How to Make 10 Times More Money in Gold Stocks
New signs of trouble in the credit markets... Subprime auto loans are going bad at a financial-crisis rate... Corporate defaults are quietly moving higher again... How to make 10 times more money in gold stocks...
Regular Digest readers know we've spent a lot of time discussing the massive bubble in the government bond markets recently...
In short, thanks to the irresponsible behavior of the world's central banks, more than $16 trillion of debt currently trades with a negative yield. As my colleague Dan Ferris noted yesterday, this situation will not end well...
I bet negative interest rates will go down in history as worse than the investment trusts... worse than the CDOs... worse than anything before them.
The central bankers have meddled with the primal forces of nature. They have obliterated and corrupted the time value of money. How they expect that to lead to increased investment and economic growth is anybody's guess.
They've made it nearly impossible to value any asset that generates cash flow without pretending that interest rates are higher than they really are today. I don't want to get too technical here, but you can't value something that generates a cash flow – things like buildings, bonds, or operating businesses – without reference to some benchmark interest rate.
But make no mistake...
The huge excesses we've been following in the consumer and corporate credit markets for the past several years have not suddenly disappeared. They, too, continue to grow...
According to the Federal Reserve Bank of New York's latest Quarterly Report on Household Debt and Credit, student, auto, and credit-card debt all rose year-over-year to new all-time highs.
Worse, for the first time since before the financial crisis, mortgage debt has set a new record, too. Mortgage balances rose to $9.4 trillion in the second quarter, officially surpassing the previous record set in the third quarter of 2008.
Likewise, regular readers know U.S. corporate debt sits at record highs today, both in nominal terms and compared to the size of the U.S. economy.
These troubling trends can't go on forever...
And like the madness in the sovereign bond markets, they're sure to end in disaster.
In fact, despite the "best efforts" of central bankers, we're already seeing some early signs of trouble...
For example, that same New York Fed report showed delinquencies on subprime auto loans are surging. The percentage of these loans 90 days or more past due jumped nearly 0.5% to 4.64% in the second quarter. This is roughly the same delinquency rate we saw in late 2009 following the bankruptcy of General Motors (GM).
In other words, subprime auto loans are already going bad at peak financial crisis levels... yet, by most official measures, the economy still remains healthy today. We can't help but wonder what will happen when the next recession inevitably begins.
But the troubles aren't just limited to consumer loans...
Just last week, Goldman Sachs analysts noted that defaults on high-yield corporate – or "junk" – bonds are suddenly rising, too.
Total junk-bond defaults have already reached $36 billion so far this year. As you can see below, this is already higher than any full year other than 2016, when a crash in oil prices caused a huge wave of bankruptcies in the energy sector...
At this pace, we'll easily see a new post-financial crisis record before year-end.
Meanwhile, the three-month trailing default rate on these bonds has already hit a new post-crisis high. It's currently at 5%. That's nearly one full percentage point above the 2016 peak, according to data from S&P Global, and up from just 1.3% since last November.
So, what should you do with this information?
If you've been with us for long, you know we believe owning precious metals is one of the best ways to protect yourself from the massive risks in the markets these days.
Generally, we recommend keeping the bulk of this allocation in the form of physical gold (and silver) bullion. There is no surer way to protect the value of your savings over the long term.
But we also suggest dedicating at least a small percentage of your precious metals portfolio to gold and silver stocks today.
This is because the best gold and silver stocks provide leverage to the underlying prices of the metals. When gold and silver are rising strongly – like they have been this year – these stocks can absolutely soar.
Unfortunately, most gold and silver miners are terrible businesses...
Consider this... Since 2000, gold has risen a little over 360%. Yet, if you had invested in a broad basket of gold and silver stocks – as tracked by the PHLX Gold/Silver Sector Index ("XAU") – you would've made less than 40% over that same time period. That's downright dismal performance.
So if you want to make the biggest profits in gold and silver stocks, you absolutely must be able to separate the relatively few high-quality companies from the "also-rans."
That's why we're so excited that legendary gold stock analyst John Doody has officially joined the Stansberry Research team...
There's simply no one better at finding the very best gold and silver stocks.
Since 2000, his recommendations are up more than 530%. That beats the overall rise in gold... and it's more than 10 times better than most gold stocks.
And remember... this period includes a devastating six-year bear market, where even the best precious metals stocks were crushed.
If you'd like to learn more about John's unique approach making a fortune in gold and silver stocks, be sure to tune in tonight...
As you've probably heard, he'll be joining us at 8 p.m. Eastern time for a special broadcast. During this free event, he'll share his latest thoughts on the market, including the name and ticker symbol of one little-known gold investment he believes could rise 500% or more in the months ahead. And you'll even have the chance to win up to $20,000 worth of gold coins just for attending.
Again, it all kicks off just two hours from now at 8 p.m. Eastern time. Click here to join us.
New 52-week highs (as of 8/20/19): Booz Allen Hamilton (BAH), Equinox Gold (EQXFF), Barrick Gold (GOLD), Invesco Value Municipal Income Trust (IIM), iShares U.S. Home Construction Fund (ITB), Lockheed Martin (LMT), Medtronic (MDT), MarketAxess (MKTX), NovaGold Resources (NG), Nuveen Municipal Value Fund (NUV), NVR (NVR), PNC – Series P (PNC-PP), Polymetal (LSE: POLY), Torex Gold Resources (TORXF), and short position in Advance Auto Parts (AAP).
Several folks sent praise for Dan Ferris' latest Digest. As always, send your comments and questions to feedback@stansberryresearch.com.
"In [Tuesday's] Digest, when speaking of the ratings agency, Dan Ferris said 'It was as if the Red Cross offered free vaccines and instead injected us all with the Black Plague.' Dan Ferris, you are damn near the funniest man alive. I love you. ROFLMAO." – Paid-up Stansberry Alliance member Brian B.
"Absolutely right on the money. Go Dan Go. Thanks to Stansberry and all work there." – Paid-up subscriber LJT
"Feedback on [Tuesday's] Digest... One word only – outstanding!" – Paid-up subscriber Michael B.
"Congratulations Dan for stating clearly the 'liar loan' era of CDOs that forced central bankers to buy bundled bad debt... Unlimited cheap loans encourage more unqualified borrowers only adding to the dilemma.
"I've spent 52 years as an independent commercial property mortgage banker, mostly with my own company. I closed my company after banks were permitted to loosen lending practices. Increased loan originations meant more fee income and they escaped responsibility for defaults by selling them through secondary market packaging and sale to unsuspecting investors.
"Yours is an old story to most of us, but your message is clear, and the default risks continue to grow." – Paid-up subscriber Wayne S.
Regards,
Justin Brill
Baltimore, Maryland
August 21, 2019