Why our monetary system is killing the middle class…
Most people think a government bent on printing money and spending it recklessly helps the middle class. In reality, it strips them of their wages and savings... In today's Digest Premium, Porter explains why it's actually the wealthy who prosper...
To subscribe to Digest Premium and access today's analysis, click here.
Cheniere lands huge U.K. gas contract… Insurance rates going up thanks to Obamacare… Doc Eifrig: Obamacare is a joke… Billionaire buys $60 million home and a $155 million painting…
The U.K. wants a share of America's abundance of natural gas.
Cheniere Energy (LNG) – one of Porter's favorite speculations on America's natural gas boom – just announced a 20-year deal to supply Centrica, a British integrated energy company. The deal, subject to regulatory approval, would make the U.K. company the sixth-largest customer for the U.S. gas export company.
Cheniere is the only company with U.S. government approval to export liquefied natural gas (LNG) from a facility outside Alaska. It expects to have the first export facility – Sabine Pass in Louisiana – operational in 2015. The Centrica deal – combined with a prior contract Cheniere entered with French firm Total – means that 96% of the current planned capacity at Sabine Pass is already spoken for even before the facility ships a drop of fuel. (Of course, with enough demand, Cheniere could build more capacity.)
British Prime Minister David Cameron already endorsed the move, saying it would "provide British consumers with a new long-term, secure, and affordable source of fuel."
The deal comes as gas prices are spiking in the U.K. According to Bloomberg, gas prices hit a high of $16 per million British thermal units (mmBtu) last week, before dropping back to a little more than $14 this week.
Natural gas also reached new highs in the U.S. this week. By way of comparison, the clean-burning fuel sells for a little more than $4 per mmBtu here – about a quarter of what it costs across the Atlantic.
Although an extended stretch of unseasonably cold weather has heightened demand in Britain… the divergence between natural gas prices in the U.S. and around the world has been widening for years. Porter first wrote about the investment opportunities it was creating in the July 2011 Investment Advisory…
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Lots of people will be competing to produce and market gas in the U.S. Few firms will be able to market gas to the world. The firms that can will generate massive profits because of the discrepancy between U.S. gas prices and global gas and oil prices.
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In that issue, he recommended subscribers buy shares of Cheniere to take advantage of the trend, citing its status as the only firm authorized to export natural gas… Although that position stopped out at a 34% loss after a few weeks, he re-recommended the stock a year later, noting the trend had only gotten stronger.
Now… the Financial Times is reporting that LNG-export supporters are stepping up the pressure on the government to grant more export permits. A December U.S. Department of Energy report counted 15 export applications pending with the Federal Energy Regulatory Commission. (It also argued that unlimited natural gas exports would have only a modest effect on U.S. pricing.)
Subscribers who opened positions in Cheniere after Porter's July 2012 recommendation are up 85%.
Porter calls the resurgent U.S. oil and gas boom the biggest investment opportunity in his career, even bigger than the Internet boom. Porter and his team developed the Global Oil Value Monitor to help identify potential investments in the oil and gas exploration sector. The monitor tracks more than 70 domestic energy companies based on a variety of metrics… It's one of the four market segments they track in the Stansberry Data supplement to his Investment Advisory.
To subscribe to Stansberry's Investment Advisory – and gain access to Stansberry Data and Porter's work on America's oil and gas boom – click here.
In a press conference yesterday, Health and Human Services Secretary Kathleen Sebelius announced that folks purchasing new insurance policies could see premiums increase thanks to Obamacare. The announcement came weeks before insurance companies are expected to release their new rates for 2014 – when several Obamacare provisions begin.
"These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market," she said. "But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they're spending."
So… not only will premiums rise, but there are subsidies for lower-income individuals. The wealthy will get double whacked.
In addition, some men and younger customers could see rate increases, while women and older customers could see rates drop, because the new law restricts insurers from setting rates based on age and gender. Does it make sense for these insurance firms to abandon statistics and finance to ensure the equality of the insured? Why should an old man have to pay more than a young, healthy one?
Dr. David Eifrig launched his Retirement Millionaire newsletter with the goal of showing subscribers the best way to take control of their health and their finances… how to break away from the mindset that institutions like the government, Wall Street, or the medical industry exist to help take care of you.
So we asked "Doc" (as we call him around the office) to weigh in on Obamacare's imminent changes. Here's what he told us…
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My mom told me last week that her quarterly payment to Medicare is going up hundreds of dollars per month... thousands of dollars a year. She feels hoodwinked by Obama.
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Her drug plans are decreasing the brand-name drugs they'll pay for and favoring generics. But this creates a conundrum for doctors and patients. Generics don't always work as well as the original drug. But the Department of Health and Human Services is saying you can't use the brand-name drug... So does the doctor prescribe something that he knows works or something less effective that Medicare will cover? What does the patient do?
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I've seen estimates that health care costs to companies will jump 40%. That will either hit company margins or employees' pocketbooks. I bet the cost is passed on to employees...
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Obamacare is a joke. People want "free" health care, so Obama promised it to them...
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Bottom line... Don't count on your health plan or your doctor. Start doing things today to improve your health... Help yourself live a longer and healthier life. Pay less for medical care because you're out there walking, stretching, meditating, and sipping a glass of wine. Plus, you'll stay away from the charlatans that will sell you vitamin supplements claiming to cure nearly any problem you have.
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Steve Cohen, the billionaire founder of hedge fund SAC Capital, is gearing up for inflation...
As we've discussed many times in these pages… high-quality, prestigious assets – what we call "trophy assets" – tend to escalate in value during periods of high inflation. That's one reason Porter has invested in Miami Beach real estate. (Digest Premium subscribers can read his thoughts on Miami here and here.)
Cohen's buying high-end real estate, too. He recently purchased a $60 million beach home in the Hamptons – the playground of New York City's elite. It's his second Hamptons house. He also owns two apartments in Manhattan – one is estimated to cost $115 million.
In addition, Cohen is also one of the largest players in contemporary art. His collection is worth an estimated $1 billion. He paid music and movie billionaire David Geffen $139 million to buy the piece "Woman III" by the artist Willem de Kooning. In 2010, Cohen bought "Flag" by the artist Jasper Johns for around $110 million. In 2007, he purchased "Turquoise Marilyn" by legendary "pop" artist Andy Warhol for around $80 million.
But his latest acquisition tops them all, and comes in the same week as his Hamptons house purchase... Cohen bought Pablo Picasso's "La Reve" from casino mogul Steve Wynn for a reported $155 million.
Coincidentally, one of the first pieces I (Sean Goldsmith) published at S&A was about "La Reve"... And how Wynn accidentally elbowed a hole in the painting in 2007. (He paid $85,000 to repair it.)
The highest-quality real estate, art, wine, and other collectibles always have a market with the ultra-rich. Regardless of what is happening in the economy, these billionaires have cash. And they're always ready to purchase a one-of-a-kind asset (especially when it doesn't trade hands often).
The ultra-wealthy are looking to preserve their wealth. And with the threat of inflation looming, art and real estate are popular options.
But Cohen may have other motives for bulking up his art collection... As Porter explained in the February 14 Digest Premium (subscribers can read it here)… art and other collectibles are also a great way to protect your wealth from the IRS. From Digest Premium:
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Owning collectibles offers one major advantage – one that I think drives 90% of the demand for collectibles: It's a great way to protect your wealth from the IRS. People know that when they die, the IRS won't have any idea what is hanging up on their walls or hiding in their vaults. So they hide money in these trophies to give to their children to avoid estate taxes. Mind you, I'm not passing judgment on these actions, nor am I recommending them... I just believe that's why a lot of demand for collectibles exists.
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Collectibles are also easily transferable across borders. You can take a Picasso on a private jet and move $100 million offshore. And no one even knows you have it.
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When you buy collectibles, you're betting on the irresponsibility of the government and the wickedness of the tax system... If the government gets more irresponsible and the tax system gets more heinous, you'll probably do well. And I think that's a good bet. But you should understand that's what you're betting on.
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New 52-week highs (as of 3/27/13): ProShares Ultra Biotech Fund (BIB), WisdomTree Japan SmallCap Dividend Fund (DFJ), iShares Singapore Fund (EWS), iShares Biotech Fund (IBB), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Health Care Fund (RXL), Targa Resources (TRGP), W.R. Berkley (WRB), Utilities Select Sector SPDR Fund (XLU), Johnson & Johnson (JNJ), Eli Lilly (LLY), Monsanto (MON), Chicago Bridge & Iron (CBI), Calpine (CPN), Chubb (CB), Navigators Group (NAVG), Becton-Dickinson (BDX), Texas Pacific Land Trust (TPL), Cheniere Energy (LNG), and Target (TGT).
Our subscribers' on-the-ground reports confirm what we've been writing… Real estate is flying off the market. Please send any local real estate stories you have to feedback@stansberryresearch.com.
"I work for a major real estate developer in NYC. We just opened a 68 unit new development a block east of Fifth Avenue on the Upper East Side. The building is under construction. Units will be delivered in 15 months. In three days, we have contracts out for signature on one third of the building at an average per square foot price of $3450.
"Last year, my husband and I could not sell our house for what we paid in 2002 (in Westchester County). This week, our realtor advised us to re-list at 20% over last year. Bidding wars everywhere." – Paid-up subscriber Elida Jacobsen Justo
"I enjoy you and all the staff at S&A' writings and observations. Having just spent a couple of years in Scottsdale, I have seen the 'local' market be propped up by Blackstone, etc. They bought the entire supply of houses regardless of condition. Propped up the real estate market overnight.
"I am now in central Illinois (long story). Nice houses here are 150 – 200 per sq ft. Totally friggin' Unbelievable." – Paid-up subscriber Jimbo
"My wife and I moved to Las Vegas, Nevada in June, 2012, not knowing how long we might be here. We thought the market was ripe for home ownership, though, and got ourselves a realtor and started looking. All we wanted was a fair-good 3 bedroom, 2 bath home, and these were supposedly available for around 70,000. We figured we could always get our money back, even if we had to leave ere long. The city is loaded with vacant houses, but they're not for sale. The banks are holding them, we are told, waiting for prices to increase.
"We saw perhaps 25 houses and made offers on four of them. There was a lot of junk, but we tried to make reasonable offers on decent homes. We soon found that we were competing with investors, who had their people in place to snap up anything that was decent. One example: a 70,000 deal fell through, and we quickly looked the house over and placed a 70,000 cash offer. We didn't get the place, because some investor offered 80,000! That kind of thing happened several times, and we decided to call it quits and rent an apartment…
"So house hunting in Las Vegas is no picnic. Buy a house, sure, but with how much hassle and grief?" – Paid-up subscriber Marty
Regards,
Sean Goldsmith
Delray Beach, Florida
March 28, 2013
Paper money is great for the wealthy and horrible for the middle class...
The reason is simple. Wealthy people have the wherewithal to hedge against the risk of inflation. They can buy real estate, for example, with fixed-interest rates – which are currently at record lows. That's a fantastic inflationary hedge.
Or they can buy gold. They can buy foreign currencies. They can own businesses that have the ability to raise prices, like Hershey.
So over time, wealthy people can find ways to protect their purchasing power and their savings. Meanwhile, the poor and middle class see their wages eroded by inflation and their savings destroyed.
And that's exactly what has happened in the United States since 1971. Real wages in the U.S. have not increased at all in 40 years. And as a result, the disparity between the rich and the poor has grown wider and wider. And that trend will not reverse, no matter what taxes or other policies the government implements.
The only thing that will change the growing disparity is a return to real capitalism. And if you look throughout history, you'll find the same thing in every socialist or communist society…
There is no real middle class in socialist and communist societies – only the very rich and the very poor. And the reason is inflation and the destruction of the monetary system.
The poor and the middle class insist on guaranteeing the banking system (which we wrote about here)... They think they're protecting themselves from bank runs, but all they're really doing is guaranteeing themselves a poor future.
All bank guarantees do is encourage shoddy lending... With no fear of loss, banks make riskier and riskier loans. Then, the inevitable losses are papered over... which eventually leads to inflation.
That's why I've been heavily investing in real estate for the past several years... And recommending readers buy capital-efficient companies (which have pricing power and the financial wherewithal to withstand a downturn) like Hershey and McDonald's. As savings and wages decrease, these assets will appreciate...
– Porter Stansberry with Sean Goldsmith
Why our monetary system is killing the middle class…
Most people think a government bent on printing money and spending it recklessly helps the middle class. In reality, it strips them of their wages and savings... In today's Digest Premium, Porter explains why it's actually the wealthy who prosper...
To continue reading, scroll down or click here.
Why our monetary system is killing the middle class…