Exactly What the Election Will Do to The Stock Market

 
I have some bad news for you…
 
Stocks could struggle – for as long as two years – after the presidential election next week.
 
It won't be because of Hillary or Donald's bad political ideas.
 
It all comes down to the lessons of history we've learned from elections.
 
You see, politics have a surprisingly large effect on financial markets…
 
I never would have believed just how powerful an influence politics has on the markets if I hadn't crunched the numbers myself. And the conclusions are even more surprising…
 
For example, stocks tend to perform better when Democrats are in office. Since 1928, the S&P 500 has risen roughly 8% a year (not including dividends) when Democrats have held the Oval Office. Stocks have increased just 2% a year when Republicans have held office.
 
That's a great example of what I'm talking about – the result is far outside of any statistical norms. It's an extreme result, any way you look at it.
 
But something else has an even bigger influence on stock returns than which party is in office…
 
It turns out that the most important factor around presidents and stock prices isn't which party is in office, but what point we are at in a given president's term.
 
We call this powerful idea the "election-cycle indicator." The conclusion from this indicator is: Stocks tend to perform best at the end of a president's four-year term… regardless of which party is in power.
 
The table below shows how extreme this phenomenon has been, going back to 1950.
 
Take a look…
 
As you can see, the biggest gains in stocks happen during the third and fourth years…
 
And we've seen typical gains of more than 20% during the third year. That's an incredible result.
 
(We use quarterly data in this analysis, using September 30 as "year end." Based on that, we just finished the fourth year of President Obama's second term.)
 
Interestingly, these results hold up during both Democrat and Republican presidencies. It doesn't matter who's in office… The election-cycle year tends to determine how well stocks perform.
 
Today, we're a few weeks into Year 1 for the next president. And based on this indicator, we could be in for a rough two years, regardless of who wins next month's election.
 
The caveat here is that these data have plenty of variability. Stocks have soared as much as 43% during Year 1… But they've also fallen as much as 28%.
 
The message from this indicator is powerful. However, I am not throwing in the towel on stocks yet based on this one indicator
 
I believe we still have plenty of upside in stocks. In September, I wrote a DailyWealth called "Stop Your Worrying, This Isn't What a Top Feels Like."
 
As I said back then…
 
Is everyone optimistic about stock prices? Is everyone "in"? Is everyone talking about their "can't lose" stock strategies at cocktail parties?
 
If you can't answer yes, then this is not a top. This is not a moment like the one we had with tech stocks in 1999, or real estate in 2006-2008.

I stand by those words. It might be foolish to bet against the incredible track record of the election-cycle indicator… But that's what I'm doing this time around.
 
Good investing,
 
Steve
 

Source: DailyWealth

A Massive Change in Precious Metals You Need to See

 
Wow. I can't believe the sea change that has happened in gold in the last two weeks…
 
Two weeks ago, my headline here in DailyWealth was "Gold Isn't a Buy Yet… But it's Close."
 
That day, I said:
 
Personally, I look forward to getting back into gold and gold stocks with my own money… They have fallen, a lot, and I believe we're at the early stages of a major long-term bull market in gold stocks.
 
But even after such a fall, and even with my long-term outlook, I personally can't get excited just yet…
 

Unfortunately, gold is still loved… And it's still in a downtrend.

My, what a difference a couple of weeks makes…
 
Today, large investors are bailing out of gold – at a frenzied pace. Take a look…
 
Meanwhile, the bleeding might have stopped in the price of gold. It's hard to call it an "uptrend" right now… But gold has moved sideways for weeks. The downtrend might be nearing its end.
 
And it's not just gold…
 
We've seen similar extreme moves by big traders in other precious metals.
 
Platinum has been the most extreme. Take a look…
 
You can see from the chart that you don't want to own platinum when investors have piled up big bets on the metal. That's where we were over the summer. But as you can see in the bottom right of the chart, big investors have bailed out of platinum today.
 
So the big question is… What do we do now?
 
Is this moment a buying opportunity for gold and precious metals?
 
Personally, I'm still not buying just yet…
 
I want to see even more large investors get out. And I want to see more of an uptrend in prices.
 
I want to be clear here: The story for gold and precious metals has improved dramatically in the last two to three weeks. The change has been more dramatic than we've seen in a long time.
 
Now is a much better time to enter gold or precious metals than it was two or three weeks ago.
 
But it's still not "optimal" – yet.
 
Based on these charts, platinum is closer to a "buy" now than gold…
 
More investors have given up on platinum. That's means platinum is closer to the bottom, in my book.
 
Summing up, investors have massively changed their opinions on gold and other precious metals in just the last couple weeks. And big investors have started to throw in the towel.
 
I didn't think it would happen this quickly, or to this degree. But it's true. Gold is quickly moving from "loved" toward "hated" again.
 
I love to see this… This makes gold and other precious metals much more attractive than they were just a couple weeks ago.
 
The "red light" in gold has changed to yellow… We're just not all the way to green, yet. I'll let you know when we get there.
 
Good investing,
 
Steve
 
Editor's note: Although precious metals aren't a "buy" today, Steve has become super-bullish on another area of the resource market. In fact, he's so bullish that he's offering a free look at the research behind his latest True Wealth Systems recommendation. Get the details here.

Source: DailyWealth

There Is 100% Chance of a Recession Next Year

 
Imagine what's going to happen when we go into a recession again…
 
As I explained yesterday, artificially low interest rates restrict growth, limit consumer spending, and encourage individuals and corporations to borrow far too much money.
 
We're seeing record debt at the corporate level, the government level, the consumer level (auto loans), and an entire generation (students) encumbered by massive debt.
 
Do you think those conditions are going to lead to calm, cool, and rational policy decisions? Do you think those conditions are going to be good for our banking system? Do you think that's going to make us less aggressive with our foreign policy? (It's Mexico's fault!) Do you think our political leaders are going to wake up and realize that it's their policies that have put us in this mess?
 
No way. They're going to keep "doubling down" until the whole thing blows up.
 
That's why I'm 100% certain we're going to enter another recession next year…
 
I've been writing about the warning signs for a long time – falling industrial production, declining trade, falling corporate profits, and rising corporate defaults. And I told you that employment would roll over next. It has. The latest jobs report showed that unemployment ticked up to 5%. The employment situation has been getting steadily weaker for the last year.
 
Next year is going to be ugly for stocks. But it will be even worse for corporate bonds…
 
In 2017, we'll see the first maturities on the huge amount of junk bonds that were issued during the record issuance cycle between 2010 and 2015.
 
Roughly $125 billion will be due. The default rate across the sector will approach 10%. And it will get worse and worse… In 2018, another $250 billion will come due. In 2019, another $350 billion. And that's before two years of $400 billion or more in junk matures in 2020 and 2021.
 
If we're in a recession next year… look out. All of these debts will be seen as unfinanceable. The bond prices of highly leveraged companies will collapse. As for stocks, the damage to share prices will be much worse.
 
The fact is, most of these loans should have never been made. These companies are vastly overleveraged. And their financial condition, as a group, hasn't improved since 2010… It has gotten worse. These companies simply can't generate enough income to pay back their loans. A reckoning is coming – and it's long overdue.
 
Unfortunately, small, junk-rated companies aren't the only ones who will have a big problem…
 
Historically, "investment grade" meant that a corporation was extremely unlikely to ever default, regardless of the economic circumstances. The investment-grade default rate is usually just above zero during a recession. The lowest-rated "tranche" of investment-grade debt (BBB) would typically see a few defaults. In the default cycle between 1998 and 2002, for example, a little more than 1% of these bonds defaulted.
 
But… BBB isn't what it used to be. A lot of BBB credit is just wishful thinking.
 
A good example of a weak BBB credit is Devon Energy (DVN). Devon is a highly levered oil and gas business that routinely operates with negative cash flows. (Last year's tally was negative $290 million.) Incredibly, despite the obvious risks to this individual balance sheet and the historic booms and busts of the domestic-energy industry, Devon's benchmark bonds are only paying 3.4%, and the company is rated BBB.
 
How can a company be considered "investment grade" if a one-level credit downgrade could leave it unable to access the capital markets? After all, in periods of credit stress, junk-bond issuance disappears. And selling assets won't repay these debts… The company is far too encumbered.
 
There are dozens and dozens of companies like Devon. Maybe hundreds.
 
As companies have added debt in this cycle, more and more of them have been downgraded to BBB. Where 10 years ago only 14% of investment-grade bonds were BBB-rated, more than 30% of the investment-grade market today is BBB-rated. In other words, "investment grade" just doesn't mean what it used to.
 
That's why even though annual default rates on investment-grade bonds have historically been low, we suspect that the coming default cycle is going to be much, much worse.
 
I expect we'll see annual default rates of at least 3% on BBB debt, with cumulative defaults reaching close to 15%. Keep in mind, almost $2 trillion worth of BBB-rated "investment grade" debt is outstanding. Losses like the kind I expect during the next cycle could result in more than $500 billion in total defaults. And that's just the defaults from the "investment grade" debt.
 
I've been warning about the coming credit cycle for about a year…
 
So far, I've been pretty much on the mark. Default rates keep creeping higher and higher. Economic conditions are getting weaker and weaker. What's coming in 2018 and 2019 will be the biggest economic storm of our lives. It's going to wipe out a lot of people – unemployment will go way over 10%. And more than $1 trillion worth of bonds will default. This is absolutely going to happen because the government can buy all the bonds it wants, but it can't make them pay.
 
This situation doesn't have to be a disaster for you, though. Don't think of it as a crisis. Think of it as a reckoning. The foolish and spendthrift are going to learn a lesson. And the wise and patient will reap their fair reward. That's why I call what's coming "the greatest legal transfer of wealth in history." It's going to be an incredible show.
 
Want a front-row seat?
 
Then please join us in my latest research project, Stansberry's Big Trade.
 
Our plan is to spend the next five years or so predicting corporate defaults. But that's not all. What we're going to do is a little different… and potentially a lot more valuable. We're looking for weak credit where there's still tremendous equity value and an undeserved rating.
 
We've done that work over the last month and put together our list. It's called "The Dirty Thirty." As a group, these stocks…
 
•   Carry more than $300 billion in debt,
•   Produced negative free cash flow of $40 billion over the last decade, and
•   Are still worth more than $192 billion in market capitalization.
Our strategy will be to buy long-dated put options on these firms. Then we just have to wait for credit conditions to deteriorate, which we know they will. I believe it will be possible to make 10 times your initial capital on these trades as a whole.
 
These companies are going to put a huge dent into the net worth of millions of Americans. Believe me, I'm aware of the dangers investors in these companies' stocks and bonds face… But I can't change it. I can only try to help you survive and prosper.
 
If you act now, while market conditions are in our favor, you can turn this situation from a tragedy into your greatest triumph.
 
Regards,
 
Porter Stansberry
 
Editor's note: The speculative strategy Porter will be using in Stansberry's Big Trade isn't right for everyone. But it's the absolute best way to make 10 to 20 times your money as the massive credit-default cycle unfolds. Learn more about these techniques – and how to get started right away – right here.

Source: DailyWealth

The U.S. Government Is Digging Our Financial Grave

 
Today, we're taking on a big economic mystery…
 
Doesn't sound exciting, does it? Well, what you're going to learn below will be responsible for earning some investors trillions in profit over the next five years.
 
Investors who don't understand this concept are going to get wiped out. What's the concept? It's the answer to the following questions…
 
Given a 100%-plus increase in federal debt and federal debt securities over the past few years… why haven't bond prices fallen, and why haven't interest rates risen? Where is all of the inflation that should have occurred?
 
As you know, bond prices not only didn't fall, they have continued to hit new all-time highs, sending rates to new all-time lows. In many places, bond prices rose so much that interest rates went negative, something most people thought was simply impossible.
 
Of course, federal debt levels aren't the only thing that has exploded…
 
Let's not forget student debt, auto lending, U.S. corporations, and, perhaps the biggest debt bubble of all, foreign corporations.
 
In the U.S., corporate obligations are at all-time highs, relative to GDP (a little more than 45%). But in China, they're even crazier: Corporate obligations have soared in the past eight years from virtually nothing to more than 120% of GDP. The corporate debt and real estate bubble in China is probably the largest the world has even seen. (Imagine working out that problem in a nation without the rule of law or a tradition of recognizing property rights.)
 
In total, the International Monetary Fund says that global debt is now equal to 225% of global GDP, up from about 200% just a decade ago.
 
Just about every economist in the world would have told you that massive increases to credit and money supply – and the resulting huge expansion of consumption – should have set off massive inflation… or at the very least, much, much higher interest rates.
 
So… why didn't it happen?
 
It's the most important economic mystery of our lives. And the answer is finally coming into sharp view, thanks to a lot of new, fascinating economic research from major economists… all of which is teaching us something most of us would have simply called common sense: Socialism doesn't work.
 
The problem revolves around a simple idea that economists call a "multiplier"…
 
They're referring to the effect new capital has when injected into an economy. Ever since the 1920s and the days of John Maynard Keynes, economists everywhere have assumed that government borrowing and spending would produce a positive multiplier for the economy. They've thought of the government's spending as "priming the pump."
 
For example, if the government borrows money to build new roads, then private industry would be spurred to build new houses along the roads and build new businesses to serve those houses, etc.
 
That's the theory. But does it actually happen in practice? That's where a whole slew of new research comes in.
 
As it turns out, there is a multiplier effect associated with government spending. But based on empirical studies, it's actually negative. That is, rather than spurring growth, more government borrowing and spending is strongly correlated with less economic growth.
 
Part of this is because governments are generally really bad investors…
 
Much of the capital they borrow and invest is wasted. And as debt-to-GDP levels surpass around 80% of GDP, the real problems begin. Research suggests that when debt-to-GDP levels stay above 90% for more than five years, the resulting damage to economic growth is particularly severe.
 
Worst of all, changes to the multiplier of government spending are non-linear. The multiplier doesn't just get a little bit worse as debts and spending increases… It falls of a cliff as debts mount. Or, in plain English, the more money governments borrow and spend, the worse the impact is on economic growth and wealth creation.
 
The data show that the U.S. economy is likely to experience big declines in GDP growth as our government continues to borrow and spend more and more in an effort to reverse the declining economy.
 
That will hurt overall productivity, corporate profits, industrial production, employment, and consumer spending – all with increasing severity as the magnitude and duration of the debt is extended. We've already seen these troubling data points occur over the past 24 months. Government borrowing and spending are literally digging our financial graves.
 
And the harder they dig, the worse it's going to get…
 
As for interest rates, the factors I've described should be more than enough to keep interest rates low. But it gets worse…
 
Quantitative easing (when the government prints money to buy bonds and manipulate interest rates lower) is magnifying the impact of this financial repression. And according to these studies, that's going to have an unintended consequence: much lower consumer spending.
 
Think about this for a minute. The government has basically sold $10 trillion in debt over the last few years.
 
If that debt was trading freely in the market – and hadn't been bought by central banks around the world – what would the interest rate be?
 
Economic theory and more than a hundred years of data tell us that interest rates should be roughly equal to annual GDP growth plus a nominal return above the inflation rate.
 
If growth is 2.5% and inflation is 2%, you should see short-term government bonds trading around 4.5%, with longer-dated bonds trading a little higher, say 6%.
 
Now, think about how much income would be generated by all of that new debt. Just looking at the recent debt (6% of $10 trillion), you would see an extra $600 billion a year sent into private hands. Looking at the total federal debt ($20 trillion), that's $1.2 trillion a year of capital sent into private hands – if the public owned these bonds and bills, and if interest rates were allowed to rise.
 
That's a significant amount of income for the private sector. But what happens when interest rates are manipulated to nothing and most of the debt is held by central banks or government "trust" funds?
 
That's taking capital away from private hands (consumption and investment) and putting it into government programs (waste, malinvestment, and disincentives to gainful employment).
 
Just think about what the government spends money on. Our government (and all the other major western democracies) has embraced the kind of social-spending programs that bankrupt every nation that adopts them.
 
The chart above shows "mandatory spending" (aka government transfer payments) versus discretionary spending, which is everything else. Our government is no longer building bridges and enforcing contracts. It's simply taking money from Peter to pay Paul. And as you'd expect, that kind of economic activity (aka stealing) has a negative multiplier. Taking lots and lots of capital from productive hands and giving it to unproductive hands might meet political goals, but it's not good for the economy.
 
Ready for this shocking conclusion? Socialism doesn't work. And manipulating interest rates makes it a lot worse.
 
Tomorrow, I'll tell you why we're about to see the biggest economic storm of our lives… and explain how you can protect yourself from it.
 
Regards,
 
Porter Stansberry
 
Editor's note: Porter and his team of analysts have been researching America's most indebted companies. These companies – which Porter has dubbed "The Dirty Thirty" – have little chance of repaying their massive debt loads. Earlier this month, they released a comprehensive list of the names, ticker symbols, and financial details of these companies. This strategy isn't right for everyone… But certain investors could make 10 to 20 times their initial investment. Get the details on this strategy here.

Source: DailyWealth

The Only Thing That's Worse Than Being Hated

 
I can't stand the Kardashians. Apparently, I'm not alone… Americans love to hate the Kardashians.
 
But how bad is "being hated"?
 
Think about it… you probably can't stand the Kardashians, either. But you still know who they are.
 
Somehow, Keeping Up With the Kardashians – the "reality" show that chronicles the fatuous existence of Kim Kardashian and her family – is still on television… and somehow, they're still making lots of money. "Being hated" doesn't sound that bad.
 
So… what could be worse for the Kardashians than being hated?
 
How about being out of the news altogether
 
No more TV shows, no more paparazzi, no more endorsements… NO MORE MONEY. That would be the real bottom for the Kardashians. That's worse than being hated.
 
Surprisingly, the same goes for investing opportunities… You might think that your investment has hit rock bottom if every headline you see is shouting about how terrible it is. But believe it or not, there IS something even worse than being hated… and when you see it, you know it's time to get serious
 
When I find an asset that is worse than hated, I get excited. I know our upside is even greater than usual.
 
The truly optimal time to buy is when a hated investment has been out of the news for a long time. And then – when nobody is talking about it anymore – it quietly starts an uptrend. That's when the biggest percentage gains can happen. That's the setup we want to see.
 
This is the situation we have in the oil market today…
 
The price of oil fell from $100 a barrel to $50 over the second half of 2014. Now, you might think that a 50% fall in six months would mean that oil was hated – and that it might be time to buy.
 
But – like Kim Kardashian – oil was still all over the television at the time.
 
The price of oil had crashed – but oil had not yet fallen out of the headlines. Far from it. So what happened next?
 
Those who bet on the price of oil rising in 2015 got hammered…
 
The price of oil fell by another 30% in 2015. Oil bottomed out in the $20-per-barrel range earlier this year.
 
Ah, but what's this? It appears – with very little fanfare from the media – that the major decline in oil prices is behind us
 
That was the big news in my high-priced True Wealth Systems newsletter earlier this month.
 
We saw new "buy" signals for oil prices in both of the tracking systems we use. That's the first time oil has been in "double-bull mode" since 2014.
 
In short, right now could be the beginning of a major rally in oil prices, based on my True Wealth Systems computers.
 
My TWS computers spotted this opportunity that, honestly, I would have missed on my own… Oil prices were not on my radar. And they have been completely out of the news.
 
But remember, the only thing worse than being hated is being forgotten.
 
That's what has been happening in the oil market today. And it's a major reason why I believe oil prices could move much higher from here.
 
Good investing,
 
Steve
 
P.S. In this month's True Wealth Systems issue, we didn't bet directly on higher oil prices. We found an even better opportunity – with dramatically higher upside. The last time oil looked this good, based on our systems, it kicked off a multi-year bull market that ended up with a potential upside of more than 1,000%. You can learn more about how we're making the trade right here.

Source: DailyWealth

The Best Christmas Present You Can Give Yourself

 
"Did you hear the owner of Johnny's died yesterday?" my friend Tim asked me at lunch.
 
I couldn't believe it. "What happened?" I asked.
 
"He died of a heart attack, in the shower. He was 40 years old," Tim said. "I just hung out with him yesterday. He seemed great. He had just adopted two kids. There's no known cause of the heart attack. But he was overweight…"
 
Man, you hate to hear stories like that. One day things are normal and the next, a family is in disarray.
 
It's heartbreaking. And it makes you think about your own mortality.
 
I don't want my family to ever experience anything like that. I'm sure you don't either. Right?
 
So let's make some changes. Together. Starting right now…
 
Let's do this… Let's take eight weeks and COMMIT. You can do just about anything for eight weeks, right?
 
The good news is, by Christmas we'll be the healthiest we've been all year. We will have given ourselves "life" – what better Christmas present could there be?
 
You can do it. Eight weeks. Let's do it.
 
One year ago, you might recall, we did the same thing… I wrote a DailyWealth called "Time to Save My Life, Starting Today." I set out to make some major changes.
 
I shared with you my "specs" on October 19, 2015:
 
Height: 6'4"
 
Weight: 262 pounds
 
Body fat %: 36% (Yeesh!)
 
Waist at belly button: 46.5 inches
 
Here are my current specs, as of October 21, 2016:
 
Height: 6'4"
 
Weight: 232 pounds
 
Body fat %: 27%
 
Waist at belly button: 43.5 inches
 
This is the man I am today. But this is still not the man I want to be.
 
I've lost 30 pounds in the last year… and my body fat percentage has improved dramatically – from 36% to 27%.
 
It's a decent effort. But I'm not there yet…
 
Join me… Commit to eight weeks. It's just eight weeks.
 
I'm not going to tell you how to do it. We all know what we have to do.
 
"Eat less. Move more." That's what it always comes down to. Do it naturally, too… with foods and exercise. We all know this is what works.
 
I am going to be ON IT until Christmas. Christmas is doable, right? We can do that. (You can take Thanksgiving off, if you want… So it's really more like two four-week bursts. That's your call.)
 
Hopefully, we can make some real long-term changes.
 
Having a goal of being "on it" for eight weeks seems perfect… It's 1) significant, but 2) achievable. What do you think?
 
I will report my "specs" back to you every Monday between now and Christmas. Write down your results. Keep yourself honest and accountable. Let's do it.
 
Wish me luck. Best of luck to you as well. We all know what we need to do, we just need to do it. Eight weeks and we'll have the best gift we can give ourselves! What are you waiting for? Go!
 
Good investing,
 

Steve

 

Source: DailyWealth

The Fed Don't Mean a Thing

 
This letter is the only thing you need to read about the Federal Reserve…
 
Ignore the sky-is-falling headlines. The Fed's decision during its December 13 and 14 meeting will have virtually no effect on your life or your investments.
 
Here are the basics…
 
The Fed is tasked with maintaining full employment and price stability by setting very short-term interest rates. It has to walk a fine line between those two goals. Low interest rates encourage economic growth, which in turn creates employment, but also risk-causing inflation.
 
Here's how the economy looks today… Employment is good, but it's not quite yet at "great." Meanwhile, inflation has not appeared yet.
 
The Fed meets in early November. According to futures markets, where traders can place bets on the outcome, the likelihood of a rate hike is only 17%. But those odds jump to 65% after the Fed's December meeting.
 
There's a lot of financial-media hoopla about what the Fed will do and what it will mean. Some pundits claim that rising rates will cause a disaster in the market… and your portfolio.
 
But they don't mean a thing (to paraphrase Duke Ellington).
 
Here are four reasons why you should completely ignore what the Fed does at its next meeting…
 
  1. There are different interest rates.
There are lots of different interest rates… from interest rates on U.S. bonds to the interest rate you earn on your savings account.
 
The most chatter is about bonds… Bond prices and yields move in opposite directions. So some people are worried that the Fed raising interest rates means bond prices will fall.
 
Here's the current interest rate you'd earn on different maturities of U.S. government Treasury securities, depending on time to maturity…
 
Maturity
Interest Rate
2-year
0.81%
5-year
1.23%
10-year
1.74%
30-year
2.49%
Here's the point: None of these rates are controlled by the Fed… None.
 
They're all controlled by supply and demand. If a lot of investors want to lend for five years, they'll buy up the bonds and the interest rate on five-year bonds will decline.
 
The only interest rate the Fed controls is the "federal funds rate"… the rate at which banks and credit unions lend to each other on an overnight basis.
 
Now, in theory, if the Fed raises that rate, it would hurt bonds with longer maturities (what we'd call "further out on the curve"). But in practice, this effect is miniscule.
 
In fact, the Federal Reserve did raise the federal funds rate from 0% to 0.25% in December of 2015. Since then, most interest rates have gone down.
 
Supply and demand will determine what happens with the interest rates that affect everyday life most, not the Fed's rate.
 
  2. The change in interest rates is extraordinarily small.
If the Federal Reserve raises rates, it will be a very small increase – say, one quarter of one percent. The Fed will then, in the future, continue to raise rates very slowly.
 
These moves are largely symbolic. Prior to the financial crisis of 2008, the federal funds rate was regularly as high as 3% or 4%. So we could have as many as 12 or 16 raises before we're at "normal" levels again.
 
Make no mistake about it, this is still an "easy money" policy.
 
  3. The change in interest rates is "priced in" and meaningless.
Financial markets are forward-looking… If everyone knew that a stock would be worth $10 tomorrow, they'd buy and sell until it was $10 today.
 
Markets aren't always perfectly priced, but a rise in interest rates has been anticipated for years.
 
Again, in theory, higher interest rates drive down the price of bonds. This leads some to claim that the day the Fed hikes rates, bonds will plummet. But do you really think there's an investment manager sitting on a pile of bonds who hasn't considered that rates are set to go up?
 
As Steve says about Fed decisions, "Let me ask you… How many crises have you been able to mark in advance on your calendar?"
 
  4. Stocks perform well when interest rates rise.
Many investors fear that rising rates will choke the life out of the stock market.
 
The theory goes that higher interest rates reduce profits for companies because they pay more to borrow… Plus, other interest-paying assets will look more attractive relative to stocks.
 
In reality, the Fed typically raises interest rates when the economy looks healthy enough to withstand it. Right now, GDP is growing, employment is strong, and even wages are increasing a little.
 
In my experience, it's the real economic factors pushing stocks up that outweigh the theoretical ones that could push stocks down.
 
Looking at historical data, when interest rates rise from low levels, like from 0%-4%, stocks tend to rise with interest rates. (It's not as safe if rates start at higher levels… When rates rise from 5% and higher, that does tend to put pressure on stocks.)
 
Talking heads in the media place more importance on interest rates than they should.
 
Over the long term – spanning a business cycle that includes a recession and recovery – the Fed can certainly affect the path of the economy.
 
But in the short term – if and when the Fed announces a change before the end of the year – it won't mean much at all. Please ignore it.
 
Here's to our health, wealth, and a great retirement,
 
Dr. David Eifrig
 
Editor's note: Last month, Doc told his Income Intelligence subscribers about an income opportunity that yields more than 30-year Treasurys today. This company has an incredibly strong brand, stellar management, and consistently grows its margins every year. Get access to his recommendation with a risk-free trial subscription to Income Intelligence by clicking here.

Source: DailyWealth

Why the World's Best-Performing Market Has 23% Upside Today

 
My True Wealth Systems readers are up triple digits in six months.
 
That's not from a risky penny stock or an options trade… That's from buying an entire stock market.
 
The crazy thing is that these gains could keep going. This market just staged a major breakout. And history says that could lead to another 23% gain over the next year.
 
Let me explain…
 
The most successful True Wealth Systems trade of 2016 has been Brazilian stocks… by far.
 
We made the trade in my high-priced True Wealth Systems newsletter in April. We bought, with leverage, through the ProShares Ultra MSCI Brazil Capped Fund (UBR). And we're up more than 100% since then.
 
That gain is thanks to a record year for Brazilian stocks. The country's benchmark Ibovespa Index ("IBOV") is up 78% this year in U.S.-dollar terms.
 
That makes it the world's best-performing major stock market for 2016. But we could see further gains, based on history.
 
You see, Brazilian stocks hit a new 22-month high last week. We've only seen seven other distinct 22-month highs going back to 1992.
 
Not surprisingly, this rare breakout tends to mean further gains in Brazilian stocks. Take a look…
 
 
1-Month
6-Month
1-Year
After extreme
7.2%
9.5%
22.9%
Buy and hold
0.7%
4.4%
9.1%
Despite major ups and downs, the Brazilian stock market has performed well since the early 1990s. The country's typical annual gain has been 9.1%. But buying after a breakout led to much better gains…
 
We saw 7.2% gains a month later… 9.5% gains over the following six months… and huge 22.9% gains over the next year.
 
In short, buying Brazil after a 22-month high is a great idea. That's the opportunity we have today. And importantly, the upside with our leveraged fund is even higher.
 
Shares of UBR return twice the daily change of Brazilian stocks. So a 20%-plus gain in Brazil's overall market could easily lead 40%-plus gains in shares of UBR.
 
That might sound crazy, since True Wealth Systems readers are already up more than 100%. But UBR is still down 64% from its 2014 high. Take a look…
 
 
This is exactly what I look for when investing…
 
Brazilian stocks spent years crashing. But that trend has reversed. And they're now in a strong uptrend.
 
Importantly, they just broke out to a 22-month high. And history says that will likely lead to further gains.
 
True Wealth Systems readers are up triple digits on this idea. But the largest gains could still be ahead of us. And that means Brazil is still a great buy today.
 
Good investing,
 
Steve
 
Editor's note: Steve is so bullish on another investment opportunity right now that he is "unlocking" his True Wealth Systems research for a limited time… and offering the chance to get the name of his latest recommendation, 100% risk-free. Read Steve's research right here (without sitting through a long promotional video).

Source: DailyWealth

Master These Five Skills and Start Investing Fearlessly

 
No matter how much research you do, you'll always reach a point when you must pluck up your courage and buy or sell.
 
Last month, I gave a presentation called "Invest Fearlessly" at the 2016 Stansberry Conference at the Aria Resort and Casino in Las Vegas.
 
I shared the five skills essential to your success in the market. Develop them now and they will give you the clarity and self-reliance you need to invest fearlessly. Let me explain…
 
The first skill you need is to be truthful with yourself. That means many things. First and foremost, it means asking yourself if you really have the temperament to manage your own investments.
 
After you get past that hurdle, you have to decide what you are. Are you a value investor? A day trader? You must have a real plan.
 
Next, you must learn how to think long term. You need a long-term perspective to overcome the emotional pull of the herd… especially near market tops and bottoms, where most people make their biggest mistakes and lose money.
 
It's hard to stay true to a winning strategy when it's underperforming without a good understanding of that strategy's long-term performance. You need to understand how money compounds over the long term. You also need to understand the history of price movements in stocks, bonds (interest rates), and important commodities, like oil and gold.
 
You must also learn negative thinking. Recognizing what you're doing wrong is a simple idea, but it's difficult to do.
 
You'll be smarter and more effective in the financial markets (and other areas of your life) if you spend more time trying to figure out what you're doing wrong than always trying to confirm that you're right. Many great investors advise negative thinking…
 
Warren Buffett says, "Rule No. 1: Don't lose money. Rule No. 2: Never forget Rule No. 1."
 
Billionaire trader George Soros says, "I'm always wrong. I'm always wrong, and I try to correct my mistakes. That is the secret of my success."
 
In other words, Soros is always trying to disconfirm any bad bets in his portfolio and get on the right side of the trade. If you can't sell your most cherished long idea or even go short on it if things change, you'll wind up with a portfolio full of financially draining emotional commitments instead of a portfolio full of winners.
 
Learn to think about all you don't know, figure out what you shouldn't do, and know when not to place a bet… Learn to disconfirm your ideas.
 
Finally, you must learn to approach investing as a business. The minute you decide to manage your own money, you start a business. Treat it like one. Embrace the four business-like investing principles in the last two pages of Benjamin Graham's classic, The Intelligent Investor: Know your business, run your business, make sure the odds favor a profit over the long term, and have the courage of your knowledge and experience.
 
That last point brings us full circle from where we started…
 
You can't be a successful investor without the courage of your knowledge and experience. False bravado won't cut it, either. You must base your courage on what you've learned. And no matter what the original source for your ideas, you had better do the necessary work to own them intellectually and emotionally before you buy.
 
Investing is like breathing. No one can do it for you.
 
Good investing,
 
Dan Ferris
 
Editor's note: Dan recently told his Extreme Value subscribers about a backdoor way to buy into a unique, one-of-a-kind trophy asset that's normally only available to billionaires. And right now, it's trading at a HUGE discount to its intrinsic value. Get the full story here.

Source: DailyWealth

No Interest-Rate Rise This Year, Says 'Bond God'

 
"Higher interest rates are just around the corner…"
 
That's what we've been led to expect. And that's what Janet Yellen keeps telling us.
 
Should we believe her?
 
Yellen should know what's going to happen with interest rates better than anyone… As the head of the United States Federal Reserve, she's in charge of the group that raises or lowers the benchmark short-term interest rate in the U.S.
 
But I don't trust her.
 
It's nothing personal… But the Federal Reserve has a long history of "crying wolf." Let me briefly explain…
 
The Fed lowered short-term interest rates to near zero in 2008. It has been threatening to raise interest rates ever since – but it hasn't done much.
 
While the threat is always there, the Fed has only raised interest rates one time since 2008 – and that was by just 0.25 percentage points.
 
Jeff Gundlach agrees with me…
 
Gundlach has earned the nickname "Bond God" for his ability to invest based on interest rates. He manages 12 figures. (In other words, investors have entrusted him with more than $100 billion.)
 
Last week, I told you why Gundlach expects higher long-term interest rates. I agree with him that long-term rates will likely rise. But he also thinks low rates will continue for short-term government bonds.
 
Gundlach believes the Fed won't raise interest rates this year. As he told Reuters recently…
 
"I didn't hear, 'We are going to tighten in December,'" Gundlach said in a telephone interview. "I think she is concerned about the trend of economic growth. GDP is not doing what they want."
Gundlach's prediction is bold. He is actually out of line with the consensus, which believes that the Fed will likely raise interest rates in December.
 
Either way, it's not going to be a big deal…
 
You see, even if the consensus is right (and the Fed raises interest rates by 0.25 percentage points in December), the general opinion is that it will be the only interest-rate rise over the next 12 months.
 
So regardless of when it happens, the potential outcome is an insignificant rise for interest rates.
 
Don't believe the threat of higher rates. If they come at all this year, the Fed will just make a tiny hike. And that will likely be it for the next 12 months, if the "experts" get it right…
 
So don't worry so much…
 
Good investing,
 
Steve
 

Source: DailyWealth