The Federal Reserve Wimps Out
The Federal Reserve wimps out... The Bank of Japan is desperate... The bond-market noose gets tighter... A new high for the Nasdaq... Last chance to be a Charter Member of Steve's brand-new letter...
As we mentioned yesterday, the Federal Reserve left interest rates unchanged at its September policy meeting this week...
That wasn't a surprise to regular Digest readers... We've been skeptical of the Fed's prediction of additional rate hikes this year. As we wrote on Monday...
From the start, we've believed that no matter what the Fed says in the near term, it's unlikely to be able to raise rates (and maintain them) significantly higher anytime soon.
In fact, we've even predicted that if the Fed did raise rates aggressively, it would likely be only a matter of time before it was forced to reverse course and cut them again.
Frankly, we'll be impressed if the central bank manages to meet its forecast of one additional quarter-point rate increase before year-end.
It's also worth noting that while the Fed said the case for another rate hike has strengthened, it also downgraded its economic-growth forecast for the third time this year...
It now expects the economy to grow just 1.8%... down from the 2% rate it forecast in June... and the 2.2% rate it expected in March.
If growth doesn't pick up (and almost no one thinks it will in a meaningful way), it is only a matter of time before the Fed's hand is forced... and it begins to cut rates again.
With rates near zero – officially held in a range between 0.25% and 0.5% – the Fed may have no choice but to adopt negative interest rates, too.
Of course, regular readers know the Bank of Japan ("BoJ") is already there. And if yesterday's announcement is any indication, its unprecedented easing efforts are about to become even more extreme...
As we mentioned yesterday, the BoJ announced a big change to its massive quantitative-easing ("QE") program. According to the announcement, the bank will no longer buy a set amount in bonds each month. Instead, it will adjust the pace of bond-buying to keep long-term interest rates – as measured by the yield on 10-year Japanese government bonds ("JGBs") – at 0%.
So if 10-year JGB yields continue to rise above 0%, the BoJ says it will now increase its purchases to push yields lower. In theory, this means the bank could be forced to purchase virtually unlimited amounts in bonds to "defend" this level if yields continue higher.
The move is intended to target the "yield curve," or the difference between short- and long-term interest rates.
As we've discussed, one of the worst consequences of central banks' QE programs has been a "flattening" of sovereign yield curves... Long-term bonds yield less relative to short-term notes than at virtually any time in history. This has punished savers – setting off the global "reach for yield" we've discussed in these pages – and made it more and more difficult for banks to earn a profit.
Again, in theory, this move should "steepen" the yield curve by increasing the difference between short- and long-term rates. But Japanese savers shouldn't get too excited...
Because the BoJ is targeting a 0% yield on 10-year JGBs, long-term interest rates are unlikely to move much higher. Instead, this move could allow the bank to push short-term rates even further into negative territory than it otherwise could.
The move could be great news for banks and other financial-services businesses that benefit from a bigger "spread" between short- and long-term rates. But it's unlikely to help savers who are already struggling to earn a real return on their money.
The market appears to agree... Global banks and financial firms soared on the news. But much of the big initial moves lower in the Japanese yen and higher in global stock markets had reversed by the end of the day.
Finally, here in the U.S., we note one of the biggest recent trends is continuing...
As we discussed on Monday, technology stocks are the best-performing sector of the market this quarter. They've nearly doubled the gain of the next-best-performing sector, financials.
Yesterday, the Nasdaq Composite Index closed at an all-time record high.
But while many tech stocks are getting expensive today, our colleague Steve Sjuggerud says one corner of the technology market is still an incredible buy...
Steve says these stocks are cheap... hated... and have just started an uptrend. He says that these investments only have to go from "bad to less bad" in order to double or even triple today's prices.
The last time Steve saw an opportunity like this was back in the early 2000s... when he left the brokerage business and started working with Porter Stansberry.
They attended the Long Beach Gold Coin and Collectible Show... one of the oldest and largest coin-dealer swap meets in the country. Out of the thousands of people there swapping coins, Steve and Porter were two of the few who were under the age of 50.
When they asked about investing in coins, the dealers all hurried to clarify that they shouldn't be treated as an investment... only as a collectible. As Porter has said, when the people who live and breathe an asset no longer have confidence to invest in it, that's the bottom.
When writing to his True Wealth subscribers in 2003, Steve noted...
Coins have been in a horrendous bear market for 14 years now, which has brought the Saint-Gaudens to ridiculous bargain levels. Today, 14 years after the peak, coin prices are STILL down an astounding 69%.
As you can imagine, after 14 years of misery, there are a lot of bitter people in the coin business. After 14 years of people getting burned, it has reached the point where the word "investor" is a dirty word...
At the time, Steve recommended three specific gold coins to his True Wealth subscribers... and sold them a few years later for 182%... 206%... and 274% gains.
One of Steve's gold-stock recommendations around the same time was even bigger...
His Seabridge Gold (SA) trade soared 995%. It's currently still the highest recorded gain in the history of Stansberry Research, as you can see in the "Hall of Fame" that we feature at the end of every Digest.
Today, Steve is seeing an even more exceptional opportunity in a certain niche of the market. In fact, he recently said:
I think [this recommendation] is actually even better than gold stocks right now. In fact, I recently spoke at an investment conference and I told folks to sell their gold and buy this instead.
Like the gold coins we mentioned earlier... as well as previous "fat pitches" that Steve has discovered that led to 100%-500% gains, time after time – homebuilder stocks in 2011... biotech in 2012... financial warrants in 2011...
The companies behind Steve's new opportunity are trading at dirt-cheap prices. Investors hate them. And they only have to get a little bit better to make gains of 100%-200% to start... and 500%-1,000% in a few years.
Steve's "fat pitch" today is a once-in-a-lifetime way to invest in some of the world's fastest-growing technologies.
Steve says it's like having a "second chance" to invest in revolutionary Silicon Valley companies before they became household names that essentially every U.S. investor knows.
This opportunity is like investing in Amazon before it took over Internet shopping... in Uber before it dominated urban transportation... in Apple long before it became the No. 1 consumer-tech maker in the world... or in search-engine giant Google when it was still largely unknown outside of a few Internet insiders...
Steve predicts that one of the companies he's recommending will become the largest in the world. Yet most U.S. investors have never even heard of it...
To learn the name of this company... and how to become a Charter Member of Steve's new service, with a portfolio of 19 different "buy" recommendations with huge upside potential... he has put together a special replay of his recent live webinar. If you couldn't make it last Wednesday... or to the Stansberry conference this week... you can listen to the whole thing right here.
But please note: This opportunity will not be around for long at current dirt-cheap valuations. Already, a number of billionaire investors – including investment legends George Soros, David Tepper, Stanley Druckenmiller, and Paul Tudor Jones, among others – are buying into this specific investment opportunity.
Steve is calling it "a back door into the world's most profitable stocks."
This little-known niche is an easy way to invest in the next Internet revolution. And Steve has laid out the blueprint right here.
New 52-week highs (as of 9/21/16): Becton Dickinson (BDX), BlackRock Floating Rate Income Strategies Fund (FRA), KraneShares CSI China Internet Fund (KWEB), Shopify (SHOP), and Guggenheim China Real Estate Fund (TAO).
In the mailbag, some great feedback from the Stansberry Conference in Las Vegas this week. What's on your mind? Let us know at feedback@stansberryresearch.com.
"I attended the convention for the first time but had to depart yesterday afternoon, so missed the 'jam session,' however, I have to be candid, I went to the event expecting to hear a lot of 'doom and gloom, Gold Bug talk,' so I was prepared to ignore that emotional thinking & listen for some nuggets of data and much to my surprise I found the entire two days to be very balanced, as speakers represented all sides of the economic equation. I did walk away with a few nuggets too.
"I signed up for next year. Good job team!" – Paid-up subscriber David H.
"Greetings! My daughter and I are thoroughly enjoying ourselves here – thank you for putting on a wonderful conference.
"Getting ready for the Alliance Meeting so allow me to give you in bullet point format just a couple of thoughts/observations:
| • | My daughter made the observation that there have been no female &/or minority speakers. The only woman on stage was Tara the 'hypnotist's' assistant. |
| • | The Tim & Myles Thompson concert was fantastic but in our opinion there should have been better crowd management re the noise level coming from the people standing in the back. To those of us sitting in the chairs it seemed extremely rude and embarrassing that the musicians had to play through that din. |
"That's all. We look forward to today and I already bought two tickets for next year." – Alliance member Don T.
Regards,
Justin Brill and Steven Longenecker
Las Vegas, Nevada, and Baltimore, Maryland
September 22, 2016
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