What rising interest rates mean for stocks...

Stansberry & Associates Hall of Fame

(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

Economics is bunk...

In today's Digest Premium, Agora Inc. founder Bill Bonner shares a conversation he recently had with a college student who was considering majoring in economics...

In his advice, Bill – who is, of course, a major financial publisher – explains why economics is a "phony science."

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

Economics is bunk...

In today's Digest Premium, Agora Inc. founder Bill Bonner shares a conversation he recently had with a college student who was considering majoring in economics...

In his advice, Bill – who is, of course, a major financial publisher – explains why economics is a "phony science."

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 11/29/2013

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.

What rising interest rates mean for stocks... Porter's biggest fear... Where to find double-digit yield right now... A bond genius' favorite place for money today... The yen's huge drop... We're in the midst of a currency crisis...

 We're living in a yield-starved environment.

The 10-year Treasury yield is at a two-year high of 2.8% today... That's up from the all-time low of around 1.6% in May... but it's still far lower than its historical average.

 Interest rates will increase... It's an economic certainty.

Despite its best efforts, the Federal Reserve can't keep rates down forever.

The question is, when will we see a more substantial increase in rates?

While no one knows the exact time frame, rising interest rates will eventually make stocks cheaper.

 Steve Sjuggerud explained the relationship between interest rates and stock valuations in today's DailyWealth...

 Still, rising interest rates are Porter's biggest fear in the market today... As he wrote in the August 16 Digest Premium...

 The question remains... Where can an investor find yield today? Retirement Millionaire editor Dr. David "Doc" Eifrig has found an unpopular corner of the bond market where investors can generate thick yields – municipal bonds.

"Muni" bonds are issued by state and local governments to pay for anything from streets to sports stadiums. They pay healthy, tax-exempt yields to creditors. But they have sold off as investors feared increased defaults.

Doc always thought the fears surrounding muni bonds were overblown. Over the past 40 years, investment-grade muni bonds have defaulted just 0.017% of the time, according to Forbes.

 He originally recommended muni-bond funds to his Retirement Millionaire subscribers back in October 2008... And they remain one of his favorite ways to earn income today. From the latest issue of Retirement Millionaire...

 Some of these funds yield close to 7%... But because of muni bonds' tax-exempt status, you actually pocket a tax-equivalent yield of nearly double digits.

 We wrote more about muni bonds in the November 13 Digest, when we mentioned that hedge funds now own billions of dollars' worth of muni bonds... up from almost none five years ago.

Doubleline Capital's Jeffrey Gundlach is one of the best bond-fund managers in the game. He recently told Barron's he's bullish on munis because many of the funds are trading below their net asset value and offering healthy yields. (Does that sound familiar?)

 Gundlach also sees another great opportunity in the market today… one Steve Sjuggerud has been recommending to his True Wealth subscribers for months… emerging markets.

"A well-diversified, dollar-denominated – so you don't have currency risk – emerging-market bond fund is the single-best place for investors to be allocating today," Gundlach said.

 U.S. high-yield corporate bonds are up around 7% this year. Meanwhile, dollar-denominated emerging-market debt is down between six and seven percent...

"This has created quite a dichotomy in value, and the yields and prospective returns on the emerging-market sector should be something investors look at," he said.

 Gundlach also said investors are too worried about rising interest rates, at least in the short term. Rates can stay low for a "multiyear period" with today's low inflation environment and an accommodating Fed.

 Steve is bullish on another sector of emerging markets, which we'll discuss tomorrow. Today, we're discussing another trend he nailed...

 Are the Japanese getting a taste of what's to come in America?

Regular Digest readers know we've been urging you to read Steve's True Wealth "currency seminar." This short, easy-to-read primer on currency movements provides you with the critical knowledge (and specific recommendations) you need to navigate the extreme volatility we're seeing – and will continue to see – in the currency markets.

 This volatility is the product of global central banks' endless "E-Z-Credit" programs. It's the result of the bankrupt belief that governments can spend, borrow, and print their way to prosperity. Still, our "leaders" pursue them on an unprecedented scale. Nearly every major government is desperately trying to escape its debt burden by devaluing its currency. And Japan is the current leader...

 Late last year, Japan elected Shinzo Abe as Prime Minister. His stated goal is to "stimulate" the sluggish Japanese economy by printing money and extending cheap credit (in other words, by devaluing its currency).

Abe's efforts have succeeded. The Japanese yen index has fallen from 127 in late 2012 to a near-five-year low of 98. This is an enormous fall for a major currency. You can see it in the four-year chart below...

 The decline in the Japanese yen shows how the global currency crisis is already producing giant market ripples. The global currency crisis isn't "going" to happen. It's happening right now.

 You can bet a fall similar to the yen is in the cards for the U.S. dollar. As Porter has described dozens of times, Obama and Bernanke's "spend, borrow, and print" policies will eventually produce a huge decline in the value of the U.S. dollar (as it will for Europe's currency).

 This is why we again urge you to pick up a copy of Steve's True Wealth "currency seminar." We also urge you to read the November issue of True Wealth.

Inside these two pieces of research, you'll find everything you need to know to not only protect yourself from the global currency crisis... but also several specific (and easy-to-buy) assets that will skyrocket in value in the coming years.

You'll learn the absolute best currency to own for the next 10 years. (Master investor Jim Rogers owns a lot of it.) And you'll equip yourself with the knowledge you'll need to prosper while so many people are struggling to figure out what's even going on.

 This information is so important, we're making it a ridiculous "no brainer" decision for you to read it. You can subscribe to Steve's True Wealth for only $39 (normally $99)... Plus, you'll be granted immediate access to his "currency seminar," where you'll learn several ways to protect yourself from what's happening in the global economy today.

If you decide True Wealth isn't for you, we're offering a 100%, money-back guarantee for your first four months. You can sign up by clicking here (without watching a long promotional video).

 New 52-week highs (as of 11/29/13): ProShares Ultra Biotechnology Fund (BIB), Blackstone Group (BX), CVS Caremark (CVS), iShares Germany Fund (EWG), SPDR Euro Stoxx 50 Fund (FEZ), iShares Dow Jones Insurance Fund (IAK), iShares Nasdaq Biotechnology Fund (IBB), SPDR International Health Care Fund (IRY), 3M (MMM), Navigators (NAVG), NVE (NVEC), ProShares Ultra Technology Fund (ROM), Cambria Shareholder Yield Fund (SYLD), Targacept (TRGT), and Wal-Mart (WMT).

 A happy Alliance member and a reader who doesn't read what we write. You can weigh in at feedback@stansberryresearch.com.

 "I just got back from Japan yesterday after spending time in Singapore and attending the Alliance conference. I was able to fly on the new 787, certainly an upgrade from the other planes flying around.

"What a great time I had in Singapore! This was my 5th Alliance meeting, and it was certainly one of the best. I really enjoyed the people, both at the Alliance meeting as well as the locals. In addition, I have friends that live in Singapore that I was able to see.

"Porter, your presentation was fantastic. It really puts things in perspective. And thanks for paying my bill for the cocktails, lunch and dinner! What a guy!!!" – Paid-up subscriber Bob Greene

 "Listen, Moron, the [Social Security] trust fund holds the largest amount of Treasury notes of any entity holding debt of the United States!! If those Treasury notes are not good, then neither are any treasury notes issued by the U.S. government! The interest on the SS Trust Funds each year is in the $100 million category. To say that there are no assets in the SS system is saying that no instruments issued by our government have any value. Last time I looked the SS Trust Fund has $2.1 trillion dollars' worth of notes.

"The fact that the government borrowed the money and utilized it for political reasons does not negate the debt. If the SS Trust Fund were allowed to sell those notes on the open market and gave you the $2.1 trillion to invest... do you think you could make the system solvent? Or is all your rhetoric about putting $10,000 in WDDGs and becoming a millionaire just bunk? Or maybe a Ponzi scheme? How much cash do you keep laying around?... Or do you invest it in a paper instrument? If I use your reasoning, then unless I have something other than a paper instrument, I'm broke." – Paid-up subscriber Bruce Foster

Goldsmith comment: First off, the U.S. government holds the most Treasurys... And it's accumulating more every day. The government is currently buying around 70% of Treasurys.

You wrote: "To say that there are no assets in the SS system is saying that no instruments issued by our government have any value."

That's exactly right.

Regards,

Sean Goldsmith
Miami Beach, Florida
December 2, 2013

Economics is bunk...

Editor's note: You can find plenty of pundits and blowhards out there who claim to know the truth about economies and how they work... and sadly, many of them have positions of actual authority in the government...

In today's Digest Premium, we feature the last excerpt of the writings of Agora Inc. founder Bill Bonner.

Originally published last month in Bill's free daily e-letter, Diary of a Rogue Economist, this essay recounts a conversation he had with his college-age son's roommate. The friend was considering switching majors to economics. In advising the student, Bill lays out exactly why economics is a "phony science"...

 "OK, let me explain it to you," we said.

The roommate was wondering if he should switch his major to economics.

"Economics is a phony science. The more you study it, the more you think you know... and the less you really know about how an economy actually functions.

"I'll explain why in just a few sentences.

 "If you are a real scientist, you start with things you can know... and you can build on them.

"Water boils at 212 degrees Fahrenheit at sea level, for example. The molecules heat up... then suddenly change from liquid to gas... and the pot boils. Right? Happens every time. You can count on it. And with this knowledge, you can build a steam engine.

 "So, the simpleminded economist comes along and says, 'Hey, an economy is like a pot of water! You heat it up... you get more activity... and GDP grows.'

"The analogy holds up superficially. You heat up the economy by putting some fire under it. If you're a central banker, you lower interest rates. If you're a politician, you increase the deficit.

"You know there's a risk of overheating... or causing a bubble. But you think you understand how it works. You think you can predict and control the outcome because you're a scientist who uses mathematical models, just like a real engineer.

 "But the problem is you don't know anything. You don't know if an economy really is like water. You don't know where sea level is. For all you know, you're high in the Alps. And you don't know whether the fuel you're using adds to the fire... or subtracts from it. [Quantitative easing], for example, may help heat up the economy. Or it may not. No one knows for sure.

"And get this. All those little molecules, you know – those individuals in the great economic pool? As soon as they catch on to what you're doing, they will change their behavior. That's the big difference between water and people. Water does the same thing no matter what you say or what you think. People don't.

 "We talk about the economy being like water. Well, try to imagine the contrary. Imagine water as though it was like a real economy. Imagine that the water knew you were going to bring it to a boil. Then instead of turning into vapor at 212 degrees, it might boil at 100 degrees or 170 degrees or 50 degrees in anticipation.

"And then, after you've brought it to a boil a few times, the water gets sick of being manipulated like this... and it boils off if it even suspects you're thinking of warming it up."

 The kid started to fidget and look away. He was afraid he had run into some cranky old nut job who was going to keep talking all morning.

"Well, I guess I'll stick with engineering."

"Good idea."

– Bill Bonner

Editor's note: Bill is a familiar name to most Digest subscribers. We frequently feature his work in our weekend Masters Series essays... and we regularly note that he is among our favorite writers on politics, history, and, yes... economics.

Bill recently established a "family office" to preserve and grow his own family wealth. In doing so, he realized that many subscribers would benefit from learning the same techniques and strategies it employed. So he launched the Bonner & Partners Family Office as a way to share these insights. He recently recorded an interview describing some of his core ideas about building a lasting legacy. To ensure you see the video when it's released next week, click here.