Last week, the "Bernanke Asset Bubble" went into overdrive...
True Wealth editor Steve Sjuggerud has been writing about what he calls the "Bernanke Asset Bubble" since late 2010... And he has positioned his portfolio to be long on a wide variety of assets, including housing and gold. In today's Digest, we congratulate Steve for making an excellent call and sticking with it.
Steve summed up his thesis in the September 13 DailyWealth…
|
The basic idea is that [Federal Reserve Chairman] Bernanke will keep interest rates lower than anyone can imagine, for longer than anyone can imagine... and that will cause asset prices to soar. That includes stocks... as well as real estate and precious metals. |
Bernanke announced last week that the Fed would buy $40 billion of bonds each month until it felt the economy had recovered to an acceptable level... In other words, the Fed has given itself carte blanche to buy bonds forever, if need be. Bernanke also announced he would keep interest rates near zero percent until 2015 – extending his previous forecast by a year.
Bernanke can't take full credit for the asset bubble... His European counterpart, Mario Draghi of the European Central Bank (ECB), is also doing his part to flood the world with capital... The ECB promised unlimited support for European sovereign bond markets.
As you can see from the new highs list toward the end of today's Digest... The bull market is on. Consumer staples, financials, bonds, precious metals, medical supplies, and energy stocks are all trading at new highs.
Longtime S&A subscribers know we've been recommending precious metals for almost a decade... And recently, we've renewed our call to buy gold and silver with new urgency… As we pointed out, gold stocks were dirt-cheap compared with the price of the metal. And we knew a third round of quantitative easing would scare even more money into precious metals.
In his September issue of True Wealth, Steve told readers how cheap the sector had become...
|
It's time to buy gold-mining stocks again... because gold-mining stocks are cheap, hated, and now in an uptrend. This is the exact criteria I look for in an investment. Importantly, the last time gold stocks were this cheap, they soared 172% in eight months. |
|
They have only been this cheap once in the last decade – and that was in late 2008, when gold stocks (as measured by GDX, the main gold-mining-stock fund) bottomed out at $17. |
|
Just over two years later, shares of GDX reached $60, for a phenomenal profit. (Three-and-a-half times your money!) |
|
The stage is set again for similar gains today... |
Steve also recommended silver in his February issue:
|
Typically, when the dollar is loved, silver is hated. The pendulum swings as far as it can in one direction. And when it can't swing any farther, it swings the other way. |
|
And that's exactly where we are now. |
|
The chart below shows how hated silver is. Right now, large speculators have their smallest position of silver futures contracts in seven years (as far back as my silver "commitment of traders" data goes). |
|
Silver hasn't been this hated since late 2008... and it doubled in 13 months when that happened. Silver was also this hated back in late 2007... and it soared 70% in less than eight months. |
|
Silver looks good now. |
S&A Short Report editor Jeff Clark also nailed the breakout in precious metals. As we've detailed… Jeff recommended gold and silver trades for the past two years with astounding success. In the August 21 Growth Stock Wire, Jeff called for a gold breakout…
|
Platinum broke out last week. |
|
Silver exploded higher yesterday. |
|
Now it's gold's turn to bust out to the upside. |
|
We took a look at the shiny yellow metal just three weeks ago. But based on the action in the other precious metals, we ought to keep a close eye on gold. It's on the verge of an explosive move that could happen any day... |
|
We could be looking at a bullish breakout for the yellow metal. When that happens, gold should make a quick move higher toward the first resistance level at about $1,665 per ounce. Ultimately, a move to $1,770 should be in the cards. |
Today, gold is trading around $1,770 an ounce. But if you were following Jeff's precious metals trades in the S&A Short Report, you've done much better.
Jeff's list of precious metals winners is long. To give you just a few examples… Jeff's readers could have made 127% in two weeks following Jeff's recommendation on Barrick Gold. He also showed them how to make 102% in about three weeks on Pan American Silver. And earlier in the year, Jeff made more than 75% in one month on Gold Fields... and 95% on Seabridge Gold in one week.
How high will gold and silver go? We say the sky is the limit... We're in the midst of a potentially unlimited amount of money being created by the Federal Reserve. This money will destroy the dollar and lead to an inflation that will punish savers and conservative investors. Money will pour into hard assets.
We're not going to guess what price would represent a "top"… that kind of fortune telling is a fool's errand... We can only say gold is going up. But that hasn't stopped the ne'er-do-wrong investment banks from putting out price targets. Our favorite comes from Bank of America...
Last week, Bank of America released a report saying the Fed will nearly double its balance sheet to $5 trillion within the next two years. (It's currently $2.8 trillion.)
The report estimates the Fed will own more than 33% of the entire mortgage market by 2014. And over the same time frame, "Fed ownership across the [six- to 30-year] portion of the Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014."
The result will be a huge inflation... the likes of which will push gold to $3,350 an ounce and oil to $190 a barrel, the bank's analysts project.
If you missed Sunday's Masters Series Digest, I'd encourage you to go back and read it... It's one of our favorite essays ever written by Bill Bonner.
We started our Digest Masters Series a few months ago... We wanted to collect our favorite essays from our favorite authors on topics ranging from finance to politics to social commentary. And Bill's essay, "Even the Rats Have Left," is one of the greatest... Bill recounts a train ride he took from Baltimore to New York City in 2000 and the desolate scene he encountered. You can find all of our Masters Series essays here.
New 52-week highs (as of 9/14/12): Berkshire Hathaway (BRK), Guggenheim BulletShares 2015 High Yield Corporate Bond Fund (BSJF), Franco Nevada (FNV), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Cambria Global Tactical (GTAA), iShares Dow Jones U.S. Insurance Fund (IAK), iShares Nasdaq Biotechnology Fund (IBB), iShares Dow Jones U.S. Home Construction Fund (ITB), SPDR Barclays Capital High Yield Bond Fund (JNK), Longleaf Partners Fund (LLPFX), PowerShares Buyback Achievers Fund (PKW), Sequoia Fund (SEQUX), V.F. Corp (VFC), Huntsman Corp (HUN), First Majestic Silver (AG), Yamana Gold (AUY), Royal Gold (RGLD), Loews (L), Kohlberg Kravis & Roberts (KKR), Medtronic (MDT), Southern Copper (SCCO), Chevron (CVX), ExxonMobil (XOM), Encana (ECA), Procter & Gamble (PG), Union Pacific (UP), Wells Fargo (WFC), and GenMark Diagnostics (GNMK).
A warning to the faint of heart… Today's mailbag contains an expletive… but it's actually a compliment. Send your e-mail, preferably a clean one, to feedback@stansberryresearch.com.
"Dear Porter, I have spent thirty years working and investing. Your subscriptions are invaluable and your insight spot on! The premise that the rich are not paying their fair share in taxes is pure bunk. I am a person of modest means. During my thirty years of employment I have given over a million dollars to charity and paid far more in taxes. Now, I have decided to shut down my career. I am not supporting a government that no longer shares in my values of hard work, Christian-based morality, and family oriented lifestyle. I appreciate your willingness to put a target on your back for all of us whom are unseen and unknown." – Paid-up subscriber M. Johnson
"Classic Friday Digest. Down to earth and intelligent. Love it Porter!! I was in dire need of reading something sound and intelligent this week with the Fed-sanity that transpired. When I read, 'So enjoy it, you bastards' I almost wanted to shoot my pistol in the air you had me so worked up. YOU ARE THE F*CKING MAN!!! You predicted the Feds moves all the way. Rereading your predictions of the Feds actions reminded me a quote from the movie snatch, 'never underestimate the predictability of stupidity.' Keep up the good work. I'm 100% behind you. Keep leading the charge brother." – Paid-up subscriber Dylan Geraci
"I have subscribed to your Stansberry Advisory and I love it. Too many people overlook the education that can be redeemed through this investment. I see all the mind numbing comments from people trying to act like they are smarter than your team. It's laughable. You have taught me a lot about insight into companies. Also DUE DILLIGENCE is key. So thanks and I plan to stay subscribed. I am a lower middle class auto technician with a new ambition and desire to succeed in investing in the financial world because of you guys." – Paid-up subscriber A.S.
Regards,
Sean Goldsmith
New York, New York
September 17, 2012
'Bernanke Asset Bubble' in overdrive... Nailing the gold and silver call... Bank of America's bold call... 'Even the Rats Have Left'... Cursing at Porter...