Gold Demand Is Surging Like Never Before
Investors are 'binging' on bonds... Gold demand is surging like never before... The most important advice Doc Eifrig's Retirement Millionaire team has ever published...
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The global reach for yield continues...
Bloomberg Markets reports that investors have been flocking to long-term government and corporate bonds in a desperate attempt to find anything that still offers a positive yield today. From the article...
Auctions of long-term debt by the U.S., Spain, and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Japan sold 30-year notes Thursday at a record-low 0.319%. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe...
In the U.S., companies with investment-grade ratings sold $7.8 billion of debt Wednesday, bringing total issuance past $41 billion this week. It's on pace to approach or even exceed the $63 billion raised in the five-day period ended Jan. 15, the busiest week this year. In Europe, American companies including Johnson & Johnson and Kraft Heinz Co. brought multibillion-dollar deals in euros, putting corporate debt issuance there within reach of a weekly record.
The driving force behind this move is the growing amount of short-term debt that's now carrying a negative yield. According to Bloomberg, this figure has now soared to a record $9 trillion since Japan cut interest rates below zero this year.
Unfortunately, while "investors" in these long-term bonds are getting a little more income, they may not realize they're taking on much bigger potential risks...
This is because of something called "duration," a measure of a bond's interest-rate risk. Bonds with longer maturities generally have higher durations. This means they're more sensitive to changes in interest rates.
For example, according to Wall Street Journal data, one-year U.S. Treasurys have effective duration of 0.959 years. In simple terms, this means that one-year Treasurys will fall about 0.96% in price for every percentage point increase in yield.
By comparison, 10-year Treasury notes currently have a duration of 9.184 years (representing a 9.2% decline for every percentage increase in yield) and 30-year Treasurys have a duration of 20.692 years (representing a 20.1% decline for every percentage point increase in yield).
In other words, the further out in time investors reach for yield, the more likely it is that even a small increase in interest rates can create significant losses... losses that could easily wipe out the entire expected annual yield.
Investors buying long-dated corporate debt could be taking even bigger risks...
The markets for U.S. Treasurys and other major government bonds are extremely liquid, meaning there are usually plenty of buyers and sellers. Under normal circumstances, investors can quickly sell these bonds if interest rates begin to rise.
That's not necessarily the case in the corporate-bond market. In fact, a recent study by Deutsche Bank credit analysts showed that liquidity plummets for most corporate bonds shortly after they're issued.
The study showed that average trading volume for investment-grade bonds drops an average of 65% during the first five days after they're sold. Volume in high-yield bonds drops a huge 80% over the same time period. By the end of the first month, volume drops another 50% on average.
Investors piling into long-dated corporate bonds with big yields today could find themselves unable to sell if interest rates start rising... and bond prices start falling.
Fortunately, not everyone is making this mistake. In fact, the latest data from the World Gold Council ("WGC") suggests more and more folks are turning to gold...
In its quarterly Gold Demand Trends report published this morning, the WGC said global gold demand surged 21% to 1,290 metric tons... the largest quarterly increase on record.
The report said it was primarily investment demand – physical gold bars and coins and gold investments like exchange-traded funds – that was responsible for the increase. Jewelry demand – which is typically one of the biggest drivers of global demand – actually fell 19% in the quarter.
Not surprisingly, the report pointed to "negative interest rates, stock market volatility, and concerns over global economic growth" as the biggest reasons for the surge in investment demand.
We'll conclude today with some fantastic new research from our colleague Dr. David "Doc" Eifrig...
If you've been with us for long, you're likely familiar with some of Doc's work. But you might not realize Doc actually writes three different paid services here at Stansberry Research.
In his exclusive $5,000-per-year Retirement Trader service, he has amassed one of the most impressive track records in our industry teaching readers how to earn consistent double-digit returns by trading options on safe, blue-chip companies.
In his $1,500-per-year Income Intelligence service, he scours the entire universe of income investments to find the best and safest opportunities for folks who absolutely need investment income today.
And of course, Doc's first publication: his $199-per-year Retirement Millionaire service.
Given its low price, you might assume Retirement Millionaire doesn't provide much value, or that it's only for novice investors. But that couldn't be further from the truth...
Believe it or not, Doc's Retirement Millionaire service has earned more "A+" ratings in our annual Digest Report Card than any other investment service we publish. As Porter explained in the February 8 Digest...
Last year, I told Report Card readers, "There's no better investment advisory service [than Retirement Millionaire] anywhere in the world, at any price"... Doc's performance in Retirement Millionaire has been incredible.
Doc earned an A+ for the 2012-2015 bull market. He had our best win rate, our highest average return, and our highest annualized return.
Doc's big winners included 74% on computer-networking giant Cisco, 62.7% on industrial manufacturer United Technologies, and 57.7% on insurance firm AFLAC. These are safe, "stodgy" stocks. But Doc picked them at the right times, resulting in "hot" stock performances. Despite the incredibly safe investment approach that Doc follows, his annualized results trounced the S&P 500 even during the raging bull market we saw between 2012 and 2015.
I can't emphasize enough how impressive Doc's performance has been. And... I expect that performance will actually get better... Doc's careful investing will really shine during tough periods in the market, like the one we're experiencing right now.
But as Doc's subscribers know, Retirement Millionaire offers so much more than just great stock recommendations. You don't even have to invest in the stock market to benefit from his advice.
In short, each month in Retirement Millionaire, Doc offers a virtual "road map" that anyone can use to live a wealthier, healthier, and happier life.
Whether you're just starting out in your career and looking to lay the foundation of a secure financial future... trying to balance work and family while saving enough for a comfortable retirement... or already retired and interested in maximizing your savings and enjoying every day to the fullest... there is something in Retirement Millionaire for you.
The June issue of Retirement Millionaire, just published yesterday, is a perfect example. In fact, it covers such an important idea, we consider it required reading for anyone who hopes to achieve real financial freedom. From the issue...
Many Americans – average folks working to build a comfortable life – assume the "rich" have a secret. It seems they know something about "how the world works" that the rest of us don't.
If these regular folks could just figure it out, they'd be wealthy, too. They'd live with less stress, more time, and more money. And money, after all, gives you the freedom to do what you'd like to do.
As Doc explained, the wealthy do have a "secret" – three of them, in fact. But they're not as complicated as you might think. They're just simple, time-tested rules that anyone can follow to become financially free. More from Doc...
Everyone who has built lasting financial security has done it this way (though they may talk about it in different terms). And these secrets not only build wealth, they allow you to use it to live the life that you want to live.
Parents and schools should teach the things we're discussing this month. But that rarely happens, and it's shameful considering how central a healthy financial position is to leading a good and stress-free life.
You don't need to be rich, though. You don't need to pursue money at all costs. But having financial stability gives you freedom. Reducing stress improves your health. And understanding how to manage your income makes for better relationships with your family and loved ones.
As a former Wall Street trader and medical doctor, I've been fortunate to have experienced careers with a hearty income. But rest assured, the three secrets work for all income levels. They are even more important for those who feel like they just don't ever get ahead.
It wouldn't be fair to Doc's Retirement Millionaire subscribers to share all the details here today. But at just $199 for a one-year subscription, the ideas presented in this month's issue alone could pay for your subscription a thousand times over.
If you're not happy with your current financial situation and you'd like to understand the real keys to building lasting wealth, you absolutely owe it to yourself to read this issue immediately. Click here to sign up for a 100% risk-free subscription to Retirement Millionaire.
New 52-week highs (as of 5/11/16): Central Fund of Canada (CEF), Invesco Value Municipal Income Trust (IIM), Altria (MO), New Gold (NGD), Annaly Capital Management (NLY), Ritchie Bros. Auctioneers (RBA), Regions Financial – Series B (RF-PB), SEMAFO (SMF.TO), Sysco (SYY), and Vanguard Inflation-Protected Securities Fund (VIPSX).
Have you benefited from Doc Eifrig's advice? Let us know at feedback@stansberryresearch.com.
Regards,
Justin Brill
Baltimore, Maryland
May 11, 2016
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