The Surprising Fall in Interest Rates Is Here

 
It's already happening.
 
And it came faster than I expected.
 
The fall in interest rates is here. Right now.
 
Ten-year government bond rates have already declined from 2.60% last month to just 2.36%, as I write. And the move down is likely not over.
 
Let me explain…
 
Last month, I detailed why interest rates could surprise everyone and head lower in 2017.
 
The reason was simple: Sentiment was at an extreme. The entire investing community was betting on higher interest rates.
 
The story is timeless. I've seen it over and over again in the investing world. And it typically leads to the same outcome…
 
When the majority of investors bet one way, the opposite tends to occur. That's what I explained last month. And it's already working out. The fall in interest rates is here.
 
Again, interest rates on 10-year government bonds have already fallen from a high of 2.60% last month to 2.36% right now… And since lower rates mean higher bond prices, that resulted in a quick 5% gain in the prices of long-term bonds.
 
The chart below shows the recent upswing in the iShares 20+ Year Treasury Bond Fund (TLT), which holds a basket of long-term U.S. government bonds. Take a look…
 
You can see that shares of TLT bottomed last month, about a week before I warned that interest rates would fall.
 
The trend of lower long-term interest rates is likely to continue for a simple reason…
 
Sentiment is even more extreme today than it was last month.
 
To see this, we want to look at what the "smart money" expects for interest rates.
 
Here's an updated version of the chart we ran last month, showing the Commitment of Traders (COT) report for 10-year government bonds. Take a look…
 
The COT report shows the real-money bets of futures traders (the "smart money" in this case). It tells us what futures traders expect will happen next for government bonds. And right now, the smart money is betting on higher bond prices… which mean lower interest rates.
 
This indicator had already broken out to a multi-year high when we wrote about it last month… And it has since hit an all-time high.
 
We saw a similar extreme level of "smart money" bets at the end of 2013. Over the next year or so, 10-year government bond rates fell from around 3% to less than 2%. And shares of TLT rallied 25% over the same time.
 
The crowd is still predicting higher long-term interest rates. Last month, I predicted the opposite – I predicted that we would see lower long-term interest rates. I got it right… and the latest numbers tell me the trend of lower long-term interest rates will likely continue.
 
Good investing,
 
Steve
 
P.S. Regardless of what interest rates do to the market this year, we recently developed a brand-new program to take the guesswork out of investing. Learn how to vastly improve your investing results in less than an hour per month by clicking here.

Source: DailyWealth

The Zero-Budget Portfolio

 
Happy 2017… You're probably going to fail this year!
 
According to Statistic Brain, only 9% of Americans are successful in achieving their New Year's resolutions. That figure more than quadruples when describing people who "never succeed and fail on their resolution each year."
 
I would think the results are equally bad, or worse, when focusing on New Year's resolutions related to investing. Why? So many of our goals are binary in nature – did we beat the market or not? Did we hit our 12% goal or come up short? Did our portfolios grow enough to buy that new sports car?
 
One problem with this type of investment resolution is it focuses on a result rather than a process – the "payoff" rather than the "playbook." But the only thing we can control is the process itself.
 
So why not make a well-executed process our goal and let the outcome take care of itself?
 
If you find this idea reasonable, then the logical next question is, "So what is an effective New Year's investment-process resolution?"
 
I'm going to suggest we borrow one from private equity group 3G Capital.
 
3G Capital has an impressive resume… Perhaps best known for leading InBev's hostile takeover of Anheuser-Busch and Heinz's purchase of Kraft, 3G is widely respected for its ability to transform a company's profitability – and quickly.
 
Fortunately, how 3G accomplishes this is no secret. The strategy is called "zero-based budgeting."
 
In essence, zero-based budgeting boils down to one critical hurdle: Every expense – old ones as well as new – must be re-justified every year, and wherever possible, those expenses must be lowered.
 
To borrow our terms from above, the "process" of zero-based budgeting includes objective analysis of all cash flows, which usually leads to massive layoffs, new budgetary restrictions, and an overall shift in corporate culture. And the subsequent "payoff"? Big profits.
 
Let's apply this concept to your portfolio… Take out a piece of paper. Write down what your ideal portfolio would be today if you were starting from scratch. Finished?
 
In essence, you're forcing yourself to start with a mental clean slate. If the actual holdings in your portfolio fit into your vision, they remain. Those that don't get the axe.
 
A slight tweak of 3G's hurdle provides us a litmus test we can use on our own portfolios:
 
Every stock, bond, or other investment must be re-justified right now. And if you wouldn't add the investment to your portfolio based on an honest assessment of its prospects as they look today, then purge it from your portfolio immediately.
The go-nowhere investments loitering in your portfolio are a very real opportunity cost (and many times, real dollar cost) to your wealth. Therefore, by eliminating them, you'll significantly boost your portfolio's productivity. And isn't that the real goal you want to achieve?
 
The challenge is viewing our assets with genuine objectivity. So many of us have high-cost longtime holdings that haven't performed for years, yet remain in our portfolios for any number of reasons. But are any of those excuses legitimate reasons to continue owning a bad investment?
 
I can't tell you how many times a prospective client has shown up with his current portfolio, often consisting of dozens to hundreds of holdings and funds (what my friend Josh Brown calls "mutual fund salad"). Many of these funds charge 1%, 2%, or even 3% or more in fees per year! These investors have no idea what their current portfolio looks like, or how to expect it to perform in the future.
 
If you don't have a 2017 New Year's investing resolution but you're willing to try, I suggest you borrow the 3G Zero-Budget approach to your portfolio. Here is a simple overview that should take less than an hour:
 
1.  
Schedule a time for a portfolio review.
   
2.   Start with a blank slate, and outline your ideal portfolio today. Aim for simplicity.
   
3.   Compare your ideal portfolio to your legacy portfolio.
   
4.   If they differ, be ruthless about purging the old holdings to reflect your ideal portfolio.
   
5.   Schedule a time to implement the changes.
   
6.   Write down your process – what big institutions call their "policy portfolio" – for how you will maintain the portfolio going forward (rebalancing, etc.).
   
7.   Share this plan with someone. It could be a friend, coworker, or a spouse. Just like sharing your New Year's resolution to lose weight, your chance of success is much higher if you are held accountable.
If you bring 3G's mindset to your investments, then I believe that by this time in 2018, you'll be very pleased with the results.
 
But regardless of which approach is right for you, don't let this New Year's pass too far by without using it as an opportunity to help your portfolio. After all, as the old saying goes, "If not now, when?"
 
Regards,
 
Meb Faber
 
P.S. For those of you who like this idea in theory but don't have time to put in the required due diligence, or perhaps aren't confident in your analytical ability, you can always outsource your portfolio to our Cambria Digital Advisor service. You can read all about our approach by clicking here. You can also download my free book, Global Asset Allocation, right here.

Source: DailyWealth

What the 'Dumb Money' Is Betting on Today

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 It's one of the few constants in the financial markets…
 
Popular investment ideas are usually losers.
 
As we often preach, it pays to be a contrarian. Or as billionaire investor Warren Buffett has famously said, "Be fearful when others are greedy, and greedy when others are fearful."
 
Whatever phrase you choose… whenever the "crowd" is heavily betting one way, it's often a good time to take the other side of that bet.
 
 We were reminded of this fact when we saw the Commitments of Traders ("COT") report on the U.S. Treasury market earlier this week…
 
If you're not familiar, the COT is a weekly government report that tracks the bets of different types of traders in different futures markets, including U.S. Treasurys.
 
In simple terms, the two main types of traders are industry professionals (who use futures to "hedge" or insure against losses) and speculators (often called the "dumb money" because they tend to get bullish at market tops and bearish at market bottoms).
 
 Speculative bets against Treasurys hit a record high last month…
 
In the December 12 Digest, we warned that this suggested at least a short-term rally in Treasurys – and a decline in interest rates – was likely. (Remember, bonds and interest rates trade inversely… As interest rates fall, bond prices rise, and vice versa.)
 
As you can see in the following chart, Treasurys – as tracked by the iShares 20+ Year Treasury Bond Fund (TLT) – reversed just days later, and they've been moving higher since…
 
And interest rates – as tracked by the yield on the benchmark 10-year U.S. Treasury note – have been falling…
 
 Typically, following an extreme like we saw last month, we'd expect speculators to begin to unwind some of these bets as Treasurys have rallied…
 
But that hasn't been the case this time. Instead, speculators have been adding to their bearish positions.
 
According to the COT data, speculative "dumb money" bets against Treasurys hit a new all-time record last week.
 
So while we believe the three-decade bull market in bonds is ending, this suggests the recent reversal rally has further to run.
 
 Meanwhile, in President-elect Donald Trump's first official press conference on Wednesday, he said less to clarify his proposals on taxes, trade, or fiscal stimulus than some analysts had hoped.
 
While Trump didn't say much about his general policy proposals, he again singled out two industries he has criticized before…
 
He criticized the cost of the Defense Department's F-35 program, causing shares of Lockheed Martin (LMT) and other defense stocks to sell off.
 
He also slammed the pharmaceutical industry again, saying companies were "getting away with murder" by overcharging for drugs. "Pharma has a lot of lobbyists and a lot of power, and there is very little bidding," he said.
 
Biotech stocks – as tracked by the iShares Nasdaq Biotechnology Fund (IBB) – fell about 3% earlier in the week before recovering some on Friday.
 
 If there was one takeaway from Wednesday's press conference… it's to expect more volatility.
 
We still don't have many details on what a Trump administration will look like. It's still unclear how many of his proposals he'll pursue… or how successful he'll be. It's also not clear what other industries or companies could draw the administration's ire in the future.
 
So we won't be surprised to see erratic market swings as more details emerge in the coming weeks.
 
If those details fall short of Trump's big promises, the recent reversal could accelerate as markets give back their post-election moves.
 
On the other hand, if Trump is successful in pushing through his proposals, the next few years are likely to create more winners and losers among sectors, companies, and even countries than we've seen in recent years.
 
 To help guide you along the way, we've developed a product unlike anything we've ever done in the 20-year history of our business. It's called Stansberry Portfolio Solutions. This new product will finally take the guesswork out of putting together a safe, diversified portfolio… and will make it cheaper and easier to make money with our research than ever before.
 
Porter, Steve Sjuggerud, and Dr. David "Doc" Eifrig went "on air" live Thursday night from our Baltimore headquarters to reveal the brand-new Stansberry Portfolio Solutions. But if you missed it, that's OK. It's not too late. You can watch the full replay of the event for free right here.
 
Regards,
 
Justin Brill
 
Editor's note: We designed our brand-new Stansberry Portfolio Solutions service with one goal in mind: to take all the guesswork out of safe, profitable investing… so you can finally "get there" and reach your financial goals. Following our recommendations will be easier, faster, and cheaper than ever before. Find out how to get started today by clicking here.
 

Source: DailyWealth

Five Ways to Prepare for Any Market Environment

 
When the year is new, forecasts come out of the woodwork…
 
Wall Street analysts had a great year as a group in 2016, predicting on average the S&P 500 would finish the year around 2,200, according to Steven Russolillo of the Wall Street Journal. It closed at a little above 2,238 on Friday, December 30, the last trading day of 2016.
 
But something a little different is happening this year, relative to the last decade or so. Analyst predictions are showing signs of fear
 
Wall Street is predicting, on average, the S&P 500 will end 2017 at 2,356. That's a rise of roughly 5% – the smallest rise predicted since 2005.
 
And Jason Goepfert of SentimenTrader.com reports a 9% gap today between the highest and lowest predictions… the smallest gap since 1999.
 
In other words, Wall Street analysts are sticking close together, like a herd of impalas in the presence of a hungry cheetah
 
That's why today, I'll discuss how to manage your portfolio in the face of uncertainty. Instead of relying on predictions, you can be ready for anything in the markets this year…
 
Right now, the Wall Street predictors are still trying to figure out what happened on Election Day. By the time they do, the "Trump effect" in the stock market will be over.
 
Rather than waste time predicting specific outcomes and betting on them (thus increasing your risk), you should prepare your portfolio for a wide range of potential outcomes and fill it with assets that can withstand various shocks.
 
This isn't easy, but we consistently recommend some basic strategies for doing it…
 
1.  Don't overpay for equities.  
We've said many times that even a great business can be a terrible investment if you pay too much. This will prepare you for the outcome of expensive stocks underperforming over the long term.
 
2.   Never be afraid to buy a great business trading at a bargain price.
It doesn't matter if the stock market is cheap, expensive, or somewhere in between. A bargain is always out there somewhere. Sure, they get harder to find when many stocks are expensive (like today). But they still exist.
 
Doing this will prepare you for the outcome we expect to take place over the long term: Things will get better for most people, and businesses that help bring that about will prosper.
 
3.   Don't be afraid to hold cash until you find a bargain.
There's nothing like the peace of mind you get from having plenty of extra cash on hand. There's nothing like the returns you'll get from deploying that cash when you finally find a good business trading at a cheap price… and then hold it for the long term, watching your money compound at arm's length from the taxman.
 
This will prepare you for the outcome that happens every now and then, one that most people are never prepared for: a big drop in equity prices. It's rare, but when it happens to you and you have plenty of cash to buy great stocks at cheap prices, you'll feel a lot better than if you have no cash to spend.
 
4.   If you can handle some inevitable losses, don't be afraid to short stocks whenever it makes sense for you to do so.
You'll lose often doing this. Betting against a business is risky. But selling short can make you money when almost nothing else does. And those are the moments you'll want to have extra cash on hand to take advantage of the many bargains that pop up when stock prices fall.
 
If you can't stomach taking small losses, you should avoid selling short and be satisfied with holding plenty of cash. Like holding cash, shorting stocks also prepares you for drops in equity prices – but it's only for more advanced investors.
 
5.   If you have a long-term, value-oriented perspective, avoid using debt to buy stocks.
If you rely on debt, when the equity value in your account falls, your broker will call you up and demand you either deposit more cash or sell some stocks (the dreaded "margin call"). It will feel awful to be forced to do this right when you should be scouting out new bargains.
 
It's hard to sleep when you have big debts looming over your head. Staying away from leverage will prepare you for many nights of satisfying, regenerative sleep, as your equity portfolio performs solely on the basis of your stock investments, not on the amount of debt you hold.
 
These five tips are a good place to start. If you put yourself in the "prepare, don't predict" mindset, I bet you'll come up with some ways to prepare for a wide range of possible outcomes we haven't covered.
 
Time spent forecasting the stock market's 2017 performance is time that could have been spent screening stocks for new bargains, enjoying a cup of tea, or watching an episode of Westworld. Use your time wisely this year, and don't predict… prepare.
 
Good investing,
 
Dan Ferris
 
Editor's note: Buying safe, cheap stocks – only when the price is right – has earned Dan one of the most impressive track records in the industry. His goal is to prepare for anything that might happen in the markets… and his strategy pays off. Last year, he closed his top recommendation ever for an incredible 631% gain. You can try his research today by clicking here.

Source: DailyWealth

Exactly How Many Shares You Should Buy

 
When you buy a stock, how do you decide how many shares you'll buy?
 
Most people don't have a clue how to do this. But it's something you have to get right – it's crucial to your investing performance.
 
So seriously, what's your process for determining how much of a stock you'll buy?
 
Do you say something like this?
 
Well, the stock is trading for around $5 a share, and I want around $5,000 of it, so I'll buy 1,000 shares.
Or are you more like this?
 
I want EXACTLY $5,000 invested in this stock, just like when I buy all my other stocks – so I just divide $5,000 by the current stock price. In this case, I have to buy 987 shares.
If either of these is your "process," then how did you decide on $5,000 for the position?
 
What makes $5,000 the "right" amount?
 
You have a reason, I'm sure… For example, maybe you have $100,000, and with 20 stocks in your portfolio, you divide it up equally.
 
That's a fine answer… But why do you divide it up equally?
 
Is that the best way?
 
Have you ever sat down and thought about this?
 
For example, should you have the same $5,000 in gold stocks as you do in a boring bond fund?
 
If you did this in the second half of 2016, your portfolio would have been crushed.
 
Investing $5,000 in each position sounds like a plan… But it's actually just "winging it," as you would have learned in the second half of last year.
 
So what is "right"?
 
This is THE important question… But it's too big a question to answer here in a short DailyWealth essay.
 
Instead, tonight at 8 p.m., we will talk in-depth about this question, and more.
 
We'll talk about how you can stop "winging it" and start investing like a pro.
 
By doing this, you'll maximize your opportunity. You'll allocate appropriately. You'll follow a stop-loss discipline. You'll finally learn to "get there."
 
Join us for our webinar tonight at 8 p.m. Eastern time, where we share the details of our new service, Stansberry Portfolio Solutions. You can RSVP today by clicking here.
 
Good investing,
 
Steve
 
Editor's note: Smart asset allocation is 100 times more important than any stock pick. That's why tonight, Steve will unveil our new service: Stansberry Portfolio Solutions. It's a dramatically better way to improve your investment results in less than an hour a month… without subscribing to another newsletter. This free event is TONIGHT only, at 8 p.m., Eastern time. Save your spot here.

Source: DailyWealth

A Solution to Your Biggest Financial Problem

 
"I was at this bar," my roommate Jeff told me back in college. "Next thing you know, the most beautiful girl in the place agreed to go out with me."
 
The next-thing-you-know phrase appeared again after college, when Jeff and I were stockbrokers together in the mid-1990s. "I talked to this potential client today," he said. "Next thing you know, he's sending in a million dollars."
 
I love – and hate – Jeff's "next thing you know" stories…
 
It's not Jeff's success that bothers me – you can't not love the guy. Instead, it's the "next thing you know" part…
 
Whenever Jeff used "next thing you know" (and he did, often – that rascal), I got frustrated… He was leaving out a key step – a secret to success. And I needed to know what that secret was.
 
If I didn't get to the bottom of "next thing you know," then I couldn't follow in his footsteps to succeed.
 
I tell you this because there's a serious missing piece of the financial puzzle out there for most of us… a secret… a "next thing you know" that we need to get to the bottom of.
 
Today, I will share a solution to finding that crucial secret. Let me explain…
 
Here's what most ordinary folks think about investing:
 
If you're reading DailyWealth, you're more sophisticated than most people…
 
You know that proper investing takes time – and that the "next thing you know" doesn't happen overnight.
 
You know that you need to diversify… to put some money into stocks, and some into other investments. That's part of the path to investment success.
 
But this still isn't enough information. These are just guidelines. The "next thing you know" is still missing.
 
So what is this missing piece?
 
It is knowing EXACTLY what to do with your money. It is knowing EXACTLY how to allocate it safely, down to the penny.
 
If you've followed our writing, you should be doing pretty well.
 
But… if you haven't taken the time to get organized… if you don't take a whole-portfolio approach… if you inevitably put too much capital in the wrong stocks, and not enough in the right ones… then you are still just guessing.
 
To get past the "next thing you know," we have an answer for you…
 
It's a way for you to start investing like a pro. By doing this, you'll maximize your opportunity. You'll allocate appropriately. You can follow your stop-loss discipline. You can finally "get there." And you can do it all in about an hour a month.
 
I can't share all the details with you here… The ideal thing for you to do is to listen in to our webinar this Thursday night, where we'll share the details of our new service, Stansberry Portfolio Solutions.
 
In short, it's the secret behind the "next thing you know." And as my friend and colleague Porter Stansberry says, it's "so easy that the average sixth-grader could do it."
 
Our live webinar is on Thursday, January 12 at 8 p.m., Eastern time. You can RSVP today by clicking here.
 
Good investing,
 
Steve
 
Editor's note: If you've been missing a piece of the financial puzzle, our brand-new Stansberry Portfolio Solutions service could change the way you invest for good… It's a foolproof approach to investing, one we suspect will become the most popular thing we produce. We'll reveal all the details in our live webinar on Thursday, January 12 at 8 p.m., Eastern time. Don't miss it – you can RSVP right here.

Source: DailyWealth

FINALLY, Gold Is a Buy Again

 
I made a lot of enemies at the end of last July…
 
I was a keynote speaker at the Sprott Natural Resource Symposium in Vancouver – maybe the first speaker at the event… In a room full of gold bugs, I told the crowd that I had personally sold all my gold and gold stocks the day before the conference.
 
The attendees thought I was crazy… Apparently, selling gold or gold stocks is never "OK."
 
But my timing for selling gold was exactly right…
 
That speech at the end of July roughly coincided with the top in gold and gold stocks for 2016. Gold and gold stocks went straight down for the rest of the year.
 
Since gold peaked over the summer, people have been bugging me to tell them when to get back in. Now, FINALLY, gold is a buy again… We just had to wait for the right timing.
 
Let me explain…
 
Back in July, I told the crowd that I personally took my biggest position in gold and gold stocks – ever – in January 2016.
 
Gold stocks were more hated than they'd ever been – seriously – so I urged my True Wealth subscribers to buy them. We sold half of our position over the summer for a 95% gain.
 
Again, we got the timing exactly right. We bought near the bottom, and sold near the top.
 
So when people asked me to tell them when to get back in, I said I was waiting for investors to give up on gold. But darn it, gold investors were stubborn… It took them many months to give up.
 
If you've been a DailyWealth reader for a while, you know what I look for… I want gold to be HATED and in the start of an UPTREND.
 
In the latest issue of my True Wealth newsletter, I told my subscribers:
 
We will be gold buyers when two things happen: 1) Gold becomes a bit more hated, and 2) the uptrend returns. That may take a few months.
My friends, here at the beginning of 2017, we finally have what we're looking for… Gold is no longer as loved as it was… AND we have the start of an uptrend.
 
We nailed the buy in early 2016. We nailed the sell in the summer of 2016. And now, here in early 2017, I'm saying the coast is finally clear…
 
If you've been waiting since this summer for my "permission" to buy gold… you did the right thing. Gold went nowhere but down for months.
 
However, things have changed in 2017… So my opinion has to change…
 
If you were waiting for my permission, now you have it!
 
Good investing,
 
Steve
 
Editor's note: If you find managing your portfolio overwhelming, Steve has just helped design an incredible new program. It's not a newsletter or research service… It's a way to help improve your investment results and get your financial house in order in less than one hour a month. Steve will reveal this new service on Thursday, January 12 at 8 p.m. Eastern time. Sign up for the live webinar here.

Source: DailyWealth

Two Reasons Stocks Can Soar in 2017

 
"I remember when the Dow hit 1,000, and then 2,000," a friend in his 70s told me last month at lunch…
 
"Now the Dow's near 20,000. That's scary."
 
This friend is no dummy… He founded a major corporation that traded on the stock market. He had tens of thousands of employees. His net worth hit nine figures.
 
And he's scared. I get that… We're in uncharted territory. But I have a positive message today:
 
Stocks can go much higher this year. And there are two major reasons why.
 
Let me explain them both…
 
First, fearing new highs simply doesn't make sense. But I do understand why it happens.
 
If prices hit a new all-time high, then they only have two potential places to go… somewhere they've already been, or somewhere they've never been.
 
Our brains tell us stocks are more likely to fall… to a place they've already been before. That feels comfortable. That has already happened, at least.
 
Our brains are wrong. And we have decades of data to prove it…
 
I explained this idea in November. I urge you to read the full essay… but the simple explanation is this: Stocks tend to perform better after hitting new highs than after hitting new lows. As I said then…
 
We crunched the numbers. And the results were amazing. You REALLY want to own stocks after a new 12-month high… And you really DON'T want to buy stocks after a new 12-month low.
 
The future could be different from the past, of course. But we're talking about 88 years of history here. So tell me… Do you think that the way stocks have behaved over the last 88 years is going to change – starting today?

Stocks have just hit new highs… And that tells me stocks could have another strong year in 2017.
 
The second major "bear case" for 2017 is something we've heard about for years…
 
"Stocks are too expensive. They can't continue higher from today's inflated prices."
 
That's what people have been saying. But think with me for a second… What's been a major driver of stock prices in recent years? It's ultra-low interest rates.
 
Investors have a choice today – between earning no interest in the bank, or taking risks in stocks.
 
Investors are always choosing between earning safe interest (if they can) or taking a risk in the stock market. So to understand if stocks are a good deal, you have to consider whether they're a good deal relative to interest rates.
 
Said another way: you must consider both stock valuations AND interest rates when sizing up the value in stocks.
 
A few years back, I built an indicator that considers both of these pieces for my True Wealth readers. I call it the True Wealth Value Indicator.
 
This simple value measure combines a stock's valuation – the price-to-earnings (P/E) ratio (adjusted for recessions) – with short-term interest rates.
 
Short-term interest rates contain a lot of information about the investing environment. Inflation is part of short-term interest rates. And so are the actions of the Federal Reserve. So our True Wealth Value Indicator tells us a lot about how to value stocks with interest rates in mind.
 
As you can see from the chart below, stocks were incredibly cheap at the bottom in 2009… and they were extremely expensive at the top in 2000. This indicator works.
 
Right now, we're about in the middle of the range… Stock valuations are not high compared with our indicator's history. Take a look…
 
Most people think stocks are expensive. But when you take today's ultra-low interest rates into account, you see that stock prices could easily go much higher from here.
 
So we have two important factors in play for 2017…
 
1.  
Stocks are hitting new highs, which is good going forward, and
 
2.   Stocks are NOT expensive relative to history when you add in interest rates.
This isn't the story most folks are telling today. It's easy to tell the "fear" story that folks expect to hear. But to me, we have the opportunity for another great year.
 
In short, more new highs are likely in the stock market in 2017.
 
Good investing,
 
Steve
 
Editor's note: Steve just sat down on camera and shared six major trends set to develop in 2017, following Trump's election victory. Learn about these opportunities and see how the election will affect your investments by watching Steve's presentation right here.

Source: DailyWealth

The 'Trump Trade' Marches On… But for How Long?

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 The new year is here…
 
We hope you and your families enjoyed the holidays… And we wish you the best in the coming year.
 
As for the markets, all we can say is 2017 promises to be interesting…
 
The 35-year bull market in bonds is teetering… Inflation is stirring around the globe for the first time in years… And President-elect Trump is pushing for the most sweeping economic and regulatory changes in a generation.
 
In short, some of the most important trends of the past several years – falling interest rates, deflation, and a heavy-handed government – could be reversing… And the coming year could look far different than many expect.
 
 In the meantime, the first trading week of 2017 began much as 2016 ended…
 
The year-end "Trump Trade" – defined by rising stock prices, falling bond prices, and a stronger U.S. dollar – continued early this week.
 
All the major U.S. stock indexes moved higher. U.S. Treasury bonds moved lower. And the U.S. dollar hit a fresh 14-year high…
 
But we've been expecting at least a short-term reversal in these trends. They've been getting extremely stretched, and several measures of investor sentiment have hit levels that often precede a reversal.
 
Investors have grown incredibly bullish on stocks and the dollar, and incredibly bearish on bonds.
 
And we could be seeing the first signs of this reversal now…
 
After hitting its new 14-year high on Tuesday, the U.S. dollar slid 1.6% Wednesday and Thursday, its largest decline since November's election. Meanwhile, U.S. Treasurys rallied Thursday, with the benchmark 10-year yield falling eight basis points to 2.36%. This was also the largest one-day decline in interest rates since Trump's victory.
 
 One trend that may have already reversed is in precious metals…
 
Like Treasurys, gold and silver are oversold. And folks who were enamored with gold and silver last summer are throwing in the towel. In fact, while gold, silver, and mining stocks remain well above last year's bear market lows, some measures of investor sentiment are even more bearish today than they were back then.
 
Yet both gold and silver quietly bottomed in mid-December and have been moving higher since. Gold stocks have done even better. As you can see in the chart of the VanEck Vectors Gold Miners Fund (GDX) below, they've nearly recovered all their losses since November 9…
 
 Elsewhere in the market, regular readers know Steve Sjuggerud has been extremely bullish on U.S. housing for more than six years now…
 
And he has been exactly right. Home prices are up significantly since 2011… And they've absolutely soared in some areas.
 
Given this trend, you might think it's too late to profit.
 
Not so, says Steve. In fact, he says housing is one of his top recommendations for the coming year.
 
Despite rising prices, Steve says housing in many areas (including his home state of Florida) is still incredibly cheap. But it may not stay that way much longer…
 
So he's urging interested readers to take advantage of this opportunity as soon as possible. As he wrote earlier this week
 
Get to Florida and buy a house. Now. I'm not kidding. If you wait any longer, you might miss this opportunity. And believe me, you don't want to miss it. I've personally been buying real estate for years… But the opportunity isn't over. Not even close…
 
The median home value in Orlando, Florida is around $161,000, according to Zillow.com. And the median home value in Jacksonville, Florida is $144,000. I can't tell you that the median home in either of these places is the right home for you, but my point is that Florida real estate is still CHEAP.

 
Meanwhile, as Steve explained, the supply of new homes in Florida has barely recovered since the housing crisis 10 years ago…
 
Homebuilding in Florida has been incredibly slow for a very long time now. Take a look…
 
One of the most basic rules of economics is that prices rise when there's a lot of demand and not enough supply. So without enough supply, house prices should rise.

In addition, Steve noted that mortgage rates remain near historic lows, and the incoming Trump administration is likely to be incredibly friendly to real estate owners and investors.
 
 In short, Steve says we still have a perfect setup in U.S. housing…
 
And he is urging investors to make owning real estate a top priority in 2017.
 
But housing is just one of six major opportunities Steve has identified for the coming year. In the January issue of his True Wealth advisory, he laid out his full "2017 blueprint," explaining exactly how to profit from each of them.
 
Again, we can't share Steve's specific investment recommendations here today. It simply wouldn't be fair to his subscribers. But you can get instant access to Steve's full 2017 blueprint with a 100% risk-free trial to True Wealth.
 
True Wealth normally sells for just $199 a year. That's well within the budget of any serious investor. But because Steve wants to encourage as many folks as possible to read this research, he has agreed to temporarily slash the cost in half.
 
Right now, you can try Steve's True Wealth advisory for just $99. That's less than $2 per week. We'll even give you a full 30 days to review Steve's work and decide if it's right for you. If you're not completely happy, simply let us know and we'll issue a full refund for every penny. Click here for all the details.
 
Regards,
 
Justin Brill
 
Editor's note: Steve believes 2017 is an "incredible moment right now for investors." That's why he recently sat down on camera to discuss his top six investment opportunities. You can watch this FREE presentation by clicking here.

Source: DailyWealth

Why I Don't Focus on the Overall Market

 
Last fall, I attended the Latticework investment conference in New York.
 
Some of the world's greatest value investors were there. But what struck me the most was that there was a lot of kvetching about being unable to find any bargains in the U.S. stock market right now.
 
This is a common complaint after the market has done well for a time. But it's also a common complaint when the stock market has gone through one of its fits… when investors are down 20% or 30%… and stocks are falling out of the sky.
 
As I always tell people, there are thousands of stocks out there. If you don't want to have a big stock portfolio, you only need to find a handful of good ones. Five to eight… a dozen, tops. Surely, out of the thousands of names that are out there, there's got to be a dozen stocks worth owning.
 
That's why I don't focus on the overall market. Let me explain…
 
The idea of "stocks" is something that exists in our heads. Nobody owns stocks. What they own is ExxonMobil (XOM), or Apple (AAPL), or Facebook (FB). They own individual companies. And those individual companies are all different.
 
Just think about it. If you took a list of the top 10 best-performing S&P 500 stocks last year and compared it with a list of the 10 worst-performing stocks, you would get a huge disparity. It's just empirically true that all stocks are not the same.
 
But I hear it a lot. People say, "Stocks are expensive," or "Stocks are going to go up," or "Stocks are going to go down." But they're talking about an abstraction – something that doesn't exist in a practical sense.
 
I'm an individual. I invest in individual stocks.
 
So when people start talking about the overall market, it just doesn't have much meaning to me. Unless, of course, you're investing in broad market indexes.
 
By buying "the market," you're guaranteed an average return – no more, no less. But if you're going to try to escape from the average, you can't do what everyone else is doing.
 
If everyone else is saying, "There's no point in looking at individual stocks," or "You can't predict ahead of time what stocks are going to do"… then maybe thinking in a contrarian way will pay off.
 
It makes sense to look at individual stocks precisely because everyone else is focused purely on the indexes.
 
Consider the "Efficient Market Hypothesis," which states that all known information about financial assets is quickly reflected in their prices and that, therefore, it's impossible to "beat the market" without taking on extra risk.
 
Lots of studies support the Efficient Market Hypothesis. And lots of studies show that there are consistent holes in that hypothesis.
 
There are predictors outside of price. For example, companies run by owner-operators. Lots of studies show that if you invest in a company run by a CEO who owns, say, 10% of the company, shares in that company outperform peers where the CEO doesn't own stock.
 
Or take family-owned businesses versus businesses that are not family-owned. The family-owned peers do better. There would seem to be certain predictive attributes that you can use to your advantage as an investor.
 
The efficient market crowd would say I'm one of the lucky "dart throwers."
 
They'd say that, given a large enough number of investors all trying to pick stocks that beat the market, there's always going to be a certain subset that puts together a really good track record purely by chance. It's like the coin flipper who lands on heads 10 times in a row – it doesn't necessarily indicate skill.
 
This argument will never end. But starting with the assumption that the market is largely efficient – and therefore hard to beat – is not bad. It will make you careful as an investor. You can't just look at a stock and say, "Oh! This stock looks cheap." Maybe the market knows some things you don't… and what you think is cheap is actually fairly priced.
 
Conversely, you might say a stock looks ridiculously expensive. But again, there may be something you don't know or don't understand. I try to approach every stock like that – very carefully. I'm always asking: What expectations are built into this stock price? Does it make sense? What's the risk? What is the market seeing and what is it not seeing?
 
That's why I try not to focus on market moves too much. I focus instead on the underlying businesses. That's how I've made my living in the markets. I look at the individual trees when most people are looking at the forests.
 
Regards,
 
Chris Mayer
 
Editor's note: Yesterday, Chris hosted a master class for his newest investment advisory, Chris Mayer's Focus. It's designed to help you build a small portfolio of small-cap stocks that could be the next Apple, Starbucks, or Wal-Mart – long before Wall Street is paying any attention. Learn how you can sign on for an incredible discount right here.

Source: DailyWealth