This Technology Could Change Our Lives… And Much Sooner Than You Might Think

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 The remarkable rally continues for one Stansberry Venture Technology holding…
 
Shares of semiconductor firm Nvidia (NVDA) surged to a fresh record high recently after the company's latest earnings report. The stock is up about 100% so far this year.
 
Nvidia reported third-quarter earnings of $1.33 per share, up 41% year over year, and well above the $0.94 per share Wall Street analysts expected. Revenue rose 32% year over year to $2.6 billion. The company also raised its dividend by 7% to $0.15 and said it plans to return another $1.3 billion to shareholders in fiscal 2019.
 
Nvidia is booming as demand for its powerful chips continues to grow…
 
The company's graphics cards have long been a critical component for the video-game industry. But they're becoming even more important as computer monitors and television screens become larger and feature even higher-resolution than before.
 
These chips are also becoming a must-have technology in a growing number of industries and products outside of video games – from cryptocurrency mining to cloud-computing datacenters to self-driving cars. As Bloomberg reported recently…
 
One argument in favor of continued bullishness: Chips are everywhere. Once mainly confined to computers and phones, the tiny devices are now showing up everywhere from washing machines to autonomous driving systems. Consumers are coming to expect even the simplest gadget to think for itself, creating a need for more powerful components and more storage to house the flood of data they create.
 This should sound familiar to Dave Lashmet's Stansberry Venture Technology subscribers…
 
Dave predicted these trends when he originally recommended shares early last year. As he explained in the May 2016 issue of Stansberry Venture Technology, video gaming alone could continue to drive business for years…
 
Nvidia is the leading designer and manufacturer of graphics cards for video gaming. And as computer monitors and television screens have gotten larger and added more resolution, the computational burden used to create graphical images has likewise increased…
 
This trend will continue during the consumer rollout of "4K" screens. The new 4K ultra-HD standard requires a visual resolution of 3,840 x 2,160 pixels – about 8.3 million pixels in total – which is four times the resolution of today's HD screens…

 
But it doesn't end there. Even-higher-resolution screens are coming soon.
 
Last year, Dave saw a prototype of the next-generation 8K screen from Samsung at the Consumer Electronics Show in Las Vegas. He described the detail in the image of a slow-motion, life-size gymnast as "awe-inspiring."
 
Dave says these better-than-lifelike images now have a role in our culture – and graphics will follow, because better graphics will drive game sales. And as Dave noted, this is a vastly bigger market than many folks may realize…
 
Globally, sales of video-game software for PCs were $32 billion last year, according to gaming-research firm SuperData. Console downloads added another $4 billion, and mobile games for phones and tablets were another $24 billion.
 
Likewise, market-research firm Statista projects $18 billion in global 4K screen sales in 2015, and $52 billion in sales for 4K screens by 2020…
 

So this is a massive market – far bigger than just one company. And yet, one company makes the lion's share of profits in graphics cards: Nvidia.

 But Dave also foresaw huge demand for these chips in the burgeoning field of "machine learning"…
 
For example, he noted that Nvidia's graphics cards could make fully self-driving cars a reality. As Dave explained, a large hurdle still remains before this technology will ever become widespread. More from the issue…
 
Industry lawyers like to call developments in this field "advanced driver-assistance technologies" to avoid liability for life-or-death decisions. For example, "driver assistance" technology that applies the brakes or pulls you back into your lane is much easier to defend than tech that leaps curbs to avoid a head-on collision – but which in turn crashes the car into a school bus stop.
 
The key will be in absolving carmakers from liability. That's when we will see truly driverless cars. Most pundits think that this is still five to 10 years out. Self-driving cars simply aren't good enough yet, largely because of weather and unexpected circumstances that really can't be programmed for: a truck losing its load or a tree falling across a road.

But Dave said Nvidia's chips could solve this problem in a unique way. In simple terms, it's like playing a video game in reverse. The same technology that enables them to create realistic objects and movement in games can allow them to track real-world objects and predict their motion…
 
Imagine that you're tracking a semitrailer… Odds are that it weighs between eight and 28 tons and has good tire tread. So in the next five seconds, it can go five miles per hour faster if it steps on the accelerator… or 30 miles per hour slower if the driver mashes the brakes.
 

Nvidia has calculated an expected tracking range for cars, delivery vans, semitrailers, bulldozers, motorcycles, bicycles, and pedestrians walking beside and across a road… even dogs and cats. So it can predict future motion.

And as Dave explained, simply by integrating fixed objects – like streets, curbs, and stop signs – with the moving-objects data, a self-driving car can reasonably navigate through a city. In other words, Nvidia is taking lessons it has learned from video games and applying them to real life.
 
 That alone is impressive…
 
But as Dave noted, Nvidia's technology goes even further. It utilizes a process called "deep learning," which could become the future of the Internet and mobility. This allows the car to "learn" to drive on its own, without a pre-programmed map or database…
 
Here's how Nvidia's car learned… For months, the car "watched" data of what real-life drivers did in reaction to different scenarios. Then Nvidia took the car out to a closed course and let it start hitting cones. After a while, it started hitting fewer cones… then no cones.
 
From there, the research team let it drive around cemeteries with no street names and no curbs. Then the car went into suburban streets. And finally, it started driving along the New Jersey Turnpike.
 
This is also the logic that will help a car negotiate snow, ice, and slush as proficiently as any human driver. That's because the car can do more than just learn from its own experiences… It can also upload data from other cars.

 Why is this important?
 
Because with no computer code telling a car what to do, automakers face much less liability. This could help make self-driving cars a realistic and affordable option far sooner than many believe possible.
 
But again, Dave noted the potential extends far beyond self-driving cars alone.
 
This kind of self-learning system is already being used by all the cloud-computing companies – Facebook (FB), Amazon (AMZN), Microsoft (MSFT), IBM (IBM), and Alphabet (GOOGL) – to optimize data routing in real time. And Dave predicted these systems would soon spread to countless other industries…
 
The bigger picture is that lots of systems can now become "self learning." These machines will range from robots on an assembly line to refrigerators that order more milk to be delivered to your door when you're close to running out.
 

Machines are learning to think for themselves. This has never happened before. And the world might be forever changed. The upside is that early investors will profit the most.

 Dave has been exactly right so far… And Stansberry Venture Technology subscribers are benefiting.
 
Nvidia shares are up more than 370% since Dave recommended them… Folks who took his advice have more than tripled their money. But we're not surprised…
 
You see, more than one out of every four stocks Dave has recommended in Stansberry Venture Technology has soared 100% or more.
 
This is an unheard-of rate of success in our industry. And if you tuned in to our first-ever cancer webinar earlier this week, you know Dave believes he has found his next potential triple-digit winner.
 
Of course, that wasn't the focus of the event… Dave and Dr. David "Doc" Eifrig spent most of the evening discussing the latest developments in cancer treatment. They even gave attendees a free copy of Doc's book – The Living Cure – explaining exactly what to do if you or someone you love is diagnosed with this terrible disease.
 
But Dave also introduced a revolutionary new device that could save the lives of millions of folks over the next several years. It could be approved as soon as December 31… And he believes the small company behind it could soar 200% or more when it is.
 
If you missed Wednesday night's event, it's not too late to learn more about this incredible opportunity. Click here for the details.
 
Regards,
 
Justin Brill
 
Editor's note: You could have doubled your money nine different times simply by following Dave's advice in Stansberry Venture Technology in recent years. Now, he has uncovered a medical breakthrough that could soon triple the share price of the little-known company behind it. Learn more about this technology – and all of Dave's research – right here.

Source: DailyWealth

Stick It to the Taxman and Avoid the 'Death Tax'

 
About one month ago, President Donald Trump was outside Harrisburg, Pennsylvania vowing to end America's so-called "death tax."
 
The "death tax" is a common name for the estate tax.
 
The IRS claims that it's "a tax on your right to transfer property at your death." That's right… after decades of paying taxes, the IRS can take even more after you die, taking that money away from your spouse and heirs.
 
When you die, the federal government taxes a portion of your estate. The tax rate can be as high as 40%.
 
But no matter what happens with the death tax, we have a way to shield nearly $11 million from the IRS' death tax right now
 
Now, I know what you're thinking. Our current administration vows to cut the federal estate tax, so why write about it?
 
The thing is, we've heard this talk before. That's why I'll remind you again: You can't trust the government to take care of you. You need to understand your own situation and learn as much as you can so you can control what happens to your estate.
 
An estate consists of your cash, real estate, investments, and other assets. This is what the government taxes when you pass.
 
The federal estate tax affects everyone. But the following 14 states and Washington, D.C. also impose a separate estate tax…
 
If you live in Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, or Washington, you face additional estate taxes.
 
Some of these states set the same exemption limit as the federal government. However, a few are much lower… New Jersey is the lowest, with the limit at just $675,000. Meanwhile, several other states are moving to increase their exemption limits.
 
On top of that, Hawaii offers a helpful process that allows spouses to effectively double their exemption. Although other states haven't followed suit yet, it's already available in federal estate taxes.
 
You see, federal law allows you to transfer estate exemptions between spouses. This process is called portability…
 
Say that Jack and Nancy are married. With a nice family farm, a vacation home, and hefty portfolios, their estate value is $9 million. Then, Jack passes away.
 
The 2017 estate tax exemption limit is $5.49 million. But if all the assets are in both their names (as joint owners), the estate passes to Nancy without triggering any tax.
 
When Nancy dies, her heirs can claim her individual estate tax exemption of $5.49 million. The rest of the estate faces the estate tax rate. The top rate is 40%, but most estates pay less than that. That's because the rate falls into levels based on gross estate value.
 
In the case of Jack and Nancy, their gross estate value is large enough that it faces the 40% tax. However, the tax is only levied on the excess over the exemption limit.
 
So that's:
 
That means Jack and Nancy are paying more than $1,000,000 for the "privilege" of dying in America. Think about that. That's a lot to take away from their children and grandchildren.
 
However, if Nancy knows to file for what's called a "portability election," she can take her exemption plus Jack's unused portion.
 
That would increase her exemption to $10,980,000… more than enough to cover their $9 million estate. Which means that estate is passed on to her family free from the federal estate tax.
 
But this doesn't happen automatically. Nancy would have to file IRS Form 706 to take over the remainder of Jack's unused exemption. It's called the United States Estate (and Generation-Skipping Transfer) Tax Return. And here's the key: You must file this form within nine months of your spouse's death.
 
There's also another way to increase the amount of your death-tax exemption, even if all your assets aren't owned jointly…
 
Say most of the assets are in Nancy's name, but Jack has a few solely in his name (and therefore would not qualify for the automatic transfer to his spouse). When he dies, his estate is only worth $4 million. That estate would be exempt from estate tax. However, Nancy could file for the remaining portion… the $1.49 million still in his exemption. That way, if her estate increases to more than $5.49 million, she'll have that additional coverage available.
 
And more recent news: If your spouse died after 2010, you now have until January 2 to file a portability claim. This is thanks to a simplified process from the IRS… It effectively eliminates the nine-month rule, but only if you act now.
 
It allows you to file form 706 retroactively… Just write "Filed Pursuant to Rev. Proc. 2017-34 to Elect Portability Under Section §2010(c)(5)(A)" at the top of the first page.
 
Remember, all this only deals with federal estate taxes. State taxes differ… And some states also impose an inheritance tax on top of an estate tax. But this is a good place to start… so you can pass on your hard-earned wealth to your heirs and loved ones.
 
Here's to our health, wealth, and a great retirement,
 
Dr. David Eifrig
 
Editor's note: Few things affect your health and wealth as much as where you live. That's why Dave has put together a report on the best states to retire in – including ones without any estate or inheritance tax. You can find out how your state measures up with a subscription to Dave's Retirement Millionaire newsletter. Click here to get started.

Source: DailyWealth

This Precious Metal Could Be a Better Buy Than Gold Right Now

 
"Steve, when are you getting back into gold?"
 
I sold all my gold and gold stocks in July last year – and afterwards, I heard that question constantly.
 
My "not yet" on physical gold finally turned into a "NOW" this past January. And I'm still waiting for the right opportunity in gold stocks.
 
But today, I'll share a little twist to the story…
 
You see, a different precious metal could jump 34% in the next year, based on history…
 
Gold is up nearly 12% this year. But one indicator tells us that you might be better off buying silver today instead…
 
In February last year, the price of silver fell to its lowest monthly close versus gold in the past two decades. And today, silver remains incredibly cheap compared with gold.
 
At the end of October, gold closed at $1,271 an ounce, while silver closed at $16.72 an ounce. That's a gold-to-silver ratio of 76… one of the highest gold-to-silver ratios we've ever seen.
 
This chart shows that gold is trading at a huge premium to silver today…
 
The gold-to-silver ratio historically moves between 50 and 70. That's why the 76 mark is so important… It means that right now, it takes 76 ounces of silver to buy an ounce of gold.
 
So what happens after times like these?
 
I looked back at each time the gold-to-silver ratio hit 76 or higher in the last two decades. It hasn't happened often. But it turns out, silver tends to soar after the gold-to-silver ratio reaches that kind of extreme. Take a look…
 
 
1-Month
2-Month
6-Month
1-Year
After extreme
4.0%
10.1%
21.0%
34.0%
All periods
0.5%
1.6%
3.2%
6.5%
Silver has normally gone up 6.5% a year for the last two decades… But buying silver after extreme gold-to-silver levels meant those annual gains shot up to 34%!
 
That outperformance was consistent over shorter periods as well. History says silver could rise 21% in the next six months alone. (Still, to be fair, we don't have a lot of historical instances to go on.)
 
Don't get me wrong. I'm still buying gold. I believe it could go much higher from here.
 
But if the gold-to-silver ratio is useful as an indicator, silver could have more upside than gold today.
 
The simplest way to bet on higher silver prices is with the iShares Silver Trust (SLV). It's an investment designed to track the price performance of silver.
 
If you're looking to add precious metals to your portfolio, consider owning both silver and gold today.
 
Good investing,
 
Steve
 

Source: DailyWealth

Don't Make This Dangerous Gamble on Complacency

Steve's note: Regular readers know I believe the "Melt Up" stage of this bull market is now 100% here – and we need to stay invested for the biggest gains. But this kind of market environment can hide dangerous risks. Today, my colleague Dan Ferris explains one popular trade you should avoid right now…
 
One type of trade is destined to ruin investors today.
 
It's a set of arcane assets that are poorly understood by those who claim to have mastered them.
 
In this essay, we'll take a close look at the bubble in Volatility Index ("VIX")-related investments – and why they're destined to blow up spectacularly.
 
Let's start with the tale of a young man who embodies all the classic foibles that destroy investors in the wake of a speculative mania (like what we're seeing today) and how his "mastery" of VIX investments will likely lead him and his ilk to ruin…
 
Seth Golden is a 40-year-old day trader in Ocala, Florida. A former logistics manager for retailer Target, Golden started selling short VIX-related exchange-traded products (ETPs) in 2012. Since then, he claims his net worth has risen from $500,000 to $12 million, according to an August 28 New York Times article.
 
The products Golden shorts are based on rolling 30-day long positions in futures contracts traded on the Chicago Board Options Exchange ("CBOE"). The basic idea of a rolling 30-day expiration is simple…
 
A VIX futures contract expires every month. At any given time, CBOE publishes nine serial monthly VIX futures contracts, currently from the November 2017 contract through the July 2018 contract.
 
This is highly simplified for illustrative purposes, but… imagine buying a November contract on November 1. Let's say it expires on November 30. On November 2, you'll have to sell enough of the November contract and buy enough of the December contract to keep the position at a 30-day average expiration. You do this every day until December 1, when you only own the December contract and the whole process starts over again.
 
ETPs do this so that whenever you buy shares, you'll always get the same thing: 30-day exposure to near-term VIX futures. You can also do this with more distant contracts to maintain a constant exposure to 60-day or 90-day rolling positions.
 
Golden says his standard position is to sell short VIX ETPs with 20% of his portfolio. He posts details of personal trades on Twitter, appears in YouTube videos, and publishes essays on websites like StockTwits.com and TalkMarkets.com.
 
Golden has two primary insights for shorting VIX products…
 
The first is that the products themselves are designed to destroy value over time. It's not absurd to bet against such a product.
 
In bull markets with low volatility – like the one we've been in for several years now – volatility futures tend to fall in value as they approach expiration. The contracts expire each month, locking in the losses and rolling over to the next month.
 
To add to the effect, the VIX futures and the ETPs based on them have historically tracked the VIX poorly.
 
For example, when the VIX tripled in August 2015, the most popular long VIX product – the iPath S&P 500 VIX Short-Term Futures ETN (VXX) – didn't even double. It rose 66%. Several weeks ago, the VIX rose 20.7%. VXX rose only 5.5%.
 
Golden is right. These are garbage securities.
 
The fact that Golden is shorting garbage is a big reason he's made so much money… But the main reason he's made so much money doing this is timing. We're in a bull market that has featured record lows in volatility. Confusing a bull market with financial acumen might be the most common investor foible of all.
 
Golden's second key insight about shorting VIX products is, as he told the New York Times recently, "The nature of volatility is that it desensitizes over time, which is why the index has been tracking down for so long."
 
Golden explained this further in a YouTube video titled "Shorting VIX Products for Max Profits"…
 
Over time, volatility actually seeks out lower levels because we become desensitized to previous events, previous fears. If we had the likeness of a 9/11 event today, the initial shock would still be there, but it would probably wear off a lot quicker this go around.
I asked Golden via Twitter, "Does [volatility] fall over time? Or is its nature to make new minima and maxima?" (In other words, doesn't volatility become more volatile over time, hitting both new highs and new lows?)
 
His reply: "Nothing to debate here. The nature of volatility is to always seek out new low levels over time as evidenced by all defining metrics."
 
I asked him if the VIX would ever make a new high. He agreed it was highly probable, though it would take an "existential" shock, like 9/11. (The term is really "exogenous," meaning an event outside of and largely unrelated to day-to-day financial market activity.) But when I tried to press him further about his theories, he called me "thick" and said, "I think we're done here."
 
History suggests Golden doesn't understand that the VIX doesn't need exogenous shocks to hit new highs.
 
The top 10 new VIX all-time highs all occurred in October and November of 2008. If you look through the VIX data going back to 1990, when it first came into existence, all but a handful of the top 100 intraday highs were logged in late 2008 and early 2009 – the end of a massive financial bubble, a purely financial event.
 
No terrorist attack on New York and Washington, D.C. No hurricane. No North Korean nukes. No exogenous shock. Nothing "existential," as Golden put it. Just the inevitable, disastrous end to a massively overleveraged credit cycle.
 
Today, we're in the final innings of the single most overvalued stock market in history. The VIX could easily make multiple new highs when U.S. stocks finally come unglued. And anyone who is shorting VIX-related products could lose everything.
 
Volatility can remain elevated for years, and it has done so in recent history. The VIX never closed below 16 from November 1996 to December 2003 (according to data compiled by Bloomberg), spiking multiple times above 30 during that period.
 
How would a trader with high-minded theories about complacency and 20% of his portfolio short VIX-related products have performed during that period? It's impossible to say, since none of the VIX ETPs existed at that time.
 
Golden is too certain about his views on the nature of volatility, leading him to a lack of imagination. And as I've written before, an investor without imagination can't see risk until after the damage is done.
 
I wish Golden well, not ill. I hope he hangs on to his $12 million and makes even more. But the complacency he believes in so deeply is the sort of idea that gets you killed financially at times like this, especially when coupled with certainty and arrogance.
 
Be very, very careful out there. Give the short-VIX gurus a wide berth. And don't take their advice.
 
Good investing,
 
Dan Ferris
 
Editor's note: No one knows when the next crash will strike… But when it does, investors like Golden could suffer devastating losses. That's why Dan's Extreme Value newsletter is a must-read today. His strategy is to build long-term wealth, no matter what happens in stocks… And his readers know that even market pullbacks can lead to major opportunities. To learn how to access a risk-free trial, click here.

Source: DailyWealth

The First Threat to My 'Melt Up' Thesis Is Here

 
A few months ago, I published five warning signs for the end of the "Melt Up" for paid subscribers to my True Wealth Systems letter…
 
At the time, NONE of them were worth worrying about… The five indicators were "all clear."
 
But today, at least one of them is not.
 
I will share this indicator with you today. And I'll tell you what it means right now…
 
These five indicators are powerful…
 
Before stocks crashed in 2000 and 2007, all five of these early warning indicators were flashing RED. Those were the only times in the last quarter century that all five indicators flashed RED together.
 
But keep in mind, these five signs are "early warning" indicators…
 
They DO NOT mean the end is here. Instead, when ALL FIVE are flashing RED, risk is extremely high. These signals typically warn us months in advance of the overall stock market peak… like they did in 2000 and 2007.
 
While it's not fair to my paid subscribers to share all five of these indicators with you, I will share one of them today.
 
It's a specific move in transportation stocks…
 
You probably know that the overall stock market peaked in 2000. But you probably don't know that transportation stocks peaked in May 1999 – long before the overall market did.
 
The same thing happened in 2007. The overall market peaked in October 2007. But transportation stocks peaked months earlier, in July.
 
Today, we're seeing the first signs of underperformance in transports… Take a look:
 
Just like we saw in 2000 and 2007, the overall stock market hit a new high, but the transports didn't "confirm" it with a new high of their own.
 
Why are transports a leading indicator?
 
One possible explanation is that transportation stocks thrive when the economy is strong and goods are moving around. When the economy weakens, those goods stop moving, and transports are one of the first places it shows. So they tend to peak before the overall market.
 
While underperformance in transports is a good early warning sign, it's not a sell signal…
 
First, this is just one of the five indicators. Secondly, transports could still turn around and hit new highs, wiping out this short-term concern. And lastly, the overall market has typically peaked months after this early warning signal flashed.
 
In short, this is not the end of the final Melt Up stage of this bull market. This is just one early warning sign that could be starting now.
 
It's my job to keep you in the Melt Up as long as possible. You might think that means I need to be the biggest cheerleader for the Melt Up. But I look at it a different way…
 
I think my job today is to help you maximize your gains – and let you know when it's finally time to pull the plug.
 
I'm on it…
 
Good investing,
 
Steve
 

Source: DailyWealth

A Huge 113,000% Rise in Seven Years – And Plenty of Upside Ahead

 
About seven years ago, the Japanese government apparently decided to buy up the Japanese stock market.
 
I'm not kidding…
 
This situation could eventually lead to a bubble. But today, it's creating a huge opportunity for investors. Let me explain…
 
Since the end of 2010, Japan's central bank has increased its holdings of Japanese exchange-traded funds (ETFs) by 113,000%.
 
You can see it on the chart below…
 
The numbers are just staggering… The Japanese central bank now owns more than 16 trillion yen worth of Japanese ETFs. (That works out to about $140 billion in U.S. dollars.)
 
For a frame of reference, more than half of the total assets in Japanese ETFs are owned by the Japanese central bank.
 
And the pace isn't slowing down. Instead, it's speeding up… This year alone, the Japanese government has added $46 billion in ETFs to its portfolio – and we still have two months of data left to report for the year.
 
I told my subscribers about this story exactly one year ago in my True Wealth newsletter…
 
The headline to my story was "Little-Known 'Mr. K' Just Set Up the Best Trade of Our Lives."
 
Here's the deal.
 
"Mr. K" is Haruhiko Kuroda – the head of Japan's central bank. He's afraid Japan will backslide into deflation… And he has the power to prevent it from happening.
 
He's committed to buying Japanese stocks. And he's also committed to keeping interest rates at zero for an EXTREMELY long period of time.
 
So this gives us an incredible tailwind in Japan… zero-percent interest rates for the long run, AND a government that is committed to buying stocks. That is a recipe for an eventual stock market bubble.
 
Subscribers who followed my advice a year ago and bought the WisdomTree Japan Hedged Equity Fund (DXJ) are up 26%.
 
But you haven't missed it yet…
 
U.S.-traded Japan ETFs actually had a net OUTFLOW of cash in 2016. And this year, the net flow in Japan is basically flat. In short, Americans don't care… yet.
 
That means this trade has more upside ahead.
 
Long story short – this Japan setup is as good as it gets. Interest rates are at zero for the long run, and you have a multibillion-dollar tailwind in the stock market.
 
Don't miss it!
 
Good investing,
 
Steve
 

Source: DailyWealth

This $25 Billion Telecom Giant Is Doomed

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 One of our favorite whipping boys just received more bad news…
 
For the past several months, wireless carriers Sprint (S) and T-Mobile (TMUS) – the third- and fourth-largest companies in the industry – have been in merger talks. A joint entity would have boasted more than 130 million U.S. subscribers.
 
That still would have come in third behind Verizon (VZ) and AT&T (T), both of which have more than 138 million U.S. subscribers today… But it would have helped to close the gap.
 
However, the deal fell through last weekend… In a joint statement, the companies said they were "unable to find mutually agreeable terms." Essentially, SoftBank (Sprint's parent company) and Deutsche Telekom (T-Mobile's parent company) didn't support the idea.
 
This news should come as no surprise to Stansberry's Investment Advisory subscribers… In the May issue, Porter and his team of analysts explained why they were skeptical the deal would go through. As they wrote…
 
A merger with Sprint, it is argued, would allow T-Mobile to compete with larger rivals Verizon and AT&T. A merger is likely the only way to save Sprint from bankruptcy. But T-Mobile's big spectrum haul makes this less likely.
 
Sprint's licenses are predominantly in the 2.5 gigahertz (GHz) range, which is high-band spectrum. And in total, Sprint owns more spectrum than any other cellphone carrier. But the Federal Communications Commission doesn't want too much spectrum held in the hands of too few companies. So with T-Mobile adding a significant amount of spectrum to its portfolio, regulators now have more reason to block a merger between Sprint and T-Mobile.
 
Nonetheless, until this week's sudden decline, Sprint's stock price had rallied as merger negotiations between carriers can now resume. (Bidders were blocked from pursuing deals during the auction process.) There's even talk that Sprint could come together with a cable company.
 
Keep in mind, Sprint's main problem is its colossal $41 billion pile of debt. Many cable companies are highly leveraged as well. And even if they weren't, why would any company want to assume all of Sprint's liabilities? They wouldn't. Sprint's interest expense is now $2.5 billion per year… and rising.
 

We don't see a viable suitor for Sprint, whether it be another wireless carrier or a cable company. Between its debt burden and the raging carrier price wars, Sprint is doomed.

 Porter and his research team recommended shorting the $25 billion company's stock back in February. As they explained to subscribers at that time, Sprint was a profitless and broken business…
 
A day may come when Sprint's high-band frequencies become more valuable. Advances in network and signal-transmission technology could make that possible.
 
But time is not on Sprint's side…
 
Sprint will likely have to reorganize long before that happens. Sprint has to deal with a huge pile of debt, which was taken on by building out its network and buying companies. And now, Sprint's spectrum licenses are becoming inextricably linked with this massive and growing debt load.
 
Shareholders should value Sprint – including its spectrum assets – based on future cash returns… But it's not generating any cash… and isn't likely to anytime soon. Sprint's future looks bleak. It lacks a competitive advantage in a very crowded industry…

And in a clumsy effort to steal customers away from its rivals, Sprint had created a price war in an industry that was already highly competitive. More from that issue…
 
The incentives and heavy discounting drove down revenue and margins. Sprint's revenues have fallen over the last two years from around $35 billion to $33 billion. Its rivals suffered, too. AT&T's wireless revenues fell for the first time from around $74 billion to $73 billon. Market leader Verizon's wireless revenues fell 3% to $89 billion. Only T-Mobile managed to grow revenue.
 
But Sprint was the least prepared to fight the price war it started. And it's the clear "loser"…
 
Of the big four U.S. carriers, Sprint is in the worst financial shape. Its operating margins and cash flows were already much worse than its competitors' before the price wars began.

 Worst of all, the company has a huge wall of debt coming due within the next five years. Sprint's debts have nearly doubled since 2010 as it has struggled to keep up with the rest of the wireless industry…
 
Almost $10 billion, or 30%, of Sprint's total debt matures in the next three years. And $17 billion – more than half of its debt – matures in the next five years…
 
Sprint has $2.8 billion worth of debt coming due this year. It has $6.1 billion in cash and $3 billion of available credit. It can pay off its debt maturing in 2017 without a problem… But it has another $6.8 billion worth of debt coming due in 2018 and 2019. That's a daunting wall of maturities for an already highly leveraged company that doesn't generate any free cash.

 
Sprint features the lowest margins in the industry. It doesn't have any profits over the last decade. It has the most debt (and the most debt coming due) of any major wireless carrier. Its network is the lowest-rated and needs the most capital expenditures to maintain. And its cash flows are negative cash flows.
 
So it's easy to see why Porter and his team recommended selling the stock short… So far, Stansberry's Investment Advisory subscribers are up about 30%. And with the potential merger with T-Mobile now off the table, shares are likely headed even lower.
 
Stay tuned…
 
 Meanwhile, if you've been with us for long, you know our goal at Stansberry Research is simple: We strive to give you the information we would want if our roles were reversed.
 
Naturally, this information is usually focused on building and protecting your wealth. But this Wednesday, we're going to share something different…
 
Our colleagues Dave Lashmet and Dr. David "Doc" Eifrig are preparing a special presentation that isn't designed to help you make money (though, as you'll see, you could have the chance to make a fortune). Instead, it's designed to show you how to protect yourself and those you love from one of the most devastating diseases on the planet today.
 
You see, Dave and Doc will be sharing the details on an incredible new cancer treatment that could revolutionize health care as we know it… and potentially save the lives of hundreds of thousands of Americans every year.
 
They believe it is going to change medicine forever… And you can be among the first to learn about this astonishing new treatment. It's absolutely free for Stansberry Research readers, but you must pre-register to attend.
 
 
Regards,
 
Justin Brill
 
Editor's note: On Wednesday at 8 p.m. Eastern time, our technology and medical experts Dave Lashmet and Dr. David Eifrig are hosting Stansberry Research's first-ever cancer briefing. You'll learn about a breakthrough that could destroy any cancer you or a family member may one day face… and how to make up to 500% in the little-known company behind it. Reserve your spot for this free event here.

Source: DailyWealth

Is This Common Mistake Leading You to Financial Ruin?

 
Karl Hill turned $2.9 million into $54 million in seven years.
 
When I met him in April 2007 at the Grant's Interest Rate Observer Conference in New York City, Hill was in his late 70s.
 
We spoke briefly after his presentation. His stooped posture, rumpled suit, and southern drawl disguised a deep, well-read, highly curious intellect.
 
Hill led a storied and accomplished life. But he missed one thing… a classic mistake that gets investors into the worst trouble…
 
By age 39, Hill had presided as the editor of Boston's Beacon Press, done foreign-management consulting, and even clocked two years with the U.S. Department of Housing and Urban Development before entering a successful career in banking.
 
Eventually, disappointed with the banking business, Hill looked to the stock market. He invested $2.9 million of his own and other people's money, starting in 2000. By the time he stood before us onstage in New York City, he'd turned that nearly $3 million into $54 million in seven years, a spectacular performance.
 
As Hill told the audience…
 
In 2000-2001, with the public temporarily disillusioned with the stock market, and Greenspan putting the pedal to the metal in ballooning the money supply with low-interest credit, I surmised that the public would put much of this inflated money into houses. I invested heavily in homebuilders, took big gains, and got out entirely in 2005-2006.

 
After exiting housing more or less at its top, Hill went whole hog into small-cap Canadian mining stocks due to "the ascendancy of real things from underground [gold, silver, oil and gas, base metals, and uranium] due to the overprinting of fiat money," which he characterized in his Grant's presentation as "the most certain thing in the world today" and "in its infancy."

 
Hill told the audience, "I can't pick stocks." A page from one of his conference handouts was titled, "Big Gains From Tiny Stocks, Selected Randomly Without Knowing Much About Them." Hill invested in stocks based on three premises…
 
1.   Most security analysis and due diligence is futile, and stock prices are erratic and unpredictable.
    
2.   Small stocks do better, on average, than bigger stocks.
    
3.   Stock prices tend to move together for different industries.
Hill put these three premises together and wound up buying equal-sized positions in hundreds of the smallest-cap stocks in what he called "the most propitious industry."
 
That's how he made so much money in housing stocks. And he planned to do the same with mining stocks.
 
He multiplied his own and others' money more than 18-fold in less than a decade. It all seemed so simple and powerful. Hill riveted the audience at the Grant's conference, as only the combination of a good story and a stellar track record can do.
 
Hill spoke as though his success in mining was as certain as his past success in housing. But it was not to be…
 
He failed to understand that the extremely risky, highly cyclical nature of the mining business trumps macro forecasting and the constant decline in value of paper money. In fact, forecasting is generally the province of fools – though I'd never call such a brilliant, warm, engaging fellow a "fool."
 
Hill was a philosopher whose philosophy about fiat money and its relationship to gold and gold stocks led him to ruin…
 
Five months after Hill's talk at the Grant's conference, the stock market peaked in October 2007. Gold stocks peaked four months later. The market crashed in 2008, ruining lots of folks, including those who, like him, had big money in small mining stocks. The VanEck Vectors Gold Miners Fund (GDX) fell 60% from its February 2008 peak to its October 2008 bottom.
 
At the conference in 2007, Hill handed out Xerox copies of his brokerage statements detailing the huge gains he'd made, including the performance of individual equities, amounts invested, and buy and sell dates. At the time, it was almost charming. Looking back, it was naïve and tinged with hubris.
 
The numbers on Hill's 2008 losses weren't published anywhere as far as I know, but they were ruinous enough. Despondent over losing his own and others' money (and possibly under the weight of a hereditary suicidal tendency), Hill shot and killed himself on October 25, 2008 at the age of 79. Had he merely held on, it's likely Hill would have made it all back in a year, and even more in another two years, judging by the performance of the big mining exchange-traded funds.
 
Hill believed gold stocks were a multiyear, one-way bet straight up that even an unfolding financial crisis couldn't stop… based solely upon a top-down thesis he viewed as "the most certain thing in the world."
 
That was his mistake. Overconfidence leads to a lack of imagination. And an investor without imagination can't see risk until after the damage is done.
 
Today, you can find other trades that will ruin investors like mining ruined Karl Hill. To avoid them, remember his story – and never fall in love with your macro predictions.
 
This is what distinguishes a great investor from yet another lucky guy with a great track record and lots of money… walking straight into ruin.
 
Good investing,
 
Dan Ferris
 
Editor's note: Dan's strategy helps his readers invest for long-term wealth, while avoiding dangerous pitfalls. The secret is to buy high-quality businesses – when the moment is right – and build a portfolio you can count on in any market. It's simple… And it has earned him one of the best track records out there. To learn more about his Extreme Value newsletter, click here.

Source: DailyWealth

This 'Boring' Energy Investment Could Soar 53% in Two Years

 
This is the kind of stock market "divergence" that I like to see…
 
Master limited partnerships (MLPs) recently fell more than 4% over five days… while oil prices rose.
 
Whenever I see a crazy divergence like that, I usually ask one question: "What happens next?"
 
We looked back to see what happened to these companies after previous divergences like this. The results shocked us…
 
MLPs soared 28% in one year and 53% in the two years following similar divergences. If history repeats (or even rhymes) this time around, then you could make some real money.
 
Let me start with a brief explanation of MLPs…
 
MLPs are not oil companies. Instead, they're the gatekeepers and toll collectors in the energy industry. Specifically, they own energy-infrastructure assets like pipelines or storage terminals. And their business structure allows them to avoid paying corporate taxes.
 
Investors like to buy MLPs for their dividends. Since MLPs don't pay taxes on their earnings at the corporate level – and since most MLPs own steady, cash-gushing assets (like pipelines) – they pay bigger dividends than other companies. The entire MLP sector pays a dividend yield of almost 8% right now.
 
Importantly, MLP cash flows tend to be stable, regardless of what oil prices are doing.
 
You might think that with stable cash flows, the price for MLPs in the stock market would be stable too. But it's not… The MLP sector tends to move up and down with oil prices.
 
This relationship between MLPs and the price of oil has been steady over the past two years… until last month. You can see it on the far right in the chart below…
 
Last month, MLPs fell 4%-plus over five days… while oil prices rose. That doesn't happen often.
 
This kind of spread has only happened 31 other times in the last 17 years. And when it does, you really want to own MLPs…
 
The table below shows the returns that came after similar occurrences since 2000…
 
 
3-Month
6-Month
1-Year
2-Year
After extreme
9.9%
15.2%
28.0%
52.7%
All periods
3.1%
6.4%
13.1%
27.9%
Since 2000, MLPs have returned a solid 13.1% a year, including dividends. But that's during normal times…
 
Buying MLPs after an extreme like we saw last week has led to dramatically higher profits… more than double the "normal" one-year return.
 
Similar divergences led to 15% gains in six months… 28% gains over a year… and incredible 53% gains over two years.
 
In short, you want to buy MLPs after they've underperformed the crude-oil price… This gives you a greater likelihood of outperforming going forward as MLP prices "catch up" to oil.
 
That's the situation we have right now. And it makes the sector especially attractive today.
 
The easiest way to own it is with the Alerian MLP Fund (AMLP). AMLP holds a basket of these companies. And it pays a nearly 8% yield today.
 
MLPs can be volatile, and oil is a bit "loved" right now… So MLPs are not on our recommended list for subscribers. But history says they could be a great trade today. If you're interested in profiting from MLPs, be sure to use a trailing stop.
 
Good investing,
 
Brian Weepie
 

Source: DailyWealth

Investment Protection No One Is Talking About

 
I'll bet you've made this mistake. And I'll also bet that your kids… and grandkids… are making it right now.
 
I've seen it time and time again. It's one of the quickest ways to lose money in the market.
 
Just as an example, let's say you put a few hundred bucks into a couple of tech stocks that you think are going to soar. Next thing you know, the tech sector takes a nosedive… And you're left with double-digit losses in a matter of months.
 
Here's how you can avoid that happening to you…
 
I've talked before about protecting your portfolio by using trailing stops, position sizing, and owning sleep well at night ("SWAN") stocks. But you could be missing another part of portfolio protection that practically no one is talking about…
 
This might seem like common sense, but many folks get excited about a certain area of the market and completely forget about the others. If you don't properly diversify your portfolio by owning multiple sectors, you WILL lose money.
 
Having multiple sectors represented in your portfolio will greatly lower your risk.
 
In 1999, Standard & Poor's and Morgan Stanley Capital International created a stock classification system. They called this system the "Global Industry Classification Standard." It originally divided the economy into 10 sectors.
 
Here's a list of the 10 sectors and some popular companies in each sector.

1. Consumer Discretionary: Home Depot (HD), McDonald's (MCD)
2. Consumer Staples: Procter & Gamble (PG), Coca-Cola (KO)
3. Energy: ExxonMobil (XOM), Chevron (CVX)
4. Financials: JPMorgan (JPM), Wells Fargo (WFC)
5. Health Care: Johnson & Johnson (JNJ), Pfizer (PFE) 
6. Industrials: General Electric (GE), 3M (MMM)
7. Information Technology: Apple (AAPL), Microsoft (MSFT)
8. Materials: Sherwin-Williams (SHW), Freeport-McMoRan (FCX)
9. Telecommunications Services: AT&T (T), Verizon (VZ)
10. Utilities: Duke Energy (DUK), Southern Company (SO)

We all know which sectors are attractive and which ones aren't. Scroll through any financial website and you'll see at least three ads claiming that they have the next "hot tech stock" or the next McDonald's restaurant.

 
The graph below shows how each sector has performed over the past year…
 
Energy and consumer staples were flat for the year, while financials and information technology led the way. Those two sectors surged more than 35%… If you invested in companies like JPMorgan and Apple, you've made a lot of money.
 
In fact, if you've invested in just about anything you've made a lot of money in the past several years. Right now, we're currently in the second-longest bull market in history. And if you own the entire S&P 500 Index, the broad market is up an outstanding 16% over the past year.
 
Currently, stock valuations are high, and many say stocks are overpriced. The average price to earnings (P/E) multiple for the S&P 500 is around 21 today… while the 10-year average P/E is down around 17.
 
Turn on CNN or any other news channel and you'll hear the bears claiming doomsday is coming.
 
Now, I don't believe a market crash will happen tomorrow, but a market correction is inevitable. Corrections, which are any 10%-plus declines in the market, are a normal and healthy part of a market cycle.
 
Diversifying across different sectors will help protect you during market downturns.
 
Take one of the worst crashes in history as an example – the 2008 financial crisis. As you'll see below, being solely in one sector can ruin a portfolio.
 
Financial, consumer discretionary, and telecommunications stocks were the hardest hit during the crisis. Anyone heavily invested in one of these sectors lost 40% to 50% of their portfolio. But if you simply owned a portfolio balanced over all 10 sectors, you could have saved 25%.
 
The financial crisis is an extreme example – it was one of the worst crashes of all time. But the same logic applies to a normal market correction. Let's look over the last "regular" market correction.
 
This was during a normal, healthy market correction of 13%. Corrections like this occur often… Excluding the dot-com bust and the 2008 financial crisis, the market has posted a 10%-plus decline 11 times since 1987. The average drawdown was 16.4%. Each correction is different, and it's usually a different sector that incurs the most loss. In this particular correction, energy stocks dipped 20% while utilities went up more than 5%.
 
That's why I always recommend proper asset allocation. If you use this opportunity to diversify not only across asset classes, but sectors as well… your portfolio will thank you.
 
Good investing,
 
Dr. David Eifrig
 
Editor's note: If you've saved for retirement, Dave says you need to know about a controversial White House memo… It may be your best chance to collect a huge cash windfall over the next few weeks. But the deadline to get positioned is fast approaching. Click here to learn more.

Source: DailyWealth