'The World's Central Banks Can't Save Us Anymore'
'The world's central banks can't save us anymore'... Top investors are getting cautious... Where Porter and Doc agree... This opportunity is ending...
The comments are enough to keep a central banker up at night...
"There may be no limit to what the [European Central Bank] is willing to do, but there is a very clear limit to what [quantitative easing] can and will achieve. The problem is that monetary policy has largely run its course."
"If central banks double down on their policies of QE, [zero interest rate policy] and [negative interest rate policy], it could cause a loss of confidence in central bankers, paper money in general, or one or more currencies, and lead to a collapse in bonds and stock prices."
"We have limited opportunities to lend... The only thing we can do is extend credit we would normally not do, and that leads to an accident waiting to happen."
Worse, these quotes come from some of the world's top CEOs and investors... like Axel Weber, chairman at Swiss financial-services company UBS... hedge-fund titan Paul Singer... and Ralph Hamers, chairman at Dutch banking giant ING, respectively.
Each January, thousands of the world's top investors, business leaders, and politicians gather in Davos, Switzerland for the World Economic Forum.
As you can guess from the comments above, the Wall Street Journal reports the mood at this year's event was anything but bullish...
Since the last financial crisis, the Federal Reserve and other central banks have used super-low interest rates and multiple rounds of quantitative easing ("QE") in an attempt to boost asset prices and "jumpstart" the global economy.
But it's now becoming clear that these policies have not worked as intended...
Despite unprecedented stimulus, the global economy is barely growing (if it's actually growing at all). These policies did send the prices of many assets higher, but even that appears to be ending. Each additional round of QE has had a smaller effect.
In short, many believe the debt-fueled boom of the past several years could be ending... and the central banks can do little to stop it. Or as the Journal put it, "the world's central banks can't save us anymore."
According to the report, several of the world's top investors are becoming much more cautious. They recommend holding more cash, being much more selective when investing new money, and preparing for a larger pullback in stocks.
Of course, none of this means a crisis is imminent...
Sure, there are plenty of reasons for concern. But as we frequently remind readers, no one can consistently predict when a bear market will begin.
What it does mean is that one of the biggest tailwinds for markets over the past few years could be fading. Whether the bull market continues or a bear market begins, more volatility is likely.
We continue to recommend being prepared for either outcome.
Our colleague Dr. David "Doc" Eifrig agrees...
Regular Digest readers know Doc isn't as bearish as Porter today. Doc believes this is just a normal correction in an ongoing bull market.
But despite their differing market views, they do agree on a few important points.
Both Porter and Doc believe that owning a diversified portfolio – using proper asset allocation and trailing stops, holding plenty of cash, and adding "hedges" (like short positions) when necessary – is the key to managing risk.
Both believe it's a mistake to sell all your positions and move entirely to cash at a time like this...
And both believe taking advantage of volatility is one of the best ways to profit during market downturns...
In fact, in his latest issue of Retirement Trader – published last Friday – Doc reminded readers why right now is the perfect time to use his options-selling strategies...
Volatility is an important part of our strategy. Option prices are determined by volatility. When volatility is high, options get more expensive. It's built into the way options are priced. In a simple sense, you can think of those who BUY puts as people buying insurance contracts. Those people are willing to pay a lot more for insurance when they are scared.
As Doc noted, this is great news for options sellers...
You can earn more income on the exact same trades simply because people are willing to pay more out of fear. And fear is high today...
So how volatile do you think the stock market is today?
It's the second-highest surge in four years... behind only the August 2015 correction... And as you can see in the chart below of the Volatility Index (the "VIX") – a measure of broad market volatility – we're not far off that peak.
Just how good is the opportunity today?
Doc just recommended selling puts on one of the highest-quality blue-chip stocks in the world.
If shares head higher, readers who take the trade today could earn 4.6% – or nearly 28% on an annualized basis – by March 17.
And if they have to buy shares? Doc says the company's dividend combined with today's generous options premium will give readers a 6.5% cash return – again, from one of the world's best companies – in the first year alone.
How much money will you earn from your dividend stocks this year?
If you still haven't tried Doc's Retirement Trader, there's never been a better time than today.
And until tomorrow night, you can claim a lifetime subscription for the normal price of just one year. Even better, it's 100% risk-free to try.
To learn more – and see a step-by-step demonstration of Doc's strategies in action – click here.
New 52-week highs (as of 1/25/16): short position in BOK Financial (BOKF), short position in Cullen/Frost Bankers (CFR), short position in Capital One Financial (COF), and short position in Zions Bancorporation (ZION).
In today's mailbag, an unusual request from a subscriber who's a big fan of Steve Sjuggerud. Send your e-mails to feedback@stansberryresearch.com.
"Dear Dr. Sjuggerud, I have received the offer to acquire your new book and have already downloaded the digital version. I intend to acquire a hardcover version as well for my bookcase but was wondering if there is a way to obtain an autographed version for my collection? I will be happy to pay a premium if necessary. I fully understand if this request cannot be fulfilled but I would have regretted it for quite a while had I failed to ask. Years ago, I dissected a promotional email for your Confidential newsletter related to ID Biomedical and it became my third most profitable trade of all time with over a $200K profit. You have been high on my list of favorites ever since... go figure. Thank you for kind attention to this request." – Paid-up subscriber Ken M.
Brill comment: At this time, we don't have plans to distribute autographed books. But if you're ever at one of our terrific Stansberry Alliance events, I'm sure Steve would be happy to sign your copy. For anyone else who is interested in Steve's brand-new book – Currency Crisis: How to Protect and Grow Your Wealth When the Government Destroys Our Money – you can get your copy right here.
Regards,
Justin Brill
Baltimore, Maryland
January 26, 2016
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