Why I'm not willing to short the euro today...
In yesterday's Digest Premium, I (Porter) discussed how Europe's fiscal problems are different – and worse – than the ones here in the U.S.
Like the U.S., the European Central Bank (ECB) has been printing tons of money to bail out the eurozone members. And recently, the ECB – along with the European Commission and financial representatives from its member countries – announced it would form a group that would have the power to shut down troubled banks and make other "centralized" decisions about the eurozone economy... The group would also have a 70 billion euro war chest for bailouts.
According to the European Union's constitution, the ECB's actions to bail out the eurozone are already illegal. And Germany is in the middle of a court case that could force it to leave the euro due to the ECB's actions.
But all of these actions are secondary because the euro has already ceased to exist. Most people will disagree, but the idea was that a euro in any country in the eurozone would be treated exactly the same... So there would be no difference in value or in legal rights or difference in the freedom to move that capital in any of the European Union countries.
If you look today, there are capital controls. For example, a euro in Cypress is not the same thing as a euro in Greece or a euro in Spain or in Italy. And a euro in Germany is stronger than any other country – because Germany is the most fiscally sound.
That proves the euro is fundamentally broken. And it's impossible to put that egg back together, given the radical level of over-indebtedness and the ongoing deficits in some of the European peripheral nations.
Despite all of that, I wouldn't short the euro today. (I wouldn't go long the euro, either.) I don't feel comfortable trading in the paper currency markets because they're all manipulated. (The lone exception is the Japanese yen, which I'm very bearish on.)
It's like trying to guess who will win a professional wrestling match. The whole thing is rigged, so how can you apply analytical skills to understanding the value of these paper receipts? The whole thing is a charade.
But like I said... the one currency I'm very comfortable shorting is the yen, because Japan's financial problems are far worse than the rest of the world – even Europe. And there's no amount of manipulation that would ever make the yen as valuable as the euro or the U.S. dollar.
– Porter Stansberry with Sean Goldsmith
Why I'm not willing to short the euro today...
It's clear the eurozone – and its currency – is in trouble. But Porter isn't willing to short the euro just yet.
In today's Digest Premium, he shares the only paper currency he's willing to short today...
To continue reading, scroll down or click here.
Why I'm not willing to short the euro today...
It's clear the eurozone – and its currency – is in trouble. But Porter isn't willing to short the euro just yet.
In today's Digest Premium, he shares the only paper currency he's willing to short today...
To subscribe to Digest Premium and access today's analysis, click here.
Another day, another new all-time high for stocks...
Soaring stock prices are commonplace these days, thanks to Federal Reserve Chairman Ben Bernanke. And while we can't keep this up forever, we're enjoying the ride right now.
If you missed it, markets are reacting to Bernanke's comments yesterday that "a highly accommodative monetary policy will remain appropriate for the foreseeable future."
The S&P 500 hit an intraday high of 1,693.12 – up nearly 5% this month. And the Dow reached 15,589.40 – up 4% this month.
As we've noted countless times, this boom will end badly. We're in unprecedented territory. Countries around the world are saddled with enormous levels of debt... And they're hell-bent on inflating their way out by printing more and more money. Eventually, this boom will turn to bust. But today, the trend is up. And the question remains... with the market at all-time highs, should you buy?
Our own Steve Sjuggerud says yes. He believes the market is still cheap, despite its recent surge higher. As he wrote in the July 11 DailyWealth...
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And as we wrote that day in the Digest...
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Even with the market rising, you need to be prudent. Lighten up on your riskier positions. Mind your trailing stops. And as Porter always says, it's a good idea to have a few short-sale positions in your portfolio.
Billionaire Jim Chanos is one of the best short-sellers in the world. He's renowned for calling Enron's fall. And he's the founder of the short-selling hedge fund, Kynikos Associates.
Yesterday, Chanos named one of his new favorite short candidates: global construction equipment giant Caterpillar.
Caterpillar is one of the stocks we use to take the global economy's "temperature." When there's construction and mining going on in the world, Caterpillar profits. The company has thrived over the past several years from the construction boom and voracious commodities appetite in China.
But Chanos, a long-time China bear, says a slowdown in China will crush Caterpillar shares.
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Chanos says capital spending on mining equipment is far above the historical average due in part to "the Chinese real estate bubble." He says a slowdown in China and the end of "the global commodities supercycle" will push spending down toward historical averages.
In other words, a return to historical norms will crush Caterpillar.
News of a slowdown at Caterpillar isn't new... In April, the company announced a 45% drop in first-quarter earnings and cut its full-year guidance, citing a slowing mining business. It also said it expected sales of its branded mining equipment to fall in half this year.
Chanos, a forensic accounting expert, also said there are some "accounting issues" at the firm.
He appeared on CNBC yesterday morning to discuss his short-China thesis in detail. You can watch the interview here.
S&A Resource Report editor Matt Badiali recently sent us an e-mail updating the oil giant's latest move to acquire shale assets, known as Vaca Muerta, in Argentina...
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As part of the deal, Chevron can market 20% of the oil produced in Vaca Muerta outside the country, after five years of operating. As the below quote from industry publication Petroleum Economist shows, operating and selling oil in Argentina is rough...
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New 52-week highs (as of 7/17/13): Fidelity Select Medical Equipment & Systems Fund (FSMEX), 1st United Bancorp (FUBC), Integrated Device Technologies (IDTI), and Ligand Pharmaceuticals (LGND).
The positive feedback about the powers of compounding with high-quality, dividend-paying companies keeps pouring in. We had plenty of good feedback yesterday. We're telling you, it works... Send your thoughts to feedback@stansberryresearch.com.
"I began investing in the [World Dominating Dividend Growers] with one of my IRAs in mid-2011. I placed approximately $140,000 into this IRA brokerage account. Today it is up to $185,000. That's 32% higher in two years. Sure, the general market frenzy has helped, but there is one thing I really like when prices do decline. Reinvesting dividends which are increasing over time into a declining stock price actually acquires more shares. When prices do increase, you enjoy this additional compounding effect from the prior market decline(s).
"I have a couple of other IRA brokerage accounts now with which I am beginning to use this strategy as well as selling covered calls, and so far, my initial response is that this will prove highly beneficial in the long run.
"I am quite happy with my results, and quite happy with your objective analysis and commentary. Even if I don't agree with something you might say in your commentaries, I appreciate the commentaries all the same. In addition, I enjoy reading about the personal excursions and such, even if they are beyond my means. I have many clients that have been successful and I love that they have created something others wish to purchase with their sweat and intelligence – and more that they have reaped the rewards for having done so. I appreciate that for you as well. After all, isn't THAT what the American Ideal is?" – Paid-up subscriber Jeff
Regards,