An update on a critical trend...

An update on a critical trend... Most Americans are unprepared... China is taking out a 'major insurance policy'... The simple way to protect yourself...

It's one of the biggest trends in the world today...

Over the past few years, the U.S. dollar has soared against nearly every other currency. That has crushed the prices of many commodities – and the companies and countries that produce them.

Now, there are signs this trend is tiring, and reasons to believe a reversal is approaching.

For example, sentiment toward many commodities is as negative as it has ever been. Resource companies are trading at their cheapest valuations in years – or even decades, in some cases.

But this is not the trend I (Justin) want to talk about today.

Instead, I want to remind you that an even bigger – and potentially much more important – long-term trend is quietly continuing "behind the scenes"...

I'm referring to the ongoing debasement of major currencies around the world... and the U.S. dollar in particular.

Porter explained this trend in an important Digest earlier this year. As he wrote in the January 30 Digest...

Why do governments always debase their currencies? It doesn't make sense... at first. After all, debasing your currency robs people of their savings and takes away the value of their wages…

The most important reason governments always debase their currency: It allows debt to be repaid cheaply. Governments always want to spend far more than they can raise through taxes. Sooner or later, these debts must be paid off. And the No. 1 way governments choose to pay down their debts is simply by printing money to do it.

Likewise, using paper money – which is constantly expanding – allows governments to "socialize" financial risks, while allowing certain favored groups (like banks) to reap windfall gains. For example, by guaranteeing depositors' savings, the FDIC allows banks to use massive amounts of leverage. There's no way any major U.S. bank would have survived 2008-2009 if the federal government hadn't guaranteed the money depositors held in U.S. banks. And the only way the FDIC could make good on its promise to pay was with a printing press...

Here's what you have to understand... All of the world's most powerful countries are broke. The European Union has government debts that are roughly equal to its entire gross domestic product (GDP)... likewise, in the U.S. In Japan, government debts are a massive 225% of GDP. These countries have no choice but to debase their currencies.

Because of the recent rally in the dollar, many Americans might assume this is no longer a concern for us. But that isn't the case. In reality, the recent "strength" in the dollar is not exactly what it seems...

After all, whenever we talk about the "price" of anything, we're referring to a ratio. We're comparing the value of whatever item we're talking about with the value of something else. For Americans, that "something else" is usually the U.S. dollar.

In the currency markets, when we say the dollar is rallying, what we're really saying is the U.S. Dollar Index is rising against a weighted basket of foreign currencies, most of which is made up of the euro (which accounts for nearly 60% of the basket), the Japanese yen, and the British pound sterling.

In simpler terms, much of the recent strength in the dollar is a sign that the economies of Europe and Japan have been in even worse shape than the U.S. But over the long term, the value of the dollar – along with the other major currencies – is still trending down.

How can you tell? By pricing (comparing) them to the one "currency" that can't be devalued. As Porter explained in the same Digest...

Consider the following chart. Over the last 10 years, the price of gold has increased, in U.S. dollar terms, by more than 200%. In yen, gold has risen more (by almost 250%), and likewise in euros. Even in the supposedly reliable Swiss franc, gold prices have increased by 134%.

What most people don't understand is that the real value of gold hasn't changed at all. Gold is an economic constant. For thousands of years, an ounce of gold has purchased the equivalent of a fine men's suit. It still does.

Gold's real value doesn't change because all of the gold that has ever been mined is still in existence. Additional mining barely increases the total supply of gold. That's what makes gold such a unique form of money: Its value never changes.

What's changing is the value of these paper currencies. They're being massively debased.

Our government's massive debts virtually guarantee this trend will continue. Despite any short-term rallies versus other currencies, the long-term trend for the U.S. dollar (and other major currencies) is down. Or as Porter put it, "For paper money, the race to zero has begun."

And that's not just our opinion. History is crystal clear on the matter. Every paper currency has failed.

While we hope this isn't news to you – and if you've been with us for long, it shouldn't be – this fact has long been forgotten by most folks here in the U.S.

Most Americans will be completely unprepared for the collapse of the paper-money system... but that's not the case everywhere.

Eastern countries – most notably China and India – have a much better understanding of the real value of gold.

Our colleague Matt Badiali – editor of the Stansberry Resource Report – recently explained how China in particular has been quietly taking out "insurance" against the U.S. dollar and other major currencies. From yesterday's Growth Stock Wire...

Over the past few years, I've been warning Stansberry Resource Report readers that China has secretly been hoarding gold.

According to the gold-industry trade association World Gold Council, China "officially" holds 1,709 metric tons of gold. That's enough to put its gold reserves as the sixth most in the world. However, this number is baloney.

China is a closed society, so information is tough to get and official numbers aren't reliable. In a recent Bloomberg article on gold, the authors wouldn't even cite China's data, saying in a note: "We have not included data for China in the above chart as there is considerable uncertainty about how large China's gold holdings currently are."

As Matt explained, the latest data from Chinese news service Xinhua shows the country's gold consumption rose nearly 8% over the past year. This means China imported more than 800 metric tons of gold during the first nine months of the year. In addition, the country's domestic gold production rose 1.5% over the past year to 357 metric tons.

In total, China has added about 1,171 metric tons of gold this year alone. As Matt noted, that's more than the Swiss government has in its vaults... and this year's total represents nearly 70% of the country's "official" gold holdings.

Clearly, China has been accumulating much more gold than it has been reporting. And the reason is simple. More from Matt...

China has been "safeguarding" the value of its currency reserves against inflation. That means one thing... buying gold. Because gold is a real store of value...

And the cheaper China can buy gold, the better. That's why... China is likely lying about its gold reserves. China has been the largest buyer of gold in the market for years.

By reporting low gold-reserve figures, China has undercut the idea that it's hoarding gold. This has helped push the gold price down more than 40% since its 2011 peak – which has allowed China to import gold more cheaply.

In short, China is making a huge investment in U.S. dollar insurance today.

But it's not just the government. Ordinary folks in these countries are still buying gold, too.

According to a new report from the World Gold Council, China and India alone now account for nearly 45% of global gold demand. Matt shared his thoughts on this report in a private e-mail this morning...

There are two key things that I find fascinating about this story...

The first is that there are hundreds of websites dedicated to helping your typical American sell "junk" gold. Want to sell your used jewelry? Easy as could be. But what the hell is "used jewelry"? What does that even mean? Unlike Americans, your typical Chinese or Indian citizen doesn't see "used" jewelry... he sees real wealth.

The second thing is that those two groups accounted for 45% of the entire gold market demand in the third quarter of this year. That's roughly 504 metric tons of gold. That's not just going into government coffers, either... that's going to the people.

There is a huge difference in philosophy between the West – which sells "used" jewelry – and the East, which is buying gold in huge amounts. The difference speaks to the way we all look at wealth.

The typical American might think a flashy car, a new watch, or the latest iGadget is wealth. Over there, it's gold. Of the two philosophies, I lean more East than West. Because I know that the electronic stuff isn't going to be worth anything in 10 years... but gold will.

If you haven't done so already, we urge you to consider putting a portion of your wealth in physical, "hold-in-your-hand" gold (and silver) bullion soon.

With gold prices trading for less than $1,100 today, Matt says this is one of the best buying opportunities in the past five years. We agree.

How much to buy is a personal decision, but our analysts generally recommend 10%-20% for most folks. Whether you accumulate your position over time or buy a large portion all at once is up to you. But we recommend taking at least a small stake soon...

As we mentioned earlier, there are signs a bottom in gold and other resource markets could be just around the corner. Gold may not stay at these prices for long.

More important, Matt says China could soon make an announcement that ends the bear market in gold in an instant. If he's right, we could see the price of gold jump 50% or more virtually overnight.

It sounds incredible, but Matt says it's not only possible, it'smore likelythan you might believe. That's why he put together a video presentation explaining all the details. Click here to see for yourself.

New 52-week highs (as of 11/18/15): Lancashire Holdings (LRE.L), Sinclair Broadcast (SBGI), Constellation Brands (STZ), and Travelers (TRV).

Porter answers a pair of reader questions about bonds in today's mailbag. As always, send your e-mails to feedback@stansberryresearch.com.

"Porter, I had exactly the same experience in calling Schwab as Jeff P. did as published in the Friday mailbag. Probably the same bond desk trader. And yes, why would Schwab care about what I buy in bonds but not in stocks? Strange. In my exchange with this fellow, he also badmouthed you. I wish I'd thought of your question as to whether he's actually read anything you've published. With each negative about you or the recommended bond, I countered with what I learned in your essays and in the webinar. Each time he admitted that what I said was true. He finally said that well, maybe you're not as bad as the fellow at the other newsletter he criticized. I do have several questions:

"According to the bond salesman, I can't put in a limit order like I do on stocks. Is that true in general or only with Schwab?

"When I put in the CUSIP online several offerings for that CUSIP come up. The only thing I see and can figure is that one might have a minimum purchase of 5 bonds while the other has a minimum of 10? Is there something I'm missing in this?

"I called Schwab last Monday. At that time the bond was trading around 73 and according to the online stats, 129 purchases had been made versus 6-7 on prior days. Obviously this was in response to your newsletter. The price of 73 was, I presume, the lowest anyone paid, yet you said not to purchase above 70. You also recommended patience in buying to obtain that 70 price. Am I correct that all these buyers purchased at 73 and ignored your advice?

"Just wanted to let you know that I found your series fascinating and highly informative. I was also thrilled that the service is available through my Flex subscription. Both my wife and I were thrilled about that. Thanks for all your hard work (you and your team)." – Paid-up subscriber Gary

Porter comment: That Flex Alliance offer is the bane of my existence. (Just kidding. I'm happy that we had an offer that was right for you and that's producing something you value and can use.)

Bond brokers are a funny breed. And something about writing an investment newsletter seems to really bother some folks. I don't get it. I mean, for Pete's sake, I live in a glass house: Everything I've ever written about investing is up on our website. Throwing stones is easy – just read my newsletters and you'll find plenty of times where I've screwed up.

Of course, you'll also find dozens of examples where we've provided outstanding insight and advice. There will always be a balance. But at the very least, no one could possibly accuse us of not being completely transparent and honest. Ask your bond broker to meet the same standard. I bet he won't. In fact, he won't even be honest with you about what it's costing him to buy the bond before he sells it to you. I'm not trying to start a fight... but learning that bond brokers (of all people) are criticizing my work or character... well... I'd be angry if I weren't laughing so hard.

If you really want to have fun with a bond broker, just ask him what he drives to work. The financial-services industry is the only business in the world in which people with less wealth and less experience tell people with vastly more of both what they should do with their money. Just keep that in mind.

Now, about your specific questions... I'm afraid I can't answer the question about limit orders. I just don't know. I haven't interviewed every bond broker in the U.S. (A guy yesterday was asking me what broker he should use in Thailand. Really. I guess it doesn't cost anything to ask...) Every brokerage firm has different services. If you don't like yours, call around. I consistently hear from subscribers that Interactive Brokers has the best online service – no phone call necessary. And I understand that limit orders on this system are allowed.

But again, as I explained (in more than 20,000 words), buying bonds can be more difficult than buying stocks. You should be prepared to call several different brokerage firms until you can find the right one for you. That's the best advice I can give you. But no matter how many times I give that advice... nobody ever seems to listen. It's amazing to me how willing folks are to put up with bad service as long as they don't have to lift a finger to make a change. Oh well. You can lead the horse to water...

Regarding CUSIPs...

Gary, please don't take offense. I'm not referring specifically to you here, but to questions like these in general. We will get thousands of these kinds of questions over the next several months. They will never, ever end. The questions all reflect the fact that folks haven't bought bonds before and don't know how to use their broker's system. But rather than do the obvious thing (pick up the phone and ask the broker what's going on), they write to us.

We offered two CUSIP symbols, as both of the bonds were identical. We offered two bonds from the same issuer, with the same terms, because sometimes there will be more liquidity in one than the other. This time, one of these CUSIPs was for a bond that's only traded by large investors or institutions. Your broker should have been able to explain that immediately. Believe it or not, we do have large investors and institutions in our subscriber file. So some folks found this useful... and some folks found it confusing. We regret not explaining that more clearly.

But in any case, there should have been two bonds that appeared, not several. And again, respectfully, Gary, I can't imagine why you're asking me these questions. I don't work for Schwab. I'm not recommending its bond platform, and I've never used it. Apparently, according to your eyewitness testimony, its bond salesmen don't even like me. I can't answer questions about why its bond services are confusing or why it doesn't offer limit orders. I have no idea.

But... why not ask the jerk who was bad-mouthing me? After all, out of the thousands of folks who read our newsletter, it was only clients of Schwab (so far) who had any trouble finding the bonds in question.

And finally... your last question really made me chuckle. We don't make a market in the bonds we recommend. As I've stressed, we are not brokers, nor do we control the market for the bonds we recommend. We published our advice and gave what we believed was a reasonable price limit. We're expecting the environment for credit to become tougher, ergo, we're happy to let these bonds "come back" to us. We expect that sooner or later, our subscribers will have the opportunity to buy. If that doesn't occur, we will live a full and happy life without these bonds. Opportunities always exceed capital. Thus, it pays to be patient and picky. But I'm not your money manager... You can pay any price you'd like.

Is it possible that the 129 trades in these bonds (as you say) on Monday were purchases made by my subscribers? Sure, it's possible. But... I think it's far likelier that it represents a routine amount of volume for these bonds. You would have to be pretty damn stupid to pay $5,000 for advice and then deliberately ignore it. But Gary, anything is possible.

"Simple Q – Your opening recommendation suggests – 'Do not buy over 70'. I have a bid for 74 which still seems practical. Your reasoning? Thanks." – Paid-up subscriber Scotty W.

Porter comment: Like I said... anything is possible.

Regards,

Justin Brill

Baltimore, Maryland

November 19, 2015