A Major Reversal in China's Currency

 
"How can you think about investing in China, Steve? There's no way you'll make money after it's done devaluing its currency!"
 
The idea of investing in China has become more mainstream in recent months. But there are still plenty of "bogeymen" surrounding the idea of investing in China…
 
For instance, ghost cities, debt bubbles, a powerful communist government, and the idea of massive currency devaluation, to name a few.
 
Currency depreciation has been a popular bogeyman in recent years… But things have shifted in 2017.
 
China's currency has begun a new uptrend this year. This is a powerful shift. And it could help power Chinese stocks even higher in the coming years.
 
Let me explain…
 
Folks have been worried about China's currency. And up until recently, it was for good reason.
 
From 2005 through 2013, China had a quasi-fixed currency value versus the U.S. dollar. The Chinese government allowed the renminbi to trade in a tight range versus the dollar with slow appreciation.
 
This meant a remarkably steady rise in the value of the renminbi. The table below shows the annual returns from 2005 to 2013. Take a look…
 
Year
Renminbi Return
2005
2.5%
2006
3.3%
2007
7.0%
2008
7.0%
2009
-0.1%
2010
3.4%
2011
4.8%
2012
1.1%
2013
2.9%
China's currency spent a decade moving steadily higher. Investors got used to it. They weren't prepared for anything else. So they were shocked in 2015…
 
You see, in 2014, China changed the way the renminbi traded. It allowed the currency to "float" more than ever before. And the immediate rise stopped.
 
The renminbi fell by 2.4% in 2014 – its first annual loss since 2009, and only the second annual loss over the prior decade.
 
Then in August 2015, China devalued the renminbi by about 3% over a few days. That was a big move for a major currency… And it was followed by a handful of other small devaluations, and finally, an even freer floating system.
 
But investors didn't realize that this was a good thing.
 
Sure, investors became fearful that the Chinese government would further devalue its currency.
 
But it allowed China's stock market to open further. It generally opened up the Chinese economy. And if it never happened, we wouldn't have the opportunity we have in China today.
 
As longtime DailyWealth readers know, I've personally visited China twice in the past two years. And all the folks I've met expected the currency decline to continue. Everyone thinks it's an obvious outcome.
 
The blanket assumption is a steady 3%-4% decline, year after year. But take a close look and you'll see that 2017 is bucking that trend…
 
What's that, my friend? To me, it looks like a confirmed uptrend in China's currency.
 
It hasn't been a major news story. The financial news isn't talking about it. But the three-year downtrend in the renminbi appears to be over. The currency is up 3.5% so far this year, with no signs of slowing down.
 
I've been bullish on Chinese stocks for years. And that has been the right call, especially in 2017.
 
China's currency rising again creates a tailwind for China's stock market. This is only part of the reason I'm bullish on China. But this major reversal means the bogeyman isn't one to worry about.
 
China's currency is secretly in an uptrend. And that's another fantastic reason to own Chinese stocks now.
 
Good investing,
 
Steve
 

Source: DailyWealth

I Can't Believe Smart People Can Be This Stupid

 
Whoa! I couldn't believe it when I read it!
 
It turns out, smart investors plan to keep owning their stocks – even when the likely outcome is losing money for a decade, or more…
 
Wow!
 
I guess the investing "establishment" has successfully bamboozled you and your fellow investors into believing that you ALWAYS need to be in the stock market.
 
At least, that's what I took away on Tuesday when my friend, investment analyst Meb Faber, conducted a surprising pop quiz…
 
Meb is one of the smartest guys I know. Last week, he asked more than 1,000 of his customers – sophisticated investors – three questions in a quiz on Twitter.
 
Effectively, this is what he asked…
 
1.   Do you currently own U.S. stocks?
    
2.   If stocks were as expensive as they were at the peak in 1999, would you continue to own them?
    
3.   If stocks were as expensive as they were at the world's all-time peak (Japan in 1989), would you continue to own them?
I was shocked at the answers…
 
87% of his respondents said they own stocks today. That sounds right. His readers are sophisticated investors.
 
Then it got crazy…
 
Out of those who responded, 55% answered "yes" to question No. 2. And 33% said "yes" to question No. 3!
 
This is nuts!
 
Look, you don't have to buy stocks. As Meb says, "You don't have to play." And history shows you don't make any money over the next decade if you buy stocks when they're extremely expensive.
 
Let's look at the second and third questions a bit closer – starting with the more extreme question: No. 3…
 
Japan's Nikkei 225 stock index peaked near 40,000 in 1989. It was more expensive than any world stock market in decades.
 
What has happened since 1989? Today – nearly 30 years later – Japan's stock market is still down around 50% from its peak, sitting at around 20,000. Take a look:
 
Can you believe that one out of three investors said "yes" – they would keep owning stocks if the stocks became as expensive as they were in Japan in 1989? I can't!
 
Let me rephrase the question, to help them land on the correct answer:
 
"The last time stocks were this expensive, you would have lost half your money over the next 30 years in stocks. So let me ask you again, would you buy stocks today if they were that expensive?"
 
Hopefully this time they'd say "no!"
 
Now let's look at question No. 2 – whether you would buy when U.S. stocks were the most expensive they've ever been. (That was in late 1999 and early 2000.)
 
Here's a chart of the Nasdaq Composite Index. (The chart is adjusted for inflation – but inflation wasn't that big a deal over the last 20 years.)
 
If you had bought stocks at the peak nearly 20 years ago, where would you be today? Would you have made any money?
 
The Nasdaq peaked in early 2000. It's now 2017 – and today, the Nasdaq is still below where it was 17 years ago (adjusted for inflation).
 
Hopefully, the message from these two charts is clear: You don't have to always own stocks.
 
Sometimes, stocks are a great buy. I've been "pounding the table" for you to buy stocks for many years now. And I expect stocks will go even higher from today's levels.
 
But they won't go up forever. And at some point, when stocks get very expensive, the odds of you making money in stocks over the following decade get pretty bad. These two charts are proof.
 
"Remember, when Mr. Market shows up at your door, you don't have to answer," Meb concluded about his quiz.
 
I agree with him, 100%. Mutual-fund companies will tell you that you ALWAYS want to be invested in stocks, because you never know what the stock market will do.
 
Having some money in stocks is the right thing to do – most of the time. Heck, nearly all of the time. But there are rare occasions (like Japan in 1989 and the U.S. in late 1999) where the risk over the next 10 years is not worth the potential reward.
 
I expect when the current bull market finally peaks, we will be at that point. We're not there yet, though.
 
Don't be afraid to own stocks today. And when the peak arrives, don't be afraid to dramatically cut back on your stock holdings – keeping these two charts (and decades of losses) in mind…
 
Good investing,
 
Steve
 
Editor's note: We're in the final stages of this explosive bull market. And to squeeze out every last bit of profit before it hits the peak, you need to watch Steve's latest presentation. It'll tell you exactly when you need to get out of the market. Click here to watch it now.

Source: DailyWealth

Wall Street Is Catching on to the 'Melt Up'

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 The incredible year for Steve Sjuggerud's True Wealth China Opportunities subscribers continues…
 
Regular DailyWealth readers know Steve made a bold call last summer. In short, despite years of dismal performance – and widespread fear of economic collapse – Steve said Chinese stocks were a "buy" again.
 
At the time, Steve noted that Chinese stocks met his three favorite investment criteria: They were cheap, hated, and just starting an uptrend.
 
Better yet, he had identified four major catalysts – including the recent groundbreaking decision by index provider MSCI – that could drive Chinese stocks higher for years to come.
 
It wasn't a popular call… Most of our readers have no interest in buying foreign stocks, let alone shares in "communist" China. But for those bold enough to take Steve's advice, the results have been nothing less than incredible.
 
Of the 22 open recommendations in the True Wealth China Opportunities portfolio, EVERY SINGLE ONE is up, as of Thursday's close. The portfolio features 19 double-digit winners, including gains of 74%, 55%, 50%, and 48%. All told, these stocks are up an average of 26%. This isn't "cherry-picking." That's the entire portfolio.
 
But Steve believes these gains are just the beginning… Plenty of upside remains, and he expects subscribers will see total returns of hundreds of percent over the next several years.
 
Congrats to Steve and his True Wealth China Opportunities subscribers on another great call.
 
 Of course, Steve remains incredibly bullish on U.S. stocks as well.
 
Longtime readers know Steve was among the first analysts anywhere to turn bullish on stocks back in early 2009. And he has remained bullish for the past eight years. Time and again, he reassured readers to stay long – the bull market wasn't over yet.
 
Today, despite fears that stocks are too expensive and the bull market is getting "long in the tooth," Steve continues to believe more upside remains.
 
Why? Because he's still not seeing the telltale signs that accompany a major top…
 
As he explained in DailyWealth last month, he knows we're getting close to a top when a huge crowd gathers after he gives a speech. In fact, Steve recalled one time when the questions continued as he made his way into the restroom.
 
However, as Steve noted, he didn't receive that type of response after he spoke at the Sprott Natural Resources Symposium in Vancouver a couple weeks ago.
 
Regular readers know all about Steve's "Melt Up" thesis… That's what he talked about at the conference this year.
 
He noted that the tech-heavy Nasdaq Composite Index doubled during the final year of the last Melt Up… and that most of those gains really happened in its last five months. Steve said we could see a similar type of Melt Up this time around.
 
And yet… nobody cared.
 
Instead of dozens of questions, Steve said he got "crickets." The response blew his mind. More than eight years into the current bull market, people still aren't interested in U.S. stocks yet. Because of that, Steve noted that there's still plenty of upside left.
 
 While most folks still don't believe a Melt Up is possible (let alone likely), we're starting to see some notable exceptions…
 
In late June, for example, one of the biggest names on Wall Street highlighted Steve's research at a private investment conference. Unfortunately, we're not at liberty to share the details publicly. But we can say you would certainly know his name… He's one of the most respected credit analysts in the world today.
 
A few weeks ago, live on financial television, well-known institutional investor David Tice called Steve "brilliant" and said he has been following his Melt Up work closely. (You can see the clip for yourself right here. The reference begins a little after the 2:00 mark.)
 
And recently, veteran market strategist Ed Yardeni echoed Steve's bullish call… even borrowing his terminology. As financial-news network CNBC reported last weekend…
 
Edward Yardeni believes investors who succumb to stock market jitters could miss out on another wave of big gains. Yardeni noted the most recent record highs for the Dow Jones, Nasdaq and S&P 500 indices aren't being driven by a surge in valuation multiples. Rather he says the activity is "more like a melt-up in earnings." And, that's a bullish sign for the rally…
 
"The fundamentals are just cranking along at a decent pace here. Earnings are doing remarkably well given that the economic data looks kind of slow. But somehow or another, companies are generating good revenues and good earnings. I think that's because the global economy is doing reasonably well," said Yardeni of Yardeni Research recently on CNBC's Futures Now.
 
Most recently, Yardeni has been arguing that some of the best bull markets have "climbed a wall of worry," and this situation is no different.

 We wouldn't be surprised to see stocks pull back in the near term…
 
We're long overdue for a correction… And history suggests we should expect more volatility as the Melt Up continues.
 
But there's no guarantee that we'll see one just yet. In fact, one rare signal suggests the next leg higher in the Melt Up could be about to begin…
 
As Brett Eversole discussed Monday, the Nasdaq index – the leader during the last Melt Up – moved higher for 10 straight trading days. He noted that even during a strong bull market, stocks usually have plenty of down days. So the recent string of up days is unusual.
 
And Brett says it's worth paying attention to… Since 1971, buying after the Nasdaq jumps 10 days in a row has led to average gains of an incredible 15% in three months.
 
Our advice remains the same: Stay long stocks, but be sure to keep a close eye on your trailing stops. In the meantime, if you're not already reading Steve's True Wealth Melt Up research, you owe it to yourself to learn more.
 
For just $99 – less than $0.30 per day – you can get immediate access to one full year of True Wealth, including Steve's complete Melt Up "blueprint." And as usual, it comes with our 30-day, 100% risk-free guarantee. Click here to sign up now.
 
Regards,
 
Justin Brill
 
Editor's note: We're in the middle of one of the greatest bull markets ever. Steve believes the Dow could soar to 50,000 – or higher – before it ends. Impossible? Steve says it's not only possible, it's likely already underway. He put together a short presentation explaining it all… including how you can profit from the Melt Up and safely get out before the bear market begins. Watch it here.
 

Source: DailyWealth

Don't Fall Into the Middle-Class Trap

 
I thought I knew what "middle class" meant.
 
I took it to mean most of working America: plumbers, electricians, teachers, police officers, nurses, lawyers, etc.
 
And had you asked me how many Americans made up the middle class, I'd have guessed it was at least 50%.
 
But according to Charles Hugh Smith, who authors the excellent Of Two Minds blog, that's not so…
 
The actual number of middle-class Americans has dwindled over the years. Today, he says, "middle class" describes only 10% of U.S. households – the 10% just below the richest 10%. Per Smith…
 
The "bottom 80%" are lacking essential attributes of a middle-class lifestyle that was once affordable on a much more modest income.

Outside of income, he includes these criteria in his definition of middle class: good health insurance, 25%-50% equity in a home, the ability to save at least 6% of your income, lots of money in a 401(k) or IRA, the ability to cover your debt and expenses if one of your household's primary wage earners loses his or her job, reliable vehicles for each wage earner, no reliance on government assistance, "generational wealth" (in the form of heirlooms, precious metals, etc.) that you can hand down, the ability to invest in kids (education, clubs, training, etc.), and leisure time for physical, spiritual, and mental fitness.
 
Do you meet all of these criteria?
 
Don't feel bad if the answer is no. I doubt 50% of the population could ever pass his tough test.
 
But the general point – that the middle class is smaller than it was during my childhood – rings true.
 
According to think tank Pew Research Center, net worth has risen only in the upper 10% of the population for the past 40 years.
 
Median wages, meanwhile, have been flat. And even with a more liberal definition of middle class, households that meet that criteria have dropped by 11%.
 
This has happened for many reasons. Much of it has to do with an unhealthy alliance between big government and Wall Street.
 
What can you do about it?
 
My view is that there is very little you can do that will make a significant difference. Yes, you can sign petitions and write letters and vote, but the relationship between all that sort of "political" activity and the economy is small and almost always long term.
 
If you want to make a significant, shorter-term difference for yourself and your family, I suggest the following:
 
1.   Spend the lion's share of your time being productive, not reading or writing or talking about the state of the economy.
Stop complaining. Turn off the news. Unplug from social media. You and you alone are responsible for the health and state of your finances, so quit messing around. Now is the time for you to spend your "leisure hours" doing something productive.
 
2.  Earn more money.
If you are an employee, you need to become a better, more valuable one. If you are a plumber, lawyer, electrician, doctor, etc., you need to acquire more customers and learn how to double or triple your hourly rate. If you are a business owner, you have to grow your business. And while you do that…
 
3.  Stop trying to be a great stock investor.
Be a wealth builder instead.
 
Growing wealth is about much more than buying and selling stocks. It's about increasing your net worth by investing in income-producing assets. It's about creating secondary and tertiary cash streams, understanding how to diversify your investments, and avoiding wealth-siphoning expenses. Increasing your net worth requires much more than good stock picks.
 
Figure out what those requirements are, and get to work.
 
Regards,
 
Mark Ford
 

Source: DailyWealth

The 'Rolls-Royce' of Precious Metals Is at Its Biggest Discount Ever…

 
There's the "silver" level… the "gold" level… and then what?
 
You tell me… What level is above gold?
 
You already know… From Obamacare to your frequent-flyer miles, the level above gold is "platinum."
 
The real precious metals typically work that way, too. But today, we're seeing something different.
 
I first wrote about this idea in the January 2016 issue of my True Wealth newsletter.
 
Platinum traded at a $250 discount to gold back then. We used that setup to make a 35% profit in seven months by buying platinum. (The price of platinum then fell for four-and-a-half months after we got out.)
 
Now, it's time for the sequel…
 
Here's where we stand with precious metals prices today…
 
Precious Metal Price
Gold $1,267
Platinum $947
 
In January 2016, platinum traded at a $250 discount to gold… Today, the gap is even wider at $320.
 
How could this be?
 
Platinum is supposed to be worth more than gold – it's harder to get out of the ground, and more "exclusive" in jewelry stores.
 
And normally, it is more expensive… But today it's not. Right now, platinum is cheap – trading at its biggest discount to gold ever. Take a look:
 
It is a true extreme for platinum. Did you ever think you'd see the day where platinum – the "Rolls-Royce" of precious metals – would be worth so much less than gold?
 
What's going on here?
 
One explanation is that platinum is more like a typical commodity than a precious metal. And commodity prices in general have been falling. Take a look:
 
As you can see, platinum has been acting more like a commodity than a precious metal in recent years.
 
Even though 28% of 2016 platinum production was used to make jewelry, platinum has real industrial uses. Platinum is much more affected by economic cycles than gold.
 
Car manufacturers used 42% of the platinum supply (specifically for catalytic converters). The remainder is used in other industrial applications.
 
So should we think of platinum as the Rolls-Royce of precious metals, or as a commodity? The answer is, you should think of it as both…
 
This chart below tells the story more clearly… It shows platinum versus an index that is made up of 50% gold and 50% commodities:
 
This simple 50/50 index tells the full story: Platinum tracks the trends in both precious metals and commodities.
 
Based on this index, you can see that platinum is trading at a massive discount. It's cheap.
 
A setup like this doesn't come around often… Platinum has rarely traded at a discount to gold.
 
And this discount won't last long… The last time we saw this happen was in January of 2016, and that massive discount went away in just seven months.
 
While we don't know exactly how far platinum could soar this time, my True Wealth readers locked in 35% gains last time. And history says big gains are possible once again.
 
Good investing,
 
Steve Sjuggerud
 

Source: DailyWealth

The Biggest Downside to 'Buy and Hold'

 
It's August here in Florida, and that means one thing…
 
It's hurricane season.
 
The trouble is, most people aren't listening. You see, Florida hasn't suffered a major hurricane since Hurricane Charley in 2004.
 
Going 13 years without a major hurricane has caused most Floridians to become complacent. It's human nature.
 
The same goes for investing. The bull market in U.S. stocks is eight years old. It has been the gift that keeps on giving for "buy and hold" investors. But we aren't naïve. Eventually – whether it's next week, next month, or next year – a hurricane will hit the stock market.
 
Is your portfolio prepared?
 
The steps you take to protect yourself today could mean the difference between a comfortable nest egg or having to delay retirement for a few years.
 
Ask yourself the following question: How long can I go before my portfolio fully recovers after a market correction?
 
In the following chart, you can see how long it took the market to recover its post-crash losses…
 
The market peaked in March 2000. By October 2002, the S&P 500 had shed nearly 50% of its value. It took until June 2007 – more than seven years – for the market to recover its losses.
 
Stocks peaked again in October 2007 and fell an enormous 56% through March 2009. It took until March 2013 – nearly five and a half years – for the S&P 500 to reach its pre-crash levels again.
 
Even after the market's most recent pullback – from May 2015 to February 2016, when stocks fell 14% – it took nearly 14 months to break even again.
 
These corrections wiped out the brokerage accounts of millions of people. Many had to postpone their retirements or even unretire altogether. Lots of people got scared out of the market and sold near the lows, missing out on the gains.
 
My friends at Stansberry Research have been warning readers to prepare for another major market correction. As my friend Steve Sjuggerud has repeated, we're in the "Melt Up" phase. The market is marching to new highs practically every day. People have grown complacent. But eventually, the Melt Up will end and the "Melt Down" phase will be here.
 
Now more than ever, you must listen to our advice…
 
1Follow your trailing stops.
I designed my TradeStops software to help investors manage risk. TradeStops can sync with your online brokerage account and tell you EXACTLY when to sell a stock. This helps minimize your losses and takes all of the guesswork and emotion out of investing.
 
2Keep your position sizes reasonable.
Don't put your whole portfolio into one or two stocks. No one stock should make up more than 5% or so of your portfolio. That way, if a stock falls 25% tomorrow, you've only lost about 1% of your total portfolio… much easier to stomach than if you have huge position sizes.
 
3Use proper asset-allocation guidelines.
Don't invest 100% of your assets into one asset class like U.S. stocks. To prepare for the market's next hurricane, you need to diversify your portfolio. That means owning some "hard assets," like real estate and gold, in addition to stocks and bonds.
 
TradeStops is designed to help you survive the next market hurricane. Of course, it will also keep you invested in this bull market for as long as possible.
 
Follow the three steps I outlined above. Your portfolio will thank you.
 
Good investing,
 
Richard Smith
 
Editor's note: How high will this bull market go? When will the bubble pop? Is it too late to get in? Steve Sjuggerud has the answers. He gathered all you need to know in a brand-new, free report for DailyWealth readers. If you have money in the markets, we strongly encourage you to get Steve's take on what's about to happen. Plus, as a part of this special offer, you'll receive one year of TradeStops – a $228 value – ABSOLUTELY FREE. Watch Steve's short presentation here.

Source: DailyWealth

The Most Important Trend in Finance That No One's Watching

 
Did you see it happen?
 
Have you noticed the most important trend in finance this year?
 
Most folks haven't. They have no idea what's going on…
 
They completely missed this enormous shift. They have no idea that for the first time in years, the U.S. dollar is crashing.
 
This is an enormous change from the past few years. And history tells us that the losses will likely continue…
 
The U.S. dollar was a major story in recent years. The rally in the U.S. dollar, that is.
 
The buck rose 40%-plus from early 2011 to the end of 2016. It was a massive uptrend with huge implications for the global economy. But 2017 has seen a huge reversal.
 
The first six months of 2017 was the worst six-month stretch for the dollar since 2011.
 
The dollar is down more than 8% in total in 2017. That's a huge move for the world's reserve currency. And it led to something we haven't seen in a while…
 
On July 21, the U.S. dollar hit a new 52-week low. That's the first 52-week low we've seen in the dollar in more than a year.
 
The dollar bull market has major chinks in its armor. You can see this clearly in the chart below. Take a look…
 
 
The chart shows the U.S. Dollar Index, which compares the dollar's value with a basket of other currencies. And as you can see, a new downtrend appears to be in place.
 
That doesn't mean we'll see an additional 20% decline all the way down to 2011 levels. But history says further losses are likely.
 
Specifically, the dollar tends to keep falling after hitting a new 52-week low. The table below shows the returns…
 
 
6-Month
1-Year
2-Year
After extreme
-1.3%
-2.9%
-4.8%
All periods
-0.2%
-0.5%
-1.0%
The table shows data going back to 1967. The dollar is down 22% since then, so the currency has a slightly downward bias. Still, the declines tend to be much worse after 52-week lows.
 
After new 52-week lows, the dollar has fallen 1.3% in six months, 2.9% over the next year, and 4.8% over the next two years.
 
Those aren't massive downside numbers. But currencies tend to move slowly. The dollar is already down more than 8% from its recent high… Another 5% decline would solidify a significant downtrend.
 
No one has been talking about this major shift. But movement in the dollar has huge implications…
 
It affects overseas investments, U.S. companies with international sales, and prices of commodities, for starters.
 
Now, a falling dollar isn't explicitly good or bad for stocks. But we're seeing a major shift in the dollar. The long-term trend could be reversing.
 
That makes this a shift you'll want to track closely in the coming months.
 
Good investing,
 
Brett Eversole
 

Source: DailyWealth