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Today, China took another step in joining the worldwide effort to inflate our economic problems away…
The Wall Street Journal reported the Chinese central bank – the People's Bank of China – just pumped another $42.14 billion into its banking system. That's China's second-largest such "stimulus" ever, and the second cash injection in as many weeks for that country.
According to the Journal, the People's Bank of China used "reverse repurchase agreements" – a kind of short-term loan – to provide the liquidity. In other words, the Chinese government forced its banks to borrow $42.14 billion. It'll also likely force them to lend it to… somebody… anybody.
If that sounds familiar, it's because the U.S. government did essentially the same thing during the 2008 financial meltdown. The Federal Reserve forced even solvent U.S. banks (like Wells Fargo) to accept hundreds of billions of dollars in government assistance.
We've written many times about how Europe and the U.S.' efforts to salve their debt problems with more debt will create a short-term jump in the value of most asset classes, including stocks (ignoring for a moment the dire long-term consequences).
It's part of what our own Steve Sjuggerud has described as the Bernanke Asset Bubble – the idea that the Federal Reserve's monetary policies (super-low interest rates and money printing) will drive up asset values.
As China's easing shows us… the phenomenon isn't limited to Europe. Steve advised his True Wealth Systems subscribers as much in their latest issue, where he wrote, "The Bernanke Asset Bubble Has Finally Gone Global."
In the October issue of his True Wealth Systems advisory, Steve says his systems are flashing a rare "super signal" in buy mode on the emerging markets – including Brazil, Russia, India, and China (the so-called "BRICs"). It's the first time this has happened in more than a year. Buying when this signal flashed in 2003 would have yielded gains of more than 1,000% by 2007. Here's what he wrote...
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Unlike U.S. stocks or gold, emerging market stocks haven't run up that much. They are still a great value. And as I'll show you in this month's issue... right now, emerging market stocks are cheap, hated, and finally in an uptrend – the exact criteria I look for in an investment. |
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It's usually hard to get all three at once... but we have them now in emerging markets. We have to take advantage of this opportunity! |
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Bernanke has promised to keep rates low through mid-2015, at least. So we could get three more years of gains out of the Bernanke Asset Bubble. And our emerging markets trade could easily deliver triple-digit gains to you during that time. Heck, quadruple-digit gains happened very recently – from 2003 to 2007. And today's setup is better than it was back then. |
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Here's a chart of it "in action." When the line is green, our "super signal" for emerging markets is in buy mode. |
In that issue, Steve recommended his favorite emerging-market super-signal play.
We launched True Wealth Systems last year after a painstaking (and expensive) effort to assemble many of Steve's trading strategies and indicators into a proprietary system. The result is a unique trading research service that uses powerful software to pinpoint big investment opportunities across 40 different market sectors – including commodities, currencies, and stocks. If you'd like to learn more about how his proprietary trading system can produce big (often triple-digit) gains, click here.
More bearish news for oil today...
As Digest readers know, Porter is bearish on oil. In addition to weakening global demand, Porter believes the huge amounts of oil coming from U.S. shale plays (like the Bakken in North Dakota and the Eagle Ford in Texas) will flood the markets. This harder-to-produce oil is now easier to extract through a technology known as hydraulic fracturing (or "fracking") and horizontal drilling.
Oil has fallen from highs of more than $105 a barrel (in February and May) to its current level around $90.
Today, the Financial Times – quoting data from the International Energy Agency (IEA) – reported Iraq's oil output will more than double by the end of this decade... And by 2030, the country will be the world's second-largest oil exporter behind Saudi Arabia.
IEA chief economist, Fatih Birol, said Iraq would account for 45% of the expected global growth in the oil supply over the current decade.
The IEA estimates Iraq's exports will more than double to 6.1 million barrels a day by 2020. "It will emerge as an energy powerhouse in 20 years' time," Birol told the Financial Times... He believes Iraq will earn $200 billion a year on average from oil exports through 2035. (Although for now, the big production increase is dependent on the Iraqi government and the autonomous Kurdish people agreeing on oil rights and revenues.)
The country is already ramping production... In September, Iraq's oil exports increased to 2.6 million barrels a day – the highest in over three decades.
So… we now have expanding production in the U.S. via shale plays, increasing alternative uses for natural gas, and more oil from the Middle East. It all spells lower oil prices.
Ken Langone, the billionaire co-founder of Home Depot, shared his bearish views of the U.S. economy during an appearance this morning on financial cable network CNBC...
Langone said whatever numbers the government is providing for unemployment "vastly underestimate" the truth. Langone pointed to an oddity in the official unemployment numbers... Once you stop looking for a job, you're technically not unemployed. However, you still don't have a job or purchasing power.
Langone currently owns a full-service truck leasing company and a textile company, among others. While the government reports unemployment has fallen from 10% to 7.8%, Langone said – based on his real-world numbers – things are "only tepid" and "have not improved in the last year." In fact, "they've gotten worse," he said.
At Home Depot, Langone said people are "buying only what they have to buy" for emergency repairs and similar situations. Langone believes "the worst hasn't happened yet."
Retirement Millionaire pick Eli Lilly screamed to a four-year high yesterday, closing at a little more than $50 a share.
Eli Lilly is one of the 12 largest pharmaceutical companies in the world, measured by market cap. It's a $58 billion giant generating billions of dollars in free cash flow year after year.
The company has a long history of producing major blockbuster drugs. It discovered and marketed insulin, which turned diabetes from a fatal disease into one sufferers can manage while leading normal lives… Eli Lilly also produced the first drugs for anemia, a once-fatal disease. It was one of the first to mass-produce penicillin. It created vancomycin in the 1950s, which remains one of the last lines of defense for hospital-based infections. The list goes on and on...
Retirement Millionaire editor Dr. David "Doc" Eifrig first recommended the stock in July 2010. At the time, he was especially drawn to the company's dividend policy. As Doc pointed out to his readers, Eli Lilly had paid shareholders a dividend for 125 years and increased it for 42 consecutive years. At the time, Eli Lilly's dividend was 5.7% and increasing at around 7.5% per year.
Doc also reminded readers that despite the weak economy back then, he expected a health care boom was on its way – thanks to the aging population and the U.S. government's new health care regime that was pushing 30 million newly insured consumers into the market. He was spot on. Readers who got into the stock at the time of the recommendation are sitting on total gains of about 54%.
New 52-week highs (as of 10/8/12): Constellation Brands (STZ), Eli Lilly (LLY), Prestige Brands Holdings (PBH), Monsanto (MON), 3M (MMM), Bladex (BLX), ExxonMobil (XOM), Two Harbors (TWO), 1st United Bancorp (FUBC).
Stock tips come from the strangest places... See today's mailbag for one of the more bizarre occurrences... And as always, send your feedback to feedback@stansberryresearch.com.
"After I retired, I decided to leave California because of its just plain stupid political and tax climate. A friend and I were having a farewell lunch at the local brew pub, and I spotted an acquaintance, who is CEO of a Nasdaq corporation headquartered in my former city, having lunch with his wife a few tables away. I dropped by their table to say hello and tell him I was leaving the state, and he told me he was having a farewell lunch with his wife because he was leaving the state for an extended period to find a new corporate HQ in Texas. When he finishes his Texas 'shopping trip,' it will mean 250 lost jobs and a vacant 120,000-sq.-ft. Class-A office building in my former city, not to mention the loss of prestige that goes with losing the world HQ of a company with market cap of $3.4 Billion." – Paid-up subscriber Kurt Hahn
Ferris comment: I hear you. I live in southern Oregon, which sees a steady flow of California tax refugees. Oregon isn't so great, either... which shows you how bad California really is!
"I am a paid up subscriber and read all your material on the regular. I am currently a morning manager at a topless club in Las Vegas. I get strange phone calls all the time due to the business I am in. Well I recently received a strange call from a gentleman by the name Chuck Williams. Normally, I would dismiss a call like this but thanks to following your work I listened for a bit.
"This person Chuck Williams claims that he has a placer gold mine in Arizona that he needs an investor for. He also stated that he has a geo report that this particular mine can produce 1oz to 4oz of gold per ton. He has also stated that he's out of time and that the 1920 acres he has is not current and could end up going to auction.
"I am not familiar with the lingo associated with mining and reading geological reports. So I thought of you and Matt. If you think this may be interesting I can forward the email this Chuck Williams sent me with his contact info. He is offering a commission to whoever gets him an investor. I figure you two would know the right people. If not I'll just chalk it up as another crazy phone call." – Paid-up subscriber Greg V
Regards,
Sean Goldsmith and Dan Ferris
New York, New York and Medford, Oregon
October 9, 2012
China joins the 'Bernanke Asset Bubble'... Steve's 'super signal'... Porter's bearish oil call... Iraq ramps up oil exports... Home Depot founder says the government is lying...