Draghi gets his way... Signs of Europe's struggle... The ECB starts buying bonds... It's almost time to buy commodities... A special presentation from a farm in Florida...
Draghi didn't disappoint...
True Wealth editor Steve Sjuggerud predicted the Bernanke Asset Bubble would cross the Atlantic. He thought Bernanke's European counterpart – European Central Bank (ECB) President Mario Draghi – would mimic Bernanke's policies, inflating European equities and causing an across-the-board inflation of the prices of all kinds of assets.
Steve wasn't exactly going out on a limb... Draghi announced he would do everything in his power to boost the European economy and weaken the euro. We don't have much faith in central bankers... But when they say they're going to print money and lower interest rates to destroy a currency, it pays to get onboard. (See the September 4 Digest for more details.)
Despite Draghi's commitment, the European Union is floundering.
Investors are terrified of Europe's economic prospects... And they're rushing into government bonds.
German 10-year bond yields – Europe's ultimate safe-haven asset – are at 0.85%.
Germany is Europe's economic driver. But even the bonds from much weaker and less financially stringent nations are trading up, sending yields lower...
French 10-year bond yields are at 1.31%... Spanish 10-year bond yields are at 2.26%... Italian 10-year bond yields are at 2.59%... Portuguese 10-year bond yields are at 3.44%. (Meanwhile, 10-year U.S. Treasurys yield 2.18%.)
Though Draghi is hell-bent on creating inflation, he's failing...
Inflation in the European monetary union is at its lowest level since 2009. Consumer price inflation fell from 0.4% in August to 0.3% in September. The ECB is a long way away from its target inflation rate of 2%.
According to Eurostat, an EU statistics firm, Italy, Spain, Greece, Slovenia, and Slovakia were already in deflation as of September... adding even more pressure for the ECB to act.
The bad news continues... We're seeing an economic slowdown – and even a potential recession – in Europe.
Last Tuesday, Germany's economics ministry cut its forecast for economic growth for 2015 from 2% to 1.3%. This followed the news that Germany's gross domestic product (GDP) only grew 1.2% in the second quarter, compared with the same period of last year.
In August, German factory orders fell 5.7%. German industrial output decreased 4% versus the previous month.
Remember, Germany is the EU's largest economy, accounting for more than 25% of the European monetary union's output. It's also the most fiscally conservative... So when Germany is hurting, it's a bad sign for the rest of the EU.
Draghi wants to provide up to a €1 trillion stimulus to Europe's economy by purchasing private-sector debt and other bonds from European banks in hopes of spurring bank lending. He is also willing to get more aggressive by purchasing huge amounts of sovereign debt.
Germany has its fiscal house in order... so it's against Draghi's pursuit of quantitative easing (QE). The country is pushing for fiscal discipline amongst EU nations... a pipe dream. Any government efforts to boost the EU economy will transfer Germany's wealth to economic disasters like Greece and Spain.
Germany has two choices: Accept Draghi's terms, or face an EU collapse. We know Draghi won't let the second option happen... And nothing stands in the way of a central banker with an itchy trigger finger.
Two weeks ago in Washington, Draghi reiterated his commitment to QE...
Speaking at the Brookings Institution, Draghi said...
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That's why we weren't surprised to see the ECB begin its bond-buying today. It started to purchase covered bonds – paper backed by mortgages and public-sector loans – from European banks.
Draghi is in the market now... And he's just getting started.
While we've seen a huge rally in U.S. stocks since the beginning of QE in December 2008, European stocks have lagged the U.S. But as Draghi starts running the printing press, we expect to see that gap close.
True Wealth subscribers have made huge money riding the Bernanke Asset Bubble, including gains of 136% on private-equity company Blackstone Group, 270% in health care stocks, and 105% in technology stocks.
A similar opportunity may be coming up in the EU.
But Europe isn't the only opportunity Steve sees today...
In the latest issue of True Wealth – out last Friday – Steve explained the upcoming opportunity in commodities...
Steve looks for assets that are "cheap, hated, and in an uptrend." Commodities check all three boxes today.
There's no doubt commodities are hated today. As Steve wrote...
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Steve also shared the three things commodities need to rally...
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Steve has kept his eye on gold and gold stocks in True Wealth Systems. Gold miners are down 70% from their 2011 highs... And they have fallen 25% in the past two months alone.
The sentiment toward the sector is terrible... And there's huge money to be made when a sector moves from "bad to less bad."
The True Wealth Systems indicators aren't flashing "buy" yet, but Steve says gold stocks could soar if gold prices increase. He's watching the sector closely.
There is one sector the True Wealth Systems indicators are flashing buy on today. The last time Steve traded the sector, his subscribers made 184%.
When this sector rallies – as Steve believes it soon will – stocks explode higher. As he told subscribers earlier this month...
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We've spent nearly $1 million on the data and programming behind True Wealth Systems. We recently visited the PhD mathematician behind the systems on his farm in Florida to give readers more insight into the technology behind this product.
You can view the presentation by clicking here.
New 52-week highs (as of 10/17/14): Nuveen AMT-Free Municipal Income Fund (NEA)
In today's mailbag, one subscriber e-mailed us twice with interesting perspectives on Ebola and Hillary Clinton. Let us know what's on your mind and how the recent market pullback is affecting you at feedback@stansberryresearch.com.
"If you guys care as much about the truth as you claim to, then why don't you visit the below website and learn how the Red Cross is intentionally infecting the Africans with their contaminated Ebola-vaccines, to help Obama & the Queen of England to steal their Gold & Diamond mines, like she has been doing for 100 years!!! Obama's 'Ebola Scare' is another FALSE FLAG scam to force all of us to submit to their contaminated-vaccines!! To read the truth (smuggled) out of Africa, to let the World know the real truth!!!" – Paid-up subscriber Josh
"Your financial newsletter used to be one of the best, but, unfortunately you must have stooped down to accepting invisible payments from crooked-persons to keep forcing the ugly mug of Hillary on us. She is a crook, just like her husband, a blatant Liar about representing the Puerto Rican district of New York & most likely guilty in the Libyan-embassy deaths of U.S. Rep's. She is so despised by so many people it's unbelievable you keep forcing her ugly face & fat/unhealthy body on us that we have to look at upon opening your newsletter!!!!!!!!!!!!!!! She is such a scab on society I told your phone Rep all this & UNSUBSCRIBED from 3 of your letters!!! & got my $117 back. I hope you have the guts to publish this valid complaint at the bottom of your newsletters, so other subscribers will wise up & also UNsubscribe from the crappiest newsletter in America!!!!!!!!!!!!!!!!!!!!!!!!!!" – Paid-up subscriber Josh (same subscriber)
Goldsmith comment: Thanks for the interesting take on Ebola. As for Hillary Clinton, we're just explaining why we think she's going to win the election... and what it will mean for the U.S. economy. If you haven't seen the video in question, click here.
Regards,
Sean Goldsmith
October 20, 2014
How to safely invest in fine art...
Philip Hoffman and his team at The Fine Art Fund Group are among the world's most foremost experts when it comes to art advisory.
In today's Digest Premium – the first installment of our weeklong series on art as an investment – Philip discusses how much money to allocate to art... and shares the risks and rewards associated with art as an investment...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
How to safely invest in fine art...
Editor's note: Philip Hoffman and his team at The Fine Art Fund Group are among the world's most foremost experts when it comes to art advisory. In today's Digest Premium – the first installment of our weeklong series on art as an investment – Philip discusses how much money to allocate to art... and shares the risks and rewards associated with art as an investment...
Before we start... a word of warning: You shouldn't put a dollar into the art market unless you have professional advisors working with you... or unless you study the art market 24/7 for at least a few years.
The risks of getting it wrong far outweigh the benefits of getting it right if you try to do it on your own.
It's like a needle in a haystack if you're a small investor with a little bit of money. Young contemporary art is the most accessible because you can go to your local art gallery, spot a picture you like, pay $10,000 for it having read the press articles about art going up, and think that your $10,000 could be worth $100,000 someday. Generally, that's a disaster.
My recommendation is that if you're going to invest in art, you either focus toward the top end of the market – $100,000 and up – or, if you're going into young contemporary art, then you work with some trusted advisors. Most advisors are conflicted because they make money advising you to buy something. They don't make any money out of advising you to not buy. It's the same thing with a stockbroker, who might tell you to buy shares of a stock 10 times so that he can get a fee on every transaction.
To someone who is well off, but not yet very wealthy – let's say below $10 million in net worth – I (Philip Hoffman) suggest allocating 5% of your wealth to art.
People are allocating money to art because they got burned in 2008 investing purely in stocks, bonds, and real estate. They realize you have to have your money in 20 baskets rather than in three baskets. There are many opportunities, whether it's gold, commodities, real estate, timber, private equity, etc. People now realize it's good to have your money spread across different asset classes. And they have finally realized that art is one of those assets.
If a client comes to us and says he would like to put money into art, we at The Fine Art Fund Group tell him what we recommend buying and what we don't recommend buying. In 14 years, we're by far the biggest in the world doing what we do... and we're the only ones with an audited track record.
We bought a picture for $2 million and sold it for $2.1 million the next morning, before we even paid for it. We got $100,000 for our client before we even came up with the money. We also bought an old master painting nine years ago for $2.05 million. We just sold it for more than $4 million. That's about 11% a year compounded.
Our track record shows that you can make money on art. You greatly lower your risk of losing money on art if you do it well and if you do it professionally. And over a long time frame, you can make a great deal of money.
There is a Van Gogh painting coming up for sale at Sotheby's auction house. The owner probably paid about $10 million, 15 or 20 years ago. It's probably going to make around $50 million to $60 million.
Of course, there are downside risks with owning that painting. When you're buying art, you have to think about a lot of things. How rare is a piece? Are you buying it at the right price? Is it stolen? Is the deal you're being offered too good to be true? Often it is. You have to understand about fakes and forgeries, and you have to make sure it's insured. And The Fine Art Fund Group can oversee minimizing those risks.
But the owner will have the benefit of five things. It's an interesting currency hedge. The owner could sell the painting in dollars, yen, renminbi, euros, Swiss francs, etc. He can move the asset from New York to London, from London to Moscow, from Moscow to Hong Kong, and from Hong Kong to Germany. There is free movement of that piece of art. The value of the picture is not correlated to the stock or bond markets. It has gone up significantly in value. And finally, the owner has enjoyed looking at that picture for 15 or 20 years.
– Philip Hoffman
Editor's note: Philip and his 45-person staff of art experts at The Fine Art Fund Group manage more than $300 million from private clients and families. To learn more about his company, click here.
How to safely invest in fine art...
Philip Hoffman and his team at The Fine Art Fund Group are among the world's most foremost experts when it comes to art advisory.
In today's Digest Premium – the first installment of our weeklong series on art as an investment – Philip discusses how much money to allocate to art... and shares the risks and rewards associated with art as an investment...
To continue reading, scroll down or click here.