Doc Eifrig is still right...
Doc Eifrig is still right (and still making money)... Possibly the most important investment advice you'll read all year... Warren Buffett's dollar prediction…
Last week was great for the optimists...
One of the big financial debates of the past year was whether the U.S. economy is gradually getting better... or if we're just one unemployment claim away from recession.
On one side, you have economic pessimists like Lakshman Atchuthan, the co-founder and chief operating officer of the well-regarded Economic Cycle Research Institute (ECRI). The ECRI is a research firm with a decent track record of making economic calls.
Last fall, Atchuthan made the rounds on CNBC and Bloomberg Television to promote his forecast that the U.S. was headed for recession. It was a highly publicized forecast. No such recession has arrived. But to his credit, Atchuthan is sticking to his guns. He's still one of the loudest voices warning of a recession.
On the other side of the debate, you have folks like our own Dr. David Eifrig... a firm believer that things are getting a little bit better each month.
"Doc" (as we call him) sees improvement in bank lending and various economic indicators as reasons to stay optimistic. Many of his "common sense" indicators (like foot traffic through the wine shop he owns and rental property demand in Augusta, Georgia… home of the Masters Golf Tournament) are also pointing to a recovering economy.
Given his optimism, Doc has guided his readers into handfuls of income-producing blue-chip stocks, mortgage REITs, and high-yield bonds over the past few years. This stance helped him score an "A+" in our annual Report Card this year.
One look at the stocks reaching fresh 52-week highs says Doc is right on...
Just last week, the new highs list welcomed "spending stocks" like Apple, lululemon athletica, Under Armour, Harley-Davidson, Dillard's, Macy's, Foot Locker, Dick's Sporting Goods, Men's Wearhouse, Nike, Liz Claiborne, and Target.
The list also included homebuilders D.R. Horton, Lennar, Pulte, and Toll Brothers. Home improvement giants Home Depot and Lowe's were there as well.
Also on the list: The world's largest hotel chain, Wyndham Worldwide... fellow hotel giant Marriott... luxury shopping mall operator Taubman Centers... and discount retailer Dollar General. Big restaurant chains Chipotle Mexican Grill and Panera Bread made the list.
So despite what the pessimists say… America is still shopping.
On this topic, we excerpt one of the most important pieces of advice Stansberry & Associates has published this year.
It's from Dan Ferris' latest edition of Extreme Value (and later excerpted in DailyWealth). We hope this advice helps guide you in picking up bargains during the many market panics we expect will occur in the next decade…
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The key to investment success is not a technique or a strategy. |
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It's not position sizing, trailing stops, options, having inside information, or owning World Dominators. It's not even the ability to value a business (a skill without which you're virtually guaranteed to lose money in stocks). |
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The key is not "buy low, sell high," or "be greedy when others are fearful and fearful when others are greedy"... though both adages will certainly help. The key to investment success is a simple, powerful truth. |
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It's the reason U.S. stocks appreciated 1.5 million percent during the 20th century. It's the reason great investors are great... And it's the reason you can set yourself up for the biggest, safest gains the market has to offer. |
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You see, understanding this truth is what allows you to buy when stocks are down and everyone is scared... and sell when stocks are overvalued and everyone is complacent... |
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To succeed in the stock market, you must believe that shopping trumps politics... |
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That's the simplest (and maybe the crudest) way to say that what happens in the business world is more important to your daily life and the daily lives of everyone in America than what happens in the White House or the Capitol. |
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The amount of shopping for hamburgers at McDonald's is more important than the debt ceiling debate. The amount of shopping for beer at the local convenience store is more important than any contest for the Republican presidential nomination. And the number of shoppers occupying the aisles of Target and Wal-Mart is more important than the number of protestors occupying Wall Street. |
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Save your hate mail. I already know what you're thinking... |
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"Dan has lost his mind. Politics is everything to investors. America could be ruined with so-and-so in the White House... and with so-and-so running Congress." |
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In reply to this phony concern, I ask you to remember the 20th century... The panic of 1907, prohibition, the income tax, the founding of the Federal Reserve, the Great Depression (in which half the country's banks failed), World Wars I & II, the outlawing of gold, the Korean and Vietnam Wars, oil shocks, the end of gold-backed U.S. dollars, the great inflation of the 1970s, the market crash of 1987, the savings-and-loan debacle and recession of the early 1990s, and the Internet bubble and crash in 2000... |
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Some of those things scared the hell out of investors. But you'd have made a lot more money if you bet against them lasting forever and for the primacy of commerce. |
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Despite all the horrible things that happened in the 20th century – despite it being the deadliest century in history (in terms of lives lost) – U.S. stocks... as tracked by Dimson, Marsh, and Staunton in their excellent book, Triumph of the Optimists... appreciated about 1.5 million percent. |
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If you want an idea that'll help you cut through the noise and make great, winning bets when everybody else is throwing up, this is it. |
You can read the rest of the DailyWealth excerpt (and learn how one of the world's greatest stock investors is taking advantage of this idea) here.
Don't think we've had rose-colored glasses welded to our face. Granted, the economy is definitely looking better. Stocks are rising. Unemployment is slowly dropping. But in today's "age of volatility," nothing is guaranteed...
That's why we encourage everyone to stay flexible with their investment portfolios. Keep buying The 12% Letter's "World Dominating Dividend Growers" when you can pick them up at good prices. Own some gold. Consider unconventional income-producing sources, like the types of corporate bonds Mike Williams recommends in his True Income advisory... and Doc Eifrig's incredible option-selling strategies in Retirement Trader. And if you're a "hands on" investor, you should take advantage of property deals like Steve Sjuggerud has been recommending in True Wealth.
Keeping a flexible investment approach will allow you to navigate a world where it's nearly inevitable that the U.S. dollar will gradually decline in value. On that note, Dan sends us this...
| Economist/author Carmen Reinhart said in a Bloomberg editorial today that "financial repression" is here to stay. "Financial repression" is a fancy way of saying "extremely low interest rates." Reinhart is the co-author (with Kenneth Rogoff) of This Time Is Different: Eight Centuries of Financial Folly, an excellent study of financial crises, their causes, and aftermaths. |
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Reinhart says central bank debt as a percentage of GDP among the world's 22 advanced economies is higher than any time in history, going back as far as 1900. And government only has five ways to reduce huge debt burdens… |
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1) Economic growth, |
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2) Fiscal adjustments or austerity plans, |
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3) Default or restructuring of private and/or public debt, |
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4) A surprise burst in inflation, and |
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5) Financial repression accompanied by inflation. |
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For now, our own Federal Reserve isn't scared of inflation. It's got the financial repression engine running in overdrive, keeping interest rates super low. Reinhart says these super-low rates are a kind of tax on bond investors and savers. Low-risk returns are lousy while the Fed keeps interest rates artificially low... and the whole exercise increases the odds inflation will ravage the U.S. economy in the years ahead. |
And Dan notes another much more well-known financial expert who has sounded off more than once about the potential for inflation in the U.S. His prognosis jibes with Reinhart's...
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Over the weekend, I watched Warren Buffett's appearances on the Charlie Rose show in 2009 and 2011. I wrote down the following quotes, which follow hard upon Carmen Reinhart's observations this morning... |
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"When politicians face almost insuperable problems, and it looks like they can solve it by printing money, I think they will do it." |
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"There will be no tendency toward deflation in this country over time… All you know is the dollar is going to be worth less 10, 20 years from now." |
Well said, Warren.
New 52-week highs (as of 3/9/12): BlackRock Corporate High Yield (HYV), Invesco Value Municipal Income (IIM), iShares Dow Jones U.S. Home Construction (ITB), PowerShares Buyback Achievers (PKW), Virginia Gold Mines (VGQ.TO) Abbott Laboratories (ABT), Calpine (CPN), Chart Industries (GTLS), Clean Energy Fuels (CLNE), and Target (TGT).
In today's mailbag, a little reasoned point-counterpoint from subscribers… Send your messages – good and bad – to feedback@stansberryresearch.com.
"Thank you for The 12% Letter and weekly essays. You asked for feedback on returns, here are mine: KO (bought 9/09, ROI 41.5%); MO (5/10, 66.4%); ABT (6/11, 15.8%); WPZ (9/11, 16.8%); MSFT (2/09, 46.4%). A few others I hold are KMP (8/08, 93.6%) and RSO (11/09, 59.4%).
"I am in the market to build an income stream to go along with my IRAs, WDDG are just the ticket. With a 150K portfolio last year it generated $7,500 in dividends and a return of 16%, not bad against a flat S&P. Thanks again, looking forward to more info and recommendations." – Paid-up subscriber Lou Rizzuti
Hunt comment: Thank you for the note, Lou. The sooner folks realize the road to stock market wealth is best traveled inside the armor-plated bulldozers Dan Ferris calls "World Dominating Dividend Growers," the better.
"YOU GUYS ARE THE BIGGEST HUSTLERS I KNOW. WISH I HAD KNOW BEFORE HAND. IT IS TERRIBLE AND DEGRADING." – Paid-up subscriber TJH
Hunt comment: Mother was right. You can't please everybody...
Regards,
Brian Hunt
Delray Beach, Florida
March 12, 2012