I'm bearish, they're bullish...

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(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

The biggest trends in the market today…

I (Brian Hunt) believe the dominant trend in the markets today is the rise of asset prices due to the easy monetary policies of global central banks.

But there are several other big ideas I think are very interesting. One is China's massive and opaque gold-accumulation program. It will likely announce how much gold it has accumulated sometime this year.

Most industry experts know China has accumulated an enormous amount of gold since it last announced its gold holdings in 2009. But we don't know how much gold. It's part of an interesting trend of gold moving from developed markets like the U.S. to emerging markets like China.

China's gold-buying will eventually put a floor under the gold price… Whether that's $1,000, $1,100, or $1,200 an ounce, I don't know. I think a case could be made that gold right now, at about $1,200, has formed a bottom.

Another interesting trend is the massive increase in North American hydrocarbon production in North America. In just five to 10 years, the U.S. went from worrying about running out of oil and gas to swimming in the stuff. Now we're thinking about exporting it. In today's age, where cheap energy equals geopolitical power, this is a major advantage...

Europe, Asia, and Latin America see North America enjoying this boom... And they desperately want to enjoy similar booms. But they don't have the technical expertise or knowhow to tap their shale deposits like North America does. It's going to be interesting to see North American oil and gas companies do their specialized work in places like China and India.

We probably have a 10- to 15-year head start on them in terms of technology and knowhow. So it will be interesting to see these foreign nations pay up for the hydraulic fracturing and horizontal drilling expertise North American firms have developed. It's a huge, long-term trend that will produce a lot of good trading and investment opportunities. Other countries desperately want to tap their shale deposits... and enjoy cheap domestic energy. They'll pay North American firms good money to help make that happen.

– Brian Hunt

The biggest trends in the market today…

The dominant trend today is undoubtedly central bank monetary easing and the resulting inflation of asset prices... But in Digest Premium today, Editor in Chief Brian Hunt discusses several other major trends that could shape the investment landscape in the future…

To continue reading, scroll down or click here.

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 01/09/2014

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.

The biggest trends in the market today…

The dominant trend today is undoubtedly central bank monetary easing and the resulting inflation of asset prices... But in Digest Premium today, Editor in Chief Brian Hunt discusses several other major trends that could shape the investment landscape in the future…

To subscribe to Digest Premium, click here.

I'm bearish, they're bullish... A secret war you've never heard about... A word about historical comparisons... Think Amazon is a good buy?...

In today's Friday Digest, I (Porter) have a short message that I hope you'll remember...

A lot of the commentators on the scene today – including several of the analysts we employ here at Stansberry & Associates Investment Research – are bullish on the stock market. As you may recall, I am not.

I believe that securities prices at some point in the near future will suffer a serious correction. Prices will fall (in terms of earnings multiples) by nearly 50%.

For many readers, this remarkable divergence of opinion has caused a lot of grief. In my mind, it shouldn't: Sooner or later, intelligent people, working independently, will always disagree about the likely course of future events. The only way all of us at Stansberry could possibly agree all the time would be if some of us were lying.

In any case... most of the bullish case for the stock market today rests on the notion that stock prices are related to bond yields. And since bond yields are so extremely low (even though they may rise a bit), stock prices should go much higher.

Furthermore, since the Fed controls interest rates, and it has promised to keep them from shooting higher, stocks will surely continue to climb. My old friend Steve Sjuggerud labels this broad set of facts the "Bernanke Asset Bubble."

I've agreed with the basic mechanics of this strategy since late 2011, when the European Central Bank decided to join Federal Reserve Chairman Ben Bernanke on the money-printing bandwagon. This massive monetary stimulus helped us achieve fantastic results from the stocks we recommended in my newsletter in 2012 – average returns of more than 22%. But then... in my view... things simply went way too far. I believe three factors will come together to destroy the current bull market. They are easy to grasp...

First and foremost, the Fed can't make interest rates go any lower – functionally. As I explained in the May 10 Digest, the interest rates on corporate bonds had declined so low, they were unlikely to allow investors to even cover the costs of likely future defaults. You could not realistically expect corporate bond yields to go lower – no matter what the central bank did.

When yields can't go any lower, they are likely to go higher – sooner or later. Investors buying bonds at those low yields were going to lose a lot of money. I didn't mince words…

The timing of this warning was incredibly accurate. As you can see in the following chart… within days, the corporate high-yield market – as measured by the

iShares iBoxx High Yield Corporate Bond Fund (HYG) – fell sharply. And longer-maturity U.S. sovereign bonds – represented by iShares 20+ Year Treasury Bond (TLT) – fell even more. (Remember, when bond prices dive, yields rise.)

I believe these trends will continue... Let me show you why...

Most of the people in the markets today continue to believe that everything happening in the U.S. and around the world is fairly normal. Stocks go up. Stocks go down. Some places are doing well. Some are doing poorly.

It's part of normal human psychology to ignore massive changes in reality. It's called the "normalcy bias." It's the tendency we all have to believe that everything is going to be all right. It explains why so many Jews didn't flee the Nazis when they had a chance. It explains why so many people drowned in New Orleans after Hurricane Katrina. It's not that there weren't plenty of warnings. It's that we human beings have a hard time believing that tomorrow won't be pretty much like today. After all, that's what our experience teaches us 99.9% of the time.

And so... almost every economist or stock analyst you read is simply going to compare today's interest rates with interest rates back in the 1960s (when the dollar was still backed by gold, and the U.S. was still a net foreign creditor). He's going to draw comparison to times when price-to-earnings (P/E) ratios were similar to today's. But he won't mention that never before have 92 million Americans been out of the labor force and effectively supported by the U.S. government at the cost of $1 trillion per year.

In short... judged by other periods in U.S. history... judged against a backdrop of "normalcy," there's nothing to worry about.

Nothing, that is, except this... Take a look at the two charts below. They should tell you all you need to know about the likelihood of massive changes in the future. They should tell you whether things are really "normal."

The first chart shows you the simple, nominal, increase in the size of the Federal Reserve's balance sheet. It's something straight out of Weimar Germany... or the last 20 years in Zimbabwe. This kind of gross, out-of-control experiment with the world's reserve currency has never happened before. No one can predict the outcome. Not me. Not anyone else. But it sure as hell isn't normal.

The second chart gives you some useful history. Comparing today's economy with the economy of 20 or 30 or 40 years ago is meaningless. What does today compare to?

The chart shows the amount of money that's being printed as a percentage of gross domestic product (GDP). And there are only two comparable examples in the last 200 years: the Civil War and World War II. Now... just ask yourself these questions... do today's securities prices make sense given the amount of instability and uncertainty in the world's dominant currency, which underlies the entire global economy?

Amazon is a truly amazing company. It has, along with a handful of other Internet companies, transformed the entire retail industry. It is, undoubtedly, a valuable brand and a valuable company. But…

Do you think a private company that's valued at almost $200 billion can really increase in value by 50% in a single year? Do you think that any private business – which must face constant competitive pressures – is really worth 56 years of operating cash flows or 150 years of earnings?

No business in history has ever deserved to be worth this much… and certainly not an Internet retailer. Retailing is an absurdly tough business. It's akin to business suicide. Amazon – the most dominant Internet retailer in the world by a huge margin – produces a return on equity of only 1.5%. And yet investors are paying 20 times book value (today) to own this stock. I doubt those investors are going to do well over the long term…

My point is... the Bernanke Asset Bubble happened. The Fed printed a truly stupendous amount of money. It bought trillions of dollars' worth of U.S. bonds. It produced a huge bubble in corporate and U.S. sovereign bonds. It forced investors out of the bond markets and into stocks. It drove up equity prices to absurd heights – that rival even the 2000-era prices for certain stocks. What happens now?

You might try to catch the tail of this bubble. There might be a "blow-off top" – a huge, manic run in securities prices. I certainly can't predict the future. But from what I see... the selloff in bonds has already begun. Meanwhile, many stocks are trading at crazy prices already – truly insane levels. Normally, these kind of sky-high valuations have painful consequences for investors who buy at or near the top. And this time... I fear the consequences could be far, far worse than even I am able to imagine.

What were the valuations of good businesses during the previous periods in U.S. history when the Fed was printing similar amounts of money? No, we're not fighting a Civil War. No, we're not fighting a global war against fascism. But our monetary authorities are fighting a desperate war – a war to save the existing sovereign debt markets… a war to bailout all the world's largest governments… a war to save the U.S. dollar… a war to prevent a social collapse… a war to save themselves. It's a war they cannot possibly win.

New 52-week highs (as of 1/9/14): Abbott Laboratories (ABT), Advent Claymore Convertible Securities and Income Fund (AVK), Becton-Dickinson (BDX), ProShares Ultra Nasdaq Biotech Fund (BIB), BP (BP), CF Industries (CF), Dolby Laboratories (DLB), Fluidigm (FLDM), Genel Energy (GENL.L), Corning (GLW), iShares Nasdaq Biotech Fund (IBB), Kohlberg Kravis Roberts (KKR), Marvell Technology (MRVL), ONEOK (OKE), Sturm, Ruger (RGR), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), Constellation Brands (STZ), Union Pacific (UNP), Virginia Mines (VGQ.TO), Vanguard Natural Resources (VNR), Walgreens (WAG), and Wells Fargo (WFC).

It seems we weren't the only ones surprised by yesterday's feedback e-mail from "BC." Send your e-mail to feedback@stansberryresearch.com.

"Paid up subscriber BC, who complained about the poor performance of Porter's blacklist stocks in yesterday's Digest, might just be the dumbest person on the planet. Why don't you guys just refund his money before he hurts himself?" – Paid-up subscriber EP

Regards,

P.S. We'll be publishing our annual "Report Card" next week.