What the "End of America" means for China...
The Chinese yuan has gone from settling essentially no international trade in 2010 to more than 12% of international transactions today, according to Joachim Nagel.
Nagel is a board member of Germany's central bank – Bundesbank. And he believes the yuan's presence will continue to grow in future international trade.
I (Porter) agree... The yuan will become more important as my "End of America" thesis plays out.
In fact, I believe the Chinese intend to make the yuan the world's reserve currency. As regular Digest readers know, the U.S. dollar currently holds that title.
The Chinese will attempt to do this by managing their external accounts in a way that continues to produce a surplus for the country. And it will invest heavily in building a reserve base outside of the dollar – you'll see China buying gold bullion and other strategic commodities around the world. China is already buying all over Africa to gain access to zinc, cobalt, nickel, and iron.
I expect more people will continue to lend and save in the yuan. It's good to keep an eye on the emerging market for the yuan. Companies around the world are beginning to issue debt in yuan because investors view it as a more stable currency than the euro, yen, or dollar.
For seven years, I've been writing about the ongoing financial crisis in the United States. The mortgage bubble that burst in 2008-2009 is just part of that crisis. The whole crisis will not be revealed until the 10-year U.S. Treasury yield significantly increases, and that's something that just began to happen in the last six weeks.
I still believe we are in the early stages of a financial crisis. And it will get much, much worse as people begin to abandon the dollar as the currency which they use for trade... for saving... and for investing. The result of that will be vastly higher interest rates in the United States and vastly less credit available to U.S. institutions.
– Porter Stansberry with Sean Goldsmith
What the "End of America" means for China...
The Chinese yuan is emerging as an important global currency... And Porter believes China will try to make it the world's reserve currency.
In today's Digest Premium, Porter discusses how this will happen... and the repercussions for America.
To continue reading, scroll down or click here.
It was one of the biggest disasters in hedge-fund history...
Billionaire hedge-fund manager Bill Ackman raised $2 billion to buy a single stock. And he wouldn't tell investors which stock he was buying.
He announced the plan in June 2007, months before the subprime crisis hit. We wrote in the June 7, 2007 Digest...
This is a whole new level of lunacy... William Ackman, a well-known "activist" investor who runs Pershing Square (a hedge fund), raised $2 billion simply by promising investors he'd invest in one, single, blue-chip, iconic American company.
Ackman is charging 2% up front and then 20% of whatever capital gains accrue. So... in effect... Ackman is getting $40 million for a single stock tip, plus 20% of whatever money it makes.
The stock in question turned out to be Target. And the retailer was slammed with the rest of the market during the crash.
In February 2009, news leaked that Ackman's Target fund was down 90%. He had amplified his losses by buying call options on Target.
We're not sure if the Target fund still exists today... To be fair, investors would be showing a slight profit if they stayed invested as the stock has retraced its pre-crisis highs (though most institutional investors can't stomach 90% drawdowns). Still, the annualized returns would have been meager.
Ackman, who is no stranger to brazen activity (note his public takedown of supplement company Herbalife), is trying it again...
Last week, Ackman announced he wants to raise $1 billion to buy shares of a single company. Again, he won't name the stock. But he did say the company was "simple, predictable, and free-cash-flow-generative and enjoys high barriers to entry." The company also trades at a "substantially lower multiple of earnings than its most comparable competitor," he said.
We respect Ackman. And we wish him luck with his new fund. (He claims a large investor already committed $200 million.) We also hope this acquisition raise doesn't mark another top in the market...
It looks like the gold price could be carving out a bottom...
Today is the seventh day in a row the precious metal has risen – from $1,212.70 an ounce on July 5 to around $1,284 today.
Despite the recent strength, gold miners are still struggling. And today's announcement from South African mining giant AngloGold Ashanti isn't helping...
Today, the company announced it would produce 4 million to 4.1 million ounces this year, down from expectations of 4.1 million to 4.4 million ounces. AngloGold also said it would write off between $2.2 billion and $2.6 billion in assets after revaluing its assets and reserves. Shares fell over 2.5% to an all-time low.
As Matt Badiali noted in the July 3 Growth Stock Wire, gold miners are taking massive write-offs today. When gold prices were high, the large mining companies spent a fortune buying new assets – according to Bloomberg, they spent $195 billion over the past decade.
Today, with gold prices still in the $1,200s per ounce, these new projects aren't economical.
Investment bank Citi recently released a report saying none of the gold stocks it covers are producing free cash flow at current prices.
In the July 11 Digest Premium, Porter said Citi may be underestimating the situation...
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Junior miners are even more speculative and volatile than large miners. When gold stocks fall, the juniors get crushed.
The Market Vectors Junior Gold Miners Fund (GDXJ) is down 63% from its September highs. It's down nearly 80% from its all-time high in November 2010.
When junior gold stocks enter a bull market, they soar... As we've told you many times in these pages, one of the best ways to get rich in stocks is to buy in early to a major bull market. With junior mining stocks down nearly 80% from the peak, the beginning of that bull market could happen soon...
In last Wednesday's Digest, we incorrectly attributed Steve Sjuggerud's recommendation of the KBW Regional Banking Fund to his True Wealth newsletter. Steve actually recommended the fund in True Wealth Systems. We regret the error.
New 52-week highs (as of 7/12/13): Automatic Data Processing (ADP), American Financial Group (AFG), Becton-Dickinson (BDX), ProShares Ultra Nasdaq Biotech Fund (BIB), Berkshire Hathaway (BRK), Cisco (CSCO), Enterprise Products Partners (EPD), Fission Uranium (FCU.V), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Home Federal Bancorp (HOME), iShares Insurance Fund (IAK), iShares Biotech Fund (IBB), Johnson & Johnson (JNJ), KLA-Tencor (KLAC), Ligand Pharmaceuticals (LGND), 3M (MMM), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), Cambria Shareholder Yield Fund (SYLD), Sysco (SYY), Union Pacific (UNP), and Alleghany Corp (Y).
Still all positive notes in the mailbag. Summer must be treating you well. Send your notes to feedback@stansberryresearch.com.
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"You guys are awesome! Just added to my ETP position on Dan's recommendation in the latest 12% Letter update and picked up SYLD on Steve's advice in his DailyWealth update. I can't tell you how comfortable I feel as a small investor in following your suggestions and advice. The reason for that, simply stated, is that you each have a gift for explaining your recommendations in a clear, concise manner that does not take a PhD to decipher (although I know Steve holds a PhD degree). He still manages to avoid talking over our heads quite nicely.
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Regards,
What the "End of America" means for China...
The Chinese yuan is emerging as an important global currency... And Porter believes China will try to make it the world's reserve currency.
In today's Digest Premium, Porter discusses how this will happen... and the repercussions for America.
To subscribe to Digest Premium and access today's analysis, click here.