Mon, Oct 14, 2013|Sean Goldsmith

Don't worry about your money...

What my favorite economic indicators are telling me today…

Right now, two of Porter's favorite economic indicators are showing signs of stress... He explains what that means in today's Digest Premium.

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

Don't worry about your money... A triple-digit winner... Four reasons the market has room to run... One sector that's left behind – and provides great yield... Taking advantage of the headlines...

"Please don't worry so much about your money right now."

Steve Sjuggerud urged readers to stay calm in his latest issue of True Wealth. Steve, as longtime subscribers know, has been bullish on the stock market for years... He believed, correctly, that Federal Reserve Chairman Ben Bernanke's inflationary monetary policies would cause asset prices across the board to soar. He calls it the "Bernanke Asset Bubble."

And prices soared... The stock market is trading at all-time highs. Bond yields are hovering around their all-time lows (bond yields move in the opposite direction as bond prices). The current 10-year Treasury yield is 2.68%. The meager Treasury yields have forced investors to move out on the risk curve to maintain their purchasing power (for one egregious example of this, make sure to read today's Digest Premium). They've also been buying real estate, commodities, and most any other asset to make sure inflation isn't eating away at their savings.

And Bernanke is showing no signs of slowing down... He maintained quantitative easing at the pace of $85 billion a month. We doubt his replacement at the Fed, Janet Yellen, will change course in any meaningful way.

Steve's bullish stance has allowed his readers to capture huge gains in stocks...

For example, they've made more than 100% in 11 months by buying shares of private-equity giant Blackstone Group.

Blackstone is perfectly positioned to profit from the Fed's monetary policies. Blackstone is an asset gatherer... It raises billions of dollars to invest across asset classes (from stocks to real estate to buying private and public companies). In addition to earning a portion of the profits on its investments, Blackstone also takes a small percentage of its total assets under management.

As the Fed continues to print money, more and more of it is finding its way into Blackstone's portfolios... That means more fees.

Also, as the Fed inflates asset prices, Blackstone is able to mark up the value of the assets in its portfolio. It can also sell its assets for rich premiums. You can see how the strategy is working out well for shareholders...

Steve outlined four major reasons why the market still has room to run in the October issue of True Wealth:

1) Short-term interest rates are at zero. And the Federal Reserve has said it will keep them at zero for many years.

For investors, it doesn't get much better than this... Short-term interest rates can't go any lower. In short, the Fed is doing all it can to help companies grow quickly. It is a perfect situation for stocks to go higher.

2) Long-term rates – like mortgage rates – are coming off RECORD lows.

I try not to do this in public, but I laugh when I hear people worry about higher mortgage rates killing the housing market...

Yes, mortgage rates are up... But my goodness, they're up from record lows! Mortgage rates are still incredibly low based on history. And house prices in many major cities lost a third of their value in the housing bust. Slightly higher mortgage rates are not going to kill this housing boom.

3) Investors are scared.

Stock investors are scared because stocks are near all-time highs. Real-estate investors are scared because mortgage rates have risen. Investors are scared of the fragile economy, politicians, the national debt, the deficit, Syria, and the list goes on.

This fear is good! It is a clear sign that the markets have not peaked yet. Think about this... There was no fear in real estate in 2006. There was no fear in stocks in 1999.

When there's no fear left, the market has peaked. Today, we're nowhere near that point.

4) Astoundingly, investors are still not in the markets yet. That means there's plenty of upside.

Have you been to a cocktail party lately? Was anyone talking about the stocks they're buying? My experience these days is that nobody is talking about the stock market. It surprises me... but I guess people got burned in stocks in 2000, and they got burned in housing in 2008, and they're not interested in investing anymore.

I saw a graphic this week that showed that CNBC's viewership has fallen to mid-1990s levels. In short, nobody is interested in investing today. This is great news! Investments peak when there's nobody LEFT to buy. Today, we have the opposite situation... Nobody is buying. There are still millions of Americans out of the market who will be in it before it peaks. So there's plenty of upside left.

As Brett Eversole, Steve's research analyst, reminded readers in today's Growth Stock Wire... Enjoy this rally. Let your winners run. But mind your trailing stops. You want to make sure you lock in profits before we see a major correction.

Despite the broader market rally, one sector of the bond market has been left behind...

Investors have pulled nearly $44 billion out of municipal-bond funds this year – the fastest pace on record, according to data from fund-tracker Lipper. Municipal bonds are those issued by state and city governments to fund anything from new sports stadiums to new roads. And due to the nature of these bonds, the interest is tax-free.

The average yield on municipal bonds (or "munis") has risen from 2.17% at the end of 2012 to 3.13%, according to data from Barclays. But the higher yield hasn't been enough to entice buyers... Sales of new munis are down 15% in September compared with last year.

In addition to broader bond-market fears due to the current interest rate environment, the recent Detroit bankruptcy and Puerto Rico's potential default on $70 billion in bonds (the latest scare story in the muni space – around 75% of the island territory's debt is held in muni mutual funds) has roiled the market.

Brett was recently quoted in industry publication The Bond Buyer on the state of the municipal-bond market…

The market also dealt with continued outflows out of municipal bond funds, which picked up pace to $729 million from the previous week's $690 million, according to funds that report weekly to Lipper FMI. Funds have reported outflows for 20 consecutive weeks.

"Asset classes in general go through these similar cycles," said Brett Eversole, analyst at Stansberry & Associates. "The most important thing is investors are starved for yield. With zero-interest-rate policy, after inflation you're getting nothing. And what's interesting about munis is they are paying more in yield."

Eversole said yields are higher than Treasury yields, which historically doesn't happen because of the tax advantages of munis. On the 30-year, muni spreads to Treasurys are "higher than reason would dictate."

During the selloff over the past five months, munis sold off as much as Treasurys, and maybe oversold, Eversole said. "Bonds in general are a dirty word to investors today. But the sentiment is too negative and I think that should set up an intermediate-term rally in the next six to 12 months. Munis have much more of a value proposition than any other bond today."

In Retirement Millionaire, editor Dr. David "Doc" Eifrig is still urging subscribers to buy munis. He wrote in his October 3 Retirement Millionaire update, in response to a reader question…

I love munis right now. You can get tax-free income that's equivalent to the best junk-bond yields in the past two decades. This situation is unheard of in my investing lifetime. And as we've written many times before, the default rate on munis is below even the best-grade corporate bonds.

Doc currently has three municipal-bond funds in his Retirement Millionaire portfolio... And all three are rated a "strong buy." In some cases, these funds are trading for double-digit discounts to net asset value (meaning you can buy the portfolio of bonds for around 11% less than their market value)... And all the while, you can collect tax-free yields of 4.9%-6.7%.

You can sign up for a risk-free trial of Retirement Millionaire for only $39... If you decide the publication isn't for you, we'll refund you 100% of your money. And you can get immediate access to Doc's three favorite municipal-bond funds to buy right now. Finding safe, rich income opportunities is one of Doc's missions in Retirement Millionaire. To learn more about the research he's done into income investment opportunities – and how to subscribe to Retirement Millionaire – click here.

New 52-week highs (as of 10/11/13): Blackstone Group (BX), Chicago Bridge & Iron (CBI), EnerSys (ENS), iShares Germany Fund (EWG), East West Petroleum (EW.V), SPDR Euro Stoxx 50 Fund (FEZ), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Integrated Device Technology (IDTI), Loews (L), Oneok (OKE), and Constellation Brands (STZ).

We often warn you to ignore the drivel most mainstream media outlets pass as "news." But sometimes, you can take advantage of most investors' attempts at "headline chasing" to profit. One reader is doing so today. Send your feedback to feedback@stansberryresearch.com.

"Sears Holdings is down 15%-plus because of a misguided article that is now being reprinted everywhere? Christmas is early!"

"Thanks to Porter Claus, Stansberry readers know the real story and have another great opportunity to make money from his stellar research. I missed buying Sears on his original recommendation. I won't make that mistake again. With luck a few more outlets will carry the article and get us in cheaper." – Paid-up subscriber Rich Gustafson

Regards,

Sean Goldsmith

Miami Beach, Florida

October 14, 2013

Stansberry & Associates Hall of Fame
(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

Investment

Sym

Holding Period

Gain

Publication

Editor

Seabridge Gold	SA	4 years, 73 days	995%	Sjug Conf.	Sjuggerud
ATAC Resources	ATC	313 days	597%	Phase 1	Badiali
JDS Uniphase	JDSU	1 year, 266 days	592%	SIA	Stansberry
Silver Wheaton	SLW	1 year, 185 days	345%	Resource Rpt	Badiali
Jinshan Gold Mines	JIN	290 days	339%	Resource Rpt	Badiali
Medis Tech	MDTL	4 years, 110 days	333%	Diligence	Ferris
ID Biomedical	IDBE	5 years, 38 days	331%	Diligence	Lashmet
Northern Dynasty	NAK	1 year 343 days	322%	Resource Rpt	Badiali
Texas Instr.	TXN	270 days	301%	SIA	Stansberry
MS63 Saint-Gaudens		5 years, 242 days	273%	True Wealth	Sjuggerud

What my favorite economic indicators are telling me today…

In Friday's Digest Premium, I (Porter) shared some of the most important economic indicators I watch to form my opinions on the economy.

And right now, some of my indicators are flashing warning signs...

First, credit markets in the United States have been warped beyond recognition by the Federal Reserve. In May, the average junk-bond yield hit a low of 4.96%. (Yields were more than 20% during the subprime crisis.) Yields on higher-risk junk bonds are falling because yield-starved investors are buying anything that will give them extra returns.

But you cannot make 5% junk bonds work mathematically. Remember, companies that issue junk bonds pay a higher yield to compensate for the higher default risk. So if you add in the inevitable default rate with inflation, you cannot possibly make a real return buying junk bonds with a yield of less than 5%. Yet we're still seeing it happen. It just makes no sense.

Likewise, in the stock market, 18 companies have market caps exceeding $10 billion AND trade for more than 10 years' worth of sales. Almost no company can meet that kind of an outlook. Exceptionally few in history have rewarded investors over the long term at that price. There's no way 18 of them exist in the world today.

So the amount of froth in the stock market is high – the most I have seen since 2007. And the warping and the dislocation of fair-market interest rates have also never been greater in my experience. I don't think we have ever seen more nonsensical interest rates in the United States. And that's purely because of the Fed.

It's hard to imagine that things in our economy will get frothier and crazier, but I think they will... If you continue pumping $85 billion a month into the economy, something crazy is going to happen.

– Porter Stansberry with Sean Goldsmith

What my favorite economic indicators are telling me today…

Right now, two of Porter's favorite economic indicators are showing signs of stress... He explains what that means in today's Digest Premium.

To continue reading, scroll down or click here.

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 10/11/2013

Stock	Symbol	Buy Date	Return	Publication	Editor
Rite Aid 8.5%	767754BU7	02/06/09	624.7%	True Income	Williams
Prestige Brands	PBH	05/13/09	402.1%	Extreme Value	Ferris
Enterprise	EPD	10/15/08	228.8%	The 12% Letter	Dyson
Constellation Brands	STZ	06/02/11	196.6%	Extreme Value	Ferris
Abbott Labs	ABT	05/20/11	178.9%	The 12% Letter	Ferris
Altria	MO	11/19/08	169.6%	The 12% Letter	Dyson
McDonald's	MCD	11/28/06	165.4%	The 12% Letter	Dyson
Ultra Health Care	RXL	03/17/11	161.1%	True Wealth	Sjuggerud
GenMark Diagnostics	GNMK	08/04/11	157.9%	Phase 1	Curzio
Hershey	HSY	12/06/07	151.2%	SIA	Stansberry

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Top 10 Totals

1	True Income	Williams
2	Extreme Value	Ferris
3	The 12% Letter	Dyson
1	The 12% Letter	Ferris
1	True Wealth	Sjuggerud
1	Phase 1	Curzio
1	SIA	Stansberry