GM is in a bad situation...

My favorite trading strategies for 2014…

In today's Digest Premium, our Editor in Chief Brian Hunt shares which trading strategies he believes will work in 2014… why he thinks we'll see a short-term correction… and what he'll buy if that correction occurs.

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

GM is in a bad situation... JPMorgan's latest multibillion-dollar payout... New highs for bank stocks... An investment that is way cheaper than the U.S. stocks and paying a 5% dividend... A 1,500% return...

 General Motors is in a bad situation...

The carmaker abandoned capitalism when it emerged from bankruptcy in 2010. The lion's share of the new GM was given to the federal government and the United Auto Workers (UAW) union. And the company did nothing to address its $26 billion pension liability. (GM's 400,000 retired workers didn't lose a dime.) Meanwhile, creditors and shareholders were wiped out.

 Following the financial crisis, automakers weren't allowed to fail. (They employ millions of people around the world, so they're politically powerful.) In a healthy correction, people pay for their mistakes. The losers disappear. The winners continue to operate and innovate. The market corrects and triumphs.

In the absence of that correction, the global auto business is plagued with overcapacity. According to different sources, some 20%-30% of global production isn't profitable.

At a car show in Geneva last year, Nissan CEO Carlos Ghosn told the audience, "All of the car manufacturers have capacity problems – all of them."

 Today, GM faces a crushing pension liability. And it faces increasing demand from other car manufacturers. But how does GM plan to compete?

As "The Chairman of General Motors" discussed in his September 27 letter (please note: Porter began writing these satirical letters in 2007 to discuss the true state of affairs of GM):

To read Porter's most recent Letter From the Chairman of General Motors, click here.

 GM's strategy of lending to nearly any potential car-buyer is short-sighted... It's pulling forward future profits while at the same time delaying massive losses from credit defaults. We've seen how extending credit to unworthy borrowers plays out in the long run.

 What do you get when the global auto market faces massive overcapacity and is selling cars to people who can't afford them? As we see from GM's December sales figures, you get lower prices...

On January 3, the company announced U.S. sales dropped 6% to 230,157 from 245,733 a year ago. GM said sales of its top-selling pickup truck, the Chevy Silverado, fell 16% to 42,593 under pressure from discounts by competitors.

 Still, we're not sure if GM's losses can eclipse those at banking giant JPMorgan...

According to the Wall Street Journal, U.S. prosecutors and regulators are expected to hit the largest U.S. bank with a $2 billion fine this week for its failure to warn them about Bernie Madoff's Ponzi scheme.

Without going into too much detail, federal law requires banks to file suspicious-activity reports when they "detect certain known or suspected violations of federal law of suspicious transactions." One of the central pieces of the case is the fact that JPMorgan filed such a document with U.K. authorities, but failed to do so in the U.S.

 JPMorgan agreed late last year to pay out almost $20 billion to end lawsuits tied to mortgage-bond sales and the 2012 "London Whale" trading fiasco. (A London-based JPMorgan trader, Bruno Iksil, lost more than $6.2 billion of the firm's capital.)

JPMorgan put $9 billion of reserves aside in third-quarter 2012 for legal issues... And it told investors another $23 billion was available to handle future settlements and lawsuits.

 Despite its massive legal bills, shares of JPMorgan are still trading at all-time highs...

 Shares of fellow banking behemoth Bank of America are also trading at multiyear highs...

Shares are up more than 190% over the past two years. They're up 34% over the last year. Just last week, thanks in part to a Citibank analyst "upgrading" Bank of America's stock from "neutral" to "buy," shares jumped 4.7%.

 For now, the trend from the Federal Reserve's quantitative easing is still up...

There's not much value left in the U.S stock market... The price-to-earnings (P/E) ratio of the S&P 500 is about 19x today. Its historical average is about 15x. At a P/E of 18 or higher, U.S. stocks in general aren't a great bargain. And while there may be upside left, chasing U.S. stocks even higher is a risky proposition.

However, you can still find value outside the U.S.

In his latest issue of True Wealth, Steve Sjuggerud told readers about what he calls "the best investment in the world right now." It's a way to profit outside the United States... and collect huge income.

This particular investment is trading at a P/E of just five. (Remember, U.S. markets are trading for 19 times earnings.) It's yielding around 5%. And it's actually trading at a discount to book value (Warren Buffett's favorite measure of value, which is total assets minus total liabilities).

In other words, this investment is dirt-cheap... And it's paying 5% interest, while everyone in the U.S. is enjoying zero-percent interest rates.

As Steve wrote in his issue:

 Steve nailed it when he said the Federal Reserve's bond-buying and low interest rate policies would drive up asset prices in the U.S. He called the phenomenon the Bernanke Asset Bubble. Now he says the bubble is moving abroad...

In his latest issue of True Wealth, Steve explains his four favorite ways you can invest outside the U.S. stock market... giving you exposure in the countries Steve says will soar the most.

Among his recommendations is an emerging-market investment that Steve says could return $14 for every $1 you risk on it. Plus... it's a low-downside/high-upside investment that our Editor in Chief, Brian Hunt, called one of the "most ridiculously good investment ideas" he saw all of last year.

If you don't already subscribe, you can access Steve's report by signing up for a $39 one-year subscription to True Wealth. And if you decide Steve's research isn't for you, we'll give you a 100% refund. Click here to learn more...

 New 52-week highs (as of 1/3/14): Activision Blizzard (ATVI), Blackstone Group (BX), Dolby Laboratories (DLB), Genel Energy (GENL.L), Corning (GLW), Kohlberg Kravis Roberts (KKR), and Virginia Gold Mines (VGQ.TO).

 Don't miss the glowing feedback about Steve Sjuggerud in today's mailbag. Send your notes to feedback@stansberryresearch.com.

 "When Steve recommended Blackstone, I bought the stock and have done extremely well.

"In addition because of the report I bought jan14 Blackstone calls strike price 18. They are about to expire and I should end up about 1500 percent on the trade I paid 1 dollar.

"It's close to 15 as we speak. My biggest gain ever thanks to the remarkable Steve." – Paid-up subscriber Max R.

 "1. I heard about MLPs from my Stansberry letters. I have one thing to say THANKS

"2. I don't pay much attention to the income because I don't use it for anything other than re-investment. However, I am up more than 60% on Targa Resources

"3. The money at this point is used for re-investment. However, as time goes on it will be used for a day to day living.

"Thanks to you all for being never less than the best." – Paid-up subscriber Jeff Spranger

Regards,

My favorite trading strategies for 2014…

Editor's note: For the next few days in Digest Premium… we'll be featuring investing insight from S&A Editor in Chief Brian Hunt.

Today, Brian shares his market outlook for 2014 and the best way to navigate what the environment expects…

 I (Brian Hunt) think what worked in 2013 is most likely to work in 2014. So what worked?

 In 2013, global central-bank easing helped markets all over the world to a big year. The U.S. stock market gained nearly 30%. Of course, there were corrections along the way. Last year, we saw corrections in February, April, June, August, and October.

And all of those corrections represented good buying opportunities... or opportunities to sell put options on blue-chip stocks, like McDonald's, Intel, or Coke.

 Today, a lot of people are calling for a correction. I agree that sentiment is a little frothy in the short term. So we'll likely see a 5%-10% correction in the next two or three months. But I would see that as a buying opportunity for most stock sectors.

 As far as what's cheap right now... I think large-cap technology stocks are a good value. You can buy them with an exchange-traded fund (ETF). Or you can buy a leveraged bet on large-cap tech through the ProShares Ultra Technology Fund (ROM). This fund is designed to return two times the daily performance (up or down) of the Dow Jones U.S. Technology Index. Other areas of value include emerging markets and blue-chip European stocks.

 I believe we could see a short-term correction. But massive central-bank easing will keep things running higher.

– Brian Hunt

My favorite trading strategies for 2014…

In today's Digest Premium, our Editor in Chief Brian Hunt shares which trading strategies he believes will work in 2014… why he thinks we'll see a short-term correction… and what he'll buy if that correction occurs.

To continue reading, scroll down or click here.

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As of 01/03/2014

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.

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