The Rich Do Have a Secret

Many Americans – average folks working to build a comfortable life – assume the "rich" have a secret. It seems they know something about "how the world works" that the rest of us don't.
If regular folks could just figure it out, they'd be wealthy, too. They'd live with less stress, more time, and more money. And money, after all, gives you the freedom to do what you'd like to do.
It turns out, the wealthy do harbor a secret – more than one, in fact. And these secrets not only build wealth, they allow you to use it to live the life that you want to live.
Today, I'm going to share one of the most important secrets to building financial security with you…
The first step to building wealth is not to increase your income… The first step is to curb your spending. Outside of a few things, spending rarely brings joy. Identify the things you truly enjoy spending money on, and forget the rest.
Humans are notoriously terrible at predicting what will make them happy. "We expect the next car, the next house, or the next promotion to make us happy even though the last ones didn't and even though others keep telling us that the next ones won't," Harvard psychologist Dan Gilbert explains in his book Stumbling on Happiness.
We get a nice warm feeling when we buy a new television or pair of shoes. So we tend to search that feeling out. Retailers and advertisers have become adept at targeting it.
But it's short-lived. The thrill of these things wears off quickly. The possessions don't change our lives in any way.
By contrast, saving money and using it to increase your personal financial freedom does make lasting improvements to your well-being and quality of life. Money saved generates future income. Income is what sets you free. And freedom is what truly makes us happy.
But many people do the exact opposite of saving. They don't just spend the money they have… They spend money they don't have in pursuit of some unachievable happiness.
Folks in America like to keep up with the Joneses. The problem is, the Joneses are financially irresponsible. They've got too much house, leased luxury cars, and too much credit-card debt. If you try and keep up, you'll get dragged down as well. A 2013 study showed that 47% of Americans, even many with high incomes, wouldn't be able to come up with $400 in cash to fund an emergency.
When you see someone who seems to live too well for the job he has, he doesn't have a secret skill. He often has a secret pile of debt.
But you don't have to become a monk. One benefit of wealth is having money to spend on a few things that bring you joy. For me, I don't hold back when spending on books or travel. It's different for each person.
Once again, a good rule of thumb is to choose one or two things you truly enjoy spending money on. Then cut back to just the basics on everything else.
For example, I still drive the same 13-year-old Hyundai. It serves me well, and I don't have to make payments on it. Instead of laying out money for a new BMW that won't make me happier… I can spend the money that would have gone to a car payment to treat myself to a couple of really nice dinners each month.
When you learn to stop buying things that don't make you happy, you'll have the freedom to enjoy the things that do… like time or relaxation.
All you need to do is give up the things that don't make you happy in the first place.
I think everyone should start by socking away at least 10% of your annual income. Try to bump that up to 15% as you get comfortable with your new spending habits.
The key to saving isn't about raising your income. It's not about saving a penny here and a penny there. It's about understanding yourself better and shaking all the frivolous desires from your mind.
Once you've got that down, you can set your money to work for you…
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: The U.S. government is on the verge of making a huge change to our money… And Dave recently reported a way that ordinary Americans can make extraordinary gains from this historic shift. (The last time this kind of move happened, a few everyday citizens made upward of 1,088% on their pocket change.) But nobody's talking about it… yet. Click here to learn more.

Source: DailyWealth

Why I'm Buying This Breakout Market Today

In January, my True Wealth Systems computers alerted me to the big story the rest of the world was missing…
They told me a stealth bull market was beginning in Europe.
You see, European stocks are staging a major breakout this year. And that's why the computers behind my high-priced True Wealth Systems service are signaling now is the time to buy.
But I've got an even more important reason to own Europe today… one that could mean triple-digit gains if history is any guide.
Let me explain…
Let's think about two different investments… We'll call them Investment A and Investment B.
A and B are similar… but not identical. They generally move up and down together… But they don't track each other perfectly.
You can think about it in terms of the housing market. For example, if your neighbor's house goes up in value, then chances are yours will go up, too.
It's not a one-for-one move, of course. One might move ahead of the other in the short run. But over the long run, the differences typically aren't huge. If asset prices are going up in general, then your house and your neighbor's house are both going up in value.
Investment A and Investment B are not houses. But over long periods of time, they have similar returns – they are correlated.
You can see how these two investments track each other on the next chart. The returns don't match up exactly month over month, or even year over year. But over a couple of decades, things even out. Take a look:
Based on this chart, over the long term, it doesn't matter if you own Investment A or Investment B. They end up with similar returns over long periods.
Like you and your neighbor's house, the major shifts are similar. But what if your house spent a decade rising while your neighbor's home value went nowhere?
That wouldn't make much sense. It would mean that the overall landscape for homes was likely strong – because your house increased in value – but that your neighbor's house was left behind for some reason.
You'd end up with a chart like this…
What would you do in this situation?
My answer is simple… I'd sell my house at that elevated price and buy my neighbor's at a low price!
This is the incredible situation we've seen in European and U.S. stocks over the last several decades
The charts above aren't random lines. They show the S&P 500 (Investment A) and the EURO STOXX 50 Index (Investment B), which tracks Europe's blue-chip stocks.
The first chart shows how things work during normal times. The U.S. performs better sometimes – like during the late 1990s. And at other times, Europe performs better – like during the mid-2000s. But the long-term returns for U.S. and Europe stocks have been similar.
If that's the case, then why should we care about owning European stocks today? Why shouldn't we just buy U.S. stocks and forget about Europe?
Well, as the second chart shows, we have an extreme situation today.
While U.S. and European stocks move together over the long term, they CAN differ over the shorter term… And when those differences reach extremes, it sets up incredible buying opportunities.
That's exactly what we have today… an incredible buying opportunity in European stocks.
The last time we saw an extreme anywhere close to this was 2002. What happened next? A massive multi-year bull market in European stocks. As I explained in DailyWealth last month
If you'd waited for the uptrend before buying, then you would have bought European stocks in mid-2003. By late 2007, you would have made 172% gains. U.S. stocks returned just 74% over the same period.
I believe we could be at the start of a similar move right now. My True Wealth Systems computers show Europe is officially entering a stealth bull market. And with eight years of massive underperformance behind it, we could potentially see triple-digit gains from here.
That's the No. 1 reason I'm buying European stocks in 2017. And I suggest you do the same.
Good investing,
P.S. Later this week, I'll be releasing a brand-new presentation that will show you how to beat the market by 50%, on average, on every trade you make – even European stocks. Be on the lookout for the details soon.

Source: DailyWealth

The Cheapest, Most Hated Asset Today

Everything has gone up. The "Trump Bump" has turned into a frenzy…
Nothing is cheap anymore… right?
My friend, you are not looking hard enough…
Something cheap (and hated) is always out there! Sometimes you just have to look past the headlines to find it…
For example, did you know there is an asset out there – that trades in the U.S. – that is currently trading for 50% less than it traded for 40 years ago in 1977?
It's true. Take a look…
Not only is it down from 1977 prices… It has fallen more than 40% since late 2015!
When an asset is in freefall like this, investors give up on it. Speculators stop buying it. And when it gets really bad, people start betting it will keep falling. And that's when I get interested.
That's when it gets "hated." And boy is this asset hated right now…
Today, the bets against this asset are the largest they've been in more than a dozen years.
Throughout history, bets against this asset have only been larger three other times – in 2000, 2003, and 2004.
Let's look at the 2000 extreme…
The extreme happened at the end of the year. You can see in the chart above what happened next – the greatest move higher in this asset in the last 40 years.
From the 2000 low to the 2002 high, it went up 250% in less than two years.
Today, this asset is as hated as it was in 2000. (The 2003 and 2004 extremes did not lead to big gains… that's the way it goes sometimes.)
So to recap… while stocks have soared, this asset is down 40% in the last 16 months. And it's the most hated it has been in more than a dozen years.
If you're looking for an opportunity in waiting, this is it.
What is this asset, you ask?
It's cocoa. (Yes, the commodity.)
But I am not a buyer just yet…
I don't like to try to catch a falling knife. Instead, I prefer to wait for the uptrend… I like to see the knife hit the ground before I pick it up.
The simple way to buy cocoa through our brokerage account is through the iPath Bloomberg Cocoa Total Return ETN (NIB).
As I said, I'm not a buyer today. But cocoa is on my radar for sure… It's not an "if," it's a "when."
Remember, it delivered a 250% gain in two years under similar circumstances back in 2000.
I suggest putting cocoa on your radar, too…
Good investing,

Source: DailyWealth

The Real Reason Why Stocks Just Hit an All-Time High

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 More than seven in 10 Americans who watched President Trump's speech on Tuesday night came away with a positive reaction, according to a CNN poll…
And 57% of viewers had a very positive reaction. While it wasn't technically a State of the Union speech, CNN notes this is the most positive reaction to a U.S. president's address to Congress since Barack Obama's first one in February 2009.
It's likely no coincidence that most media outlets also noted Trump's speech marked a significant shift in character. As the Wall Street Journal reported…
President Donald Trump, after reaching the White House with fiery rhetorical attacks and a combative message, pitched his agenda to voters and Congress with language that was much more presidential and traditional in tone. He also issued a call for American renewal in stark contrast to the aggressively nationalist posture he outlined at his inauguration just over a month ago…
His speech largely avoided his signature attacks on his adversaries and the political establishment. While he once again highlighted the challenges of violent crime in some urban communities and drew attention to crimes committed by illegal immigrants, he didn't repeat his denunciation of "American carnage" in his inaugural address.
Although there were no major policy shifts – he called for reworking trade deals and cracking down on illegal immigration without using the controversial "America First'' label to describe them – the edges of his most incendiary rhetoric were sanded off. It was the Trump doctrine with aspirational overtones.

 Despite the conciliatory tone, Trump again shared few details about how his economic plans would be carried out…
But the market apparently heard enough for the so-called "Trump Trade" to resume.
U.S. stocks surged to new all-time highs Wednesday, pushing the Dow Jones Industrial Average above 21,000 for the first time. The U.S. Dollar Index rose as much as 1% to a new seven-week high. And interest rates – as measured by the yield on the benchmark 10-year U.S. Treasury note – jumped more than 10 basis points to above 2.45%.
 Recent remarks from Federal Reserve officials likely helped, too…
Four separate officials – Dallas Fed President Robert Kaplan, Philadelphia Fed President Patrick Harker, New York Fed President William Dudley, and San Francisco Fed President John Williams – spoke on Tuesday. And each was more "hawkish" than the last. As news service Reuters reported…
New York Fed President William Dudley, among the most influential U.S. central bankers, said on CNN that the case for tightening monetary policy "has become a lot more compelling" since the election of President Donald Trump and a Republican-controlled Congress.
John Williams, president of the San Francisco Fed, said that with the economy at full employment, inflation headed higher, and upside risks from potential tax cuts waiting in the wings, "I personally don't see any need to delay" raising rates. "In my view, a rate increase is very much on the table for serious consideration at our March meeting." Williams, unlike Dudley, is not a voter this year on policy, but his views are seen as influential among his colleagues…
The comments on Tuesday before Trump's speech included remarks from Philadelphia Fed President Patrick Harker calling for three rate hikes this year.

Clearly, the market was listening… According to the CME Group's FedWatch Tool, the probability of a March interest-rate increase surged this week to greater than 75%. Financial news network CNBC reports some other measures put the odds above 80%.
As Craig Erlam – senior market analyst at currency-trading firm Oanda – wrote in a note this week, it appears the stock market no longer fears rate increases but rather sees them as further evidence of a strengthening economy…
I think the Fed's clear optimism about the economy, even when not factoring in a Trump boost, is feeding the positive sentiment in the markets… Investors don't fear rate increases like they have in the past, instead it's the pace of tightening that they're focused on, and three hikes this year is clearly palatable.
 One last note before we sign off today…
We've heard from a handful of readers who are concerned about the recent performance of gold stocks. And for good reason…
Over the last couple of weeks, gold stocks – as tracked by the VanEck Vectors Gold Miners Fund (GDX) – have fallen roughly 13%. Meanwhile, the price of gold is up slightly over the same time frame.
Some folks have asked if this is a bearish sign. After all, we often say gold stocks tend to lead gold higher in a bull market. So is this divergence a reason to sell?
In a word, no. It's true that gold stocks tend to lead the way higher, but it's important to remember that no market relationship holds true 100% of the time. More important, if you "zoom out" just a little, you'll see that's exactly what has happened this year…
Since the sector bottomed in December, gold prices are up a little more than 10%. Over the same period, gold stocks have rallied roughly 15%. Even after the recent pullback, gold stocks have outperformed gold over the past two and a half months.
We continue to believe a new leg in the ongoing bull market has begun, and much higher prices are likely this year. This recent correction may run a bit further… But we view it as buying opportunity, not a reason to sell.
If you don't already have a portion of your portfolio in precious metals and the very best gold and silver stocks, this is a great time to start adding new positions.
As longtime readers may recall, we launched our Stansberry Gold & Silver Investor service last spring to take advantage of the new bull market in precious metals. And folks who joined us have done incredibly well.
Today, the second leg up in the bull market has begun… And we believe even larger gains are likely in the months ahead.
That's why we've decided to open Stansberry Gold & Silver Investor to new subscribers for an extremely limited time. Better yet, we've been working hard "behind the scenes" over the past eight months to make this service even more valuable than it was before…
In short, Porter and his team have been developing a new tool – what they've dubbed the "G-2 Indicator" – to help them find the most explosive opportunities in the precious metals sector.
This indicator is rarely triggered… In fact, they back-tested 10 years of data on more than 200 publicly traded gold and silver stocks and found just a handful of signals. But when it appears, it often leads to rapid gains of 100% or more… sometimes in a single day.
Right now, the "G-2 Indicator" has triggered a "buy" signal on not one – but three – tiny gold stocks. Stansberry Gold & Silver Investor senior analyst Brett Aitken has prepared a short presentation explaining it all. Click here to read it now. (This link does not lead to a video.)
Justin Brill
Editor's note: Porter and his research team recently uncovered an extremely rare indicator in the precious metals sector… When this "G-2 Indicator" flashes, they've discovered that it can dramatically turn the odds of success in your favor – and lead to incredible gains. Right now, we're seeing a "buy" signal in three different stocks. Get all the details right here.

Source: DailyWealth

Why Gold Stocks Are Underperforming Gold

Gold stocks are down 11% since February 6… But gold prices are up 1%.
Normally, when gold goes up, gold stocks go up even more… But that doesn't always happen.
Why not? What's going on?
I explained it in late January in my True Wealth newsletter: "For the first time in nearly a year, we have the 'all clear' to buy gold," I wrote.
Note that I said "gold" – not gold stocks.
"Gold stocks are still too loved for my tastes," I wrote later in the issue.
To understand what's going on, we need to make a distinction here between gold buyers and gold-stock buyers. In short, they haven't been behaving the same recently. Here's the full story…
When the price of gold was falling in late 2016, gold buyers gave up on gold – which allowed the price of gold to bottom.
Gold-stock buyers acted differently. They never gave up on gold stocks. Instead, they kept "doubling down" and adding more to their positions.
One way to see it is to look at the actions of investors in the main gold exchange-traded fund (GLD) and the main gold-stock ETF (GDX).
Here's what I wrote in January…
In the case of gold, they're scared. They're taking their money out, and fast. [The shares outstanding have] been declining… falling 18% from last July through today.
Meanwhile, the opposite happened with gold-stock investors…
While gold is hated, gold stocks aren't… not even close. Gold stocks have become more loved as they have fallen in price over the past six months. The chart below shows this phenomenon. It's the shares outstanding for GDX and GDXJ – the two major gold stock ETFs. Take a look…

I didn't recommend gold stocks when I recommended gold. I expected we'd see gold stocks struggle to outperform gold. (Of course, I didn't think they'd fall by double digits over the course of a month when gold was up, either.)

As I said in January, "Gold stocks are still too loved for my tastes."
After a month of terrible underperformance, gold stocks are a little bit less loved… but not enough for me to be a buyer just yet.
If you've read my writing for any length of time, you know that I look for things that are not only cheap, but also hated. Gold stocks don't qualify, just yet…
Good investing,
P.S. My friend and colleague Porter Stansberry has assembled a team of analysts dedicated to finding the best opportunities in gold and gold stocks. When the uptrend resumes in gold stocks, his Stansberry Gold & Silver Investor subscribers should far outperform "one click" funds like GDX. And for a limited time, Porter is offering entry to this service. You can get the full details here.

Source: DailyWealth

Three Clues for Finding Companies That Jump off the Page

It was an unusual research project…
Not one in 1,000 investment advisors or newsletter writers would ever consider it.
My research partner and I read every shareholder letter issued by companies in the S&P 500 Index.
I got the idea from billionaire superinvestor Warren Buffett. Several years ago, Buffett talked about a one-page fax he got from the CEO of a potential acquisition: The quality of the business, he said, "jumped off the page."
During our project, we found a few shareholder letters that were that good. And if you study what I'm about to teach you… you, too, will be able to identify companies that "jump off the page" as wonderful investments you'd like to own one day.
You won't have to pick stocks anymore. They'll pick you!
And it's easier than you think…
I found three valuable types of insight in the best shareholder letters…
1.   How the company spends the excess cash it earns,
2.   How to keep the company accountable and measure its success, and
3.   How the CEO describes the company and what makes its approach to the industry different and better than other competitors.
The first and most important insight a great shareholder letter will give you is about the company's approach to cash
It's great to own a piece of a profitable company… But if the management team squanders the profits, they'll destroy shareholder value instead of preserving and growing it.
Take Wall Street mega-bank JPMorgan Chase (JPM), for example. To this longstanding member of the S&P 500, growing its dividend is the most important thing it does with excess cash – even more important than growing the business!
Here's the relevant passage from an annual shareholder letter by CEO Jamie Dimon…
Our fortress balance sheet… provides us with excess capital to invest, and we always are thinking way ahead about the best ways to deploy it.
As we have said in the past, after steadily increasing dividends, our favorite deployment is in growing our businesses. After investing in the growth of our businesses, we look at other ways to use the remaining excess capital. One use we consider is buying back stock – but only at a price we think is good for shareholders.

The priorities for investing excess cash couldn't be clearer. First, JPMorgan will grow its dividend. Second, it will consider ways to grow the business. Third, it will look to spend cash in other ways, including buying back its stock.
When you find the companies that allocate excess capital wisely – like JPMorgan has – well, I can't stress enough how highly valuable that is to you as an investor. It's like knowing who's going to win an Olympic gold medal before the event begins.
Second, great business leaders want to be held accountable. They want to give you, the shareholder, an objective benchmark for measuring their success.
Consider 3M (MMM), a conglomerate that produces everything from Post-it notes to welding goggles.
Its shareholder letter provides investors with a crystal-clear set of financial benchmarks they can refer to in the future to make sure management is performing well.
Here's what 3M Chairman and CEO Inge Thulin said in a shareholder letter…
Finally, we set out financial goals for the next five years. We now have targets that are both realistic and aggressive, and that provide a real possibility of upside.
The five-year goals are as follows:
•   Grow earnings per share 9%-11% per year, on average
•   Grow organic sales 4%-6% per year, on average
•   Maintain return on invested capital above 20%
•   Free cash flow conversion of 100%
Shareholders can note these objective benchmarks and know in five years if management is performing up to speed or not.
Most shareholder letters don't do this. They aren't crystal clear about how to gauge success because they fear they won't measure up. But great management teams believe in what they're doing. They want to be held to an objective standard.
Humans are ego-driven. They want recognition… But they like their recognition to come with as little effort and commitment as possible. So it takes a special kind of person to draw a line in the sand and let the world know that's the point from which his future progress will be measured.
Many good shareholder letters contain one additional big idea. Simply put, you want a manager who can explain the industry he's in and what makes his company's approach to it different and better
For example, here's a clear explanation of how and why apartment REIT Equity Residential (EQR) changed its business…
Approximately 10 years ago, we made a monumental shift in our company's investment strategy away from two- and three-story walk-up garden apartment properties with surface parking in suburban locations across the 50 largest cities in the country, towards higher density, urban properties in a handful of gateway cities in the northeast and West coast…
We also wanted to invest where the construction of new housing would likely continue to be constrained, such that demand would exceed the supply of all forms of housing.

Letters like this – that explain the company and the industry in plain English – provide a free, high-quality (and sometimes entertaining) financial education that will take very little of your time.
Those are just three examples of several great shareholder letters we read during our project. We found 79 that show the companies are dedicated to paying out their excess cash to shareholders… keeping themselves accountable… and explaining their business and industry in plain language.
Of course, there are great companies that don't have great shareholder letters. But it's hard to find the opposite – a really great shareholder letter that isn't written by a great CEO of a great business.
I've never heard about anyone undertaking a project like we did… But I believe in those kinds of "manual" methods of stock screening. It's easy for computerized screening tools to miss things an experienced human being carefully poring over the same data would find.
To be a great investor, you have to be willing to look at the stock market in ways most other people don't.
Reading the shareholder letters of the companies you invest in is invaluable when it comes to understanding the business, the industry, and what you can expect from your management team… especially when you find one that's sending the right message in a clear, credible way.
Good investing,
Dan Ferris

Source: DailyWealth

What to Do With Gold and Silver Today

Precious metals are making a move…
Gold and silver both bottomed the day after the U.S. Federal Open Market Committee raised rates in mid-December. And they've climbed higher ever since…
This week, both metals hit three-month highs. Gold traded as high as $1,264 per ounce and silver traded up to $18.48 per ounce.
And as I'll explain in today's essay, it could be the start of the next big leg higher for both gold and silver…
If you hold any precious metals positions in your portfolio, this is welcome news. It was a rough 2016 for gold and silver bulls. If you held gold and silver stocks, you likely stopped out of some of your holdings.
In my DailyWealth Trader service, we stopped out of a couple of positions… But we're still holding a couple of 50%-plus winners.
As a reminder, I suggest everyone hold at least 5%-10% of their wealth in gold and silver. (That can include some mining stocks, as a speculation.) Since the 2008 financial crisis, global central banks have employed a gigantic "E-Z Credit" program of money printing and low-to-negative interest rates. It's a reckless program that debases paper currencies and runs a high chance of ending in disaster.
Gold and silver, which have been used as money for thousands of years, are great forms of financial-disaster insurance. Governments can't print them on a whim, as they do with paper currencies. So people turn to gold and silver when they're worried about the value of their cash declining.
The natural question today is, "What now?" Should we buy gold and silver miners to earn big profits on the next leg higher? Should we wait for a pullback?
Before I get to the answer, let's take a look at the most important big-picture chart for the precious metals. It's a huge "wedge" – or narrowing trading range – in gold…
Often, when any asset breaks out of a wedge, it makes a sharp move in the direction of the breakout. Right now, gold is in the middle of its trading range.
Two of the biggest clues that point toward the next big move in gold are the direction of the U.S. dollar and of the 10-year U.S. Treasury yield (the benchmark for global interest rates). But both of these are in a sort of "no-man's land" right now, too.
Gold will likely climb toward the top of the wedge at around $1,310 per ounce… And silver will likely move in the same direction. But we don't have a strong buy signal right now.
Here's my advice… If you don't have at least 5% of your investable assets in precious metals, go ahead and buy some today. Start with the physical metals, in coin or bar form.
If for whatever reason you don't want to own physical gold and silver, the next best thing is owning a fund that holds the metals in a secure vault, like the Central Fund of Canada (CEF). Right now, it trades at a big 9% discount to the actual value of the gold and silver in its vaults. That's a great deal.
You may also want to put a little bit of money into a fund like the VanEck Vectors Gold Miners Fund (GDX), which holds a basket of gold miners. It will be more volatile than gold, both on the upside and the downside. For most people, miners should probably be a smaller percentage of their holdings than the physical metals.
If you already hold 5%-10% of your portfolio in precious metals, you can add to your holdings today. But don't go overboard. With CEF trading at such a big discount, that's my top recommendation. Any miners that you add should be small, "starter" positions.
With gold trading inside of its wedge, the reward-to-risk profile on the miners isn't great right now. The current 10-week uptrend is a positive development. But it's not time to get overly aggressive.
If you're anxious to buy, take another look at that chart above. There's no need to hurry and take big risks. If gold breaks out of the wedge to the upside, we'll have a much better trade setup. At that point, we can expect much higher precious metals prices ahead. That will be the time to get aggressive.
Good trading,
Ben Morris
P.S. My colleague Porter Stansberry and his team of analysts have discovered a powerful signal called the "G-2 Indicator." When it flashes – like it is right now – gold stocks can quickly double. Get the full details right here.

Source: DailyWealth