The truth about inflation in the U.S. today...
Whenever I (Porter) discuss higher inflation in the U.S. due to the Fed's loose money policies, the naysayers say I'm wrong.
They point to falling grain prices or how quickly money is circulating through the economy (monetary velocity), both of which are at multiyear lows...
The thing is, most people don't even understand what inflation is...
Believe me, velocity will go through the roof when people realize they have to get out of the dollar to safeguard their wealth. Today's super-low monetary velocity just tells me that people are afraid to transact. They understand that the whole world's economy is rigged, so they freeze. And that's not a good outcome.
I don't buy into theories like demand-induced inflation. Inflation is completely created by an expansion of the money supply in excess of savings. That definition spans time and civilizations across the world.
If you want to engineer an inflation, you increase the money supply above and beyond the savings rate. Sooner or later, you're going to get much higher prices.
The size of the inflation is related to how much money is being created in excess of savings. Money is only as valuable as the savings backing it... In our case, our savings rate is basically nothing and has been that way for 25 years.
Meanwhile, our money supply has grown enormously. We've gone from a monetary base of around $600 billion to a monetary base in excess of $3 trillion. And there will be hell to pay.
Anyone who believes we aren't seeing inflation today is naïve.
– Porter Stansberry with Sean Goldsmith
The truth about inflation in the U.S. today...
Inflation is a simple concept... yet many people don't even understand what it is. In today's Digest Premium, Porter explains it... and shows why people who deny it are naïve.
To continue reading, scroll down or click here.
The truth about inflation in the U.S. today...
Inflation is a simple concept... yet many people don't even understand what it is. In today's Digest Premium, Porter explains it... and shows why people who deny it are naïve.
To subscribe to Digest Premium and access today's analysis, click here.
More bullish news for the housing recovery...
According to research firm CoreLogic, U.S. home prices rose 2.6% from April to May. And they were up 12.2% from May 2012 – the biggest year-over-year increase since February 2006.
"Across the country, pent up demand and continued low interest rates are fueling strong demand for a limited inventory of properties," said CoreLogic CEO Anand Nallathambi in a statement. "We expect that trend to continue to drive up prices throughout the balance of the summer months."
CoreLogic estimates prices likely rose another 2.9% in June.
In today's DailyWealth, Steve Sjuggerud said he's seeing the first "chinks in housing's armor"...
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Steve says those are two serious speed bumps in the housing recovery. But he believes big profits are still on the way...
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You can read the rest of Steve's essay here.
Ara Hovnanian, CEO of homebuilder Hovnanian Enterprises, appeared on CNBC this morning to discuss housing. Like Toll Brothers CEO Doug Yearley, Hovnanian is bullish. (Remember to take what these guys say with a grain of salt... It's in their interest to be optimistic about their sector.)
Still, as you can see from the chart below of the Dow Jones U.S. Home Construction Fund, which holds a basket of homebuilders, shares are ripping higher... Homebuilders' sales and backlogs are increasing, and inventory is coming off the market.
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According to Hovnanian, the U.S. is up to 900,000 annual housing starts. That's nearly double the levels from two years ago. We're "up dramatically from where we've been," Hovnanian said. But 1.5 million to 1.6 million is about where they're expecting it to average for this decade.
Hovnanian also praised the Federal Reserve for its quantitative easing, which brought interest rates to record lows... He said its actions allowed hesitant buyers to enter the market. In general, Hovnanian isn't concerned about rising interest rates, as long as they don't go up "in a shocking way." And some folks view rising interest rates as a reason to buy a new home, locking in rates before they move higher.
The Japanese stock market continued its upward march today... The benchmark Nikkei index moved to more than 14,000 last night, a 1.8% gain – and the fourth up day in a row.
Steve Sjuggerud shared his bullishness on Japan in the January issue of True Wealth. He called it the "No. 1 opportunity of 2013."
The week Steve published his issue, Prime Minister Shinzo Abe promised to print enough money to squash inflation and weaken the yen. In other words, he was taking a page out of Federal Reserve Chairman Ben Bernanke's playbook.
Steve expected stocks to soar as the yen weakened. And they did... He recommended an exchange-traded fund that offers exposure to Japanese stocks while hedging weakness in the yen. True Wealth readers are up 29% so far.
Several giant life insurance companies – like MetLife and Prudential – hit two-year highs today.
Life insurers issue policies to folks that are payable upon death. Actuaries – the "quants" of the insurance world – pool the policies together, estimate when people are likely to die, and predict how much money the companies will have to pay out every year.
One of Porter's research analysts, Bryan Beach, covers insurance stocks. He explained why we're seeing this bullish move...
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As you can see from the following chart of the FTSE 350 Life Insurance Index, these companies are still far off their 2008 and 2001 highs... They're simply making up ground.
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Bryan also said the strong performance could be caused by the market's perception that Fed Chairman Ben Bernanke will decide to continue (or increase) quantitative easing...
You see, life insurers buy high-quality, long-dated bonds to meet their estimated payments over the years. Their earnings are steady and predictable. But because life insurers hold long-dated bond portfolios, they're more sensitive to rising interest rates.
If rates go up, life insurers' book values will get crushed (the value of their portfolios will drop). But if Bernanke can keep rates down, they should do well.
We're not saying life insurance is a buy today... But many people don't know that the best way to profit from life insurance is actually outside the stock market.
A small subset of companies operates outside of Wall Street and has been paying out money to investors for years. Our colleague Tom Dyson, publisher of our corporate affiliate, The Palm Beach Letter, has closely studied several of these companies. One group of companies has paid out for 121 straight years. These companies survived the Great Depression... the stagflation of the '70s... and the 2008 credit crisis without a hitch.
And the best part is, your profits grow tax-free. You can learn more about this strategy by clicking here.
New 52-week highs (as of 7/1/13): DCP Midstream Partners (DPM), 1st United Bancorp (FUBC), and Ligand Pharmaceuticals (LGND).
The praise continues rolling in for James Altucher's new book, Choose Yourself. Have you read the book yet? Let us know at feedback@stansberryresearch.com.
"Only 50% through [James Altucher's book Choose Yourself] and I'm already buying copies for my 5 children (and their mates) and 3 of my 7 grandchildren. Thanks." – Paid-up subscriber DR
"Fantastic book! Liked Choose Yourself so much I bought copies for my sisters, brother, & son. Thank you for making me aware of it." – Paid-up subscriber Jack Hodges
"I downloaded The above noted book and the other 4 items and so far have read Choose Yourself (a great read, pity I could not have read it 50 years ago) also his Top stocks for 2013. I anticipate reading the others within the next few days. Thank you for providing the recommendation." – Paid-up subscriber Bob Hughes
"Wackiness notwithstanding, this young man is incredibly on the dime. I escaped from Corporate America 48 years ago and made certain that each of my three children were entrepreneurial for exactly the reasons he sets forth in his book!" – Paid-up subscriber MM
Goldsmith comment: I can't remember receiving more positive feedback about anything we've ever done before. We're thrilled folks are enjoying Altucher's book so much... We found it useful and entertaining.
If you still haven't purchased a copy of Choose Yourself, you can do so by clicking here. But act quickly... we're on pace to sell out this week.
Regards,