On Tuesday, I (Dan Ferris) told you about one of the popular financial press' two obsessions, neither of which do investors much good. I told you how it's obsessed with assigning meaning to every tiny move in the price of every stock, bond, and commodity in the world.
The financial press' second obsession is economic data and forecasts... and making connections between those data and individual securities.
For example, how many times have you heard in the past several years that "the American consumer is dead" and therefore retail giant Wal-Mart is a terrible investment?
And yet, Wal-Mart, which I've been recommending for years, is up more than 60% over the past year. Its sales, earnings, and dividends have never been higher. As our editor in chief, Brian Hunt, showed you yesterday, the retail company has just kept growing and growing, and paying shareholders higher and higher dividends, every year for decades.
Yet somehow, this juggernaut of a business (which sells more groceries, toys, and jewelry than anybody else in the world) was suddenly going to crater?
Fidelity Investments' Peter Lynch says if you spend 13 minutes a year thinking about the direction of the economy, you've wasted 10 minutes.
At the Berkshire Hathaway shareholder meeting earlier this year, Warren Buffett said in the 47 years he and his business partner Charlie Munger have known each other, they have "never talked about macro stuff."
That's a huge lesson, one most investors will never learn. I shudder to think how many people avoided buying Wal-Mart over the last several years because they thought "the American consumer was dead."
I'm sure plenty of folks avoided Constellation Brands, the biggest seller of premium wines in the world because they thought people wouldn't buy premium wine in a "global recession." But Constellation, which I recommended in June 2011, made another new high yesterday... It's up 55% in a little more than a year.
For every great business, there's somebody who thinks a macro wind will crush it. They have failed to learn one of the greatest lessons anyone can learn, if they seek riches in the stock market: Great businesses are great because they can ride out and even exploit macro problems like recessions and interest-rate movements.
So don't let the financial press' twin obsessions prevent you from buying great businesses and compounding your wealth with great stocks.
The key is searching out great businesses. Great businesses aren't cyclical. They don't get better or worse with the economy. They stay profitable and continue to gush free cash flow and pay higher dividends every year.
Of course, plenty of decent investments see their fortunes changed (for better or worse) by big macro trends. And one of the biggest macro trends of the last decade has been gold's bull run...
As Digest readers know well... After trading near $255 an ounce in early 2001, gold prices blasted higher over the next 10 years, hitting $1,900 an ounce last year. It's cooled a bit since then, trading today around $1,650 an ounce.
Still, one industry executive says the metal still has plenty of upside...
Sean Boyd, CEO of the $8 billion mining company Agnico-Eagle, is super bullish on gold. In an interview with King World News, Boyd said he believes global monetary policies and an overall lackluster economy will push gold to $3,000 an ounce...
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We've seen the first large stimulus coming out of China. So if we get more stimulus globally, that has the potential to take gold from the $1,600 range to the $3,000 range, which would be akin to the move from $700 to $1,900. |
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So that $3,000-an-ounce gold number is certainly not out of the question, given the weakness in the overall global economy, and the serious issues around debt which is going to result in more stimulus, and as a result debasement in paper currencies. |
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When they (central planners) talk a different story between austerity and stimulus only if needed, I think the reality is stimulus is needed, and we will see stimulus in one form or another coming out of Europe and the Fed. |
In the August 23 Digest, we noted the Federal Open Market Committee's announcement that another round of easing would come "fairly soon" should the economy not recover... Gold and silver both gained on the news.
We also reminded readers that we've been predicting a rally in the metals and mining stocks. As Steve Sjuggerud pointed out, gold stocks "have only been this cheap once in the last decade."
Boyd agrees with Steve that mining stocks are undervalued. Sure, he's the CEO of a gold mining firm. But we believe he's right. Boyd also said in the interview...
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The [mining] industry, in terms of market cap, is still extremely small relative to other equity options out there. You get money moving into a relatively small sector, that's when you can have really sharp moves in equity valuations. So it's not going to surprise us, as gold moves, to see 10% to 15% daily moves in some of these (gold and silver) equities. |
So gold stocks are historically cheap today. And the looming promise of more quantitative easing will send metal prices soaring (and subsequently, the shares of mining stocks). It's an ideal recipe for big gains.
Frank Curzio – editor of our small-cap-focused Phase 1 Investor newsletter – discovered a little-known play in the metals market. It has nothing to do with gold or silver, but Frank believes his readers could return hundreds of percent on this small mining stock.
The company produces what Frank dubbed a "magic metal" that can be found in almost every electronic gadget made today, along with dozens of other products found in the average person's house.
And right now... the Chinese government is moving to monopolize the world's supply... The country recently announced it will consolidate more than 200 mines of this metal into 20 facilities. China also imposed duty taxes for any country importing it. These measures have resulted in much higher prices.
Frank is recommending shares of a company that holds one of the few sources of this metal outside of China. Unlike many risky small-cap miners, this company's mine is fully developed. Last week, the company made its first shipment of the metal.
If you're interested in learning more about this opportunity, Frank is hosting one of his exclusive conference calls tonight. For those who don't know, Frank's conference calls offer readers the rare opportunity to hear some of the smartest industry "insiders" discuss his recent recommendations.
Tonight's call features one of the best resource investors in the world. Frank was excited to get access to him. (We won't reveal his name here at his request.) Frank describes him as having "more 1,000% winners than any investor I know." He was one of the early investors in rare-earth stocks... buying them for pennies and selling them after their share prices went into the double digits.
Also on the call will be the president of the company Frank is recommending to his Phase 1 readers. This person is a veteran of the resource industry – drilling and exploring mines for more than 25 years.
There are several catalysts that could push this stock significantly higher over the next 60 days. Longer term, Frank's "insider" believes this company could be a five- to 10-bagger over the next two to three years – if investors buy the stock right now.
Frank's exclusive conference calls are available only to Phase 1 subscribers... To learn more about this opportunity and how to gain access to the call tonight, simply click here...
New 52-week highs (as of 8/29/2012): Guggenheim BulletShares 2015 High Yield Corporate Bond Fund (BSJF), BlackRock Corporate High Yield Fund (HYV), ProShares Ultra Health Care Fund (RXL), Constellation Brands (STZ), Eli Lilly (LLY), and Two Harbors (TWO).
A slow mailbag today. What's on your mind? Let us know... feedback@stansberryresearch.com.
"I have made money following you folks advice, mainly on WDDG's and Doc's advice doing IRA selling of covered calls. Both have been winners for me. I like Porter's advice for the upcoming Boom in LNG.
"There are several financial letters I subscribe to and almost all of them are solidly behind the 'end of the financial world' including you folks. It seems Porter has found a silver lining with the US Gas & Oil potential and Doc points out that the US Economy is growing although slowly.
"If Dr Steve's advice is to buy in when everyone hates something, it's probably time to invest big in the US. Realestate, LNG & Oil, Metals. It looks like we have a spark." – Paid-up subscriber Jeff Donohue
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and New York, New York
August 30, 2012
The financial press' other obsession... Buffett/Lynch on 'macro stuff'... Bullish on gold... Sjug: 'Gold stocks never cheaper'... Curzio's 'Magic Metal' conference call...