I (Porter) was recently asked, "If someone had $100,000 sitting in cash… where would you tell him to put that cash?" It's a good question. And the best way for me to answer it is to tell you what I'm personally doing with my money...
I still think real estate is the best, most obvious opportunity investors have right now. Stocks are fairly priced... they're not cheap. Gold has gone up for 12 years. Bonds are no longer an option. So that leaves real estate as one of the last big avenues for investment where you're likely to find bargains…
Another idea is to buy homebuilder stocks. Homebuilders are going to participate in the same trend. We've seen their stocks rally significantly over the last two years. And they're going to continue doing well as long as mortgage rates remain low.
If you look into homebuilders that own all their land inventories… you find that these guys are the worst real estate investors in the world. They buy land at the top of the market and sell at the bottom. And they do it again and again and again. That means all the profit that they make building homes ends up eventually being lost in bad real estate deals. So if you're going to buy a homebuilder, buy a builder. Don't buy a land manager, because there are no good publicly traded land managers in the homebuilding sector.
A great example of a "land-light" homebuilder is NVR Corp (NVR). The company focuses on optioning finished lots from land developers. It pays the developer a small deposit upfront to hold the lots and pays the rest only when it's ready to start building homes. As a result, NVR only maintains a small amount of lot inventory compared to other builders.
"Abe's Revenge" may have claimed its first casualty today... and the market cheered on the news.
The head of Japan's central bank announced he'll leave his post early... and Japanese stocks rallied on the news, believing his successor will embrace the inflationary policies of Prime Minister Shinzo Abe. It's a phenomenon True Wealth editor Steve Sjuggerud has labeled "Abe's Revenge"... and called one of the biggest stock opportunities of 2013.
In December, Abe had just been elected as Japan's prime minister, sweeping the election with a two-thirds majority. But this isn't his first run in office... He previously resigned as prime minister in September 2007. After his resignation, Japan's stock market (the Nikkei) fell in half... And the Japanese yen soared 40% versus the U.S. dollar.
Today, Abe is taking the opposite stance. As Steve wrote:
In 2006, Abe says he mistakenly backed Japan's central bank when it raised interest rates. The stock market soon fell dramatically, and the higher interest rates strengthened Japan's currency.
Now, Abe is vowing to undo that mistake – and then some – as he takes office...
He wants to do what Federal Reserve Chairman Ben Bernanke is doing in the U.S. – multiplied by 10. (Bernanke has cut interest rates to zero – and has been printing money. Bernanke is fueling the "Bernanke Asset Bubble," which has the potential to be the greatest asset bubble in history. It could drive U.S. stocks and real estate to new, unheard-of heights.)
... He may force the central bank to cut interest rates to BELOW zero and buy trillions of yen worth of assets... pushing Japanese asset prices up. The central bank will pay for these assets by "printing" yen – crushing the value of the currency.
Today, Bank of Japan governor Masaaki Shirakawa announced he will step down three weeks earlier than expected. The Nikkei jumped 4% on the news to its highest level since September 2008. Export-driven stocks led the rally... automakers Toyota and Honda gained 6% and 3%, respectively. Electronics maker Sony was up 4%.
The stock Steve recommended as his favorite way to play this trend has rewarded shareholders... True Wealth subscribers are already up 12% on the recommendation in just six weeks.
We're confident the rally will continue... On Tuesday, Abe said fears of runaway inflation in Japan are overblown. "It's unfortunate that there are people who tout the mostly unfounded fears of hyperinflation," he said.
Longtime Digest readers know we view most statements from government officials as blatant lies. And this is no different. Abe revealed himself with his very next statement, when he essentially called for inflation by asking Japan's business leaders to raise wages for employees. He said it could boost domestic demand and beat deflation.
If you're a user of the social-media website Twitter, you may want to check your account status… Wired magazine reports that the service just discovered a "live hack." Twitter shut down the hack "moments later." But the attacker had already made off with the private data of 250,000 users. This includes usernames, e-mail addresses, and passwords. Twitter believes other companies are victims of the same attack. It's a situation similar to the Subway restaurants' credit-card hacking we noted only last week.
In recent days, the Washington Post and the New York Times newspapers have been hacked, too. Thieves stole the passwords of every single Times employee, then accessed 53 employees' personal computers. The Times believes China-based hackers used a sophisticated "spear-phishing" attack to breach their safeguards.
Spear-phishing attacks target individuals through their e-mail accounts. One click on an innocuous-looking e-mail downloads remote access tools (RATs) onto the victim's computer. The attacker uses the RATs to steal passwords, documents, screenshots... and even eavesdrop through the computer's microphone and webcam. It all goes on without the victim's knowledge.
The Times believes the hack went on for four months. It employed antivirus software company Symantec for online security... but the hackers still installed 45 pieces of malware (malicious software) on their computer systems. Of that number, the Symantec systems identified and quarantined only one.
If you believe hackers find your personal data less appealing than the New York Times', you are mistaken... and vulnerable.
The Wall Street Journal reports the number of "traditional" bank robberies – where a masked gunman demands cash and then bolts out the door – has fallen by more than 50% over the past 11 years. In 2001, there were more than 10,000 bank heists. In 2012, the number dropped to 3,870. The problem is, the bank robbers haven't gone away... they've just moved online.
According to the FBI, traditional bank robbers stole $29.5 million in 2012. In 2010, their online counterparts raked in $1.8 billion in checking and debit-card fraud. Online-banking crime is a hypergrowth industry. Since 2001, Internet crime has risen 500%. The crooks have learned that your online data is much more lucrative than a bag full of cash...
Dr. David "Doc" Eifrig, editor of Retirement Millionaire, has made it a personal mission to help others recognize the threats they face online. He just completed a special report that highlights your privacy vulnerabilities – and shows you how to fix them.
One of the simple techniques Doc describes provides 100% security from a hacker making unauthorized charges to your account... even if he gets complete control over your credit card number. Another shows you how to achieve the highest possible password security. You'll soon understand why readers have praised Doc's privacy work as "worth the cost of many years' subscriptions." To learn how to gain access to the report and a risk-free subscription to Retirement Millionaire, click here.
New 52-week highs (as of 2/5/13): WisdomTree Japan Hedged Equity Fund (DXJ), Johnson & Johnson (JNJ), Prestige Brands Holdings (PBH), Automatic Data Processing (ADP), Chicago Bridge & Iron (CBI), Chubb (CB), Alleghany (Y), Kohlberg Kravis Roberts (KKR), Becton-Dickinson (BDX), BLADEX (BLX), Cheniere (LNG), and Walgreens (WAG).
In today's mailbag, more positive trading results from our readers. Let us know how you're doing... feedback@stansberryresearch.com.
"How ironic that Federal Govt. office has same acronym for 'Office of the Personal Management' of course dealing with other people's money mainly in retirement funds! Surely there is no bigger Other People's Money (OPM) manager than Fed. Govt... Just a little fodder for Porter!" – Anonymous
"Hey guys... I just did some financial planning (looking over last year and planning this year) and wanted to let you know the gains I've gotten. First, I'm just 'listening' to whatever everyone says and doing it... instead of trying to reinvent the wheel. My strategy is simply to read the various newsletters, write down the ones that seem the most logical to me, do my own research on them, and invest in whatever ones I think still make sense and that I truly understand.
"My results: I started investing in August of 2012. From August-December, my TOTAL portfolio return was 15%. That's a mix of selling puts, selling calls and just regular stock buying. (This includes about a dozen mistakes I've made and learned from along the way) Also, in January 2013 ALONE I've made another 13%. Again, that's total portfolio (about 10 I believe), not just one stock. Literally all I'm doing is following the suggestions that make the most sense to me, making sure I get a good gut feeling, and pulling the trigger. That's not even mentioning the education! I have most of your best articles printed, in a binder, with highlighting and handwritten notes. I'm still trying to really 'get' how to value businesses correctly. Trying to get it fully engrained in the next month or two by continually reading and re-reading articles on it several times, then doing my own analysis." – Paid-up subscriber Jeremy Reeves
"The day after you published the premiere issue of Stansberry Alpha, I opened the paired trade you recommended on CBI. Sold the 35 Put and used the proceeds to buy the 45 Call, both January 2014 expiration. Bought the calls for $3.09 and sold them today for $10.00. Hard to say which was more fun: booking a triple in less than three months, or funding the whole trade with zero out-of-pocket expense. Now that's what I call a very profitable use of Other People's Money! Thanks for the great tip." – Paid-up subscriber LB
Regards,
Sean Goldsmith
New York, New York
February 6, 2013