The Contrarian Opportunity of a Lifetime
China fears are 'completely overblown'... Emerging markets guru echoes Sjug... The contrarian opportunity of a lifetime... Your last chance to try Steve's China research at a massive discount...
China fears are "completely overblown"...
So says Jim O'Neill, the former chairman of Goldman Sachs Asset Management. If you're not familiar, he famously coined the term "BRIC" – for Brazil, Russia, India, and China – in a 2001 paper predicting the rapid growth of these emerging economies.
Today, O'Neill remains bullish on China and sees "no signs" of the crisis many in the financial media have been predicting. As he noted in an interview with Bloomberg published this morning...
This continues to be completely overblown. China has demonstrated multiple times that it's very good at dealing with its cyclical challenges. Arguably if other countries' monetary and fiscal policy could be adjusted with the success of China, the world would be a much stronger place...
At some point, they'll have a crisis, just like everyone else... But I see no signs of it from this supposed slower growth.
Of course, O'Neill is referring to the Chinese government's recent move to rein in speculation and financial leverage. This has erased nearly $500 billion from the country's stock and bond markets over the past four weeks. But he believes this is actually a bullish development, not a reason for concern.
O'Neill's comments may sound familiar...
They echo those from our colleague Steve Sjuggerud earlier this week.
Regular Digest readers know Steve is super bullish on China today. In Tuesday's edition of our free DailyWealth e-letter, Steve explained why the Chinese government's "crackdown" is creating an incredible investing opportunity...
The important thing you need to understand is, China is reining in what needs to be reined in...
China's credit system expanded "too recklessly and too quickly," hedge-fund manager Kyle Bass told Bloomberg last week.
Bass is betting on a Chinese credit crisis. One of his big concerns is the size of China's "wealth management products" (WMP) industry. WMPs offer higher yields... But they are not part of the official banking system. Instead, they are part of China's lightly-regulated "shadow banking" sector.
Huge amounts of cash have flowed into WMPs from Chinese investors. But they encourage too much leverage and reduce transparency.
As Steve explained, the Chinese government's actions are all about getting investor money out of the shadow banking system and into the proper banking system. And it appears to be working...
The government has taken decisive action here recently... And it has seen results. "The number of wealth-management products issued by Chinese lenders sank by 39% in April from the previous month," Bloomberg reported over the weekend.
And it's not just WMPs. The crackdown is happening across the board... real estate, cross-border money flows, etc. China has tightened up regulations. And it has raised interest rates.
Investors have gotten the hint. They are speculating less, and buying fewer WMPs. The Chinese government is getting what it wanted.
In the meantime though, these moves have caused investors to flee like never before...
As Steve noted, virtually no one is bullish on China today. Even Chinese investors have thrown in the towel...
With across-the-board government clampdowns, investors are scared of China right now. Nobody is invested. Not the Chinese, and not foreigners like you and me. Everyone who wants to sell has sold (or close to it).
This setup typically means we have an "asymmetric" trade setup... where our upside is dramatic, and our downside risk is limited.
Sure, the market could weaken a bit more in the near term. But this setup is what I want to see... China is cheap. And right now, it's also extremely hated. That means we have limited downside risk versus dramatic upside potential in China.
Don't look at this clampdown as a negative. Instead, see it as a positive... China is reining in what needs to be reined in. It's doing the right thing. Meanwhile, investors have fled.
Steve has built his career – and made a fortune for his subscribers – by making big, contrarian bets just like this...
He recommended cheap and hated gold stocks in the early 2000s, before they soared hundreds of percent...
When most investors were panicking in early 2009, he was practically begging his readers to load up on U.S. stocks. We don't have to tell you what has happened since then...
He did it again in real estate in 2010, telling readers it was the best time in history to buy a house...
And in early 2012, he told readers to buy left-for-dead biotech stocks, even promising that "if you catch just one biotech bull market, you may never have to work again." Subscribers who followed his advice made nearly 600% over the next two years.
You get the idea.
But believe it or not, Steve says the opportunity in Chinese stocks today is even better than any of those big winners...
He says it could be the trade of his entire career... And once again, he's practically begging folks to join him. As he wrote in this morning's edition of DailyWealth...
The takeaway here is simple... And it's one I believe in strongly...
The entire world has given up on the idea of owning Chinese stocks. Both here in the U.S. and overseas, no one is interested.
It doesn't get any more contrarian than this. And that's why I believe China could end up being the most contrarian idea of my career. No one wants to own China – that's why our upside is so large.
Today's opportunity is simple... Buy Chinese stocks. I hope you're bold enough.
We hope you'll forgive our persistence...
We're sure many of you are tired of hearing about China.
But we have never seen Steve so bullish – and so certain – of an investment thesis... and potentially life-changing opportunities like this don't come along often.
We wouldn't be doing our jobs if we didn't do everything we can to urge you to take advantage.
As you've likely seen, Steve has been offering a massive discount off the usual cost of his True Wealth China Opportunities advisory. He's even throwing in an unheard-of $3,000 guarantee and waiving the usual monthly maintenance fee.
But if you've been on the fence about trying True Wealth China Opportunities, you need to act soon.
This special offer expires at midnight Eastern time tonight. After that, it will be too late. Click here to try True Wealth China Opportunities now.
New 52-week highs (as of 5/9/17): Tencent Holdings (0700.HK), Apple (AAPL), Boeing (BA), Alibaba (BABA), Morgan Stanley China A Share Fund (CAF), Coach (COH), Ctrip.com (CTRP), 3D Systems (DDD), Quest Diagnostics (DGX), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI South Korea Capped Fund (EWY), Nuveen Preferred Securities Income Fund (JPS), KraneShares CSI China Internet Fund (KWEB), McDonald's (MCD), Naspers (NPSNY), Paysafe (PAYS.L), Shopify (SHOP), Stanley Black & Decker (SWK), Tencent Holdings (TCEHY), and short position in Hertz Global (HTZ).
Two notes of praise in today's Digest... Send your thoughts to feedback@stansberryresearch.com. As always, we can't respond to every e-mail, but we read them all.
"I want to thank Dan Ferris for his analysis on Fossil Group back in the June 2016 edition of Extreme Value. I totally agreed with his premise that wrist watches have been replaced by smart phones or smart watches. Dick Tracy was ahead of time. Dan recommended to short watch maker Fossil Group as a way to capture this trend. His reference price for the short sale was $28.67. By the time I read and understood Dan's advice, the price was about $30. By November, the stock had declined to just above Dan's recommended 'sell down to' price of $24. Then the Trump wave hit after the election. Fossil spiked up to $36.61 by Thanksgiving and officially hit Dan's stop price.
"Since my sale price was slightly higher, I never stopped out and decided to stay with the trade. To my good fortune, Fossil reversed immediately after Thanksgiving and has continued downward since. Tuesday's earnings report from Fossil proved Dan's thesis as the company more than doubled its expected 1st quarter losses. Today, the stock dropped another 22% and is trading at about $14.05 as I write.
"While officially Extreme Value booked a loss on Fossil back in November, Dan's analysis was spot on but just a bit early. With today's sell off, I am up more than 50% on the demise of Fossil Group based on Dan's recommended short sale. Thanks Dan!" – Paid-up Stansberry Alliance member Bob Plath
"Give Porter some credit... His [Shopify] recommendation is up 212% for me. Seems you guys need to update the top 10 open recommendations at the bottom of the Digest! Thanks again Porter." – Paid-up subscriber Matt Vestrand
Brill comment: You're right, Matt. Shopify (SHOP) is up an incredible 230% since Porter and his team recommended it in the April 2016 issue of Stansberry's Investment Advisory. But this recommendation was part of a long/short pairs trade with troubled online-review service Yelp (YELP).
Unfortunately, despite clear problems in its business, Yelp shares continued higher... And they were stopped out of that half of the position last August. As a result, the official gain on the trade does not qualify for the top 10 at this time.
On the bright side, it looks like the market is starting to see the problems Porter warned about last year... Yelp shares fell more than 18% today after reporting dismal first-quarter results last night. It is now down around 30% this year.
Regards,
Justin Brill
Baltimore, Maryland
May 10, 2017