How you can profit from low volatility in today's market...
The Chicago Board Options Exchange Volatility Index (VIX) measures the prices people are willing to pay for options that protect the value of their stock holdings. That's why we call the index the market's fear gauge: The higher the VIX, the more people will pay to insure their stocks... hence, the more scared they feel.
The VIX has been repeating a pattern over the past couple years...
First, the index reaches a very low level, like 12 or 13. Then, some headline event hits the market, and the VIX will jump to 20 or higher. That spike has marked fantastic put selling opportunities.
I (Brian Hunt) am really not inclined to do much right now. At 13 today, the VIX is likely too low for how much uncertainty is in the markets. (Our founder Porter Stansberry is calling for a 50% collapse in equity multiples.) Still, I'm not going to buy calls hoping the VIX explodes higher... That trade is too volatile for me.
But for the average trader, it's important to take notice when the VIX jumps past 20 – whether it's due to a political dog-and-pony show in D.C. or simply a market correction.
When the VIX gets above 20, that usually marks short-term bottoms in the market. So you can keep an eye on that. When the VIX spikes, it often coincides with some tradable bottoms in blue-chip stocks... Because the VIX is higher, you get a little extra premium when selling options. That's the most important thing to keep in mind.
– Brian Hunt
How you can profit from low volatility in today's market...
In today's Digest Premium, Editor in Chief Brian Hunt divulges a simple trading strategy that has worked with the VIX over the years.
To continue reading, scroll down or click here.
Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)
As of 01/10/2014
| Stock | Symbol | Buy Date | Return | Publication | Editor |
| Rite Aid 8.5% | 767754BU7 | 02/06/09 | 674.3% | True Income | Williams |
| Prestige Brands | PBH | 05/13/09 | 441.7% | Extreme Value | Ferris |
| Constellation Brands | STZ | 06/02/11 | 276.9% | Extreme Value | Ferris |
| Enterprise | EPD | 10/15/08 | 247.9% | The 12% Letter | Dyson |
| Ultra Health Care | RXL | 03/17/11 | 220.4% | True Wealth | Sjuggerud |
| GenMark Diagnostics | GNMK | 08/04/11 | 186.5% | Phase 1 | Curzio |
| Ultra Nasdaq Biotech | BIB | 12/05/12 | 183.3% | True Wealth Sys | Sjuggerud |
| Altria | MO | 11/19/08 | 182.9% | The 12% Letter | Dyson |
| Fluidigm | FLDM | 08/04/11 | 181.0% | Phase 1 | Curzio |
| Ultra Health Care | RXL | 01/04/12 | 179.8% | True Wealth Sys | Sjuggerud |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals |
| 1 | True Income | Williams |
| 2 | Extreme Value | Ferris |
| 2 | The 12% Letter | Dyson |
| 1 | True Wealth | Sjuggerud |
| 2 | Phase 1 | Curzio |
| 2 | True Wealth Sys | Sjuggerud |
Stansberry & Associates Hall of Fame
(Top 10 all-time, highest-returning closed positions across all S&A portfolios)
| Investment | Sym | Holding Period | Gain | Publication | Editor |
| Seabridge Gold | SA | 4 years, 73 days | 995% | Sjug Conf. | Sjuggerud |
| ATAC Resources | ATC | 313 days | 597% | Phase 1 | Badiali |
| JDS Uniphase | JDSU | 1 year, 266 days | 592% | SIA | Stansberry |
| Silver Wheaton | SLW | 1 year, 185 days | 345% | Resource Rpt | Badiali |
| Jinshan Gold Mines | JIN | 290 days | 339% | Resource Rpt | Badiali |
| Medis Tech | MDTL | 4 years, 110 days | 333% | Diligence | Ferris |
| ID Biomedical | IDBE | 5 years, 38 days | 331% | Diligence | Lashmet |
| Northern Dynasty | NAK | 1 year, 343 days | 322% | Resource Rpt | Badiali |
| Texas Instr. | TXN | 270 days | 301% | SIA | Stansberry |
| MS63 Saint-Gaudens | 5 years, 242 days | 273% | True Wealth | Sjuggerud |
How you can profit from low volatility in today's market...
In today's Digest Premium, Editor in Chief Brian Hunt divulges a simple trading strategy that has worked with the VIX over the years.
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
A ridiculously expensive stock... Why Tilson is short... Pop stars and technology firms... Curzio's thoughts from the Consumer Electronics Show... Things are improving in Spain... A company with a 6.8% dividend...
In last Friday's Digest, Porter reminded readers why he thinks the market could fall 50% (in terms of earnings multiples).
As he has said many times... Porter believes the massive amount of money the Federal Reserve has printed since the financial crisis will cause interest rates to rise. And rising interest rates push the earnings multiple of stocks down. (We also covered this idea in detail in the January 9 Digest.)
Porter also highlighted the froth he sees in today's market by focusing on Internet retailing giant Amazon. He wrote:
|
Today, we'd like to bring your attention to another company sporting an absurd valuation. Unlike Amazon, which has risen to become the dominant Internet retailer, this other company hasn't proven its chops. It's still in its infancy.
The company is 3D Systems (DDD), a 3-D printing company. We admit, 3-D printing offers huge growth potential. (Bulls argue we could see a 3-D printer in every home, but we doubt it.) Today, DDD sports a $9.7 billion market capitalization. It trades for more than 21 times sales and 74 times forward earnings.
Consider this... In Porter's monthly "SIA Black List," which he publishes in Stansberry's Investment Advisory, he lists companies with a $10 billion market cap trading at more than 10 times sales. The more companies that appear on the Black List, the frothier the market, he argues.
DDD is trading at more than two times Porter's gauge for an absurdly expensive, large-cap company.
Take a look at this two-and-a-half-year chart from DDD:
Hedge-fund manager Whitney Tilson – whose firm, Kase Capital, is short DDD – recently returned from the Consumer Electronics Show (CES) in Las Vegas. He sent this update on DDD to his private e-mail list:
|
Tilson also pointed out that DDD announced it appointed will.i.am, a member of the music group the Black Eyed Peas, as its chief creative officer. Tilson said it reminded him of when Blackberry named musician Alicia Keys its global creative director in January 2013.
Since the announcement, Blackberry's stock has fallen from $16.60 to less than $8.40 a share today. (Blackberry ended its deal with Keys this month.)
Even the bulls say DDD is getting long in the tooth... Analysts from investment banking firms Needham & Co. and FBR Capital Markets placed price targets of $100 and $98 a share. (DDD is currently $94.74 per share.)
Small Stock Specialist and Phase 1 Investor editor Frank Curzio also attended the CES. Frank was particularly enthusiastic about a new technology in an already widely used consumer electronic. From today's Growth Stock Wire:
|
You can read Frank's full essay here.
The "Draghi Asset Bubble" – the rise in European asset prices thanks to European Central Bank chief Mario Draghi's adoption of the monetary policies established by Federal Reserve Chairman Ben Bernanke – is in full swing...
Shares of the iShares MSCI Spain Fund (EWP), which holds the stocks of many of Spain's largest companies, hit a two-year high today.
Also, at its first government bond auction of the year, Spain last week sold nearly $7.2 billion in five-year debt – more than its target. The maximum yield on that debt was 2.411% – the lowest yield Spain achieved since adopting the euro currency. The previous low was 2.644%.
The auction came the same week as an oversubscribed bond sale from Ireland. On the same day, Portugal and Spanish bank Bankia also tapped the debt markets.
Sentiment in Europe is improving...
Despite the rising prices and bond-market confidence, European blue-chip stocks are still cheap. Steve Sjuggerud, who originally recommended European blue chips in the November 2013 issue of True Wealth, updated readers in the most recent S&A 16 (a model portfolio we send out quarterly for our lifetime S&A Alliance members):
|
I asked Brett Aitken, co-editor of Stansberry International and a Barcelona resident, for his thoughts on Spain's recent performance. Brett and Porter dedicated the latest issue of Stansberry International to Spain.
He said the rising stock prices and lower bond yields are "clearly very promising for Spain."
Cheap credit in the early 2000s led Spain to its own financial crisis in 2008-2009. But lately, Spanish economic sentiment is improving. Exports are rising. And yields on 10-year debt have fallen from 5.5% to a little more than 4% in the past year. In addition, Spain is starting to attract major investors. From the issue:
|
Brett recently traveled to New Zealand, Australia, and Singapore. He told me the folks he spoke with in those places are still skeptical about investing in Spain, which he takes as a bullish sign.
|
Brett recommended a Spanish energy company he thinks could rise by 60% over the next 12-18 months... and still represent a fair value. This company has a 155-year history. It's growing, and it's extremely well-managed... And it just secured another 544 million-euro contract to add to its 2 billion-euro backlog. Plus, it pays a 6.8% annual dividend (higher than almost anything you can find in the states).
Right now, Stansberry International is only available to our lifetime subscribers to Stansberry's Investment Advisory and S&A Alliance members. But we're currently offering Digest readers 30 days to test Stansberry International (including access to all back issues). In fact, we're giving Digest readers 30 days to test more than $2,000 worth of our research as part of our first-ever "focus group." You'll get access to research from Porter, Dr. David "Doc" Eifrig, Steve Sjuggerud, Frank Curzio, Matt Badiali, and Dan Ferris (whose research alone costs $1,000 a year).
But you'll only pay $49 to sign up. You can learn the details here.
We're also hosting a special live event with Porter, Steve Sjuggerud, and Doc Eifrig this Thursday at 8 p.m. Eastern time.
Each analyst will share his top prediction for 2014... Porter will debut a never-before-disclosed idea he calls "the turning point." Also on the call, Doc will tell readers about a secret way to profit from Obamacare. Finally, Steve is sharing what he thinks the No. 1 bull market will be in 2014.
If you're wondering how to position your portfolio going into the new year, this call is an absolute must. You can sign up for the call – which is completely free – by clicking here...
New 52-week highs (as of 1/10/14): Abbott Laboratories (ABT), Advent Claymore Convertible Securities and Income Fund (AVK), Becton-Dickinson (BDX), ProShares Ultra Nasdaq Biotechnology Fund (BIB), BP (BP), Blackstone Group (BX), CF Industries (CF), Dollar General (DG), Dolby Laboratories (DLB), PowerShares Chinese Yuan Dim Sum Bond Fund (DSUM), Fluidigm (FLDM), Corning (GLW), iShares Nasdaq Biotechnology Fund (IBB), SPDR International Health Care Fund (IRY), Kohlberg Kravis Roberts (KKR), Ligand Pharmaceuticals (LGND), Marvell Technology (MRVL), National Fuel Gas Co. (NFG), ONEOK (OKE), Penn Virginia (PVA), Sturm, Ruger (RGR), RPM International (RPM), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), Constellation Brands (STZ), Union Pacific (UNP), United Technologies (UTX), and Virginia Mines (VGQ.TO).
One subscriber writes in with a timely question. Send your messages to feedback@stansberryresearch.com.
"I am a recent subscriber, and already followed many of your investment hints, being generally pleased with the results, and taking responsibility for the occasional, temporary dips. Your analysis makes sense and I believe it can be applied to all kind of investments.
"As your customers are spread all over the world, many of them might like to consider also investments made in euro currency, through European banks and brokers, to take some distance from the vagaries of the Fed and the dangers of the dollar.
"As you follow the markets in Russia, China and in developing countries, you are certainly already keeping a tab also on the European market.
"Personally I would much appreciate if you decided to publish for your international customers a short recommended portfolio of euro stocks responding to your usual strict criteria of seriousness and economic goodwill.
"I hope to be able to read in one of your future comments in your letters, that you adopt this initiative and that you will publish from time to time a few recommendations covering this wish.
This would help to avoid the trap of hedge funds collecting a high proportion of the gains accrued by customers, to the benefit of helpers, not of the investors. (Stansberry's Investment Advisory, January 2014)." – Paid-up subscriber Elia Levi
Goldsmith comment: Hopefully today's Digest addressed your concerns. In Stansberry International, Brett and Porter will focus exclusively on foreign markets. Again, you can learn more about accessing Stansberry International here...
Regards,
