Keep your eyes open for our FedEx package... The trend is your friend... The biggest trend today... Going long gold stocks... Low oil prices are helping some sectors... And crushing others... Apple may return $200 billion to shareholders...
Before we begin today's Digest, I need to share an important message...
Last week, we sent a FedEx package to a tiny selection (less than half of one percent) of our top subscribers. The package contains a special, time-sensitive invitation.
If you were selected, you should receive your package this week. We look forward to hearing from you.
In yesterday's DailyWealth Trader, Editor in Chief Brian Hunt explained why "the trend is your friend." When the market is moving higher, it tends to keep moving higher... and vice versa. Following this simple idea has made DailyWealth Trader subscribers big profits over the past year.
In particular, Brian highlighted one major trend...
One of the longest standing trends in the world right now is falling yields on U.S. Treasury bonds. Interest rates on the benchmark 10-year Treasury peaked at nearly 16% in 1981... And they've been falling ever since. Today, the annual yield you'll earn for loaning your money to the U.S. government for 10 years is just under 2%.
It's hard to find anyone who thinks buying these low-yielding Treasurys is a good idea. Many people say Uncle Sam is so deeply in debt that concerned borrowers will demand higher rates of interest. But the trend is clear... Rates are falling.
As you can see from the chart below, betting on lower interest rates has been a winning trade for decades...
DailyWealth Trader subscribers are up 44% on the ProShares Ultra 20-Plus Year Treasury Fund (UBT). As yields continue to move lower, shares are moving higher... They're nearing an all-time high.
Brian and the DailyWealth Trader team are also profiting from several other trends in the market today...
In yesterday's Digest, we told you gold stocks are breaking out and that Stansberry Resource Report editor Matt Badiali thinks we could see huge gains in junior mining stocks.
Last week in DailyWealth Trader, Brian noted the extreme pessimism in gold stocks and their recent breakout. He recommended going long a special gold fund... It holds the 25 gold stocks that are most sensitive to changes in the gold price. It ranks them according to low debt levels and high revenue growth... And it weights those stocks based on its rankings.
He also recently went long a depressed blue-chip stock. (Porter thinks this company will be one of the best-performing stocks over the next 10 years.) And today, Brian recommended shorting one of the most popular growth stocks in the market. (Hint: It's sensitive to low oil and gasoline prices.)
If you're active in the markets, DailyWealth Trader is a must-read. Brian and his research team provide daily trading notes, highlighting the big trends... And they provide subscribers with actionable trading recommendations.
You can learn more about DailyWealth Trader – and how to get started on a risk-free 30-day trial – by clicking here.
Back to Treasurys...
Yields on the 10-year Treasury are down to 1.93% today... But as we explained in the January 5 Digest, they're likely headed lower.
And in the January 6 Digest, we shared some wisdom from Dr. David "Doc" Eifrig about why Treasury yields could stay depressed, even if the Federal Reserve hikes interest rates this year.
In short, it's a "tug of war" between supply and demand. There's a record amount of money around the world today looking for safety... And the U.S. Treasury is the world's safe-haven asset.
Plus, Treasurys still yield more than comparable debt in Europe and Japan. Today, the yield on five-year Japanese government bonds fell to 0%. Yields on German bonds ("bunds") with maturities between one and five years recently turned negative. In other words, you pay the German government to hold your cash.
And our economy is in better shape than both Europe and Japan, so you're earning more to keep your money stored in a safer asset. For now, the U.S. is still the best place for your money...
The other big trend today is falling oil prices. Crude oil fell to around $45 a barrel today on fears that U.S. oil stockpiles would increase.
Investment bank Goldman Sachs and our Stansberry Research founder Porter Stansberry both believe oil could go even lower... to $40 a barrel.
U.S. oil production hit 9.1 million barrels a day through December 12. That's the highest level the Energy Information Administration (EIA) estimates have seen, dating all the way back to January 1983, according to Bloomberg. Meanwhile, OPEC nations are still holding production steady.
Supply is overwhelming slack global demand.
But low oil prices have been a boon for certain sectors...
While the price of crude is down more than 45% over the last three months, the Dow Jones Transportation Average – which is made up of railroad, airline, trucking, and freight companies – is up nearly 15%. As Brian explained in a recent DailyWealth Market Note...
There's a good reason for watching the transports. If the shippers of goods are enjoying lots of traffic, robust profits and rising share prices, the economy can't be doing that badly. If the transports are tanking, it's a danger sign for the economy.
Airlines are enjoying cheap oil, too. Airlines profit margins are directly linked to oil prices. And this "boom and bust" sector is now in full "boom" mode. Southwest Airlines, JetBlue, American Airlines, and Delta Air Lines are up nearly 50% on average over the last three months.
Lower gas prices mean a few extra bucks in the budget for most Americans. And they're not wasting any time spending that cash. As we noted in the January 8 Digest, we're seeing new highs across the retail sector... Wal-Mart and Target, home-improvement stores Home Depot and Lowes, drugstore chains CVS Health and Walgreens, and clothing retailers TJ Maxx and Macy's are up an average of 20% since mid-October.
But it's not all good news...
Falling oil prices have crushed most companies in the solar industry. As you might imagine, when oil prices get this low, expensive and inefficient solar panels suddenly become less attractive...
Oil companies, especially highly leveraged ones, are taking it on the chin. Take small-cap energy firm Goodrich Petroleum, for instance. The company has one of the highest debt-to-asset loads in the industry. And its shares are down 75% since October.
Energy firms account for more than 10% of the S&P 500's earnings. Lower earnings across the sector put downward pressure on the index. Energy companies are also cutting back on capital expenditures, which will hurt gross domestic product (GDP).
Changing gears... We read an interesting note on Apple from Kulbinder Garcha, managing director at Credit Suisse. Garcha upgraded Apple from "neutral" to "outperform" today. He thinks Apple will boost its share-repurchase plan and dividend because it's making too much cash...
We estimate that Apple's net cash will be at $143 billion by April 2015 and as such, see it likely that management will do another increase in [an] upcoming announcement. We now assume that Apple will announce a sizeable increase in its cash return program for the next 3 years through the end of 2017 to over $200 billion of which $165 billion will be buybacks and $37 billion will be dividends.
In April 2012, Apple earmarked $45 billion to return to shareholders ($35 billion in dividends and $10 billion in buybacks). It upped the program to $130 billion in 2013 and 2014, where it stands today.
Since announcing a capital return plan, Apple's cash hoard has grown from $97 billion to an estimated $142 billion at the end of the fourth quarter, according to Credit Suisse. And unless Apple gives shareholders more money, its pile of cash will only get larger. As Garcha explained...
If Apple does not increase its cash return program to $200 billion, then the net cash would stand at $184 billion by the end of 2016, which means Apple would have nearly double the amount of net cash on hand compared to the end of 2012. This is clearly excessive and significantly higher than when the company first implemented their cash return program at the end of 2012.
Extreme Value editor Dan Ferris recommended Apple in June 2013. At the time, he called it "the cheapest World Dominator we've ever recommended." Dan nailed the call. In just 19 months, Extreme Value subscribers are sitting on gains of nearly 80%.
New 52-week highs (as of 1/12/15): Bristol-Myers Squibb (BMY), Brookfield Property Partners (BPY), Cempra (CEMP), Esperion Therapeutics (ESPR), iShares U.S. Home Construction Fund (ITB), Nuveen AMT-Free Municipal Income Fund (NEA), Nuveen Municipal Opportunity Fund (NIO), Nuveen Municipal Value Fund (NUV), and ProShares Ultra 20+ Year Treasury Fund (UBT).
Today, we clarify two pieces of confusion for subscribers. Let us know what's on your mind at feedb
"I got and read my copy of, The Death of Money, from Stansberry Research – great book. Thank you. But I did not see the 'Bonus Chapter' referred to in today's Stansberry Digest where it said:
Plus, Jim agreed to write an exclusive bonus chapter for Stansberry Research subscribers. In it, he explains his favorite assets to own during a crisis. This is something you won't find anywhere else.
"Is this something forthcoming or did I miss it somehow?" – Paid-up subscriber Tom
Goldsmith comment: Hi, Tom. When you signed up to receive your copy of The Death of Money, we e-mailed you the bonus chapter. Please check your inbox. If you can't find it, you can contact our customer service department at (888) 261-2693 from Monday through Friday between the hours of 9 a.m. and 8 p.m. Eastern time.
And for everyone else, if you haven't claimed your free copy of The Death of Money, you can do so right here. (We just ask you pay the $4.95 shipping and handling.)
"In yesterday's Stansberry Digest you referenced Patterson Lake South with a symbol of PLS? This is not correct and I cannot find a Patterson Lake South or PLS listed on the US or Canadian exchanges?" – Paid-up subscriber Tim George
Goldsmith comment: Sorry for the confusion, Tim. Patterson Lake South isn't a publicly traded company. It's one of Fission Uranium's uranium deposits.
Regards,
Sean Goldsmith
January 13, 2015
