Doc Eifrig Shares Some Good and Bad News About the U.S. Economy

The U.S. economy is booming... Job openings soar to an all-time record... Doc Eifrig shares some good and bad news about the U.S. economy... 'This is the time to own gold'... Sjug calls the bottom...

There's no denying it...

The U.S. is booming right now.

Virtually every data point we've seen in recent months has shown the American economy is growing at its strongest pace in years. And this morning's report on job openings was no exception. As the Wall Street Journal noted this morning...

American employers had more than seven million unfilled jobs for the first time on record this summer, reflecting a historically tight labor market that is causing some businesses to struggle to find workers.

There were a seasonally adjusted 7.136 million job openings on the last business day of August, the Labor Department said Tuesday. That extends further into record-high territory for data dating back to 2000.

Available jobs in August outnumbered unemployed workers actively looking for work by 902,000, the largest such gap on record. Prior to March, job openings had never exceeded unemployed workers in more than 17 years of monthly records.

As regular readers know, this economic strength – along with the positive stock- and credit-market indicators we've been following – is why we continue to give this long bull market the benefit of the doubt.

Today's latest economic record should be no surprise to Retirement Millionaire subscribers...

While Steve Sjuggerud has rightly earned the reputation as Stansberry's resident "bull," our colleague Dr. David "Doc" Eifrig has also been consistently (and correctly) bullish for much of the past nine years. And one of the biggest reasons for his bullishness has been the U.S. economy.

You see, Doc closely follows a number of traditional and "real world" economic indicators. And time and again over this long bull market, Doc has told his subscribers not to worry about a bear market, because the U.S. economy continued to improve.

In the latest issue of Retirement Millionaire, published last Wednesday, Doc shared an update on just how good things are today...

Two weeks ago, I was flying west from Baltimore, heading to the San Francisco airport. My vineyard grapes had matured for the year, and I was heading to Calistoga to pick the fruit for my 2018 vintage.

No worries, though. This happens a lot. Usually when I get in late, I'll spend the evening at a hotel near the airport and set out early in the morning. But the plane was scheduled to land late in the evening, and I wasn't relishing the 2.5-hour drive that would still lie ahead of me.

But this time, pulling up my favorite sites for hotel and travel reservations produced... nothing. Everything was booked: the Hilton Garden Inn San Francisco Airport North, sold out... the Hilton San Francisco Airport Bayfront, sold out... DoubleTree, sold out... Homewood Suites, sold out.

I'm not just talking about my favorite hotels or the closest ones. I expanded my search farther and farther from the airport. Sold out. Sold out. Everything was 100% booked. I'd never seen anything like it. Finally, I found a room all the way downtown. The Hilton San Francisco in the Financial District could take me... for $1,040 a night.

Of course, San Francisco is one of the most expensive cities in the country. But expanding my search all the way out to Oakland didn't do much better. I could stay at a Hampton Inn for $600. No thanks. The waffles are good, but not that good. Ultimately, I decided to stay in Baltimore and fly out first thing in the morning.

Again, this is just one of several real-world indicators Doc follows...

And right now, they're all sending the same message. More from the issue...

You can't get a hotel room. You can't hire a contractor to show up within months. No one can find employees (at least not for the wages they are willing to pay). Amazon (AMZN) just gave raises that by my estimate will cost it $3 million per hour, minimum.

From my office in Baltimore, I can spy multiple construction cranes... And my window faces north toward the bad sections of Baltimore. Look south toward the ever-growing Inner Harbor, and construction is everywhere.

Here at Stansberry Research, many of us just returned from our annual Alliance Meeting in Las Vegas. Everything from the flights, to the restaurants, to the gaming floor at the Bellagio hotel bustled at max capacity.

Right now, all of my gauges – both real-world ones and more traditional economic measures – tell me the economy is cooking. It couldn't really be performing much better.

That's the good news...

Unfortunately, Doc's update also came with some bad news as well: When things can't get any better, they can only get worse. As he explained...

It's inevitable. But right now, things look about as good as they can get.

You can measure this with "potential GDP," a measure of what the economy would produce if all its assets were put to productive use. In 2014, we used this measure to point out that the economy had not yet recovered from the financial crisis and still had plenty of room to grow.

Well, the gap between potential and actual output just closed...

As Doc explained, an economy has 'momentum'...

Spending helps create jobs and raise wages... giving people more money to spend... which in turn creates more jobs and higher wages.

This cycle can run along for a while – and often longer than you might expect. But it can't run forever. And Doc says he is now seeing the first signs that a turn is approaching...

Boom times eventually choke themselves off through inflation. Rising prices can come from rising costs (known as "cost-push inflation") or rising demand (known as "demand-pull inflation").

Today, for the first time in my lifetime, we see both.

The prices for raw commodities have stepped up and consumers are out buying, flying, staying in hotels, and spending money like a burning wildfire. Higher labor costs contribute on both ends. Higher wages create consumers who spend, leading to demand-pull inflation, and they raise costs, leading to cost-push inflation.

As a result, Doc says it's time to prepare for the eventual end of this boom...

No, this doesn't mean selling all your stocks. Like us, he remains cautiously bullish today.

However, he believes most folks – especially those with a large percentage of their net worth in stocks – should hold some extra cash in their portfolios right now. And he is now recommending subscribers buy more gold for the first time in years.

Of course, if you've been with us for long, you know Doc has long recommended keeping a small portion of your portfolio in gold as a "chaos hedge." But he says we're currently experiencing three market conditions that make it an ideal time to consider holding more...

First, as noted above, inflation is on the rise. It's been running at 0% to 1% a year for several years, but now it's crossing into 2%. That's a reasonable rate. But if it approaches 4% or 5%, that could be disruptive (although still nothing like the hyperinflation of the 1970s).

You want to own gold during periods of inflation. In recent years, the price of gold hasn't been as closely correlated as it had been in the '70s, when the two moved in lock-step. But it still stands to reason that when the value of money declines (the essence of inflation), the value of a hard asset like gold will rise.

Second, despite fears to the contrary, Doc says rising interest rates aren't a major headwind for gold prices right now...

You want to hold gold when interest rates are low. And even after the recent rise, Doc says that's still the case today...

All asset classes compete with each other... One of gold's big drawbacks is it doesn't pay a yield. When government bonds pay 1%, holding gold becomes more attractive. You don't give up much yield. But when government debt pays more, say 5%, some investors would move from gold to bonds.

Today, bond yields have moved higher... But they're still historically low. The 3.2% yield that U.S. 10-year government notes pay wouldn't be considered generous at any time in history outside the past 10 years. Yields are far from rich, and gold can still earn its place.

Plus, the Federal Reserve will back off its plan to gradually hike rates quickly if it senses any stress in the economy or the stock market. A new regime of quantitative easing would send gold soaring.

Doc's final reason is the simplest...

But it may also be the most important: Gold has typically done well when boom times (like we're currently experiencing) inevitably turn to bust...

Gold goes up when stocks crash and people get scared.

This next chart measures from the peak of the stock market to its lowest point. But if you held longer, gold continued to rally. Which would you prefer, to see your wealth chopped in half or earn around 20%?

And yet, despite this bullish picture, almost no one is interested in buying gold today...

As we've discussed several times in recent Digests, Doc noted sentiment is as bleak as it has been in years...

If you're a gold bug, it's been a tough couple of months for you. The price of gold is down roughly 10% since the start of 2018 and down about 40% since its 2011 peak...

No one is buying today. But forget buying... traders have actively jumped on bets that gold will go down...

Large speculators in gold futures have bigger bets against the price of gold (compared with the number of all gold futures bets) than any time over the past 17 years.

In short, Doc believes it's an ideal time to add some more 'disaster insurance' to your portfolio...

The potential "payout" is spectacular... Yet, it's currently cheaper than it has been in years...

Let's recap... You want to own gold for safety... at least a little. It's a hedge for when the rest of your assets collapse.

The times that it comes in handy – inflation, fear, and low interest rates – all look to be in the offing.

Of course, gold isn't a productive asset and its performance can cause your portfolio to lag if you buy it at high prices.

But today, you can get gold about as cheap as its been in two years and when it's hated by investors. That means you can put on your hedge for cheaper than usual. We think it's bound to rise whether the market gets a shakeup or not.

Longtime readers know it's always noteworthy when several Stansberry Research analysts agree...

The reason is simple: Unlike many other firms, we're completely independent. We aren't beholden to advertisers or the companies we're analyzing. We work only for you, our subscribers.

We've also hired some of the best analysts in the world, and no one – not even Porter himself – tells them what to write.

As a result, this means our analysts sometimes have differing opinions. Despite complaints from frustrated subscribers who would prefer we all parrot the same viewpoints, we believe this is one of Stansberry Research's greatest strengths. As Porter often says, it's what we would want if our roles were reversed.

But it also means that when several analysts agree, you should pay attention.

And right now, Doc isn't the only one who has recently become bullish on gold again...

In fact, Steve Sjuggerud became the first Stansberry Research analyst to officially "call the bottom" last month, when he recommended gold and gold stocks to his True Wealth subscribers.

Steve said the current setup in precious metals is one of the best investment opportunities outside of the "Melt Up" anywhere in the world today. It checks all three boxes of what he looks for in a great trade: It's cheap... extremely hated... and it's just starting an uptrend.

Like Doc, Steve also noted that gold and gold stocks are likely to continue to do well when this long bull market finally ends. As he explained in last month's issue of True Wealth...

This week, for the first time in years – and for only the second time in my long career – I'm personally buying gold stocks again. And I'm also doubling the amount of the physical gold I own. In short, I am putting my money where my mouth is.

Why? The reason is simple... Gold speculators are betting against gold to a greater degree than at any time since 2001. As you know, gold's great bull market started in 2001, from a similar degree of "hated." And as you know, gold stocks soared starting around that time.

I realize nobody is talking about gold or gold stocks today. But that's what you want... In order to buy an asset at the best price, you want to buy it when it's hated and ignored. And you want to sell it when it's all over the news.

I expect today's extreme means that we are close to the start of the next great bull market in gold.

One last thing...

Speaking of the long bull market in stocks, the biggest night in Stansberry Research history is fast-approaching...

Steve is hosting a live Melt Up event On Wednesday, October 24 at 8 p.m. Eastern. Already, tens of thousands of readers have saved their seat for this historic night. Several of the biggest names in finance – people like Jim Rogers, Whitney Tilson, David Tice, and more – will join us for this free event.

During the event, Steve will share his latest thoughts on the Melt Up... what he's watching to know when the bull market will end... and the name and ticker symbol of one stock he believes could return as much as 1,000% during the final stages of the Melt Up.

If you have even a dollar invested in the markets today, you owe it to yourself to attend this free event. Don't miss out. Reserve your seat here.

New 52-week highs (as of 10/15/18): none.

Another Stansberry Alliance member shares his experience with the recent volatility. We'd love to hear from you, too. Let us know how you're doing at feedback@stansberryresearch.com.

"[Regarding the] recent volatility... I have had the good fortune to be one of the early Alliance members. Prior to then I seemed to have a knack for following the bad advice of a number of financial newsletters and consequently losing considerable money in my portfolio. It has been a slow and painful process assimilating the teaching of Porter, Steve, David, and the rest of the Stansberry crew. However, as Porter has often explained, 'there is no such thing as teaching, only learning'. Unless the student is willing to learn and apply what has been taught, the instructor may as well pack it up and call it a day. I just checked my portfolio and thanks to the hedges and strategies learned from Stansberry Research it is down $5 and change from one week ago. You read that right 5 dollars. Thanks for the continuing education classes." – Paid-up Stansberry Alliance member Kirk K.

Regards,

Justin Brill
Baltimore, Maryland
October 16, 2018