigars and martial arts. By the time he left a half-hour later (we were scheduled to meet for only 15 minutes), I had promised him more of my business. I had also given him a copy of my latest book and a $20 cigar!
 
He should have given me a cigar. That's the power of charisma.
 
Many salespeople are charismatic. You meet them. You like them. You buy from them. Even when they don't have the best product or the best pricing.
 
Charismatic people seem to have a natural ability to sell almost anything, including their ideas. They aren't all cut from the same cloth. Some are smart. Some are not. Some are good looking. Some are not. What are their secrets?
 
They smile a lot. And they like to chat. But do they have skills that the rest of us – those with, let's say, ordinary social qualities – can learn?
 
Absolutely!
 
Below, I've listed 12 ways you can become more charismatic and get more out of your business relationships.
 
These are "rules" I try to follow in dealing with people. (Some of them are based on principles identified by Robert Cialdini in his book Influence: The Psychology of Persuasion.)
 
1. People tend to do business with people they like. So, behave in a way that makes you likable. Be polite and patient. Avoid being crude, rude, gruff, or impatient.
 
2. People are attracted to people who keep their word. That means when you make a promise, do exactly what you promised. Do it by the deadline you promised – or sooner.
 
3. People trust people who have their best interests at heart. They will think you have their best interests at heart when you give them advice that benefits them as much as, or more than, it benefits you.
 
4. People want to do business with people who are experts in their fields. So, become an expert in your field through practice, research, training, education, and study. As you acquire that expertise, share it. Give speeches, and write articles and books. Be generous with your knowledge. Know that in doing so, you are demonstrating your expertise.
 
5. People feel comfortable giving money to people who are authentic and honest. (That means you must be honest, frank, ethical, and aboveboard.) Believe that telling the truth is more powerful than lying, even when the lies are mendacities by omission.
 
6. People are attracted to people who are attractive. You don't have to get plastic surgery, but you can eat right, exercise, dress well, and be well-groomed. And pay attention to your personal hygiene.
 
7. People feel better with people who seem to be "real." The best way to do that is to admit your shortcomings when they are evident. When the conversation turns to a subject about which you know next to nothing, admit it.
 
8. People respond to people who listen and pay attention to what they are saying. Remember the old cliché: You have two ears and one mouth because you should listen twice as much as you talk.
 
9. People feel comfortable with people who are like them. The trick here is to identify what you have in common with the other person. It could be golf, kids, pets, or anything else. Then use that to cement a bond between you.
 
10. People are attracted to people who are humble. So don't brag about your successes. You can mention them, but don't brag. If someone brings them up, downplay them. Switch the topic as soon as possible to the other person.
 
11. People tend to value people who are in demand. That's why you should never tell a prospective customer that things are slow and you really need his business. Think about doctors. How would you feel if you walked into a doctor's office and you were the only patient? Wouldn't you wonder how good he was? As much as you hate it when you have to sit there and wait, don't you feel more assured when a doctor's waiting room is packed? Of course you do.
 
12. People want to be surrounded by helpful people – people who make their lives easier and save them time. So make it a personal policy to attend to the needs of others – even when your purpose is to help yourself.
 
Which of these people-pleasing skills do you have already?
 
Congratulate yourself for acquiring them, and practice them more.
 
Which ones do you still need to develop?
 
You can't do it overnight, but you can – and should – work on them every chance you get, which is every time you have a conversation, however short or casual, with anyone – bank president or car valet.
 
Regards,
 
Mark Ford
 
Editor's note: Mark and his team just put the finishing touches on the Extra Income Project – a collection of nearly three dozen ways to start earning more income outside the stock market today. Right now, you can get access to the Extra Income Project for a HUGE 50% discount to the regular price. But don't delay… This offer expires soon, and may never be available at this price again. Learn more here.
 

Source: DailyWealth

'The Bargain of the Century,' Says the 100%-a-Year Man

 
When I started out in this business in the early 1990s, Mark Mobius was the biggest legend to the guys in our office…
 
We called him the "Double-Your-Money Man." He delivered triple-digit returns, regularly, to investors. Take a look:
 
Year
Return
1989
98.3%
1991
111.8%
1993
100.4%
His "doubles" didn't end in 1993… Investors doubled their money with Mobius in eight months starting in late 1998. He roughly doubled investors' money again in 2003… and again in 2009.
 
Mobius delivered these returns in the Templeton Emerging Markets Fund (EMF) – which was the first emerging-markets fund available to U.S. investors. (He started the fund in 1987, and he's still involved today – nearly 30 years later.)
 
So what does the Double-Your-Money Man like today? Early last month, Mobius told Bloomberg. He focused on two ideas…
 
First, he believes Brazil could go up "another 100% to 200%." But more importantly, he explained why he believes Russia is the "Bargain of the Century."
 
"[Russia] has been closed to us and many other investors, for the most part, because of sanctions," he said. "If sanctions are lifted, then you could see a big, big surge in Russian stocks."
 
Russian stocks are cheap…
 
There aren't many things you can buy today as cheap they were 20 years ago… But today, you can buy Russian stocks at 1997 prices.
 
A 20-year-return "drought" like this is almost unthinkable for U.S. investors. Many folks remember the 2000s as the "lost decade"… Well, Russia is currently finishing its lost TWO decades. Unbelievable!
 
The result of this drought is simple: Two decades of near-zero returns have led to incredible value in Russia's market.
 
The VanEck Vectors Russia Fund (RSX) holds some of the country's largest companies… and it's the easiest way for Americans to own Russia. The fund trades at a price-to-earnings (P/E) ratio of just seven…
 
When you buy a company for seven times earnings, even if a lot goes wrong… you can still make money.
 
If you bought a private business at seven times earnings, you would have earned all of your investment back in seven years – assuming no growth. Every cent after that is pure profit.
 
This value is a big reason why the Double-Your-Money Man sees Russia as the Bargain of the Century. The big catalyst he sees is the removal of sanctions that have crippled the country's economy. The sanctions are up for review next month.
 
We're on board this trade in True Wealth Systems. The easiest way to join us is through shares of RSX.
 
Good investing,
 
Steve
 

Source: DailyWealth

What I'm Afraid of in the Markets

 
I am unafraid…
 
We have incredible investing opportunities right now in U.S. stocksU.S. real estatecommoditiesemerging markets… You name it, I'm probably bullish on it.
 
How can we have so many great opportunities?
 
The short answer is FEAR. We are seven years into a great bull market in stocks… But investors are not at all acting "giddy" like you see at a market top.
 
At a market peak, investors have no fear. Based on that fact alone, we are not at the peak yet.
 
I am not afraid of the next 12-18 months in the financial markets. Our investing upside potential is far greater than people believe, in my opinion.
 
So what am I afraid of? Let me tell you…
 
I'm not afraid of the short run. It's the long run that has me worried.
 
You see, our government is on an unsustainable path.
 
Two charts tell the story…
 
The first is a chart of the U.S. debt-to-GDP ratio.
 
Debt in the U.S. has been at manageable levels throughout history… with the exception of World War II. That was an extraordinary moment of borrowing – and we borrowed in excess of 100% of GDP. Take a look:
 
Today, the Congressional Budget Office projects that by 2032, our debt-to-GDP ratio will exceed that of World War II (under its "Alternative Fiscal Scenario"). Our debt-to-GDP ratio will hit 250% of GDP in less than 40 years.
 
Where is this increase in government borrowing coming from?
 
It isn't from defense spending like it was during World War II. The increase in government spending is almost all on entitlements and the interest on the national debt.
 
In about 20 years, spending on entitlements (that's Social Security and government health care programs) plus the interest on the national debt will eat up ALL government revenues.
 
It is truly shocking. Take a look:
 
That leaves no money to pay any government employees… no money for Homeland Security… no money to run the U.S. government.
 
In 15 years, our national debt (as a percent of GDP) will be worse than it was at its peak during World War II. And in 20 years, entitlements and the interest on the debt will eat up all government revenue.
 
Something has to change. But what politician is bold enough to stand up and make these changes? Nobody, so far…
 
Our politicians are like the proverbial boiling frog. (If water is heated slowly enough, a frog won't jump out of a pot – and it will be boiled to death.)
 
As long as our debts rise slowly, nobody will do anything… until it's too late.
 
THAT'S what I'm afraid of.
 
Fortunately, you and I can make a lot of money in our investments before that day arrives. We have some incredible upside potential in the near term, before the long-term problems start to become a problem.
 
In short, we have time before the water starts to boil…
 
Good investing,
 
Steve
 

Source: DailyWealth

Here's Why You Should Own Fewer Stocks

 
Concentrated Investing is hot off the presses.
 
The basic idea behind the book is that owning a portfolio of 10 to 15 stocks leads to better results than a widely diversified one.
 
The book includes profiles of investors who ran such concentrated portfolios. Below are my notes on a few favorites: Lou Simpson, John Maynard Keynes, and Claude Shannon.
 
Lou Simpson: How an Investor Should Act
 
Simpson ran GEICO's investment portfolio from 1979 to 2010. His record is extraordinary: 20% annually, compared with 13.5% for the market. His five key strategies are:
 
•   Think independently
•   Invest in high-return businesses run for the shareholders
•   Pay only a reasonable price, even for an excellent business
•   Invest for the long term
•   Do not diversify excessively
On the last one, Simpson writes: "Companies that meet our criteria are difficult to find. When we think he have found one, we make a large commitment."
 
Simpson's focus increased over time. In 1982, he had 33 stocks in a $280 million portfolio. He kept cutting back the number of stocks he owned, even as the size of his portfolio grew. By 1995, he had just 10 stocks in a $1.1 billion portfolio.
 
But he did not just buy and hold. Simpson would add to a holding if it fell (and thus became more attractive). He would trim it back if it got pricey. Simpson didn't sell because the stock price fell. He based his buy and sell decisions on valuation.
 
Another important aspect of Simpson's record: He did not trade much. There was very little turnover. He said you only need one, two, or three good ideas a year once you're fully vested. "We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting and not a lot of thinking."
 
John Maynard Keynes: Successful Through the Great Depression
 
Keynes is famous as an economist, but early in his career he speculated on currencies and commodities. This risky approach cost him all of his money in the early 1920s. And he nearly lost it all again after the Great Crash of 1929.
 
After this, he changed his approach. He began to think about stocks as businesses with an underlying value apart from the quoted stock price. He began to hold on to stocks longer. Typically, five years. He often continued to buy them if they fell lower.
 
He also came to love focusing his portfolio on fewer names:
 
As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one's risks by spreading too much between enterprises about which one knows little and has no reason for special confidence…
He made his reputation as a money manager running King's College's endowment. His Chest Fund sometimes had half of its money in just five stocks. In 1933, he had two-thirds of his portfolio in South African mining stocks.
 
His results were spectacular. The Chest Fund (1927-1945) grew fivefold while the U.K. market fell 15% and the U.S. market fell 21%. He offered up the best summary of his own approach in 1938:
 
•   A careful selection of a few investments (or a few types of investment) having regard to their cheapness in relation to their probable actual and potential intrinsic value.
    
•   A steadfast holding of these in fairly large units through thick and thin, perhaps for several years, until either they have fulfilled their promise or it is evident that they were purchased on a mistake.
    
•   A balanced investment position (i.e. a variety of risks in spite of individual holdings being large).
Claude Shannon: The Power of Rebalancing
 
Shannon was a brilliant mathematician who made breakthroughs in a number of fields. He might also be the greatest investor you've never heard of.
 
From the late 1950s to 1986, he earned 28% annually. That's good enough to turn every $1,000 into $1.6 million. What I want to highlight here, though, is an investing method he wrote about later called "Shannon's Demon."
 
It goes like this: Imagine a portfolio of $10,000 with 50% in cash and 50% in one stock. The idea is that you will always keep this portfolio at 50/50 by rebalancing every day.
 
So, let's say the stock falls by half after the first day. Now you have $7,500. You have the $5,000 in cash and $2,500 in the stock. You rebalance. Now you have $3,750 in cash and $3,750 in that stock.
 
The next day, the stock doubles. Now you have $11,250. Your portfolio is up $1,250, even though the stock is at the same level it was when you started. You rebalance again. The stock gets cut in half… If you repeat this pattern, your portfolio will be worth $1.1 million at the end of 80 days.
 
The assumptions are not realistic, but they make an important point. As the authors of Concentrated Investing point out:
 
[The gain] occurs though the stock hasn't budged – it's still at its starting price – and a buy-and-hold investor in the stock would have no gain… The rebalancing forces the investor to buy stock at the low, and sell at the high.
Most investors do the opposite. In Bonner Private Portfolio, we use rebalancing strategies to enhance our return. We add to our favorites when the market gives a chance to own them cheaper. We trim them back when the market gives us a good price. And we focus on position size.
 
Regards,
 
Chris Mayer
 
Editor's note: On Tuesday, June 21, at 8 p.m. Eastern time, Chris, Porter Stansberry, and Agora founder Bill Bonner are hosting their first-ever free training event. In it, you'll learn more about Chris' investment strategy, which beat the returns of several legendary investors over a decade-long period, including Warren Buffett and Carl Icahn. Plus, Bill will explain why he is putting $5 million of his family's trust money into Chris' recommendations. Sign up for this FREE event right here.

Source: DailyWealth