A new uptrend in an unexpected place...
A new uptrend in an unexpected place... The latest on the U.S. dollar... The End of Aging...
Editor's note: This week in the Digest, we're featuring special commentary from Paul Mampilly, editor of our newest trading service, the Professional Speculator. Yesterday, Paul shared his predictions about the future of Big Data and how it will influence everything from restaurants predicting your food order to computers automating your decisions. He also shared the names of a few companies set to benefit from this long-term megatrend. If you missed it, you can read it right here.
Today, Paul discusses how certain companies are working to slow down or end the aging process, and even develop superhuman senses... and shares the names of more companies that will reward investors today. Be sure to read Paul's essay at the end of today's Digest.
According to the Wall Street Journal, an uptrend has quietly developed in U.S. bank stocks...
The KBW Regional Banking Index – a widely followed gauge of regional banks – is up nearly 6% since the beginning of April... around twice the return of the S&P 500.
Over the last 10 years, the KBW has fallen 24%, while the S&P 500 has risen 79%. But that trend could be starting to turn around. From the article...
Many are growing more confident that U.S. growth will pick up in the second half of the year following a soft start to 2015, buoying long-term interest rates.
Stronger growth and rising rates would boost banks' earnings by allowing them to widen the spread between the interest they charge on loans and what they pay for deposits.
Other portfolio managers say that even without a rate increase, valuations on banks are low, given improving loan growth and rosy credit trends. Banks have also largely put behind them a series of large penalties and legal troubles over mortgage securities, interest-rate rigging, and other issues.
"Domestically focused bigger banks are one of the few areas that are still cheap in the marketplace," David Chalupnik, head of equities at Nuveen Asset Management, told the Journal.
The PowerShares KBW Bank Portfolio Fund (KBWB) trades for nearly 25% cheaper than the S&P 500 on a price-to-earnings basis today.
Last Thursday in the True Wealth Market Intelligence Sentiment Monitor, Steve Sjuggerud and research analyst Brett Eversole discussed the opportunity in financial stocks today...
Years after the financial crisis, investors still want nothing to do with financial stocks. Today's reading of 20% is one of the most negative in history. Sentiment this bad could point out an opportunity. When investors flee a sector en masse, it tends to point toward a bottom, not a top. When investors are all doing the same thing, they're usually wrong.
Interestingly, financial stocks have begun a silent uptrend in recent months. They've underperformed the overall stock market since the beginning of 2015... but they've beaten U.S. stocks since bottoming at the end of January. Negative sentiment, combined with an uptrend, makes financial stocks a sector that interests us right now.
Steve also recently updated his thoughts on the U.S. dollar...
Regular Digest readers know the dollar soared for much of the past year. From July 2014 through March, the dollar rallied nearly 25%... a huge "parabolic" move for a major currency. And as the dollar soared, investor sentiment was soaring, too...
Investors were so optimistic that Steve called it "the most important extreme in the world." He warned his True Wealth Systems subscribers about the situation last fall...
The rally has pushed sentiment to extreme levels. We noted the extreme dollar sentiment in a recent Review of Market Extremes. And things have gotten crazier since then...
Steve reminded readers that extreme sentiment is almost always a bad sign...
When sentiment readings signal extreme optimism, the opposite usually occurs... Now, we aren't making this bet today. We wouldn't consider it until the downward move begins. But there's a reason we're calling this the most important extreme in the world today... Most everything you buy, sell, and trade comes priced in dollars.
Of course, the dollar – and investor sentiment – continued higher through most of the winter. In March, the dollar hit its strongest level in 12 years, while optimism hit all-time extremes.
But since that time, both have reversed. The dollar is now nearly 5% weaker than it was then. Steve shared his latest thoughts on the dollar with True Wealth Systems subscribers last week...
After spending almost a year going straight up, the dollar has spent two months going straight down. The buck had gone too far, too fast. And everyone expected that rise to continue. Stretched trades like this always come back to Earth... Investments (like the dollar) tend to crash when everyone loves them. And that's what we saw before the dollar began its descent...
Steve also explained why there's likely more downside ahead for the dollar...
The March peak in investor sentiment was the highest we've ever seen. But similar rollovers have occurred during all of the dollar's major down moves over the last 15 years. And when the dollar starts falling, double-digit declines are common. The dollar even fell nearly 30% in the early 2000s. This tells us the downside will likely continue.
We don't expect the dollar to fall immediately back to last summer's lows. But history says more downside is likely from here. That's good news for other global currencies, commodities, and even U.S. stocks. The strong dollar has been a massive global headwind.
New 52-week highs (as of 5/26/2015): Deutsche X-trackers Harvest China A-Shares Fund (ASHR), CDK Global (CDK), Global X China Financials Fund (CHIX), and WisdomTree Japan Hedged Equity Fund (DXJ).
A slow day in the mailbag. What can we do for you? Send your questions and comments to feedback@stansberryresearch.com. And don't forget to read Paul's piece on the end of aging below...
Regards,
Justin Brill
Baltimore, Maryland
May 27, 2015
The End of Aging
By Paul Mampilly, editor, Professional Speculator
Two trends are converging and setting up what I believe will become an incredible megatrend...
The first trend is based on the aging populations in the U.S., Europe, and Japan. More than 25% of the population in these regions is older than 64 – and potentially out of the workforce. You want to see a rising population of people from 20 to 64. But between 2008 and 2013, that age range fell for almost every country in the European Union, as well as Japan and the U.S. (You can see that data here.)
Right now, by the time you're 65, your vision and hearing are starting to go. Your arms and legs can't do what they could when you were younger. And your risks of cancer and heart disease increase. But technology is going to change that.
Imagine getting an implant that gives you better hearing than the normal human ear... better eyesight than the normal human eye... or better hand dexterity than the normal two-handed person.
Imagine robots that can detect cancer the moment it develops, and zap it with a laser... or super drugs that can identify your specific heart disease variant and effectively cure it through a personalized drug.
You might think I'm describing something that will be possible in the next century, or even the next millennium. But I'm actually describing what's going on right now. We're already developing bionic eyes and ears, robotic interventions against cancer, and medicine based on your personal genetic code.
Developing alongside the trend of stopping the aging process as we know it is a second megatrend: the digitization of the world.
Michael McAlpine is an assistant professor of mechanical and aerospace engineering at Princeton University. He led a group that developed a 3D-printed ear implant. McAlpine believes his work could lead to the creation of a man-made sixth sense that's electronic and replaces human senses...
As the world becomes a more digital and electronic place, I think we're going to care less about our traditional five senses... and we're going to want these new senses to give us direct electronic communication with our cell phones and laptops.
Imagine having wireless connectivity to the Internet with your eyes and ears... or being able to hear a pin drop or read small text from across the room... or possessing super strength in your arms and legs. It might seem far-fetched right now. But the reality is that we are well on our way to developing these things already.
At first, these technologies will help stem the effects of aging. But younger people are going to eventually want and demand these super senses, too.
Like with most innovations, this won't happen all at once. Progress will seem slow at first. But we need to know that as these technologies mature, there will be incredible opportunities for early investors.
New products and industries will emerge, and the stocks of these companies will soar as investors anticipate their huge potential. You could gain exposure to these developments by buying the large-cap medical-device companies like Medtronic, St. Jude Medical, and Boston Scientific. But to really capture these technologies' explosive potential, you should look to the small-cap companies that are pure plays on these technologies.
Editor's note: One small technology company has developed what could be the biggest medical breakthrough of the decade... and Paul says it's one of the best speculations he has ever come across in his 25 years of investing.
Paul believes this stock could double over the next year... and make today's investors up to 26 times their money over the next decade and beyond, turning every $5,000 invested into $135,000.
Learn more about this opportunity – including how you can take advantage of a special charter offer on Paul's Professional Speculator service – right here.