"That doesn't make any sense..."
I called Porter earlier today to discuss the massive bubble forming in the bond market. We've been warning our readers about this event for years, but it's now coming to a head. I checked a few blue-chip issuers on Bloomberg, and bond prices are officially losing touch with reality.
Investors are paying a premium to hold corporate bonds with paltry yields. Microsoft paper yielding 4.5% and maturing in 2039 trades for more than $110. ExxonMobil paper yielding 3.6% due in 2021 trades for more than $144. Johnson & Johnson paper yielding 4.35% and due in 2029 trades for $133.
As Leon Cooperman said yesterday... When investors are scrambling to lock in low yields for long periods of time, you don't want to be buying bonds. Would you loan money to anyone right now for 20 years at 4%? And would you pay a premium for the opportunity? Remember, your principal is returned at par (or $100). You eat the rest.
Today's trading is just bizarre in general... Treasurys are up, the market is flat, and gold and oil are up. Nothing makes sense. You would at least expect bonds to fall after Warren Buffett's announcement yesterday, putting him firmly in the "bond bubble" camp... At Fortune's Most Powerful Women Summit, Buffett said it's "quite clear stocks are cheaper than bonds." He added he "can't imagine" why anyone would buy bonds at current prices.
While other investors have been piling into bonds, John Paulson has loaded up on stocks. After two correct bets that made him billions (shorting housing followed by long financials), Paulson's hedge fund had a bad 2010, down around 10%. The recent stock rally has pushed his largest fund back into the black... Paulson's flagship Advantage Plus fund jumped 12% in September. He's received a lot of flak for buying gold and stocks, but we think he's playing this market right.
Digest readers are aware of Matt Badiali's unparalleled success in the November 2009 issue of Phase 1 Investor. Matt recommended three junior mining stocks – AuEx Ventures, Rainy River, and ATAC Resources... All of them were triple-digit winners. ATAC Resources returned more than 540%.
Everyone knows you buy junior mining stocks for potentially huge gains. But everyone also knows that most of these stocks bomb. You have to have great connections in the sector, geological knowledge, and boots-on-the-ground research to make money in junior miners. Even then, a lot of companies you buy will blow up.
Since last year, Matt has been searching the world for the next three junior mining successes. In the most recent Phase 1, Matt shares his discoveries. He says one of these companies, which he's actually visited, is "the next ATAC." The company recently published results for one of its mines. Matt said the results were "unbelievably good." All three of these stocks could realistically soar hundreds of percent... And we've got momentum on our side with the current bull market in precious metals. To learn more about Phase 1 and access Matt's junior mining picks, click here...
On the topic of timing resource cycles... Matt is currently working on a new product, which will focus solely on the junior mining sector. It's called the S&A Junior Resource Trader. We're currently circulating "beta picks" internally, and Alliance members will start receiving the research soon. In the service, Matt will debut a proprietary timing indicator he's developed so we'll never miss a big trend in resources. Just last year, Matt used this indicator to make 4,000% on one mining stock.
Buying these micro-cap miners at the beginning of a boom is the easiest way to get rich. Ask any multimillionaire resource investor like Doug Casey or Rick Rule... And in this service, we're swinging for the fences on every pick... We want stocks that will return hundreds of percent over a two- to three-year period. As I said above, most of these junior miners bomb. But Matt's timing indicator also ensures we'll avoid wipeouts. It's simply the best way to buy junior mining stocks that I've ever seen. We expect to launch this service to the public in mid-November.
New highs: Market Vectors Gold ETF (GDX), Sprott Resource Lending (SILU), Silver Wheaton (SLW), Cola-Cola (KO), Prestige Brands Holdings (PBH), WD-40 (WDFC), Freeport-McMoRan Copper & Gold (FCX), HMS Holdings (HMSY), iShares Silver Trust (SLV), Enterprise Products Partners (EPD), Washington REIT (WRE).
In today's mailbag, one reader explains how to handle "conflicting" analysis. Send your questions and criticism to feedback@stansberryresearch.com.
"Pray that you are well. Afraid this is a bug report. Me, being the one bugged. I've just recently subscribed to S&A Digest. What's puzzling me is that the only hot tip on this whole sheet... is linked to another newsletter that costs $1,000. So what I actually paid my money for was a promo sheet for other newsletters? Really thought I was paying FOR HOT TIPS... not links to ways to get them. Am I misunderstanding what I've gotten myself into? Or should I just request a refund? I mean, will my subscription ever yield any actual tips on which I may act? Just curious." – Paid-up subscriber Bob M.
Goldsmith comment: The Digest is free, so you may be disappointed with your refund. I did contact customer service on your behalf, however. Apparently, you just signed up for the S&A Resource Report. You can access all of those recommendations at www.stansberryresearch.com.
"Cookie cutter reports? I don't think so. There is nothing wrong when two expert minds see the same picture and draw different conclusions. Given these two perspectives I choose rather than follow blindly. I may reject both recos... not because they are wrong, but because neither fits my situation. I applaud Porter for giving his experts free reign to make the call as each one sees it." – Paid-up subscriber Great-Grandma B
Regards,
Sean Goldsmith
Baltimore, Maryland
October 6, 2010Bond prices are going crazy... Buffett doesn't like bonds... Paulson back in black... Badiali's new service... Refund my Digest...