Draghi keeps his promise... A big anniversary... 'Growing signs of a recovery'... Your second chance to profit from the boom in stocks... A 'long road' for oil... The best opportunity in oil today... Reader feedback: Are we manipulating our data?...
"The ECB is ready to do whatever it takes to preserve the euro... believe me, it will be enough."
European Central Bank ("ECB") President Mario Draghi made that promise three years ago on July 26, 2012. And even if you disagree with the actions he has taken, it's hard to argue with the results so far...
The Greek crisis appears to be settled (for now), with Greece remaining in the euro.
Bond yields for "peripheral" countries like Spain, Portugal, and Italy – many of which have similar debt issues as Greece – have plunged. For example, 10-year yields in Spain have fallen from as high as 8% in 2012 to less than 2% today.
And recent economic data suggests that the euro area economy is finally starting to grow again. From an article on financial-news website CNBC...
Growing signs of a recovery in big European economies such as France – which has long been a weak spot in the region – suggest 2016 could be the best year for the region in over a decade, according to one fund manager...
It's the latest sign that hefty monetary stimulus from the European Central Bank, a weak euro, and lower oil prices are working their magic in the eurozone, helping provide a strong buffer from turbulence in debt-struck Greece.
"France is the industrial, manufacturing, business confidence laggard of Europe, so to see France turning the corner is very important," Michael Browne, fund manager at Martin Currie, told CNBC's "Squawk Box Europe" after the release of the French data. "It means we have growth in the U.K., we have growth in Germany, Italy is clearly turning the corner, and now France is coming on board."
As we've discussed, Draghi is determined to create his own version of the "Bernanke Asset Bubble" in Europe.
Slowly but surely, it seems to be working. And some analysts believe it has created a fantastic opportunity today...
Last week, investment bank Goldman Sachs upgraded Europe to "overweight," meaning that the bank expects European stocks to outperform U.S. stocks for the rest of the year. More from CNBC...
"European equities have been one of the key asset classes to benefit from a fading of Greek risks following their drawdown," Goldman Sachs wrote in its Global Opportunity Asset Locator report published on Monday.
"While performance potential might be limited in the near term after the strong rebound, several supportive fundamental factors should help outperformance of European vs. U.S. equities until year-end," it said.
These factors include a weaker euro, comparatively easy monetary policy, and a pickup in Europe's economic growth – which the bank expects will help drive stronger earnings and a recovery in margins.
This sounds a lot like what our colleague Steve Sjuggerud wrote in the August issue of his True Wealth advisory, days before the Goldman report. Here's Steve...
I'm going to let you in on a major moneymaking secret... It's one of the best I know. It has consistently made me money in all types of markets and all types of investments. If you get it right, it almost always works. Here it is: BUY UNCERTAINTY.
But that's not all there is to it... The ideal setup is when uncertainty is CLEARLY changing to certainty. It could be the passing of a law, a weather event, or a political change. The possible setups are endless. You just need uncertainty clearly changing to certainty.
You can see exactly what I mean by looking at European stocks... As the Greek situation simply moved from uncertain to "less uncertain" when Greece submitted a bailout plan, European stocks moved up 5% in a day.
European stocks have moved higher since the latest Greek deal was announced, but Steve says the biggest gains are likely still ahead.
If you missed the big gains in U.S. stocks over the past few years, Steve thinks this could be a great "second chance." More from Steve...
The situation in Europe will continue to move from "uncertainty" to "certainty" as the terms of Greece's bailout unfold – and that should be great for European stocks. Meanwhile, European stocks are a great deal for us right now... If you've missed the stock boom in the U.S. since 2009, you are in luck with Europe... You get another chance at it.
You see, the U.S. is further along in its recovery than Europe is. So the zero-interest-rate policy in the U.S. will be going away at some point soon. But that's not the case in Europe.
Interest rates will stay near zero in Europe for a while... and that should fuel a U.S.-style boom in European stocks and property. Also, importantly, European stocks are not nearly as expensive as U.S. stocks...
While Europe could finally be improving, the latest data suggests that oil prices could have a long road to recovery...
Analysts at investment bank Morgan Stanley believe the price slump could continue for another three years, rivaling the historic crash of 1986. The Organization of the Petroleum Exporting Countries (OPEC) continues to increase production, and the possibility of relaxed sanctions in Iran could cause further problems.
Canadian oil-sands producers have an especially bleak outlook. Oil sands produce a poor-quality product that is expensive to extract. Worse, it needs to be refined before it gets transported via pipelines, which adds even more costs. That's why Porter and the Stansberry's Investment Advisory team call it "oil mud."
Between falling prices and increasing supply, the oil-sands business model is broken. According to a recent article in the Wall Street Journal, the supply cost per barrel at the major Alberta oil-sands plays is higher than the current spot price of West Texas Intermediate ("WTI") crude, the domestic benchmark.
Another uncertainty looms for the industry: A May election ended the 44-year reign of the Progressive Conservative Party in Alberta, Canada. The new leadership has vowed to raise taxes on energy companies and withdraw support of new pipelines. But during a recent speech to international investors, Canadian politician Rachel Notley referred to the Alberta oilfield as an "international showpiece" and a "tremendous asset." It's too early to predict how this will play out, but industry insiders remain wary.
Meanwhile, shares of oil-sands producer Suncor Energy (SU) hit a new 52-week low today.
Porter and his team shorted the company as part of a "pairs trade" in February. In particular, they recommended a "best of breed" U.S. shale-oil producer – EOG Resources – and shorted Suncor to help protect against further declines in the price of oil.
As they noted at the time, Suncor was ideally suited as one of the weakest "oil" companies in the world...
We estimate Suncor's true cost of production exceeds $80 per barrel, making it the most expensive, large-scale source of liquid fuel in the world...
If the economic scenario we foresee develops (lower energy prices, much less energy price volatility), Suncor will end up bankrupt...
Shares of EOG have fallen since the recommendation. The plunge in oil prices over the past month has pushed even the best producers lower. But the short position in Suncor has helped "hedge" the decline and allowed subscribers to remain in the trade.
Investment Advisory subscribers are down 2.8% on the combined position and continue to own one of the world's best shale-oil companies (EOG), while remaining short one of the world's most expensive oil producers (Suncor).
While the ongoing supply glut continues to pinch oil producers, one sector stands to reap huge profits...
As we mentioned in the July 13 Digest, countries like China and India are taking advantage of cheap prices to fill strategic reserves. A recent article in the Financial Times reported that shipping rates for Very Large Crude Carriers (VLCCs) have soared 50% since the start of the year.
The tanker industry is cyclical... and new tankers take years to build. "At the moment, ships haven't been ordered to the extent that it would put a dent in rates," said Paddy Rodgers, CEO of Euronav, the world's largest tanker company.
Porter and his team explained how to profit from this trend last month. In the June issue of Stansberry's Investment Advisory, they recommended the best-positioned company in the sector...
We believe at least three companies are set up to make loads of money over the next tanker cycle. Euronav, the Belgian shipping colossus, will probably thrive. And our source in Singapore had plenty to say about the business acumen of Frontline Chairman John Fredriksen, indicating that he understands the industry as well as anyone, is always ready to do a deal, and seems to catch the upcycles well.
But for our portfolio, we'd prefer to get in alongside the blue-chip stock in the sector... the company with the cleanest balance sheet... and the most conservative management. Based on this criteria, Nordic American Tankers (NAT) is the best fit for the Stansberry's Investment Advisory portfolio.
NAT has the lowest debt-to-asset ratio among our favorite shippers – less than half the average (21% vs. 52%). We believe its management team is as conservative as they come.
Subscribers who followed Porter's advice are up nearly 20% in less than two months.
New 52-week highs (as of 7/24/15): Cempra (CEMP), Omnicell (OMCL), short position in Suncor Energy (SU), short position in Viacom (VIAB), W.R. Berkley (WRB).
In the mailbag, subscriber Jim writes in again... And two others note their experiences with Porter's energy-related research. Send your notes to feedback@stansberryresearch.com.
"Glad I could provide you some fodder to prove yourself and your credibility in Friday's mailbag. At the time in question, I was only subscribing to your Stansberry's Investment Advisory newsletter and nothing else. How many gas/drilling-related stocks were winners out of those specific picks in the Stansberry's Investment Advisory only? I admit I was unclear with previous letter, but was not referencing your entire basket of other newsletters during 2011 that I am presuming you got your numbers for Friday's response? I did not renew my 2011 Stansberry's Investment Advisory subscription based on that specific newsletter's overall poor portfolio during that time frame, so surely wouldn't know that other newsletter picks did well.
"I also think you even said in a later Stansberry's Investment Advisory you were disappointed with the Stansberry's Investment Advisory portfolio performance during that time period, and I distinctly recall one of your customer service reps saying that you had been 'hard on yourself' when I gave him my reasoning for dropping the Stansberry's Investment Advisory.
"I'm not trying to bust your balls; I think your team gets a lot right or else I wouldn't be subscribing. I am even going out on a limb with your company as a $5,900 Flex Alliance subscriber... I'd love a quick reply back that I remembered correctly about the Stansberry's Investment Advisory recommendations from 2011 and not numbers from all your other newsletters combined during that time. If I don't hear back from you, I can assume that you and the company use numbers however it suits you best. Thanks for your time." – Paid-up subscriber Jim
Brill comment: Porter was referring only to positions he and his team recommended in Stansberry's Investment Advisory. And as he explained on Friday, the average gain of those 27 stocks was 23.7% (or 17.9% on an annualized basis). That's the raw data... We aren't manipulating the numbers to our benefit.
"I don't have the time to look up the percentage, but to give you instant feedback – I made well over 100% with Cheniere. Sure wish I hadn't sold it when I did." – Paid-up subscriber Betsy B.
"Porter: On your memo to the letter writer stating that you were 'wrong on Natural Gas', and your reply: We, your readers, depend upon your research, intuition and ideas, but we also must learn to do our own homework... the letter writer clearly did not do his homework! And when you included an explanation of what happened with Cheniere Energy, you showed me that once again you are giving us the straight stuff, and this is very hard to find these days. Thank you, please keep up the good work, and reread some of your more positive letters!" – Paid-up subscriber Alex Forrester.
Regards,
Justin Brill
Baltimore, Maryland
July 27, 2015
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