The economic indicators Porter watches...
I (Porter) look at hundreds of economic indicators to follow what's going on in the economy.
I follow the overall level of credit in the economy very closely. I follow the amount of various types of debts... like state, local, federal, financial, mortgage, student loan, and car.
As an aside, if you want to see another example of the bubbles we're inflating again, take a look at car sales over the last 18 months or so. As I pointed out in my latest "Letter from the Chairman of General Motors," the main reason for this is because car companies are now financing subprime borrowers again.
In General Motors' case, it has put up $12 billion in financing for car buyers over the last 18 months. About half of that went to people with a credit score below 600. Didn't these guys learn anything?
Back to the topic at hand... I watch lots of different indicators of debt, currency, and credit around the world. And in a global paper economy, looking where the credit flows is very, very important.
I watch dozens of different measures of economic activity. That includes the Producer Price Index (PPI), the Consumer Price Index (CPI), and employment. I watch the Bureau of Labor Statistics employment figures. And I watch commodity prices via the Rogers Index and the Goldman Sachs Commodity Index.
I also watch the prices of gold, crude oil, and natural gas... I watch the ratios of how expensive gas is relative to coal, for example. I watch 25 to 30 individual stocks that represent key markets, like shipping giant UPS (for transportation), railroad giant Union Pacific (for oil shipments), and EOG Resources (for oil drilling).
I follow the indicators I publish in my Investment Advisory newsletter. That includes mutual fund flows and the risk spread between U.S. Treasurys and junk bonds. And I keep a close eye on the stock market as a whole to see general stock valuations.
In Monday's Digest Premium, I'll share what my trusted indicators are telling me about the market today...
– Porter Stansberry with Sean Goldsmith
The economic indicators Porter watches...
Every day, Porter tracks hundreds of economic indicators. In today's Digest Premium, he shares some of the most important things he watches to take the temperature of our economy.
To continue reading, scroll down or click here.
Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)
As of 10/11/2013
| Stock | Symbol | Buy Date | Return | Publication | Editor |
| Rite Aid 8.5% | 767754BU7 | 02/06/09 | 624.7% | True Income | Williams |
| Prestige Brands | PBH | 05/13/09 | 398.1% | Extreme Value | Ferris |
| Enterprise | EPD | 10/15/08 | 226.6% | The 12% Letter | Dyson |
| Constellation Brands | STZ | 06/02/11 | 187% | Extreme Value | Ferris |
| Abbott Labs | ABT | 05/20/11 | 178.5% | The 12% Letter | Ferris |
| Altria | MO | 11/19/08 | 169.2% | The 12% Letter | Dyson |
| McDonald's | MCD | 11/28/06 | 164.7% | The 12% Letter | Dyson |
| Ultra Health Care | RXL | 03/17/11 | 159.3% | True Wealth | Sjuggerud |
| GenMark Diagnostics | GNMK | 08/04/11 | 150.8% | Phase 1 | Curzio |
| Hershey | HSY | 12/06/07 | 150.8% | SIA | Stansberry |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals |
| 1 | True Income | Williams |
| 2 | Extreme Value | Ferris |
| 3 | The 12% Letter | Dyson |
| 1 | The 12% Letter | Ferris |
| 1 | True Wealth | Sjuggerud |
| 1 | Phase 1 | Curzio |
| 1 | SIA | Stansberry |
Stansberry & Associates Hall of Fame
(Top 10 all-time, highest-returning closed positions across all S&A portfolios)
| Investment | Sym | Holding Period | Gain | Publication | Editor |
| Seabridge Gold | SA | 4 years, 73 days | 995% | Sjug Conf. | Sjuggerud |
| ATAC Resources | ATC | 313 days | 597% | Phase 1 | Badiali |
| JDS Uniphase | JDSU | 1 year, 266 days | 592% | SIA | Stansberry |
| Silver Wheaton | SLW | 1 year, 185 days | 345% | Resource Rpt | Badiali |
| Jinshan Gold Mines | JIN | 290 days | 339% | Resource Rpt | Badiali |
| Medis Tech | MDTL | 4 years, 110 days | 333% | Diligence | Ferris |
| ID Biomedical | IDBE | 5 years, 38 days | 331% | Diligence | Lashmet |
| Northern Dynasty | NAK | 1 year 343 days | 322% | Resource Rpt | Badiali |
| Texas Instr. | TXN | 270 days | 301% | SIA | Stansberry |
| MS63 Saint-Gaudens | 5 years, 242 days | 273% | True Wealth | Sjuggerud |
The economic indicators Porter watches...
Every day, Porter tracks hundreds of economic indicators. In today's Digest Premium, he shares some of the most important things he watches to take the temperature of our economy.
To subscribe to Digest Premium and access today's analysis risk-free, click here.
The most useful ideas you'll read this year... How to prepare for the dollar crisis... The best stock market opportunity of Steve Sjuggerud's career... How to make 20% a year SAFELY...
In today's Digest... a collection of great ideas.
The most useful ideas you'll come across this year, in fact.
Before we get into these ideas, it's vitally important for you to realize why we're sharing them...
It will be the difference between losing nearly everything you have in the coming years of volatility and currency depreciation... or doubling, tripling, even quadrupling the size of your asset base during this time.
As Porter detailed a few weeks ago, the U.S. is in a horrific financial situation. It's much worse than most people realize.
We are squandering trillions of dollars of accumulated capital and competitive advantages built up over centuries. We are selling the "family furniture" to the Chinese and other foreigners in order to fund vast social welfare programs and our bloated military-industrial complex.
No less than Warren Buffett – America's wise grandfather – has issued major warnings about this dangerous situation. Still, we spend and borrow.
As Porter noted in his piece:
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We can't know when the dollar crisis will arrive. We only know it will. We know it will bring extraordinary volatility. And when it happens, you'll want to be prepared. You'll want to know why it's happening... and what you can do to protect your family.
That means becoming familiar with key, timeless wealth ideas... the kind we constantly cover in the S&A Digest and our subscription newsletters.
We share many of these ideas below...
Ignoring these ideas will lead to your bankruptcy. Mastering them will make you wealthy in the coming age of volatility...
We've covered our "core" risk-limiting techniques many times in the Digest. These include asset allocation and position sizing. Because we've covered these ideas so many times, we won't delve into them today. If you're not familiar with these ideas, consult our "11 Steps to Maintaining and Growing Wealth with Your Investments" guide.
Today, we're adding strategies to your investor "toolbox."
One key strategy for your "toolbox" is a mastery of the "boom and bust" cycle...
Certain assets – like biotechs, commodity producers, and airlines – go through tremendous rallies of hundreds of percent... They draw in the "hot money" and rise to absurd valuations. When everyone has piled into the trade and there's no one left to buy, they get crushed and lose 50%-80% of their value.
Ride the booms and avoid (or even short) the busts, and you can make a fortune.
In the coming years, our inflationary monetary policies will produce huge booms and busts in these areas... just like they have for the past five years. If you know the right time to buy them (at the bottom, when nobody can stand the thought of owning them) and the right time to sell them (at the top, when they are very popular with the masses), you'll do extremely well in the market.
Our senior analyst Steve Sjuggerud is exceptional at spotting these opportunities...
And right now, Steve is hugely bullish on one of the world's greatest "boom and bust" assets. It's been in "bust mode" for three years. But according to Steve, it's about to see another massive boom...
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As Steve showed his True Wealth Systems readers, this asset is cheap. The best value Steve has seen in his lifetime. It's hated. NO ONE wants to invest here... You'll see why in a minute. And it's now officially in an uptrend, up nearly 25% from the bottom.
And if you buy right now, you can make 100%, 200%, even 300% gains... without taking on any leverage. The potential is so high, Steve says, because the numbers are so good: "I don't expect to see valuations like this again in my lifetime."
The asset is emerging markets.
We know most U.S. investors can't stand the thought of putting money overseas.
But you're fighting with a hand tied behind your back if you ignore the potential here. Remember... these markets are growing much faster than the U.S.
We're skeptics of any "official" growth numbers out of China. They're fudging the numbers, just like any government would (including our own).
But you don't have to buy into government stats to understand this... Shanghai is China's most populous city. And Pudong is its financial district. As you can see, things have changed...
And you don't have to be a bull from China to profit on emerging markets. Here's how Steve explains it...
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While Steve thinks China presents an interesting trade, he's NOT recommending folks buy the big China exchange-traded fund (FXI). He's got a better idea.
It spreads your bet around several of the world's fastest-growing economies. They're dirt-cheap right now... And the last two times they were this cheap, they doubled investors' money in about a year. (And once went on to gain more than 700%.)
Another idea you need to master is how to recognize great businesses.
If you don't know how to identify and invest in great businesses... while avoiding marginal businesses... your portfolio is very unlikely to survive the large systematic shocks headed our way. You'll end up owning weak, risky businesses that will blow away like ashes in a typhoon.
Fortunately, Extreme Value editor Dan Ferris just shared his full guidebook on what makes for a great business with his readers...
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His five clues are:
| • | Consistent returns on equity. This number tells you how much money you're going to make (on average, over the long term) on the cash you put into the stock. |
| • | Consistent profit margins. Competition usually drives profit margins lower. So if you find a company that can hold its profit margins steady, you know you've found a great competitor. |
| • | Strong balance sheet. A company that either has much more cash than debt... or generates much more than enough cash to cover its debt payments... is much less risky than a company that depends on the debt market to keep running. |
| • | Lots of free cash flow. A stock is a piece of a business. Businesses get their value from how much cash they produce for their owners. So the more free cash flow, the better. |
| • | A history of rewarding shareholders. Companies put cash in their shareholders' pockets by buying back shares or paying dividends. |
One stock that hits all five "clues" is Microsoft (MSFT).
Microsoft's return on equity is at about 46%. According to Bloomberg, that beats nine out of every 10 stocks with a market cap of $500 million or more. It earned a thick 28% profit margin last year (up from the year before). With $15 billion in debt and $77 billion in cash, it has more money than it knows what to do with. It generated more than $24 billion in free cash flow in 2012. And it spent half of that on dividends and share repurchases.
Right now, Microsoft is trading right at Dan's maximum buy price of $34 a share.
The most important benefit of Dan's research is that you can use it to generate big gains with a large portion of your portfolio...
With "boom and bust" speculations, you have to constantly monitor them... and you never want to have too much money at work. The gains can be spectacular. But if you get caught in a bust, you can get seriously hurt.
Microsoft and the companies like it on Dan's exclusive buy list are all solid, safe long-term holdings. These are the stocks you need to own as the dollar gradually loses its value. Great businesses will preserve your purchasing power.
Another idea you must master is volatility.
Most investors have a completely warped view of volatility and the market environments it creates. Volatility is typically associated with falling stock prices and negative headlines.
Most investors see volatile markets, falling stocks, and bad news as cause to curl up in the corner. This is completely at odds with how a sophisticated investor sees them...
Sophisticated investors and traders flock to volatile markets.
They know volatility and crisis are what create incredible buying opportunities.
Doc Eifrig just touched on that idea in today's Retirement Trader...
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He says he "couldn't design a better scenario" for option traders than the one we have today:
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Doc is always on the lookout for these kinds of opportunities... when the crowd gets scared out of a good idea. And his readers are benefiting: Doc just closed his 136th winning trading position in a row.
That brings us to the fourth thing you master today: how to safely generate income...
The government is hell-bent on "juicing" the economy. It's keeping interest rates near zero, which leaves retirees few options for generating income on their savings. Plus, with the very real threat of rising interest rates, most bond investments aren't safe.
But as Doc noted, right now is an incredible time to sell options. Selling covered calls and naked puts is a SAFE way to generate double-digit annual income (without using any leverage or margin).
Just take a look at what we've done in DailyWealth Trader:
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In August, we had six trades expiring for an average 1.5% in 45 days, 12% annualized. |
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In July, we had eight trades expiring for an average 1.3% in 75 days, 7% annualized. |
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In June, we closed three trades for an average 3.4% in 61 days, 20% annualized. (We closed two of those trades early here.) |
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In May, we had seven trades expiring for an average 3% in 47 days, 23% annualized. |
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In April, we had 12 trades expiring for an average 3.4% in 60 days, 20% annualized. |
| • | In March, we had three trades expiring for an average 4.5% in 60 days, 27% annualized. |
With volatility spiking, we're seeing even higher payouts now. Take our latest trade on tech giant Cisco (CSCO), for example...
We recommended that readers buy shares of Cisco and sell the November $23 covered calls. At the time, Cisco was trading for around $22.80. Selling the covered calls meant agreeing to sell their shares for $23. They collected $0.77 per share (3% of the purchase price) for doing so.
Right now, Cisco is trading for more than $23... If it stays there, shares will get "called away" when the option expires on November 16. Not only will traders get to keep the option premium, but they'll also earn capital gains when they sell shares for $23.
That comes out to 44% annualized.
Next week, subscribers can expect to see a similar trade on Apple.
We've recommended eight option trades on Apple since June. We closed five of those trades with an average 4.2% return in less than six weeks. The other three are on track to close as winners, too... for an average 3.7% return in about seven weeks...
So we expect these eight trades to average 33% annualized returns.
One final idea for your toolbox...
Is how to sell a stock.
It sounds laughably simple. But it takes most folks years of terrible investment results before they finally learn the basics of selling stocks.
It's easy to buy stocks. It's easy to get excited about their business prospects and profit potential. It's a lot harder to admit a mistake and move on. It's also hard to hang onto a winning investment without getting an "itchy" trigger finger... and selling too soon.
Fortunately, there's an easy way to master the selling of stocks... the "trailing stop."
Recently, Richard Smith, the founder of TradeStops.com, compared a simple, mechanical stop loss to strategies followed by real-life investors... like you.
Dr. Smith studied math at the University of California, Berkeley. And he holds a PhD from The Watson School of Engineering at SUNY Binghamton. He owns his own huge database of securities prices and has a large team of programmers. He's done extensive statistical analysis for major pharmaceutical companies.
Here's what he found:
After analyzing dozens of individual investors' portfolios trade-by-trade, we've found that in nearly every single case, a trailing stop would have dramatically improved performance.
Take one consultant in his mid '40s, for example... If he had used Dr. Smith's software – instead of gaining 30.8% of his investment's value in Patriot Coal Corp – he would have made a 231.8% gain.
Another investor – a 60-year old retired psychologist – instead of taking a short-term capital gain of 18.5% in Apple – would have made a 50% long-term capital gain using Dr. Richard Smith's software (saving big money on taxes as well).
This is only a small sample of the everyday investor portfolios Dr. Smith analyzed. He found the same mistakes in the dozens of portfolios he analyzed...
Even our own...
| • | Following the recommendations in Porter's Investment Advisory over the last 10 years produced a 300% total return. But using Dr. Smith's recommendations would have made 364%. |
| • | Dan's Extreme Value produced 166% gains. But using Richard's formula with Dan's investment ideas would have made a lot more – 253%. |
| • | Steve's conservative advice in True Wealth served readers very well, with total returns of 144%. But using Dr. Smith's formula all of the time (instead of just most of the time, like Steve did) would have increased that gain to 204%. |
You see, even analysts with decades of experience have trouble figuring out the right time to sell.
You might have seen us discuss these results already... You might have heard us talk about Richard Smith's software...
But we had to bring it up again.
Richard recently put together a full report that shows you exactly what would have happened if S&A's editors all used 25% trailing stops... and never sold a stock except when the trailing stop was triggered. (He also shows you which editors have the best overall track records.)
As Porter recently wrote, "I believe that if you knew what was inside Richard Smith's report and how easy it was to use TradeStops... you would be crazy (or stupid) not to buy it and not to use his software."
The thing is... You don't have to buy it. You can get it for free. And you can try TradeStops for free. But you have to let us know that you're interested before midnight tonight.
If you're ready to master this idea – if you're ready to finally know WITHOUT QUESTION when to sell a stock – click here.
New highs (as of 10/10/13): EnerSys (ENS), East West Petroleum (EW-V), SPDR Euro Stoxx 50 Fund (FEZ), Integrated Devices Technology (IDTI), Loews (L), ONEOK (OKE), and Sturm, Ruger (RGR).
In today's mailbag, some satisfied readers write in about TradeStops. Haven't we angered you lately? Send your notes to feedback@stansberryresearch.com.
"I finally decided to bite the bullet on your reco and bought into TradeStops ... Sure enough, on entering 38 positions in 4 portfolios, I found 2 that needed attention. That paid for the program." – Rick
"Thank you for the recent link and special offer to TradeStops.
"Until now I was manually calculating my trailing stops and it was becoming quite cumbersome and awfully time consuming. Now I can rest easily knowing I have entered my stops without exposing my position for the world to see." – Steve Jochimsen
"I 100% depend on TradeStops; the software is very simple. My extremely broad portfolio has many positions as I subscribe to most of your newsletters and have modest positions from all of them; probably too many. I can't even imagine how much time it would take to do even a rudimentary job tracking manually. I have used TradeStops since Summer, 2011, when Steve recommended it shortly after I joined Stansberry. Their software and versatility has vastly improved since then." – Terry Safford.
"I can't thank you guys enough for the point out years ago to TradeStops. It's been very very beneficial to my portfolio and my overall financial health." – Joe
"I just listened to the Podcast with Richard Smith of TradeStops. He's got a great site and I highly recommend it for anybody trading, just like you do. You guys turned me on to it and its terrific." – Anonymous
Amber comment: If anyone else would like to hear Porter's full discussion of TradeStops, you can find it on his podcast right here.
But don't wait to follow up... After midnight tonight, it'll cost $99 to try TradeStops. You can start your free trial right here.
Regards,
