Better Than Buying Stocks in 2009
Better than buying stocks in 2009... No surprises from the Fed... The world's biggest dividend payer is Apple?!... Facebook crushes earnings... Why fears about the company's growth are overblown... P.J. O'Rourke tackles consumer trends...
"The upside potential is dramatically greater than buying stocks in 2009 or buying real estate in 2011..."
So said our colleague Steve Sjuggerud during last night's live emergency briefing.
Of course, if you joined us, you know he was referring to the unusual opportunity in Chinese stocks today. And if you know anything about Steve, you know he doesn't make statements like that often...
After all, he called the 2009 bottom in U.S. stocks almost perfectly. He even borrowed money – for the first and only time in his life, via a home-equity loan – to buy stocks. Then in 2011, he turned bullish on real estate, telling readers it was "the best time in history to buy a house."
Each of these situations were what Steve calls a "fat pitch"... an opportunity where the odds are stacked so heavily in your favor, it's simply too good to pass up. And readers who took his advice have done incredibly well...
The broad market – as represented by the benchmark S&P 500 Index – has more than tripled since Steve's 2009 call, while many individual stocks have done far better Meanwhile, median U.S. home prices have risen nearly 50% since 2011 to a new all-time high.
Yet Steve says the opportunity in Chinese stocks today is more certain – and has substantially higher upside potential – than either of those previous examples.
Why? In short, a "perfect storm" of sorts has come together...
China is the world's second-largest economy and the world's second-largest stock market... yet virtually no one is invested today. To borrow Steve's favorite investment mantra, Chinese stocks are cheap and hated... and they've quietly started an uptrend.
Meanwhile, a once-in-a-lifetime event is guaranteed to cause as much as $1 trillion to flood into Chinese stocks over the next several years. And this catalyst could be coming in a matter of days.
Steve says folks who buy the right Chinese stocks now could easily and safely make five times their money or more over the next few years... And he's practically begging all Stansberry Research subscribers to put at least a little money into this opportunity immediately.
Unfortunately, we're not able to offer a replay of this week's emergency briefing. So if you weren't able to join us, it's too late to see Steve's presentation in full. But it's not too late to take advantage of this incredible opportunity...
For a limited time, you can still get all of Steve's China research and recommendations at a massive discount from the usual subscription cost.
Better yet, Steve is so sure of this opportunity, he's even including an unheard-of guarantee... If his big prediction doesn't happen before the end of your initial subscription term, he'll give you an entire bonus year of his work – valued at $3,000 – absolutely free.
Click here to take advantage of this special, time-sensitive offer.
As expected, the Federal Reserve left short-term interest rates unchanged at its May policy meeting yesterday...
The Fed said it believes the slowdown in economic growth in the first quarter is "likely to be transitory" and that "fundamentals... remain solid." It also noted that inflation is running close to its 2% target, and said it still expects further rate increases later this year.
In other words, nothing to see here...
On Tuesday, consumer-electronics giant Apple (AAPL) reported its latest quarterly earnings...
The news was generally positive. Revenue came in slightly below analyst expectations, while earnings per share came in higher.
However, several media outlets noted that iPhone sales – the company's biggest source of revenue – fell from the same quarter last year. Apple sold 50.8 million iPhones in the quarter ended April 1, compared with 51.2 million in 2016.
But Apple CEO Tim Cook isn't worried about the apparent slowdown. As Bloomberg reported on Tuesday...
"We're seeing what we believe to be a pause in purchases of iPhone, which we believe are due to the earlier and much more frequent reports about future iPhones," Apple Chief Executive Officer Tim Cook said during a conference call with analysts.
In the past, Apple changed the basic shape of the iPhone about every two years. The iPhone 7, unveiled in September, had similar form and features to its predecessor, extending the cycle to three years. That may have encouraged more customers to delay purchases.
Cook makes a great point. (And as iPhone owners who are waiting to upgrade to the latest version this fall, we would have to agree.)
Still, despite the decline in iPhone sales, Apple is still growing...
It reported a second straight quarter of revenue growth, after three consecutive quarters of declines last year. And its services business – its fastest-growing segment, which includes products like iCloud, the App Store, and Apple Music – grew 18% last quarter.
Apple also reported a new all-time-record $257 billion cash hoard... and announced another $50 billion in new share buybacks, on top of the $175 billion it has already approved.
The company also increased its annual dividend nearly 11% to $0.63 per share. Believe it or not, this increase now makes Apple the largest dividend-payer in the world. As financial news network CNBC reported...
There was a time when Apple investors were loath to call it a "dividend stock." Now it's the biggest dividend stock there is.
Apple announced after the bell Tuesday a 10.5% increase in its dividend to $13.22 billion annually, surpassing Exxon Mobil's $12.77 billion payout and making it the biggest-paying dividend stock in the world...
To be sure, Exxon still pays a higher dividend yield than Apple (3.75% to 1.72%) because its share price is lower. The oil producer long loved by investors for its payout increased its dividend for the 35th year in a row last week by 2.7% to $0.77 a share, [S&P Dow Jones Indices analyst Howard] Silverblatt notes.
Apple has now increased its dividend for five straight years since first declaring it back 2012. It has risen more than 70% over that time.
Stansberry's Investment Advisory portfolio holding Facebook (FB) also announced results last night...
And the company trounced analyst expectations on nearly every metric reported.
Facebook reported revenue of $8 billion versus expectations of $7.8 billion... earnings per share soared 76% to $1.04 versus expectations of $0.87... monthly active users ("MAU") increased to 1.94 billion compared with expectations of 1.91 billion... and daily active users ("DAU") increased to 1.28 billion versus expectations of 1.26 billion.
The company also said ad revenue increased an incredible 51% year over year... 85% of which came from mobile advertising. And free cash flow doubled year-over-year.
According to Victor Anthony, internet analyst at Aegis Capital, Facebook now has the longest streak of quarterly outperformance of any company he's covered in the last 10 years. As he noted in an interview on CNBC's "Squawk Box" this morning...
50% advertising revenue growth. Against that scale, it will probably do about $39 billion in revenues this year. They're buying back stock. Engagement is up. Monthly active users is up 17%. Everything is moving in the right direction for this company.
Given this strong performance, you might expect shares soared today. But you'd be wrong... Facebook shares closed down today.
Why? Because the company repeated its warning from last year that revenue growth would temporarily slow in coming quarters as it reaches the limit of how many ads it can place in front of users.
But again, this wasn't unexpected... The company first warned about it a year ago. More important, so-called "ad load" is just one of three drivers of revenue, along with user growth and increasing time-per-user. And Facebook has been preparing for this change for some time. As the Wall Street Journal reported last fall...
Starting in the middle of next year, Facebook will stop showing users more ads in their news feed, the tactic it has been using to juice revenue growth for the past two years, the company said Wednesday. As a result, advertising growth will "come down meaningfully," Chief Financial Officer Dave Wehner said during a call with analysts.
Facebook now expects a "much smaller contribution from this important factor going forward," he said. He added that Facebook expects to power growth by adding more users and boosting the amount of time they spend on the social network. Video is key to that strategy.
This should sound familiar to Stansberry's Investment Advisory subscribers. As Porter and his team explained in the December issue when they first recommended shares...
Facebook is planning on spending more than $5 billion on acres of cloud storage and server farms next year. This means Facebook is preparing for more minutes of time and bigger images per user. In other words, Facebook is building out its network to prepare for three emerging tech trends:
- Secure mobile video calls
- Ultrahigh-definition (so-called "4K") images on the desktop
- 3D images on smartphones
Looking at these three major technical trends, we see Facebook preparing to monetize them. More than anything we see in its past growth rates, this assures us that Facebook has a bright future.
That lets Facebook scale using a network effect. So each user is more profitable.
And as we see in capital expenditures, Facebook is preparing its infrastructure for the next 10 years... There are no dark clouds on the horizon. The number of users and revenue per user can keep growing.
Stansberry's Investment Advisory subscribers are already up more than 30% in just five months.
New 52-week highs (as of 5/3/17): AMETEK (AME), Allianz (AZSEY), Cheesecake Factory (CAKE), iPath Bloomberg Livestock Subindex Total Return Fund (COW), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI Singapore Capped Fund (EWS), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), Alphabet (GOOGL), Global X MSCI Greece Fund (GREK), McDonald's (MCD), 3M (MMM), Spirit Airlines (SAVE), and short position in Hertz Global (HTZ).
In today's mailbag, a longtime subscriber weighs in on last night's China briefing... And Porter answers an important question about our new Stansberry Portfolio Solutions product. What's on your mind? Let us know at feedback@stansberryresearch.com. And be sure to read on for the latest essay from Digest contributing editor P.J. O'Rourke.
"I've added a new mantra to my investment list: 'Don't bet against Dr. Steve Sjuggerud – he knows...' Thank you Dr. Steve, Brendan, and Jared for another terrific webinar tonight. I enrolled in True Wealth China Opportunities at inception [I'm already up 18%], but it was great to hear your most recent thoughts during tonight's special event. Cheers to you!" – Paid-up subscriber Bill T.
Brill comment: We couldn't agree more... Steve and his team prepared a great presentation on the once-in-a-lifetime opportunity in Chinese stocks today – an opportunity Steve is calling the biggest and most important of his career.
We aren't going to replay the event... But if you're interested, you can get a quick summary of this opportunity right here.
"Just finished reading the latest update to The Total Portfolio. You recommended closing 5 positions and selling short several stocks. For those of us who can't short stocks, do you have other recommendations for those funds?" – Paid-up subscriber Kevin C.
Porter comment: Kevin, that's a great question...
First, a disclaimer. I can't tell anyone what to do with his money. And I know you realize that, as you asked about people who might not be able to short stocks.
So please don't construe anything that follows as advice for you, per se. This is intended for our entire audience that can't short stocks, which, happily, is the group you're asking about.
My first response is: Why can't you short stocks? I understand that you can't short stocks in your IRA account. But currently The Total Portfolio is short about 8% of the portfolio – about $8,000 for a $100,000 portfolio.
It's hard for me to imagine that most investors couldn't find a way to short a similar amount of equity outside of their IRAs. Please understand, I know that's true for some people. But I'd wager that most folks simply haven't taken the time to learn how to short or to get permission from their brokers.
So here's the first lesson... You don't have to start with 8% or 10% of your portfolio. Just find the short idea you think is the most sound from your own experience with those businesses, and then call your broker and ask to short a single share. Yes, that's right. Just one share. I understand that doing so is inefficient from a cost standpoint, but making money isn't the point here... It's learning how it works and what it feels like to actually short a stock.
Trust me, it's a big, boring letdown. It's not half as scary as you might think. It's actually pretty uneventful with the kind of stocks we've been shorting lately. They're not very volatile and the gains have been steady. It's just like owning a high-quality business... but in reverse.
My bet is about 80% of our subscribers would enjoy the experience if they'd only try it.
For those who truly can't (or won't), my best advice is to simply own a mix of cash and physical bullion.
So instead of holding 8%-10% of your portfolio short stocks, hold around the same amount in cash and gold. The mix depends on how worried you are about the fate of the dollar. I keep between 5% and 10% of my cash reserves in physical gold.
But everyone has a different "sleep easy" ratio. You'll have to decide what's right for you. I personally don't feel the need to hold huge amounts of gold because my other "hard" assets provide a base for my savings. That's stuff like land (timber, farmland, apartments), collectibles (rare cars, art, collectible watches), and the large investments I hold in private equity.
I also know that my own company (where I hold the bulk of my wealth) is conservatively managed. Likewise, all of my investments in public equity (and my children's trust accounts) are managed by the professionals at Stansberry Asset Management. I believe applying that additional layer of due diligence and investment experience is worth every penny. (And, please note – I don't get any break on the fees.) For investors with more than $500,000 to put into stocks, it's worth a call to the principals at Stansberry Asset Management to see if their approach is right for you: (646) 854-4370.
Whatever you decide, don't forget that you will need cash when the market crashes. Cash that you can easily and instantly convert into bonds or stocks, when the markets bottom. For that kind of "liquid" money, I recommend a blend of short-term Treasury bills or notes – like you'll find in the iShares 1-3 Year Treasury Bond Fund (SHY) – and physical gold bullion.
The bullion is to protect you in case of a sudden devaluation of the dollar. And the Treasury bills and notes are the world's premier liquid asset. They're the most "money like" thing you can own outside of cold, hard cash.
By the way, for folks putting serious money to work in Treasury bills and notes, I'd recommend avoiding the ETF fees and buying directly from the U.S. Treasury.
And for anyone buying a large amount of physical gold, I recommend shopping around to find the lowest purchase spread over the spot price. Give David Hall Rare Coins a call (800) 759-7575 or (949) 567-1325) for any order above $250,000. In fact, at that level, you can ask to speak directly with my friend Van Simmons, who has been taking care of our high-net-worth readers for almost two decades.
Virtually all coin dealers will try to sell you a line of complete B.S. – like paying collectible prices for what are really bullion coins. Van, who founded the world's premium coin-grading service in the 1980s, knows all the cons and will steer you into the safe coins you need, even when that means a smaller commission for him. Doubt me? Give him a try with a small ($250,000) order and see if he delivers on every promise. Then, if you want to buy truly collectible coins, you'll know who to trust. Van is the world's leading dealer, too. He can get you the coins nobody else can because his company has graded all of the best coins. He knows who owns them.
Finally, just to be clear... I don't receive any compensation of any kind for mentioning TreasuryDirect or David Hall Rare Coins.
On the other hand, it should be very clear that I have an interest in Stansberry Asset Management, as noted in more detail below.
Please understand that Stansberry Asset Management (SAM) is a completely separate business – with different employees, different owners, a different board of directors, a different physical office (in New York City), and a radically different regulatory regime. SAM manages investment accounts above $500,000 on behalf of private investors and is a regulated investment advisor. It does not have privileged access to any of Stansberry Research's publications and only receives our work after it has been published to our subscribers. See below for more important information on Stansberry Research and SAM.
Hope that clears up your question.
Regards,
Justin Brill
Baltimore, Maryland
May 4, 2017
Consumer Trends Among the 'Grumpies'
Back in March, I wrote a column called "Armchair Predictions About Consumer Trends."
I had just realized I was an armchair expert on certain consumer trends because I had a perfect demographic focus group of millennial female consumers right in my living room – my two daughters, ages 16 and 19.
"This demographic is responsible for a large portion of America's consumer spending," I said at the time. "And from what I can tell by my credit-card bills, my daughters do about 120% of that spending."
But now I've realized I also have a perfect demographic focus group of another segment of consumers: the male, 65-plus Baby Boomer. That focus group is me.
I'm a real armchair expert on this subject because I'm the one sitting in the armchair.
Marketing experts don't seem to think guys like me are major consumers. To judge by advertising that's pitched to people our age and gender, you'd think the only things we shop for are Medicare supplemental insurance, reading glasses, and Viagra.
The marketing experts are fools. Male, 65-plus Baby Boomers are more important to U.S. consumer economics than most other sections of the population, including the Yuppies.
Call us the "Grumpies" – Graying Rich Upset Male Persons.
And note the "rich" part. What makes us important is that we've got the money. Men over the age of 65 have among the highest average net worth of any Americans. (That is, if we're still alive. The Americans with the highest average net worth are the widows of men over 65.)
So pay attention, marketing experts. (And investors too.) Keep an eye on Grumpie consumer trends.
Of course, given that the main characteristic of Grumpies is grumpiness, these are not "consumer trends" in the sense of "products we want to buy." These are gripes – consumer trends in the sense of "products we'd like to stuff up the noses of the people who manufactured them."
But the companies that marketing experts work for don't make profits just by knowing what products consumers love. They also need to know what products consumers loathe.
And here are some...
We don't like the Internet. Of course, it's handy. And like everybody else, we use it all the time. But...
When we're trying to Google something important, such as "best salmon river in Atlantic Canada" and an ad pops up... the way we feel about the company that posted that ad is the way Gloria Steinem feels about Bill O'Reilly.
We Grumpies hate social media... even if our little Suzy and that dork she married post cute pictures of the grandkids on Facebook.
We detest the whole everybody-connected-to-everybody-24/7 thing. We'd like to be dis-connected, up on the Miramichi River in New Brunswick, casting flies and claiming that our cellphones and laptops fell out of our waders.
We'd also like someone to develop an app that gets rid of all apps, a no-app app. Call it a "napp."
Maybe that would keep people from fiddling with their phones all day. Imagine how much fun the sitcom Cheers would have been if Norm walked into the bar and nobody said anything because Sam, Diane, Carla, Frasier, Woody, and Cliff the mailman all had their noses buried in their iPhones.
No one is willing to dispose of their phones these days. Meanwhile, everything else that's for sale seems to be completely disposable, and this makes us Grumpies mad.
When I moved to rural New England in the 1970s, I bought a bunch of power tools. Forty years later, they still work. Albeit my old Skilsaw is down to about 60 rpm, and I keep forgetting to take the chuck wrench out of the chuck when I'm using my original electric drill, which usually causes the chuck wrench to fly across my shop and bust a window.
So I bought a good cordless drill a few years back. But its battery packs have quit taking a charge. I went to the hardware store to buy new batteries and found out they'd have to be special ordered. If they still made those batteries anymore, which the hardware store clerk wasn't sure about.
Then I found out I could buy a new drill, the same brand, with a pair of different "improved" battery packs, all for less than the special-order batteries for my old (perfectly satisfactory) drill.
This is just wrong. Shortly afterward, my Shop-Vac died. The $0.50 plastic on/off switch broke. And you guessed it, the price to get it fixed was more than the price of a new Shop-Vac.
Build things to last, damn it! We Grumpies may not be children of the Depression, but we're children of children of the Depression. We grew up hearing: "Use it up, wear it out, make it do, or do without."
I couldn't fix the Shop-Vac myself because... (A) They don't make that (perfectly satisfactory) model of Shop-Vac anymore... (B) They don't make parts for that model anymore... And (C) when I tried to substitute another switch, I laid a screwdriver across the positive and negative poles to test the connection and set off all the smoke alarms in my shop.
OK, maybe point (C) was my bad... But you can't fix anything anymore.
You can't even comprehend it.
The washer-dryer and dishwasher at our house have no knobs or dials. Instead, they have circuit boards that look like miniature maps of downtown Mumbai faced with flat panels of electronic touch controls. You touch them, and they take control. What will happen next is anyone's guess. The washer dries, the dryer sets itself on "rinse," and the dishwasher goes into spin cycle.
Same with cars. Unfixable. I grew up in the automobile business. I was a passable shade-tree mechanic in my youth. But now I'm flummoxed. I don't even try anymore. The last time something started to go thunk-thunk-thunk, I didn't bother to look in the engine compartment. I immediately took the car to a real mechanic.
My mechanic is a Grumpie, too. He's been working on cars since the Edsel was the Tesla of its day. I can speak frankly with him.
"To tell the truth," I said as I opened the hood, "I don't know what two-thirds of the stuff in here is."
My mechanic said, "To tell the truth, I don't, either."
Regards,
P.J. O'Rourke
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