It Is a Very Dangerous Time in the Markets
Your last chance to get one of Steve Sjuggerud's new recommendations for FREE... 'It is a very dangerous time in the markets'... Hedge-fund titans sound the alarm... Bonds are 'the biggest bubble in the world'... Chanos: This company is 'a walking insolvency'... 'Bond God' Gundlach: Interest rates have bottomed...
We're about to give away one of our top stock picks live, on air tonight at 8 p.m. Eastern time.
As you've likely heard, Steve Sjuggerud and Stansberry Research founder Porter Stansberry are hosting a FREE live webinar tonight to share the details on an exciting new investment opportunity... an opportunity Steve expects will lead to gains of 500% to 1,000% over the next several years.
But what you may not realize is that Steve is so bullish on this opportunity – and feels so strongly that every Stansberry Research subscriber should put a little money in this idea as soon as possible – he has agreed to share one of his brand-new recommendations live on the air.
That's right... You can get the full details on one of his favorite ways to profit from this situation – including its name and ticker symbol – simply by attending tonight's free webinar.
But again, tonight's event begins promptly at 8 p.m. Eastern time... less than two hours from now. If you still haven't reserved your spot, it will soon be too late.
"It's a very dangerous time in the global economy and global financial markets..."
No, that isn't a quote from Porter's Friday Digest. It comes from billionaire hedge-fund manager Paul Singer, whose Elliott Management fund earned 14% annual returns for a remarkable 35 straight years.
Singer spoke at the annual Delivering Alpha conference in New York yesterday. His warnings should sound familiar to regular Digest readers...
He noted that unprecedented central bank manipulation has created risks unlike any we've ever seen in the "5,000 years-ish" history of finance. From his speech (courtesy of financial-news network CNBC)...
Eight years of ever-declining rates and ever-increasing radicalism in other monetary policies have not created a sustainable, accelerating uptick in growth. What they have done is created a tremendous increase in hidden risk, risk that investors don't exactly know or have faced about their holdings...
With roughly $15 trillion on the major central bank balance sheets, with all of these rates at zero or even crazily below zero, you have a very delicate situation... Central bankers and policymakers have gotten themselves deeper and deeper.
Like Porter, he warned about the credit markets in particular, calling bonds "the biggest bubble in the world."
He singled out longer-term government debt from the so-called "Group of Seven" (G-7) developed economies – the U.S., Canada, France, Germany, Italy, Japan, and the United Kingdom – as especially risky...
I think owning medium- to long-term G-7 fixed income is a really bad idea... Sell your 30-year bonds. These are not safe havens. In fact, there's a tremendous amount of risk.
Singer also reiterated his bullish stance on gold, noting it is "the only money and store of value that has stood the test of time." He also said gold is "undervalued and underpriced in today's world" and is "the opposite of confidence in central banks."
But Singer wasn't alone in his warnings...
Hedge-fund legend Ray Dalio – founder of Bridgewater Associates, the world's largest hedge fund – echoed Singer's biggest concerns...
Dalio agrees central banks have created unprecedented risk, and "the risk is all on the downside. We've never been in a world like this before."
He also warned of the "dangerous situation" in the credit markets, and suggested the next default cycle is approaching... not just in the U.S., but around the world...
There's only so much you can squeeze out of the debt cycle, and we're there globally. You can't lower interest rates more.
Renowned short-seller Jim Chanos, founder of hedge fund Kynikos Associates, also spoke on Tuesday.
He didn't weigh in on broad market risks, but he was incredibly bearish on our favorite "whipping boy," electric-car maker Tesla Motors (TSLA)...
Back in May – when he first disclosed short positions in Tesla and its troubled sister firm, solar-panel installer SolarCity (SCTY) – Chanos compared the carmaker with Valeant Pharmaceuticals (VRX), the notorious drug company whose shares crashed 90% last year.
Over the summer, he called Tesla's proposed merger with SolarCity a "shameful example of corporate governance at its worst."
Yesterday, Chanos went even further...
He said shorting Tesla is his single best investment idea today.
He said the incestuous merger between the two firms is "crazy" and "the height of folly." He also said recent disclosures from Tesla had only strengthened his case.
Chanos noted the operational "synergies" that Tesla CEO Elon Musk has touted are "questionable at best." More important, he says the merger will make the new company "a walking insolvency."
Why? As Porter has explained, both companies are burning through cash at an unsustainable rate. Chanos agrees... and says the merger will only make this problem worse. In fact, he predicts the combined company would burn through an astronomical $1 billion-plus per quarter...
[The new company will] constantly need access to the capital markets. And when you need that amount of money just to run your business model, you put yourself at risk.
He also dismissed the common comparison to Internet retail giant Amazon (AMZN) – whose shares have soared despite being unprofitable for most of its history – calling Tesla "the anti-Amazon."
In particular, he noted that despite years of losses, Amazon never had to go back to the capital markets to raise additional funds after it had gone public. That is certainly not the case with Tesla.
Chanos' bottom line was simple...
[These companies will] continue to lose lots of money... and continue to need more and more capital.
We couldn't have said it better.
Fixed-income manager Jeffrey Gundlach – CEO of investment firm DoubleLine Capital – didn't speak at this year's event. But the so-called "Bond God" made another notable call during his September investor webcast last week.
Regular readers may recall Gundlach predicted a bottom in interest rates over the summer. As we wrote in the July 13 Digest...
Gundlach doesn't just believe bonds are forming a near-term top... He thinks the entire, decades-long bull market in bond prices is ending. And while he doesn't think yields will soar higher immediately, he doesn't believe rates will go much lower.
He agrees that sentiment has become extreme. He says he has fielded more investor questions about buying Treasurys recently than at any other point in his career. He also noted that no one he talks to thinks interest rates can go higher today... and said it's often when most people say something "can't happen" that it's most likely to occur.
So far, he has been right... The yield on 10-year Treasurys has risen from a low of 1.35% in early July to near 1.7% today.
But Treasurys aren't alone... Bond yields around the world have been rising in tandem.
For example, 10-year Japanese Government Bond ("JGB") yields have risen from negative 0.3% to near 0% over the same time period.
And the yield on 10-year German "bunds" – Europe's benchmark debt – has actually returned to positive territory again, from a low of negative 0.2% in July to more than 0.03% today.
Of course, savers in Japan or Europe probably aren't celebrating... Yields are still near historic lows.
But the recent rise has likely been jarring for folks who believed bond yields could only go down, and bond prices could only go up. And if Gundlach is correct, this could be just the beginning of a much bigger (and longer-term) move. He's recommending investors prepare for rising rates and higher inflation by moving into cash, protecting against volatility, and reducing the duration of the bonds they own...
Interest rates have bottomed. They may not rise in the near term as I've talked about for years. But I think it's the beginning of something, and you're supposed to be defensive.
We can't say for certain if Gundlach is correct and the final bottom in yields – and the final top in bond prices – is already in. Central banks may have a few last tricks up their sleeves.
But regular readers know it is only a matter of time before this massive credit bubble reverses and a panic begins... and you don't want to have your savings in overpriced bonds when it does.
New 52-week highs (as of 9/13/16): none.
Two notes of praise in today's mailbag. We often joke that positive feedback only comes from relatives or folks who have been drinking... And we don't know either of the below authors. Send your letters to feedback@stansberryresearch.com.
"All I can say is that [it] would be like a day without sunshine if [I didn't receive the Digest] every day. And I mean that in the most sincere and truthful way. Every day I look forward to reading Porter's words of insightful wisdom. Keep up the good work guys. Thank you." – Paid-up subscriber Marc D.
"Hello Stansberry Research, I just want to thank you for great advice and information about markets in general. I have learned more about real economics and markets in about 1 year than I had in the previous 4+ decades... [I] have worked as a public servant in local government for nearly 23 years. This was mostly for 5 different counties in 3 states and now 17 months for my first city. All of these were in a planning and zoning capacity for which I was ok with, but I must say I never imagined my first foray into city government as being SO oppressive.
"For example, the city I work for in a Midwest metropolitan area has in the last several months done the following via zoning: 1) shut down a single-mom's cupcake business out of her own house, 2) asked a man to self report to the city when he bought his next auto that he planned to refinish and sell hopefully for a profit so he would not eclipse the state government number of autos a private individual could sell in a year without a dealer's license, 3) require a business coming to town to plant 53 trees, 240 shrubs, redesign their facade, and other changes all on 1.3 acres with the building taking up 10k square feet, and 4) discouraged several local businesses and organizations that are out of space and desire to expand into larger facilities from doing so because there is a LONG list of requirements everybody has to meet, but few if any can actually meet.
"I could go on at length about the above, but I want to say this, I no longer desire to be a planner because the attitude of city officials towards nearly all members of the public seems quite arrogant and puffy and seldom considers land owner's objections and thoughts about tons of new regulations being imposed upon them. I am seeking a new career path, but it seems difficult for a 47-year old journeyman planner. I am seeking something where I get paid for my effort instead donating my time free to the 'public cause or good.' I would be interested in any of your thoughts regarding the above. Thank you for your time and effort." – Paid-up subscriber C.B.
Regards,
Justin Brill
Baltimore, Maryland
September 14, 2016
|