Germany's reality check moment... 'Slime' calls it... Steve: 'Biggest rally ever'... The Utilitization of American Industry... Jim Rogers: Crisis inevitable now...
Germany's attempts to become both green and nuclear-free have collided with reality...
German chancellor Angela Merkel says Germany will have to build another 20 gigawatts of electricity generation capacity powered by fossil fuels... now that it has sworn off nuclear power in the wake of the Japanese earthquake. Germany must build the fossil fuel plants because it can't fill the power void with so-called "renewable" sources of energy like solar and wind.
Why Germany is worried about earthquakes is a mystery... Japan is in the Pacific "Ring of Fire," one of the most earthquake-prone regions of the world. Germany – literally on the other side of the globe – is a geologically stable place. No tsunami is going to hit Germany any time soon. Regardless, the country is worried, and the government says it'll eventually switch off all 17 of its nuclear plants.
Problem is, switching off just the first seven will add 25 million metric tons of carbon-dioxide emissions. By exiting nuclear, Germany will become less green and create a new source of natural gas and coal demand.
"A clear sign to head for the exits [and sell gold] is when you see a golden bull tearing up the NYSE on the cover of Slime or Newspeak," our friend Doug Casey likes to say, referring to mainstream magazines Time and Newsweek. Doug is talking about the "magazine cover indicator." That's when an idea has become so popular, it can be used to sell more magazines. When a mainstream publication trumpets an idea, the trend is likely to correct (despite underlying fundamentals).
We saw this happen on Tuesday, with USA Today's story about our nation's $62 trillion in debt. And today, Slime (aka Time) ran the cover "What Recovery? The Five Myths About the Economy."
On cue, the S&P 500 reversed its seven-day slide. And the dollar gained against the euro and pound. We're still bearish on the dollar and U.S. economy. Our debt problem is insurmountable. But with Time and USA Today bearish, contrarians should be cautious in the near term.
Steve Sjuggerud called for a bull market in stocks before either publication dedicated their front page to the bear case. At his presentation at our Editors Conference in Nemacolin Woodlands Resort, he told the crowd, "We are about to enter the greatest bull market in history."
This latest bull market is courtesy of Ben Bernanke and the magic printing press. Steve argued stocks are the cheapest they've been in 20 years. And thanks to the huge amounts of money flooding the system, "assets could soar in price far higher than you can imagine, for longer than you can imagine."
Steve believes the end game is disaster. Again, the U.S. cannot simply continue adding to the massive debt load. However, in the meantime, he believes when U.S. interest rates rise, stocks will rise. He presented a 20-year chart showing the S&P 500 has historically risen in tandem with rising interest rates.
To learn more about Steve's newsletter True Wealth and access the latest issue, titled "The Best Time to Buy in a Generation," click here. In this month's edition, Steve tells readers several of his favorite stocks to buy to take advantage of the bull market.
Steve was just about the only bull in the room. Most folks were bearish. I'm somewhere in the middle. I can't pretend to know where stocks will head. I believe they should probably fall because so many of them right now seem overvalued to me.
When it came my turn to speak at the conference Monday morning, I told the audience we were seeing the next step in the "Utilitization of American Industry."
Think about so-called public utility companies. They get a monopoly in exchange for accepting limits on their returns. The gas and electric companies are the classic example. The tobacco industry is another example I first wrote about in the March 2008 Extreme Value.
The government appeared to be penalizing cigarette makers, but in fact has cemented the superior competitive position of its largest incumbents. Marlboro is three times larger relative to its competition inside the U.S. than elsewhere. More regulation always means somebody in that regulated industry just got a free gift from the government.
In the next issue of Extreme Value, I'll tell you all about the next industry that's about to become a utility: banking. The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law July 21, 2010. It's going to utilitize the banking industry, putting smaller competitors out of business and cementing the competitive position of banks favored by the government.
The government is none too shy about turning banks into utilities because most of the "sheeple" in the U.S. believe the government can really take care of them. So they don't realize they're being screwed. The American Banking Association says the law will put 1,000 banks out of business in the next 10 years. Does that sound like a more competitive landscape to you? And if it's not more competitive, how on Earth could it ever be good for the consumer?
The 2,300-page Dodd-Frank law contains clear language that indicates the government will play an "enhanced role in the supervision of risk management standards for systemically important financial market utilities; strengthening the liquidity of systemically important financial market utilities."
The government will spend more time in bed with banks. Can this possibly turn out well for anyone? Actually… yes, if you know which banks are favored and destined to make more money.
In the July issue, I'll show you how to spot which banks the government favors. If you want to know two of the banks that have already been handpicked by the regulators to become winners in the utilitization of American banking, the only place you're going to read about it is Extreme Value.
I've never heard anyone talk about how the government is taking over American industry as much as we have here at Stansberry & Associates. And within S&A, nobody has covered the utilitization of American industry as much as I have. If you believe in the End of America scenario as Porter has spelled it out to millions of Americans already, you must also believe the utilitization of American industry is at hand. To get access to Extreme Value, click here.
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New 52-week highs (as of 6/9/11): Forest Laboratories (FRX), Annaly Capital Management (NLY).
We'd love to hear from anyone who shares Steve's contrarian bullish viewpoint right now. Write us at feedback@stansberryresearch.com.
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"While I agree the steak and setting at the Prime Rib is terrific, the most underrated steak (filet) in Baltimore can be found at Tio Pepe's. The other chains are great (Morton's, Ruth Chris) but for a unique steak experience, try Tios!!!" – Paid-up subscriber John
"I find your info very intriguing and amusing. What's amazing is that you point out all the problems in the USA; but, you do NOT have any solutions. Your end of America presentation scared the crap out of me more than any terrorist thug could.
"So what currency, specifically, is going to replace the $US as the world's reserve currency? Or are we all, who have only 6, 5, 4 figure investments going to hell in a handbag? You know when Bush took over in 2001, the USA owed about $3.5 Trillion. When Bush left in 2009, the USA owed about $10.7 Trillion. Now Obama is up to $14.3 Trillion.
"I suppose our political leaders have failed us to a certain extent. But I believe that the majority of Americans have basically given up intellectually speaking on the greatest and largest political experiment the world has EVER known.
"And you sir (although you're probably brilliant financially) and your friends sound like greedy, small-minded capitalists who cannot understand why everybody isn't an entrepreneur.
"Why do we have SOC.SEC & Medicare? You probably think they should be privatized. In the past 50 years Congress & the Presidents have taken the money out of these funds because they could get away with it and the public & the media did nothing. The media's not liberal or conservative; they're just intellectually brain-dead like the public they cater to serve the advertisers. Our capitalist democracy is a great system as long as there are responsible leaders & stewards. Now we have millions of agendas with NO sense of ethics or doing the RIGHT THING.
"Stick all this in your pipe & smoke it as you bash America because you don't like the fact that we have a Black man as our President!!
"We need to bring back the Glass/Steagle Act. In 1960, 50% of all federal tax receipts came from our very successful CORPORATIONS; now they pay about 21-22%. If you really want our country to COME BACK, you better advocate a new radical CAPITALISM. ENERGY & TECHNOLOGY are the keys to it. Again, where are the courageous Leaders? The Public needs to be properly informed and then they need to participate. And then we can create more millionaires... sort of like what Bill Gates did with many of his employees... So then you could sell more righteous financial info to them, Mr. Stansberry.
"By the way, I like good solid DIVIDEND Stocks paying 5% or more of their share price. I hate it when GOLD, SILVER, OIL go up in price. I know this is going to happen, but it's bad news for U.S." – Paid-up subscriber Peter Waldman
Ferris comment: I bet it's doubly hard to prosper and be happy by ignoring reality, contrary to conventional wisdom about "blissful ignorance." I wish you luck. Unfortunately, it seems like you'll need it.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and New York
June 9, 2011