Why Does Trump Say Dumb Things About China?

 
President Donald Trump believes he's a great dealmaker… But is he?
 
His dealmaking with China looks amateurish…
 
"China's a currency manipulator!" he repeated relentlessly on the campaign trail – threatening the world's second-biggest country with sanctions.
 
He's wrong about this. Completely wrong. It shows his ignorance of global economics, and it makes the U.S. look bad.
 
Importantly, Trump finally conceded that China is not a currency manipulator this week – or at least that he won't call it one…
 
"Why would I call China a currency manipulator when they are working with us on the North Korean problem?" he Tweeted on Sunday.
 
But why did he call China a currency manipulator in the first place? Why would he keep repeating this lie for so long?
 
From the moment he won the election, Trump has been baselessly jabbing at China. I thought I'd explore why in today's DailyWealth
 
I sat down with legendary Asia investors Peter and Tama Churchouse to get the perspective about Trump from their side of the globe, and to talk about the opportunity in Chinese stocks…
 
Peter has lived and worked in Asia for 35 years, and he headed Asia Research for Morgan Stanley when I was coming up. His son worked for JPMorgan. Together, they write Stansberry Churchouse Research's flagship investment newsletter, The Churchouse Letter.
 
I interviewed them in late January – but the insights they offered back then turned out to be dead on. Let me share with you some excerpts of our interview…
 
Steve: Trump immediately took a phone call from Taiwan's leader when he was elected. This angered China's leaders. So can you give us the significance of this from your perspective?
 
Peter Churchouse: I think it seems the president is trying to use Taiwan as a bargaining chip when it comes to trade negotiations and tariffs and exports and so on and so forth. I think that negotiating chip is going to go seriously flat. The simple reason is that Taiwan and China have a very, very close relationship these days in terms of economics and social contact.
 
The Taiwanese have invested massively in manufacturing capabilities in China. You have got hundreds and hundreds of thousands of Taiwanese living and working in China.
 
Now if Trump comes along and starts upsetting that balance, I don't think the Taiwanese are going to support him on any of this. They want the status quo to stay as it is. They don't want the status quo to be upset.
 
Steve: The Chinese want the status quo… The Taiwanese want the status quo… So Trump trying to use the "One China" policy as a bargaining chip is essentially useless?
 
Peter: I don't think it is going to be successful, if that's what the leadership in America think they are trying to do. There are other ways that are probably more productive to get China to come on board and deal with some of these issues that they may be concerned about.
 
Tama Churchouse: Yes. And also, let's bear in mind this looks like a typical Trump negotiating tactic… which is to come in with an extremely outlandish initiating position. The position he has tried to establish here is questioning the sovereignty of China over Taiwan.
 
That is not up for discussion by the Chinese. It is not a chip. It is not on the table. It is not there, and it won't work as leverage. As Peter said, the Taiwanese aren't even looking for Trump's support in this regard. So I think that conversation is going to be over quickly.
 
Steve: Let's move on to the currency. Trump says China is a currency manipulator. Can you comment on that?
 
Peter: Yeah, the currency-manipulation thing is a complete farce.
 
Steve: Are his advisers going to tell him this?
 
Peter: I have not heard his advisers actually mention this. When you talk about a currency manipulator, you are implying that country or that person is manipulating the currency downward. It's devaluing the currency. An actual fact of the last seven or eight years is the Chinese currency has gone UP against the U.S. dollar by something in the region of 20%.
 
Steve: What about compared with other major currencies?
 
Peter: It has gone up tremendously against sterling. And even more so against the euro. If you want to call China a manipulator, the country has manipulated the currency to the upside, not to the downside.
 
The Chinese government has spent about $500 billion to try and PREVENT the currency from going down. So China is doing exactly the opposite of what the Trump administration is accusing it of.
 
Steve: Our subscribers might think that if Trump is making all of these threats, China is less attractive as an investment. But I think Americans don't fully appreciate how drastically China has changed… Can you comment a bit on this big change?
 
Peter: Yes. Basically, the Chinese economy is moving to be much more of a consumer-driven economy. It has been historically export driven.
 
Tama: China is turning into a domestic-demand-driven consumer economy, and it has got the largest emerging middle class in the world. That is going to drive these stocks over the next decade.
 
Steve: Which of our four big themes in my True Wealth China Opportunities letter would you say you like the most at this moment?
 
Tama: I am definitely going to go with the consumer-technology theme, for sure.
 
Steve: So you are with me… that [my favorite Chinese stock] could be the world's largest company someday soon?
 
Tama: Yes, 100%.
 
So Peter and Tama believe Trump talked with Taiwan and called China a currency manipulator to use these things as bargaining chips. But there was no "Art of the Deal" here – China wasn't concerned about either of these things.
 
American investors have been fearful of investing in Chinese stocks – particularly when Trump started out with a combative tone on China.
 
That appears to be easing… as Trump wants China's help with North Korea.
 
As Trump tones down his rhetoric on China, American investors will get less worried about Chinese stocks.
 
As you might already know, I am extremely bullish on Chinese stocks, in all forms…
 
Buy China now, if you haven't already.
 
Good investing,
 
Steve
 
P.S. I urge you to join me in China this June to see the massive changes going on for yourself. Peter and Tama Churchouse will be part of the trip, too… I hope you can join me. Click here for the details

Source: DailyWealth

The Best Advice for Success I Can Possibly Give You

 
I couldn't believe my good luck… I was going to be at a dinner with legendary investor Jim Rogers!
 
This was in 1996. I was 25 years old. Jim was a hero to me – he'd put together possibly the greatest track record of any living investor running a hedge fund in the 1970s.
 
I'd read his books, and he shaped a lot of how I think about the markets. So I was looking forward to meeting him in person for the first time. The dinner, and the investment conference it was part of, seemed like a great opportunity.
 
But my spirits sank as I walked in the room…
 
Twenty people were already seated at the dinner table.
 
I assumed many of those folks would want to get close to Jim… Maybe I wouldn't even be able to hear a few words from him. A handshake might be about it.
 
I scanned the table for empty seats. There weren't many. My buddy Porter Stansberry was with me (he was 24 at the time). I saw two empty seats together… And I couldn't believe it – these two empty seats were the two seats next to Jim Rogers!
 
All kinds of thoughts went through my head about why I shouldn't sit next to him:
 
•   "Jim's a legend, and I'm a nobody. I don't deserve the seat next to him."
•   "Jim knows a LOT more about everything than me – I don't want to waste his time."
•   "What if I say something foolish?"
•   "I'm supposed to be an expert like him, but what if he sees that I'm nobody special?"
Jim was a legend. I'm sure many of the other folks at the dinner had the same thoughts in their heads – and that's why none of them were sitting next to him.
 
I summoned my courage, put all those negative thoughts aside, and went for it…
 
Porter and I took a seat next to him. And it was one of the highlights of our lives to that point…
 
Jim couldn't have been more entertaining or charming for the next two-and-a-half hours… sharing his strong opinions on everything under the sun.
 
He knew that I knew a lot of details about his story. (For example, I knew his home phone number growing up in Demopolis, Alabama was "5." Not 555-5555. Just "5.") He was comfortable holding court – just for Porter and me. It was fantastic.
 
Since then, Porter and I have done a lot with Jim. He's been a speaker on our podcasts and conferences, and we don't hesitate to help each other out. And it all started because Porter and I faced our fears, took a chance, and simply sat down next to him.
 
To me, this is a secret to much of my success in life… Just getting past the fear of looking foolish, and taking the risk. It's hard to do… but it's the right thing to do.
 
This came up again recently… And I wanted to share the story with you…
 
Porter and I are no longer the young bucks we were in 1996. I will be 46 years old in a couple months. And our little business, Stansberry Research, has grown into a much bigger business.
 
Just recently, we had a couple-day meeting with many of our employees in Kiawah Island, South Carolina. One night at dinner, Porter and I sat at a table. The entire table filled up – except the two seats between us.
 
I asked Porter if he remembered the Jim Rogers dinner 20 years ago. He said, "Of course."
 
We wondered which young bucks would take the two empty seats between us. All the tables filled up… everyone took a seat… and the two seats between us stayed empty – for the entire dinner.
 
It was an opportunity wasted.
 
I'm sure the same things that were going through my head before we took a seat with Jim were going through people's heads in our company.
 
But trust me, you've got to step up. The upside is exponentially greater than the downside risk. Take the risk, and it can change your life for the better. Don't take the risk, and you're right where you were before the dinner – no worse off… but no better off.
 
I get that it seems like a big deal… and that it's tough to overcome your nerves. Back at that Jim Rogers dinner, many of the other folks in the room were successful legends in their own right… But even so, they were too intimidated to take those seats next to Jim.
 
Taking a seat at the table is just one way to follow today's advice…
 
Most people don't want to risk looking stupid. But I've learned that it's OK to say, "I'm sorry, I don't understand your idea. Can you explain it again?"
 
Jim Rogers didn't look at us like we were stupid. Instead, he appreciated that we were engaged in his ideas… wanting to understand them, wanting to learn more.
 
Again, I approach it the same way I approach investing… You want to accept a little bit of downside risk for a lot of upside.
 
In situations like this, the "math" is almost always the same – the potential upside is dramatically greater than the risk of looking foolish. You just have to overcome your fear of embarrassment.
 
Be bold, my friend. Summon your courage. Overcome your fears. Go ahead and take that seat at the (metaphorical) table. And potentially change your life.
 
You will be glad you did!
 
Good investing,
 
Steve
 

Source: DailyWealth

The Stock Market's 'Fear Gauge' Is Rising Again

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 After months of complacency, volatility is moving higher again…
 
As you can see in the chart below, the stock market's "fear gauge" – the Volatility Index ("VIX") – has now jumped back above 15 for the first time since November's presidential election…
 
This move has coincided with growing doubts about the "Trump Trade," as well as rising geopolitical tensions…
 
This week, the Trump administration accused Russia of colluding with Syria over a suspected chemical-weapon attack. It also ordered the use of the "mother of all bombs" – America's most powerful non-nuclear bomb – on Islamic State targets in Afghanistan.
 
And the White House sent what President Trump himself called an "armada" to the Korean Peninsula, promising to take "unilateral action" to deal with North Korean threats if necessary.
 
 Of course, we have no crystal ball…
 
We can't say for certain if fear is finally returning to the market. And we don't know if these events will lead to the first significant correction in stocks in more than a year.
 
But we do know that it's only a matter of time before volatility moves much higher again. As we wrote in the February 1 Digest, just days after the VIX closed below 11 for the first time in years…
 
Investors haven't been this complacent in nearly 10 years, since early 2007…
 
As you can see in the chart above, if there's one certainty in the markets it's this: Periods of market calm and complacency (when the VIX falls into the teens or lower) are always followed by periods of volatility and fear (when it leaps past 20).
 
 So-called "safe haven" assets have also been moving higher…
 
The yield on benchmark 10-year U.S. Treasurys – which have long been considered a safe haven, as the least risky sovereign debt in the world – has now fallen below 2.3% for the first time since December. (Remember, bond yields trade inversely to bond prices… Yields fall as prices rise.)
 
Gold and silver have been moving higher, too. Gold rose to a new five-month high of $1,288 per ounce this week, while silver just hit its own five-month high at $18.51 per ounce.
 
 Now, a topic that has nothing to do with the investment world…
 
Porter has spent several years and more than $2 million creating his world-class shaving razor, the OneBlade. Here's Porter, on the idea that started it all…
 
When I turned 40 (four years ago) I decided that I wanted to start a new business. I wanted to build a "thing" – a great product. I wanted to build something that could last forever. I wanted to build something that my children could point to and say: "My Dad made that, and it's the best in the world." (My young sons still don't really understand what I do at Stansberry Research.)
 
I've always admired Rolex and Ferrari. Long before I could afford to own either of these companies' products, I was deeply impressed by their passion. It was the incredible effort they've expended to build watches and cars that are objectively better than any other in the world.
 
So right after I turned 40, with that in mind, I decided to build a razor.

As Porter explained, ever since he started shaving in the 1980s, he had never been happy with any shaving product. He always suffered from razor burn and ingrown hairs after using cartridge razors. He continues…
 
By my late 30s, I was only shaving once a week – and only by going to a barber to get a straight-razor shave. That was the only solution that worked for me… And that time-honored ritual was the idea that launched OneBlade.
 
Like many luxury brands, I wanted to build a brand that would be valued not because of its marketing… but because of its technical capabilities and reputation for innovation. Several years and more than $2 million later, I firmly believe we have produced the best razor in the world.

Porter isn't alone in this opinion. In addition to receiving positive coverage from Fast Company magazine, Business Insider, and a host of other news outlets, his OneBlade razor has amassed an impressive collection of accolades.
 
Meanwhile, hundreds of Stansberry Research subscribers have written in over the years telling us they agree, like Terry G…
 
I consider the best investment I've made in the last 90 days to be the OneBlade. I've been looking for a decent shave my entire adult life. Finally, at 54, I found it. The OneBlade gives me a close, comfortable shave. Even in the tough areas, like where the chin turns under and becomes neck. I've always had a problem cutting myself there. The OneBlade just floats right over that area, taking all the hair with it.
 
Sweet! I've thrown away my styptic pencil. My last desperate attempt to buy a decent shave was a Norelco triple head electric shaver. $275. What a supreme waste of money. I think I'll short Norelco to get my $275 back.

And Mike C., who told us…
 
The real reason I'm writing in tonight… It's OneBlade! What an awesome shave! If you don't own one you are missing out! I know it sounds expensive at first, but it isn't when you experience the great close shave you get without the irritation of every other razor I've tried. Believe me, in 36 years of shaving I've tried just about – no make that everything in existence to get a comfortable shave! Haven't had one until OneBlade.
 
I've suffered from razor burn all the time and bumps on my neck at times from shaving and hated it! Now, I actually don't mind shaving, and love the results I get with the OneBlade razor! It delivers the closest shave I've ever had without any of the irritation! Yes, you read that right, no irritation!!! OneBlade is a small price to pay for a great comfortable shave! Now that's a value for $$ in my book! Thanks for a great shave.

But Porter has never shared the whole story of the incredible amount of work that went into researching, designing, and testing the OneBlade razor… until now.
 
Porter recently sat down on camera with OneBlade CEO Tod Barrett, lead industrial designer Mark Prommel, and "barber to the stars" Craig Whitely.
 
Even if you're not interested in buying a razor for yourself, it's a fascinating "behind the scenes" look at what Porter and the OneBlade team have accomplished in a short time. This free video is only available for a few days. You can watch it here.
 
Regards,
 
Justin Brill
 
Editor's note: Porter recently sat down to share the inside story behind what it takes to produce the award-winning OneBlade razor. For a limited time, you can save $100 on a complete starter kit. Watch the roundtable and get all the details right here.

Source: DailyWealth

We Saw 400% Gains the Last Time This Happened

Editor's note: The markets will be closed tomorrow in observance of Good Friday. Your next issue of DailyWealth will arrive in your inbox on Saturday. Enjoy the holiday.
 
I will cut right to it today…
 
The last time we saw this setup, emerging market stocks soared 400%, crushing the returns on U.S. stocks.
 
Now, we're seeing this setup again. And I expect history will repeat – and emerging market stocks will dramatically outperform U.S. stocks in the next few years.
 
Let me explain what's going on…
 
Emerging market stocks have massively underperformed U.S. stocks – for a very long time…
 
Stocks in the U.S. have soared in the last seven years. Meanwhile, stocks in emerging markets have literally gone nowhere.
 
Look at the chart below, and you'll see what I mean:
 
In seven years, U.S. stocks have more than doubled… while emerging markets stayed flat.
 
We've seen this type of dramatic underperformance before. The last time emerging markets underperformed for at least four consecutive years was 1995 through 1998. You can guess what happened next…
 
Emerging markets went up 64% in 1999. They went on to soar by more than 400% during the mid-2000s… And they outperformed the U.S. market for 10 of the next 12 years.
 
Could we see a similar path today? Absolutely. It's already happening…
 
Emerging market stocks have outperformed U.S. stocks by 11 percentage points since their January 2016 bottom.
 
That outperformance over the last year isn't a full reversal of the past five-plus years… But it's a start.
 
If you're a longtime reader, then you know that's exactly what I want to see – the start of an uptrend.
 
In short, buying emerging markets after years of underperformance has led to incredible returns in the past. I expect we will see incredible returns from emerging markets again, starting right now…
 
I urge you to take advantage of it!
 
Good investing,
 
Steve
 
P.S. Join me in China this summer to see the opportunity in emerging markets for yourself. We've lined up an incredible group of expert speakers for our 2017 Asia Opportunities Conference Series, where we'll discuss the most lucrative opportunities in Asia with some of the most exclusive analysts in the field. You ought to consider joining us… It will be a fantastic trip! I hope to see you there… Click here for the details.

Source: DailyWealth

Why Investors Are No Better Than Lab Monkeys

 
Every wealth builder should know one thing…
 
When the outcome of an investment depends heavily on some expected future event, it is inherently risky. When that anticipated event comes with a time frame, the risk is exponentially greater.
 
The good news: You can shorten those odds by being rational.
 
The bad news: Your brain is wired to respond to investment opportunities in irrational ways…
 
Many studies have shown this. One of my favorites was conducted at the UNSW Business School in Australia by Elise Payzan-LeNestour.
 
She tracked the decisions of investors given speculative opportunities. And then she compared their behavior with the responses of lab monkeys.
 
The monkeys were presented with two levers. One lever always dispensed a small amount of sugar. The other lever sometimes provided double the sugar, and at other times gave an electric shock.
 
Time and time again, the monkeys took the gamble. They ended up with lots of shocks and less sugar than they would have received from the safe lever.
 
The same pattern was evident with the investors…
 
When given the choice between risky investments that offered high returns and safer investments with lower returns, they favored the risk. As Payzan-LeNestour put it, "Investors pick pennies in front of steamrollers because they overlook the possibility of a loss."
 
When it comes to choosing safe investments, Payzan-LeNestour concluded that investors are no better than lab monkeys.
 
I've made my share of monkey-brained investments in my life. And almost every one of them involved speculation – the anticipation of some future event with a specific time frame…
 
My first real estate investment comes to mind. When my wife and I were beginning our family in Washington, D.C., our landlord came to me with a "fantastic" moneymaking opportunity.
 
She showed us charts and graphs illustrating how local real estate prices had risen for years with lines projected into the future. She also gave us lists of facts that seemed to prove a continuing bull market in property.
 
According to her calculations, I would double my money in less than three years by buying one of her properties. Knowing nothing about real estate at the time, I acquiesced. I invested about five grand, which was the entirety of our savings at the time, and waited expectantly.
 
You can guess what happened.
 
The market went the other way. I quickly lost my $5,000 and continued to lose money as property values tanked. It took me several years and $30,000 to dig myself out of that hole.
 
Here's another example: I was a member of an informal group of investors for about a dozen years. These were all investment insiders and experts – business owners, specialists, analysts, and financial gurus.
 
Every so often, one of us would bring something to the table. They were always speculations. But they were within the scope of the expert's knowledge, so they all seemed like good bets.
 
How did we do?
 
I like to say that our track record was "perfect"… We lost 100% of our money on every deal.
 
When it comes to investment opportunities, most of us do not act rationally. Here's why: Neurobiologists say the human brain is really an organic network. Some parts of the brain do the rational thinking, while others facilitate our emotional and primitive instincts.
 
Emotional intelligence can be extremely useful. And we sometimes make good decisions when our rational conclusions, emotional impulses, and primitive instincts line up.
 
But to make good decisions consistently, you must tamp down your primitive instincts… the part of the brain that always goes for more sugar and ignores the possibility of loss.
 
And the best way to do this, when it comes to investing, is to adhere to rules of engagement that reduce risk.
 
I've developed three such rules:
 
1.  Don't invest in anything you don't understand.
 
 
The challenge is that it's sometimes easy to convince yourself that you understand something when you don't. But you must know the business inside and out. You must know how it makes money, which products are most profitable, what particular problems it faces, what sort of financing it needs, etc.
 
2.  Never invest a lot of money in any single asset.  
 
When it comes to stocks, this is called "position sizing." You might say, for example, that you will not spend more than 5% of the money you have allocated for stocks on any particular stock, or no more than 1% of your net worth on any particular stock.
 
3.   To reduce risk further, always diversify your investing across a broad range of asset classes.

 
This is called asset allocation, and some studies suggest it is the single most important factor in acquiring long-term wealth.

 
These rules are what prevent my monkey-brained instincts from getting the better of me. And they will help you do the same.
 
Regards,
 
Mark Ford
 
Editor's note: If you've made one too many "monkey brained" decisions in your investing career, it might be time to try something new. Mark has put his best advice for building wealth without risk into a single program – one that will tell you how to grow and preserve a fortune. You can learn more about it by clicking here.

Source: DailyWealth

The 'Bubble Guru' Called the Last Market Peak… What's Next?

 
Where is the market going next?
 
When will it peak?
 
And when will the "bubble" burst?
 
I'm sure you're asking these questions… But who are you looking to for answers?
 
Today, we'll look to the guy who actually called the last major stock market top and bottom, with amazing accuracy…
 
Jeremy Grantham is a 78-year-old Englishman best known for studying stock market bubbles more thoroughly than anyone, ever. He's the co-founder of GMO, an investment-management firm in Boston.
 
In 2000, Grantham called the stock market peak – with incredible detail…
 
That year, he gave an interview in Outstanding Investor Digest titled "Bubbles have always given back everything. There have been no exceptions – NONE." In it, Grantham delivered a dissertation on exactly why, and exactly how, the stock market crash would unfold. He got it EXACTLY right.
 
At the time, nobody wanted to believe him. He was labeled a "perma bear" – someone who always looks for the negative in the markets. But he was just calling it like he saw it.
 
In late 2008 – near the bottom of one of the worst nine-year runs in stock market history – Grantham became incredibly optimistic. That time, he was the lone "bull" among "bears." He wrote:
 
For an unparalleled 20 years, [stocks] have been overpriced. Now, finally, they are cheap and likely to get cheaper. Likely, I believe, to set up a once-in-a-lifetime investing opportunity (or maybe twice in a long career).
Finally, stocks appeared to hit bottom in Grantham's mind…
 
In March 2009 – within days of the stock market bottom – Grantham said "buy." He wrote a letter to his customers saying that stocks were worth "30% above today's price."
 
Again, he got it exactly right.
 
I love reading Grantham's thoughts (even when I disagree with them) because he is an original thinker. He is willing to go against what everyone else is saying.
 
So what does Grantham – the "bubble guru" – say about the likelihood of a stock market bubble today?
 
You might think the guy known for spotting bubbles would be looking for one today. Since March 2009, the stock market has gone up – practically uninterrupted – for eight years. We've got to be hitting "bubble" proportions – right?
 
Not so fast. Grantham gave the Wall Street Journal his opinion last week – and what he said surprised me.
 
Here's what he told the Journal about the U.S. stock market today:
 
It doesn't have the characteristics of a bubble… Remember the style from 2000, or Japan in '89, or the U.S. housing market… or 1929 in the old days was a classic. We have almost none of that euphoria. We also have very imperfect fundamentals.
 
[I don't see] mad desire to invest in the stock market.

I agree with him, 100%.
 
We are not seeing the classic signs of a bubble, yet. We don't see "mad desire" to invest in stocks, yet.
 
Investors know that stocks have gone up for eight years. So they think they have to come down.
 
They will come down, eventually… But we are not at that point yet.
 
Jeremy Grantham – the guru of bubbles – says that we're not in a bubble today. Who would know better?
 
I agree with him. We are not in a stock market bubble – yet. Don't let 'em tell ya any different.
 
Good investing,
 
Steve
 
P.S. I actually believe stocks have a lot of upside – right now. At the end of a great bull market in any asset class, we often see what I call the "Melt Up" – a moment of euphoria where the maximum gains happen – before the "Melt Down." This Melt Up phase is starting now. I've written up a special report on how to profit from this rare opportunity… For more details, click here.

Source: DailyWealth

Legitimate 9% Yields in a Zero-Percent World

 
"I've got a good retirement plan… I just don't have a good plan for retirement," my cousin told me a few weeks ago at lunch.
 
He's a smart, hardworking guy… a big-shot executive for a Fortune 500 company (though he would never describe himself that way).
 
He has a good retirement plan from his company. But what should he do so he can live on his savings?
 
He needs income. And today, I'll share one way to get it. This investment offers a legitimate 9% yield in today's zero-percent world.
 
Let me explain…
 
My cousin is not alone.
 
That same week I spoke to him, I saw my mother-in-law (who is in her 70s)…
 
She said to me, "Steve, I love reading about all your investing ideas. But I'm getting too old for that speculative stuff. Can't you write about income for us? That's what we need!"
 
She's right. So my research team and I recently dug in to answer one simple question: What is the highest-yielding, safest investment out there today?
 
It turns out that the best place for safe, high yields today is what I call "virtual banks."
 
These are probably the best high-yield investments that most investors have never heard of.
 
So what does a virtual bank do?
 
It does the same basic thing that a traditional bank does – but with no brick-and-mortar branches, no tellers, and no walk-in customers.
 
A virtual bank borrows money at a low interest rate and lends it out at a higher one. The collateral for its loans is real estate.
 
Sounds like a regular bank, right? But it can deliver higher returns, more safely.
 
I've recommended these several times in my career, with great results…
 
•   In March of 2002, I recommended a virtual bank called Annaly Capital Management (NLY) in my True Wealth newsletter. We closed out the trade in early 2005 for a 55% total return.
 

•   In the September 2008 issue of True Wealth, I recommended a virtual bank called Hatteras Financial (which has since been bought by Annaly). We closed out the trade in December of 2009 for a 68% total return. (Yes, that was a 68% total return, in 15 months.)
In hindsight, those were some great buys!
 
With their high yields, virtual banks offer a lot of income potential. And if our buy is timed well (like they were in those two examples), then the total return can be amazing, too.
 
Right now, you can earn a healthy dividend yield from this idea…
 
You can spread your risk across a basket of virtual banks by buying the iShares Mortgage Real Estate Capped Fund (REM). This exchange-traded fund offers a legitimate 9% yield in a zero-percent world.
 
If you're looking for income, consider virtual banks today.
 
Good investing,
 
Steve
 
P.S. REM is a simple way to invest in this idea. But I recently told my True Wealth readers about my absolute favorite virtual bank. This company is a fantastic value and pays a 10.4% dividend right now. You can learn more about True Wealth, and how to gain access to this recommendation, right here.

Source: DailyWealth

The Most Contrarian Recommendation of Steve Sjuggerud's Career

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 Longtime readers know Steve Sjuggerud is a true contrarian…
 
Steve has made a career of recommending cheap, hated assets that most investors have no interest in owning… And he has a long track record of winners to show for it (including the best-performing recommendation in Stansberry Research history).
 
But in last month's issue of his True Wealth Systems service, Steve made what could be the most contrarian recommendation of his career so far. From the issue…
 
What is the most contrarian bet you've ever made? Have you ever bet against the Yankees? Or on the Cubs? How about in the financial markets? Have you ever bet against gold?
 
Today, if you follow our advice, you will set a new personal best… You will make the most contrarian bet of your life.
 
The story is simple. The numbers don't lie. It's time for us to make a trade betting on LOWER interest rates.

As Steve explained at the time, practically NO ONE believes interest rates can go lower today. Instead, speculators are making record bets that rates will go even higher…
 
Bets on higher interest rates have hit an all-time extreme, based on one of our favorite sentiment measures – the Commitment of Traders (COT) report.
 
If you're a longtime reader or follow our weekly Review of Market Extremes, then you're likely familiar with the COT report. It shows the real-money bets of futures traders in dozens of markets. Like most sentiment measures, the COT report tends to be "wrong at the extremes and right in between."
 
This means that futures traders get it right most of the time. But they also usually aren't making extreme bets one way or another. And when they do, they're usually wrong. They tend to pile into a trade at the worst possible time.
 
Of course, the opposite side of their trade – the smart money – tends to get it right.
 
Recently, the smart-money bets on the benchmark 10-year Treasury bond in the futures markets hit never-before-seen levels. Take a look:
 

 
 Yet, while smart-money traders were as bullish as they'd ever been, Steve noted the trend in rates had already quietly turned down…

 
Interest rates peaked at 2.6% in December, and today, we are closer to 2.4%. Take a look:
 
As Steve noted, this was a perfect setup for a big short-term move lower in rates…
 
Here's the deal…
 
1. We are seeing an all-time extreme in the number of bets on higher interest rates, while…
 
2. The trend of interest rates has just started to move lower.
 
This is a big deal. This is what I love to see. This is the exact moment to make this trade…
 
This should be the most contrarian trade you have ever made. Nobody is betting on lower rates. And that's exactly why right now is the perfect time.

Interest rates peaked just days after Steve's recommendation and have been moving lower since. The yield on the benchmark 10-year Treasury bond has fallen to around 2.3% today.
 
But Steve isn't the only notable analyst who believes rates could be headed even lower from here…
 
 "Bond God" Jeffrey Gundlach now agrees…
 
Regular readers know Gundlach – CEO of investment firm DoubleLine Capital – called the bottom in long-term interest rates last summer when virtually everyone thought rates could only go lower. As we noted in the July 13 Digest
 
Gundlach doesn't just believe bonds are forming a near-term top… He thinks the entire, decades-long bull market in bond prices is ending. And while he doesn't think yields will soar higher immediately, he doesn't believe rates will go much lower.
 
He agrees that sentiment has become extreme. He says he has fielded more investor questions about buying Treasurys recently than at any other point in his career. He also noted that no one he talks to thinks interest rates can go higher today… and said it's often when most people say something "can't happen" that it's most likely to occur.

He was exactly right… 10-year rates bottomed at 1.35% in early July and soared to 2.6% by year-end.
 
 Gundlach still believes the long bull market in bonds is over, and rates are headed higher over the long term…
 
But today, like Steve, he says rates could fall much further before the rally resumes.
 
Gundlach expects the 10-year Treasury yield to drop below 2.25% "at a minimum," but he wouldn't be surprised to see it fall below 2% before moving higher again.
 
Gundlach also believes the post-election "reflation trade" has peaked for now, and he no longer thinks we'll see 10-year rates break above his critical 3% level this year. As he told news service Reuters…
 
With inflation falling in the months ahead, pressure for higher yields is reduced. The bear case [for bonds] will need another narrative because [the consumer price index] will be back below 2%.
Gundlach could be correct…
 
The fate of the so-called "Trump Trade" – the big rally in the U.S. dollar, stocks, and interest rates driven by expectations on higher growth and inflation – will likely depend on what happens over the next few months.
 
If Trump and the Republican Congress can deliver on his "big three" policy proposals – tax reform, regulatory reform, and infrastructure spending – we could see a new era of growth (and potentially a lot of inflation).
 
If they fail, we could slide back into a serious recession (or worse).
 
 We believe tax reform could be the most critical of the three… This coming debate could determine the future of the U.S. economy for the next few decades.
 
That's why we held an exclusive event earlier this week in which we interviewed the "Metropolitan Man" about all the ramifications. We shared everything we know about what likely comes next… and what it means for the country, the economy, and your money.
 
But don't worry if you missed this week's event… You're not too late. For a limited time, you can gain access to a replay of the briefing. Click here for all the details.
 
Regards,
 
Justin Brill
 
Editor's note: If President Trump's tax agenda unfolds the way we expect, you could make hundreds-of-percent gains by targeting a specific group of winners and losers Porter and his team of analysts have identified. Learn more here.

Source: DailyWealth

The 'Melt Up' Is Here – Investor Optimism Hits a 17-Year High

 
The switch flipped…
 
For the first time in years, greed is driving investors.
 
Instead of being fearful because of the 2008 bust, "Mom and Pop" are jumping back into stocks.
 
I call this the "Melt Up." It's the final push higher in the bull market. And the gains could be extraordinary.
 
It's starting… right now. And that means now is the time to get on board.
 
Let me explain…
 
Fear has driven the markets for years. The idea of getting back into stocks was tough for Mom and Pop. But that has finally changed.
 
For the first time in years, investors have forgotten their fears… And they're excited to load up on stocks.
 
Investor optimism just hit its highest level in 17 years – since the dot-com bubble. This tells me the Melt Up is here.
 
Again, this is the simple idea that before the bull market has a major "Melt Down"… it will have a Melt Up, where prices soar as investors flood back into stocks.
 
That's happening right now. Investors are bullish once again. Take a look…
 
Investor optimism just hit a level we haven't seen in 17 years. But more important, stocks will likely move much higher before an eventual crash. History proves it…
 
The last time we saw a similar bullish extreme was at the beginning of 2004. The S&P 500 soared by over 50% in the three years after that extreme.
 
And while consumer optimism was a bad sign for stocks in 2000, at the end of the dot-com bubble, I believe today's market is more like 2004. And I believe a similar move higher is likely, starting now.
 
I know that might sound like a dangerous prediction. It seems that we should move OUT of stocks as everyone else moves in. But we don't want to miss out. We know there will be an eventual Melt Down… And that makes capitalizing on the Melt Up even more important.
 
We are in the late innings of this bull market. But the largest gains will come as investors pile back into stocks. That's beginning to happen right now.
 
The last time we saw a similar extreme, the S&P 500 moved up around 50% over the next three years. We could be at the start of a similar rally today. And that means that we want to continue owning stocks.
 
Good investing,
 
Steve
 
P.S. I recently put together a presentation on the power of the current Melt Up in stocks. It explains exactly how this idea works, and how savvy investors have used it to make fantastic profits over the years. You can view the entire presentation, free of charge, right here.

Source: DailyWealth

'Bond God' Sees Long-Term Rates Below 2%

 
"What kind of fool would bet on LOWER interest rates?"
 
I asked that question a week ago here in DailyWealth.
 
The answer was, "ME… And nobody else."
 
Or so I thought…
 
But Jeff Gundlach – nicknamed the "Bond God" because of his prescient bond market forecasts – has joined me…
 
Gundlach manages more than $100 billion through his investment firm, DoubleLine Capital. This week, he updated his investors on his thoughts for the rest of the year.
 
His comments about long-term interest rates were particularly important.
 
For context, the benchmark long-term bond is the 10-year U.S. government bond. It peaked this year at an interest rate above 2.6%, and is currently below 2.4%.
 
"I expect a rally on the 10-year," Gundlach said. A "rally" means higher bond prices – and therefore, lower interest rates.
 
How low can interest rates fall? Gundlach predicts they will fall "to below 2.25%, at a minimum… maybe a bit lower than 2%." He added that he expects rates to move back up after that point.
 
How high could the benchmark Treasury bond go in 2017? "I don't think we're going to see 3% on the 10-year this year," he said.
 
I explained why interest rates could fall in my essay last week – nobody believed long-term rates could fall while the Fed was raising short-term interest rates. Bets reached a record high on this idea. I said they were all wrong. And based on Gundlach's webcast, he agrees. We've been right so far.
 
Gundlach added another important reason why U.S. long-term rates could come down…
 
Interest rates in the U.S. are dramatically higher than they are in the rest of the developed world. For example, comparable 10-year bonds in Germany and Japan pay next to nothing in interest – 0.25% or less. So international investors have huge incentives to take their money out of their low-yielding government bonds and move it into U.S. bonds.
 
Are you ready for long-term U.S. interest rates to be less than 2%?
 
You ought to be prepared for the possibility. The world's best bond investor says it could happen… And I wouldn't bet against him…
 
Good investing,
 
Steve
 

Source: DailyWealth