Gold reaches an all-time high... Steve's favorite virtual bank... One reader gets $1,400 of silver from his bank...
Most people didn't notice it... but gold reached its all-time high this month. You just had to be European to feel the impact.
Regular Stansberry & Associates readers know we like to say, "There are always two sides to a price." On the one side there is the product, service, or asset. On the other, you have the "measuring unit" being used – like dollars, yen, euros, etc. Knowing this lets you see things others don't. And it will lead you to start answering questions like, "Did oil rise today?" with "Rise relative to what?"
As you can see from the chart below, when you look at a ratio of the gold price versus euros... gold is rising. In fact, it's rising so much that it's back to its all-time high (reached in 2011)... when priced in euros. The precious metal is at an all-time high in the eyes of a citizen who uses the currency of the world's largest economic zone (the European Union).
The price action comes at the same time as European Central Bank Chairman Mario Draghi's proposal to engage in unlimited bond purchases in the European Union. Mario knows that firing up the printing press is Europe's only way out of its massive debts and unfunded obligations. Gold, the only currency that cannot be debased by men like Draghi, continues to rise against "debaseable" paper currencies. Stay long gold.
Steve Sjuggerud's favorite "virtual bank" just hit a new high...
Longtime Digest readers know several S&A editors are bullish on U.S. banks. Their reasoning is simple. Banks make money by borrowing money at a relatively low rate and lending it out at a higher interest rate. The higher the difference between these two interest rates – known as the "spread" – the more money the banks make.
Interest rates near zero percent have been the order of the day for years... and "Banker-in-Chief" Ben Bernanke, the Federal Reserve chairman, has pledged to keep them there for years to come. This has been a major boon to the banks' bottom lines.
Instead of "borrowing" money by paying interest on deposits like conventional banks do... "virtual banks" borrow money at low interest rates and buy up government-backed mortgages. Then, they sit back and collect their payments. And if the mortgage goes into default, the government picks up the tab. It's nearly risk-free investing.
And 14 months ago... Steve introduced his True Wealth subscribers to a new way to take advantage of the opportunity virtual banks represent. As he described it...
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Over the years, we've taken advantage of one particular government-caused distortion more than any other... by buying what I call "virtual banks." |
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Right now, thanks to a government-caused distortion, the interest rate spread is artificially wide. Ben Bernanke has cut short-term interest rates to the lowest levels in history. So banks can take in money at an artificially low interest rate and lend it out at a much higher one. Bernanke has cut short-term rates close to zero. Meanwhile, mortgage rates are close to 5%. |
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In the past, Annaly and Hatteras have been our favorite ways to play it when the interest rate spread gets artificially wide. |
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But there's a new company doing this type of thing... And it has done better than both Annaly and Hatteras. So what is this new company? It's... Two Harbors Investment. |
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Two Harbors pays a higher dividend: 15% versus about 14% for Annaly and Hatteras. It also uses less leverage than Annaly and Hatteras use. And it appears to be dramatically less risky in the face of rising interest rates. If interest rates rise, Annaly and Hatteras could get hurt, but thanks to some sophisticated hedging techniques, Two Harbors won't move much. |
Today, Two Harbors hit an all-time high of $11.92 per share. Subscribers who took Steve's advice are up roughly 30% in total returns (including dividends).
Two Harbors isn't the only housing-related winner Steve has shared with readers...
The homebuilding sector is enjoying one of the biggest rallies in its history. Today, major homebuilders D.R. Horton, Toll Brothers, Ryland, and Lennar all traded at fresh 52-week highs. More than a year ago, Steve wrote one of his most emphatic True Wealth issues ever. He pleaded with readers to buy real estate and real estate-related stocks, like homebuilders. Steve recommended buying the iShares Dow Jones U.S. Home Construction Fund (ITB) – an exchange-traded fund that holds many big homebuilder stocks as well as some housing-related companies like Home Depot.
What has followed is a remarkable demonstration of how you can quickly make big money when things go from "bad to less bad"...
Longtime Stansberry & Associates readers are familiar with Steve's "bad to less bad" theory. It's one of the basic tenets of his True Wealth newsletter. It's the foundation of an incredible system of low-risk, high-reward trading.
Making gains when assets go from "bad to less bad" amounts to finding assets that have been hammered for some reason... be it a natural disaster, a broad market sell off, or a long industry downturn... and buying them after the market has bottomed. You can make tremendous returns when a bit of normalcy returns to the market – when conditions get "less bad" for the industry.
When an asset suffers a major decline... or has suffered through an extended bear market... people say things are "bad" for that asset. Nobody will want to buy it.
Mention the asset to someone at a cocktail party, and they politely walk away. You'd never see it on a mainstream magazine cover because the publishers know having that particular asset on their cover would repulse potential readers.
It's around this time – when most folks can't stand the thought of buying that asset – that it can start to trade for such cheap prices. All it takes for your investment to rise 50%... 100%... or 200%... is for things to get "less bad."
As True Wealth subscribers have realized over the years, "bad to less bad" trading not only offers tremendous upside, it's also a safe way to trade. When extreme pessimism surrounds an asset, there is little downside risk to your trade. Everyone who wanted to sell has already sold. The selling pressure is exhausted. The risk gets "wrung out" of the trade.
That's what has happened in homebuilders over the past year or so. Homebuilders were so sold off and depressed after the real estate crash – and the subsequent "dead zone" period after the crash – that just a bit of improvement has allowed these stocks to skyrocket.
After Steve's March 2011 recommendation (which came with a wide, 50% trailing stop), homebuilders continued to decline... But then, they staged a huge rebound. Many homebuilders have doubled and tripled in price off their 2011 lows. Since Steve's readers got in just before the ultimate bottom, they are up 44% in about 18 months, a big win.
You can see the win below, in the two-year chart of the homebuilder fund (ITB):
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Steve founded his True Wealth advisory on the belief that you don't have to take big investment risks to enjoy big returns... Seeking out "bad to less bad" opportunities is a key part of that. And for more than a decade, he's turned unconventional (and often unpopular) investing ideas into big winners for his subscribers. It's made Steve one of our industry's most trusted and popular writers. To learn more about his True Wealth service, click here...
New 52-week highs (as of 9/11/12): Berkshire Hathaway (BRK-A), Guggenheim BulletShares 2015 High Yield Corporate Bond Fund (BSJF), Cambria Global Tactical Fund (GTAA), iShares iBoxx High Yield Corporate Bond Fund (HYG), SPDR S&P International Health Care Fund (IRY), SPDR Barclays Capital High Yield Bond Fund (JNK), V.F. Corp (VFC), Abbott Laboratories (ABT), Monsanto (MON), Medtronic (MDT), BLADEX (BLX), Chevron (CVX), Two Harbors (TWO), and GenMark Diagnostics (GNMK).
In today's mailbag... Subscribers describe their success using Doc Eifrig and Dan Ferris' recommendations. We're always gratified to hear about people using our ideas to build their wealth. Send your comments to feedback@stansberryresearch.com.
"I've begun my second year since I first started investing in stocks. I struggled at first, not knowing what I was doing (I thought I knew...). Of course, it didn't help any that I was invested heavily in risky stocks either... duh.
"Truly, since I started taking Dan's advice and investing in WDDGs (a much safer and wiser selection of stocks), I'm up more than 12% from just earlier this year (since February 2012).
"I'm extremely happy with Dan and the Stansberry group's recommendations. Since February, I've made nearly 13% in Coca Cola (including 1.5% in divs); 21% since March 2012 in Wal-Mart; nearly 15% in Cisco since May – I hung onto that one keeping in mind the advice from S&A – thought it might crash several times, as well as JNJ, but now up 3.48% since April; up nearly 17% in Target since May; and hung onto Southern copper (never did hit that SL) and am FINALLY up now 1.5%.
"Thanks, Dan and the Stansberry group! You helped save my retirement!!! Looking forward to making much more with all of your great advice!" – Paid-up subscriber Linda Faircloth
"I recently ignored the naysayers and bought a one-year subscription to Doc Eifrig's Retirement Millionaire newsletter.
"I then proceeded to use the method he describes to legally extract almost $1400 in silver from my local bank in less than 5 days. And the bank thanked me!" – Paid-up subscriber R.S.
Goldsmith comment: We're glad you took Doc's advice... Lots of folks thought it was too good to be true, when we told them how you can walk into your bank and walk out with physical silver. But many of our readers are taking advantage of this idea to make quick, easy money. To learn more about how you can get real, hold-in-your-hand silver from your local bank, click here...
Regards,
Sean Goldsmith, Brian Hunt, and Josh Reeves
New York, New York, and Delray Beach, Florida
September 12, 2012