Rebooting Japan's nuclear power industry...
As we explained in yesterday's Digest, Japan is backing away from its no-nukes pledge. Once again, basic economics is overriding political speechmaking...
In today's Digest Premium… we look at one of the best ways to profit from a rebound in the nuclear-power fuel.
To subscribe to Digest Premium and access this today's analysis, click here.
Steve's bullish housing call... The 'Bernanke Asset Bubble'... Jeff Clark: New bank-stock rally imminent...
Digest readers know True Wealth editor Steve Sjuggerud is bullish on housing. Prices in many cities are lower than replacement costs. And thanks to the Federal Reserve's policy of keeping interest rates near zero, mortgage rates are at record lows.
Steve has recommended several ways to play the housing rebound, including buying physical properties, holding shares of the iShares Home Construction Fund (ITB), and investing in several mortgage real estate investment trusts (REITs) – what Steve calls "virtual banks."
We know many folks don't have the funds or time to actually buy houses. But starting today… we have a very close proxy to that trading in the market.
Two Harbors, one of Steve's favorite mortgage REITs, began investing in physical homes in 2009. And it bought homes in the most devastated areas – Las Vegas, Phoenix, Tampa, and Atlanta (among others).
Two Harbors recently spun off its $150 million portfolio of rental homes into a separate company called Silver Bay. And Silver Bay (SBY) started trading as an independent company today. Steve discussed it in today's DailyWealth…
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This "pile" of homes was bought at the right time... and in the right markets (as I'll show). Plus, most of these homes have already been rented out – which will lead to a nice income stream for you down the road. The opportunity I'm talking about is called Silver Bay Realty (SBY). |
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I've written about Silver Bay before... It is a "spinoff" from Two Harbors, which is one of the recommendations in my True Wealth newsletter. Recently, Two Harbors announced it would spin off its residential real estate portfolio into a stock – Silver Bay – that only owns (and rents out) residential real estate. |
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Well, Silver Bay has just started trading. It has no debt and a pile of cash (roughly $225 million) for buying more homes. It will ultimately take over a portfolio of 3,100 single-family properties bought at the right prices and in the right markets. |
For more signs of the U.S. housing recovery, consider the latest from the largest U.S. cement maker, Cemex...
First, the $11 billion company is trading at a 52-week high. It's up 77% this year.
When the world is building, Cemex makes more money. And right now, the U.S. (and the world in general) is building... During a presentation to analysts today, Karl Watson, president of Cemex USA, said the company expects stronger results in the U.S. between 2013 and 2016.
Watson said Cemex expects U.S. housing starts to increase 16% next year, hitting 873,000. The company forecasts U.S. residential sector cement demand will jump 14% in 2013.
"We are heading up. People are investing, signing contracts, there's real momentum... We don't see our business falling off a cliff," Watson said.
Cemex's current annual U.S. cement sales are around $3 billion. The company believes it will be producing 16 million tons of cement in the U.S. with sales of $5.4 billion in four years.
Steve is bullish on housing and most other assets because of what he calls the "Bernanke Asset Bubble." The Bernanke Asset Bubble is a financial phenomenon created by Federal Reserve Chairman Ben Bernanke's easy-money policies (low interest rates and money printing). Steve believes these policies will send prices sky high, creating bubbles in many different asset classes.
At first, Bernanke's bubble was a domestic phenomenon. Then in October, Steve noted the bubble had gone global. He wrote in the October 18 issue of S&A's free daily e-letter DailyWealth:
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But as of October 1, our True Wealth Systems computers tell us it's time to get our heads (and our money) outside the U.S... "Bernanke Fever" is apparently contagious. It has caught on around the globe. And there's an easy 25% trade to make today... |
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Unlike U.S. stocks or gold, emerging market stocks haven't run up that much yet. They are still a great value. And as of October 1, they're officially in an uptrend. Take a look... |
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Our system is in "buy" mode when the chart is green. Based on history, emerging markets return nearly 19% a year when our system says buy, like it does today. |
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Importantly, emerging markets aren't just in a new uptrend today. They are also cheap and hated... |
Since Steve's alert, markets around the world have been hitting new highs. Yesterday, the exchange-traded funds for Australian, German, Austrian, French, Singapore, U.K., Mexican, South Korean, and Thai stocks hit 52-week highs.
In his April issue of Stansberry's Investment Advisory, Porter explained why the Bernanke Asset Bubble – and the money printing from other central banks around the world – would also be great for financial stocks. He wrote…
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My thesis on the world's biggest banks is simple. Despite the ongoing financial problems in Europe, both the European Central Bank (ECB) and the U.S. Federal Reserve have the ability (thanks to the printing press) to stop any run on the banks. Their previous actions (quantitative easing) have committed them to an inflationary policy to save the banks and continue the monetary system as it exists today. |
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The price we will all pay is inflation – and ultimately the loss of the U.S. dollar as the world's reserve currency. But these problems can be kicked down the road a bit, allowing more time for the wealthy to prepare for the inevitable collapse. I believe that's exactly what's going to happen. And that means the world's largest banks will continue to be bailed out via continuous manipulation of the money supply. |
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That's what happened in the U.S. in the fall of 2008 and 2009. And that's what has happened in Europe, starting in December 2011. |
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Thus, the world's largest banks are de-facto sovereign credits. They cannot fail. So to make safe investments in them... all we need to do is ensure the individual bank has enough of a capital cushion to protect the common stock shareholders from any remaining bumps in the road. |
Like Steve, Porter also believed home prices would rise. The turnaround in housing would turn the bad debts banks hold on their balance sheets into performing loans. And their value would rise.
The banks that took huge write-offs in 2008 and 2009 could reverse them... adding billions of dollars to their balance sheets. As Porter explained in that issue... if, for example, rising prices lifted the average value of Bank of America's assets by 10% over three years, it would increase the bank's equity by $200 billion (a large increase for a bank with a $90 billion market cap).
Porter was correct, but early... He stopped out of his recommendations of Bank of America and Citigroup, posting double-digit losses on both. But today, both stocks are trading at new highs (approximately 20% above where Porter recommended them).
If you missed that rally, don't worry... Master trader Jeff Clark – editor of the S&A Short Report and Advanced Income – believes we're about to see another huge rally in bank stocks. In a note to S&A Short Report subscribers today, Jeff said bank stocks are about to break out to the upside.
When he saw a similar setup last year, bank stocks rallied 10% in a short period of time.
Jeff thinks we'll see a similar move over the next few weeks. But he's not recommending stocks like Bank of America or Citigroup, which have already rallied... If the bank sector breaks to the upside, the stocks that have lagged will play "catch up."
So Jeff is recommending one of the laggards (a solid bank with recent insider purchases). He believes readers could make 100% by January.
To learn more about the S&A Short Report and access Jeff's latest trade, click here...
New 52-week highs (as of 12/17/2012): Guggenheim BulletShares 2015 High Yield Corporate Bond Fund (BSJF), iShares Australia Fund (EWA), iShares Germany Fund (EWG), iShares Singapore Fund (EWS), SPDR Barclays High Yield Bond Fund (JNK), Sequoia Fund (SEQUX), Hershey (HSY), Travelers (TRV), and Walgreens (WAG).
A light day in the mailbag... It's hard to imagine we've gone 24 hours without angering someone. Let us have it at feedback@stansberryresearch.com.
"I am a paid subscriber as I was very impressed with the first analysis paper that you wrote... I am really interested in other investments besides stocks. I think the stock market will crash in the near future at some point. I don't have enough years left to make up for the down turn that is sure to occur. Thanks for the opportunity to vent." – Paid-up subscriber Flo Winn
Goldsmith comment: We advise all our readers to hold some of their assets in precious metals. We think gold and silver are two of the best ways to protect yourself from global central banks racing to devalue their currencies.
Collectibles (like coins and art) are also good ways to protect yourself. Plus, these assets historically perform well during inflation.
Next week in Digest Premium, we're running a special series with our best contact in the collectibles space. We've asked him to identify and discuss his five favorite collectibles today.
In case you're not familiar, we launched Digest Premium last month... It's a way for Digest readers to get extra insight from Porter and his research team. We publish this extra bit every day at the end of the regular Digest.
And it's one of the best values we offer... You can sign up for Digest Premium for $10 per month. If you're interested, you can learn more here...
Regards,
Sean Goldsmith
New York, New York
December 18, 2012
Rebooting Japan's nuclear power industry...
As we explained in yesterday's Digest, Japan is backing away from its no-nukes pledge. Once again, basic economics is overriding political speechmaking...
In today's Digest Premium… we look at one of the best ways to profit from a rebound in the nuclear-power fuel.
To continue reading, scroll down or click here.
In yesterday's Digest, we discussed how Japan's pro-nuclear, Liberal Democratic Party wresting control of that country's parliament sparked a big jump in the prices of uranium and uranium stocks.
The newly empowered party is expected to introduce measures to reverse the moratorium on nuclear power put in place by the preceding ruling party after the 2011 meltdown at the Fukushima Daiichi power plant. The expected actions include rebooting Japan's 48 decommissioned reactors following a three-year review process.
Japan's 2011 declaration that it would go nuke-free proved harder to achieve than it was to promise… But in the short term, it devastated the global market for uranium.
When the Japanese shut down their nuclear power plants, they took 20 million pounds of uranium demand off the market. And power companies liquidated their inventories – dumping 15 million pounds of supply, as Japan's power companies eliminated their surplus fuel.
And the drop in demand and spike in supply crushed uranium prices...
It also crushed uranium stocks. Take a look at this chart of Cameco (CCJ), the world's largest uranium miner...
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Although the trend (certainly, the sentiment) for the uranium sector has been relentlessly bullish for the past 20 months… S&A Resource Report editor Matt Badiali says the bearish action presents "a fantastic opportunity in the uranium sector."
Throughout the financial crisis in 2008 and 2009 and the Fukushima Daiichi meltdown in 2011, uranium prices held around $40. It appears that's the floor for prices.
And one of our closest contacts in the resource space, expert investor Rick Rule, believes prices will soon spike. (Rick was also super-bullish on uranium before prices skyrocketed in 2000.)
The cost of mining uranium is much higher than it was a decade ago. But uranium prices aren't keeping up... Miners are losing money. As Matt wrote in the December issue of the S&A Resource Report…
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According to Rick, the "term price" of uranium, which is the price paid for long-term sources of supply contracts, is $65-$70 per pound. The spot price is less than $50 per pound. He and his analysts came up with a production cost of $85 per pound for miners. In other words, miners are losing nearly $40 per pound selling at the spot price today. |
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Things have to change... |
In the commodities markets, the cure for low prices is low prices. Miners will stop producing if they're losing money. And the subsequent supply shortage will cause prices to rise.
This is all bullish for Cameco, which produced more than 15% of the world's mined uranium in 2011. It controls some of the world's best uranium mines.
And it's currently trading at 8.5 times estimated 2013 earnings (half its value in 2009).
Cameco will be one of the biggest benefactors of uranium's current tailwinds.
Rebooting Japan's nuclear power industry… Here's one great opportunity in a beaten-down sector (that's turning around)…