A market of extremes...

You must do this this year to protect your family…

We recently asked a top international asset-protection attorney what is the one thing you must do this year to protect your wealth.

In today's Digest Premium, we share his answer… and it may surprise you.

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

A market of extremes... Record corporate-bond sales... Junk bonds getting popular... Private equity crushes 2013... Macau gambling revenues hit record... A $100 million apartment... The same old advice...

 The Digest team is back in action today...

We hope you and your families enjoyed the holidays... And we wish you the best in the new year.

As for the markets... All we can say is 2014 promises to be an interesting year.

 Bond yields are at rock bottom, but rising. And the Federal Reserve has begun tapering its bond purchases... Gold and silver are coming off their worst years in more than a decade... Stocks are at all-time highs... New York Stock Exchange margin debt is at an all-time high (meaning folks are using record amounts of borrowed money to buy stocks)... Stock buybacks are at a record high... Oh, and a record amount of money is floating around the world...

Everything is at an extreme. And yet… investors aren't worried. The Volatility Index (the "VIX"), the market's fear gauge, is still under 15 (compared with 80 in the midst of the subprime crisis). According to Investor's Intelligence, a sentiment poll of newsletter writers, 59.6% of folks are bullish today. Only 14.3% are bearish. This sentiment is indicative of market tops, not bottoms.

Today, we'll look at some of the follies in the market that have been created or bolstered by the Federal Reserve's easy-money policies.

 First off, companies took advantage of absurdly low interest rates to issue a record $1.11 trillion in corporate bonds in 2013, according to data provider Dealogic. That surpasses the 2012 record of $1.05 trillion. Investors' appetite for bonds was insatiable last year, even though they lost money.

The S&P U.S. Issued Investment Grade Corporate Bond Index lost nearly 1.5% in 2013, its first down year since 2008.

We also saw some crazy bond deals... Technology giant Apple sold $17 billion of bonds in April, including some 30-year paper. (It's interesting to note a technology company is selling 30-year debt.) It was the largest corporate-bond deal ever at the time. Then, the huge telecom firm Verizon sold $49 billion of debt in September.

 Verizon and Apple are still highly rated corporate credits. But lots of money was also chasing higher-yielding, riskier corporate debt. As Jeff Clark wrote in the December 31 Growth Stock Wire…

 We spent a lot of time last year discussing the private-equity sector. Steve Sjuggerud recommended private-equity giant Blackstone Group in the December 2012 issue of True Wealth. Frank Curzio recommended another major player, Kohlberg Kravis Roberts, in the July 2012 Small Stock Specialist.

Readers are up 142% and 88%, respectively.

 Both Frank and Steve recommended private equity because the sector is a perfect way to play quantitative easing and low interest rates. At their core, private-equity firms borrow money to buy assets.

Over the past few years, these shops have been able to borrow vast sums of money at record-low rates to buy everything from equities to single-family homes. They also charge fees for their assets under management (which have grown to record highs). And they can take advantage of rising asset prices to mark up the assets on their books and sell other assets for rich valuations.

 For 2013, investors in private-equity funds are expected to receive more than $120 billion, according to investment adviser Cambridge Associates. That beats last year's record of $115 billion.

 Take a look at Blackstone's chart. Last week, it surpassed the $31-a-share price set at its initial public offering in 2007 (which we labeled a major "sign of the top"). The recent rally in Blackstone's stock has put another $3.7 billion in founder Steve Schwarzman's pocket...

 Negative real interest rates – when the rate of inflation is greater than the "risk-free" government-bond rate – force people to take more risks with their money. If you simply hold money in your savings account, you will see your wealth disappear. We're experiencing that today. And that's why we're seeing asset prices soar... The Fed has forced savers into riskier assets, like stocks and bonds.

 When inflation is eating people's wealth, you also see an uptick in gambling – another guaranteed way to lose money. Consider the latest numbers from the Chinese gambling mecca, Macau.

Gambling revenue in Macau increased nearly 19% to a record $45 billion in 2013, according to Macau's Gaming Inspection and Coordination Bureau. The semiautonomous region of China overtook Las Vegas as the world's largest gambling center in 2002... And analysts expect Vegas' 2013 revenues will only be one-seventh of those in Macau. Some analysts say Macau's gambling revenue could top $100 billion in the next five years.

For more on Macau, you can read the November 25 DailyWealth, which True Wealth Systems analyst Brett Eversole filed from the ground in Macau.

 Another result of the Fed's policies is soaring prices for "trophy assets." When rich people expect inflation, they trade their dollars for the world's most coveted art, gold, precious stones, wine, and real estate.

In November of last year, somebody paid a record $1.1 million for a rare Rolex watch. And as we discussed in the November 13 Digest…

 Now, an all-time record is about to be broken in one of the most competitive real estate markets in the world, New York City...

The cover of the most recent Departures magazine for American Express Platinum and Centurion cardholders boasts the headline – "The Hunt for the $100 Million Apartment."

It discusses the number of ultra-luxury penthouse condominiums coming onto the market today...

The developers of a building called 50 United Nations, located near the United Nations headquarters on 1st Ave., gave buyers the option to purchase the top-floor duplex and the full-floor penthouse below it for $100 million. It would be the first $100 million apartment sale in New York City history.

The nine-figure New York apartment is inevitable... According to Departures, the owners of an apartment in the Time Warner building (on Columbus Circle) turned down a $150 million offer.

 And an investment fund led by hedge-fund manager Bill Ackman recently purchased the penthouse in One57, a new luxury building, for $94 million. Citing "someone very close to Bill Ackman," the article concludes that the fund manager is "waiting for the phone to ring. He has no plans to sell – until someone offers him a billion."

 Is a billion-dollar apartment possible? Sure... These trophy assets – be it a Francis Bacon painting or New York City penthouse – can reach absurd heights during inflationary periods. We know we'd rather own them than sit in dollars. "Real estate has become currency," said Izak Senbahar, one of the developers quoted in the article. "New York has become a safe piggy bank... And it's sexy. You can only look at gold, but you can enjoy real estate."

 There's a lot of nonsense going on in the markets today. Things are looking toppy. But prices can always go higher (Steve Sjuggerud and David Eifrig both think so). We'll simply repeat the advice we've given you throughout this upward march... Raise some cash by selling some of your riskier positions, and mind your trailing stops.

If you're looking for a tool to help you with your trailing stops (including sending you automatic alerts when your stops have been triggered), we can't recommend our corporate affiliate TradeStops strongly enough. If you'd like to learn more about this tracking service and sign up, you can do so here...

 New 52-week highs (as of 12/31/13): BP (BP), Anheuser-Busch InBev (BUD), Blackstone Group (BX), Chicago Bridge and Iron (CBI), Enterprise Products Partners (EPD), Energy Transfer Equity (ETE), iShares Germany Fund (EWG), Freeport-McMoRan (FCX), SPDR Euro Stoxx 50 Fund (FEZ), Cambria Shareholder Yield Fund (SYLD), Corning (GLW), iShares Dow Jones U.S. Insurance Fund (IAK), Intel (INTC), SPDR International Health Care Fund (IRY), 3M (MMM), ONEOK (OKE), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Technology Fund (ROM), RPM International (RPM), Range Resources (RRC), Sequoia Fund (SEQUX), ProShares Ultra S&P 500 Fund (SSO), Skyworks Solutions (SWKS), Union Pacific (UNP), and United Technologies (UTX).

 In today's mailbag, some friendly notes from subscribers... How did your trading account look at the end of last year? Let us know at feedback@stansberryresearch.com.

 "Reading Porter's Digest today reminds me that we are fortunate people and not to take that for granted.

"I wish I had discovered Stansberry years ago. My previous investing history turned out overall well despite my bad habits. Since reading Porter, Steve, Doc, Matt and the others I finally believe I'm starting to educate myself on wealth building, risk management, and lessons of life. Over the last few years, I've made fewer mistakes and accumulated more profits than the previous ten years. I attribute that outcome to the Stansberry team and my belief and trust in them.

"Please forward to Porter and the team for me. They have helped my family more than they know. My humble thanks. Merry Christmas, Happy Holidays and wishing you all a very prosperous New Year." – Paid-up subscriber Richard Driscoll

 "Just wanted to thank you guys for a great year. As of today, my accounts are up over $500,000 year to date. That's about a 60% return for the year. I have never made even close to this amount of money in the market. The profits came from selling puts as recommended by Retirement Trader and DailyWealth Trader, and from Stansberry Alpha. More importantly, you have educated me to do many of my own trades, and to let the winners run and cut the losers quickly.

"I'd say that was well worth my small admission to become an alliance member. Perhaps that was my best investment." – Paid-up subscriber Rob M.

Regards,

You must do this this year to protect your family…

Editor's note: Longtime readers will recognize Joel Nagel's name. One of the world's top asset-protection attorneys, he's one of our go-to sources for insight in how to safeguard your wealth and diversify your assets outside the United States.

For today's Digest Premium, we asked Joel the No. 1 step he recommends people take right now to protect themselves. His answer may surprise you…

 As an asset-protection lawyer, my "top money move" for 2014 will differ from investment-oriented people significantly. For the last 25 years, we have been preaching the benefits of various legal structures to preserve, protect, and pass on wealth as efficiently and securely as possible. For folks without international legal structures, that would be the logical starting point.

 Moving some assets away from the dollar and outside the U.S. is something that should be on everyone's radar. Since S&A has been saying this for some time as well, I will assume most readers with assets worth protecting have already made at least some moves to diversify their wealth away from the U.S., the U.S. dollar, and perhaps away from all paper currencies through exposure to precious metals and other "hard assets."

 My top money move for 2014 isn't something that will give you an immediate financial return… and surprisingly is not a structure or strategy to protect assets. Rather, my top move for 2014 is to establish a second residence or citizenship to help you protect yourself and your family.

 Ultimately, protecting your family physically is much more important than protecting your wealth or finding the next best investment opportunity. Like insurance, a second residency or citizenship is something you may never need. But when the moment comes that you do need it, it is too late to start looking. A second passport can be used for safety in global travel and also to more easily open financial accounts with many banks/brokerage firms around the world.

Second citizenship falls into three main categories. First is citizenship through ancestry. For that, you need to have a parent or grandparent who immigrated to the U.S. In these cases, it is relatively easy to claim your citizenship. Ireland, the U.K., and Italy (just to name a few) make it relatively easy to obtain ancestral citizenship.

 People who don't have the ancestral option essentially have two other options, which I like to refer to as the "slow-cheap" method and the "fast-expensive" method. With the slow-cheap method, you physically go and live in another country for a number of years as a resident and then you may apply for citizenship. This process can take from three to 12 years depending on the country, but the residency application fees and government costs can be nominal.

Alternatively, the "fast-expensive" options generally refer to "economic citizenship," in which you can skip much (or all) of the residency period by making a large payment to the government or an even larger investment in the country that creates a specific number of jobs. The U.S. actually pioneered this type of fast-track investor visa (green card), which other countries have emulated as either permanent residency or citizenship programs. The programs start at $150,000 for several Caribbean nations and can go up to $3 million in the case of Austria.

 New in 2014 will be a fast-track citizenship program in Malta, which I believe could become the top economic citizenship program in the world. (You are one of the first people to even know about it.) The Malta passport is considered one of the top 10 passports in the world, with visa-free travel to most countries, including the United States.

Additionally, as Malta is a member of the European Union, Maltese citizenship permits a person to live, buy property, or invest [in many European nations] without further restrictions. While the costs of the Malta program are high at a little more than $1 million, there are perhaps no better and safer citizenships to have than a Maltese citizenship.

 Second residency or citizenship is undoubtedly my top money move for 2014. Whether you can afford a Cadillac program like Malta or only a low-cost option like Dominica, I believe everyone with assets to protect should consider a second residency or citizenship.

– Joel Nagel

Editor's note: Joel Nagel is an international lawyer and entrepreneur focusing his practice in the area of asset protection, cross-border transactions, and global investment. He can be reached at Nagellaw@aol.com or 001-412-749-0500.

You must do this this year to protect your family…

We recently asked a top international asset-protection attorney what is the one thing you must do this year to protect your wealth.

In today's Digest Premium, we share his answer… and it may surprise you.

To continue reading, scroll down or click here.

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