Mon, Sep 9, 2013|Sean Goldsmith

Clear signs the economy is improving...

Porter's take on improving U.S. auto sales...

I (Porter) have seen a lot of headlines recently about U.S. automobile sales approaching their highest level since late 2007.

Auto sales are an important economic indicator... And these numbers are bullish for the economy.

The thing to realize is there was only around $160 billion in checking accounts back in 2007... Today, checking accounts hold more than $1 trillion. Where did all the money come from?

If you print enough money, you can encourage the consumer to spend. And I would not be at all surprised if we see much stronger economic results over the next several quarters and, correspondingly, much higher inflation. And that's good in a lot of ways. It's great that we'll generate some profits for the car companies finally after billions and billions of dollars in bad bankruptcy debts.

But the truth of the matter is that we're probably not making any net economic progress at all... Printing up new money and writing off bad debts is basically a breakeven proposition. Over time, our standard of living will fall unless we're able to generate real profits, real savings, and real capital investment.

The best way to gauge that is to look at productivity numbers. If you look at the real cost of automobiles adjusted for inflation, the price has gone down because we've gotten better at building them, and we have some productivity gains. That's great.

But what would the cost of cars be in terms of nominal dollars if we hadn't had all this inflation? How much stronger would working-class wages be if we hadn't had all this inflation? How much better would the productivity gains have been if we had had real growth instead of all this inflation-inspired growth?

In short, I'm glad car sales are up. I'm not surprised, because there's tons of cash out there now. But I'm concerned about where our purchasing power will be at the end of this next inflationary cycle. I'm afraid that the answer to that is not good... We'll see prices go way up. And while Mom and Pop America might feel a little richer today, their real wages have continued to fall.

– Porter Stansberry with Sean Goldsmith

Porter's take on improving U.S. auto sales...

Porter is happy that U.S. car manufacturers are finally making money after being bailed out by the government... It's a good sign for the economy.

But as he points out in today's Digest Premium, the future implications of this strength are bad...

To continue reading, scroll down or click here.

Porter's take on improving U.S. auto sales...

Porter is happy that U.S. car manufacturers are finally making money after being bailed out by the government... It's a good sign for the economy.

But as he points out in today's Digest Premium, the future implications of this strength are bad...

To subscribe to Digest Premium and access today's analysis, click here.

Clear signs the economy is improving... Shipping stocks are soaring... This 'boom and bust' sector is dirt-cheap... Act III is beginning...

The U.S. economy is steadily grinding higher...

The stock market is near its all-time highs. Home prices are rising. The manufacturing sector (as measured by the Manufacturing Purchasing Managers Index) is improving – meaning it's buying more raw materials and supplies.

As we discussed in the September 5 Digest, U.S. automobile sales are approaching their strongest point since 2007... And weekly jobless claims are declining.

That's what happens when you pump trillions of dollars into an economy... It eventually moves off bank balance sheets and into the hands of businesses and individuals. We're starting to see that money work its way through the system.

In today's Growth Stock Wire, Editor in Chief Brian Hunt showed readers more signs of an improving economy...

An idea that strikes many people as crazy is producing stock rallies all over the place...

The idea is that despite all the negative press it's getting, the economy is somehow "not falling apart." It's slowly getting better. This means growing demand for cars, cement, steel, and shipping services.

As Brian points out, shares of Ford are at a one-year high. The Guggenheim Shipping Fund (SEA) – an exchange-traded fund that holds a basket of shipping stocks that transport commodities around the world – is trading at a two-year high.

And shipping stocks are ripping higher today. Take a look at this one-year chart of dry bulk shipper Genco Shipping. Dry bulk shippers carry coal, grain, iron ore, and other "dry goods" (i.e. not oil).

As you can see, shares of Genco have doubled in less than one month. Shares were up as much as 15% today alone.

These shipping stocks' performance is a sure sign the economy is improving. As the economy improves, demand for goods increases (meaning there's more to ship) and the shippers can charge more for their services.

To track the cost of shipping dry goods overseas, simply follow the Baltic Dry Index. Shipping rates are soaring right now...

Today, several of our analysts – including Brian and Small Stock Specialist editor Frank Curzio – see a huge opportunity in one of the most beaten-down sectors of the commodity market... While the economy is undoubtedly improving, these stocks are still trading below 2009 levels.

As Frank wrote in the September 6 Growth Stock Wire...

Deutsche Bank and mining giant Rio Tinto predict steel prices will rise at least 3% annually over the next few years. China Iron and Steel Association, a nonprofit organization that has over 100 key members from top steel companies and institutions in China, forecasts growth of 4% to 5% annually over the next few years. These are not massive numbers. But they are much stronger than they were during the recent crisis years.

For the record, I am not predicting a massive global economic boom any time soon. But the markets in China, Europe, and the U.S. are on much stronger ground compared to 2009. And stocks like U.S. Steel and AK Steel are trading below 2009 levels.

Steel is one of the great "boom and bust" sectors in the market. And it's been busting for years. But you have an opportunity to make double-digit gains in the sector today. As Brian wrote in the August 30 DailyWealth Market Notes:

Due to a sluggish global economy and excess production capacity, steel has been in "bust mode" for the past few years. Low prices have produced big losses for players like U.S. Steel (X). The stock has fallen from $60 per share to $17 per share. But as you can see from the chart below, this beaten-up steel leader has found a bottom in the $17-per-share area. If things simply get a little "less bad" for the sector, U.S. Steel and its competitors could easily jump 50%.

All of this plays into Steve Sjuggerud's "script" for how the markets will react to the Bernanke Asset Bubble – the asset inflation resulting from Federal Reserve Chairman Ben Bernanke's money printing.

Steve has broken the economic recovery into three acts. (You can read more about the recovery here.) And he believes the final act – Act III – is just beginning.

Luckily, this is where the huge money is made – potentially hundreds of percent from here.

During Act III, Mom and Pop start buying the riskiest stocks in the market – like gold miners, commodity stocks, and emerging markets. (As Frank Curzio noted, steel stocks are still trading at their 2009 price levels. And as Act III continues to play out, this sector could soar by triple digits.)

Steve is closely monitoring the economy and how it's fitting into his three-part script. And he's been updating his True Wealth readers about the progress.

For example, in his latest issue, out last month, he recommended another beaten-down sector with triple-digit upside potential. (His readers are up 4% on the position.)

These are big, well-known businesses... They're making lots of money. But they're trading at dirt-cheap valuations.

Steve has made huge gains buying various sectors as his script plays out. His readers booked 165% profits in Texas Pacific Land Trust. And they're up 152% in the ProShares Ultra Health Care Fund... 90% on Berkshire Hathaway... and 60% on homebuilder stocks.

Like Porter, Steve knows this rally can't last forever. But he thinks we can make huge profits before the downturn. To learn more about Steve's market script – and how to profit from the beginning of "Act III" – click here...

New 52-week highs (as of 9/6/13): Fluidigm (FLDM), Qlik Technologies (QLIK), Constellation Brands (STZ), and Targa Resources (TRGP).

An empty mailbag today... Surely we've done something to offend you lately. Let us know at feedback@stansberryresearch.com.

Regards,

Sean Goldsmith
Miami Beach, Florida
September 9, 2013