Bond King Bill Gross released his September investment outlook... He says deleveraging, deglobalization, and reregulation ("DDR") will lead us to a sustained period of slow growth, or the "New Normal"...
It's time to recognize that things have changed and that they will continue to change for the next – yes, the next 10 years and maybe even the next 20 years. We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds... in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.
Gross says DDR will permanently change business and economic models we take for granted... The rest of the world will no longer produce goods for the U.S. in return for our printed money. And unless other world powers develop a consumer ethic of their own, this will lead to slow growth.
Also, fewer people are buying homes (the "New Normal" home ownership rate will be around 65% as opposed to a historical 69%), so there will be fewer homes for people to borrow against and, as a result, less consumption.
The successful investor during this transition will be one with common sense and importantly the powers of intuition, observation, and the willingness to accept uncertain outcomes.
Gross says his firm, PIMCO, has drawn the following conclusions:
- Short-term interest rates will remain low for an extended period of time.
- Following government stimulus efforts and guarantees are "keys to future investment returns."
- Asia and "Asian-connected" economies will dominate future growth.
- The dollar is vulnerable in the long term.
Plenty of items in today's news support Gross' conclusions...
Payment processor ADP released its unemployment numbers for August, and U.S. companies cut a worse-than-expected 298,000 jobs. Sure, it's an improvement from the 360,000 lost jobs in July, but it's still another 300,000 folks without jobs.
Analysts are expecting August retail numbers, the important "back-to-school" month, to be down between 3.6% and 3.8% from last year, which would mark the 12th consecutive month of declining retail sales. Additionally, retailers are stocking around 10% less inventory, as they don't expect any consumer improvements this year.
We've been providing readers with plenty of safe investments for the "New Normal"...
Dan Ferris' World Dominators provide safe and steady returns in any economic condition... And they can actually use recessions to dominate the competition and gain market share. Click here to learn how to access Dan's list of World Dominators.
In today's DailyWealth, Steve Sjuggerud recommended municipal bonds. The Van Kampen Municipal Trust (VKQ) is now yielding a tax-free 7.4%. If you're in the highest tax bracket, you'd need to earn a taxable 11% to equal those returns.
And Porter's latest recommendation is a business that will make enormous returns during Gross' "New Normal." This business thrives in an inflationary environment... And the government depressing short-term interest rates will help even more, pushing this business' margins to record highs. To access Porter's latest report, click here...
Of course, we always recommend having some of your savings in precious metals, and – as you'll see in today's mailbag – you may want to consider stocking up on ammo and toilet paper.
Kudos to Braden Copeland, whose recommendation of VeriFone (PAY) entered our Top 10 list today. Back in April, Braden noticed the company's CEO, Douglas Bergeron, was loading up...
After the company announced earnings on March 3, Bergeron began buying stock heavily. He purchased 422,100 shares from March 3 through the beginning of April...
VeriFone's stock has jumped from a low of $2.31 late last year to about $7 today. Even so, the whole company is going for less than $600 million. With quality management, the company might be worth 15 to 20 times its 2007 cash flow – which was nearly $90 million. That would put it between $1.3 billion and $1.8 billion, three times as much as it's selling for. – Braden Copeland, April 8, 2009, Inside Strategist
After a strong quarterly earnings announcement yesterday, VeriFone soared more than 20% today. In a little more than four months, Inside Strategist subscribers are up 100%.
Braden's latest recommendation is likely to return even more. A sharp hedge fund manager has been loading up on this company's stock – in fact, he bought another $1.3 million worth in the past three days. We learned the hedge fund manager plans to use this company as his holding company... He'll use the cash flows from this profitable business to buy other, undervalued businesses, exactly like Warren Buffett did with Berkshire Hathaway.
We all know how Berkshire Hathaway turned out. If we can get long-term returns anywhere near that neighborhood, this one stock could make you rich. To sign up for Inside Strategist and access Braden's latest pick, click here...
A small personal note from Porter:
I've been working for the last several months to establish a new, global social club. We are finally set up, legally. We're calling it The Atlas 400. (Originally we planned to call it The 400 Club, but a New York nightclub group owns that name.)
Some of you will undoubtedly wonder why anyone would join an expensive ($25,000) social club. For me, this is the most exciting new project I've ever been involved in. Why? I know all of the best things I have in my life came to me because of relationships I built: Sjuggerud, a childhood friend, gave me my first job in financial research. My friendship with Michael Masterson led to starting my own business. My friendship with Doug Casey has led to dozens of valuable relationships, trips to amazing places around the world, etc. I even met my wife through a friend I made in business.
I am very excited to use our private Facebook-like application to stay in touch with my best contacts around the world. I'm looking forward to traveling more often with my friends. And I'm very eager to see what I learn from being a part of such a group.
Up first for The Atlas 400? A group of us will fly to Munich on September 25 to enjoy Oktoberfest for two days. Then, we'll head to Stuttgart to race Porsche's new Panamera on the company's private track. If you've already expressed an interest in joining The Atlas 400, you should receive an invitation letter and a membership application by week's end. If you would like to get on the list, send an e-mail to feedback@stansberryresearch.com.
Also... if you've got any contacts in Munich or Stuttgart – or even better, live there yourself – we'd love to hear from you. What are the best hotels, restaurants, beer tents, etc.? We've already got some reservations in place, but a local's opinion is always welcome.
If you miss out on the Germany trip, don't worry... We've got several more events planned. We're flying to Argentina in October for the grand opening of Doug Casey's luxury development, La Estancia de Cafayate. And we're setting up a members-only private fishing tournament at the world's premier fishing lodge, Pinas Bay, Panama. There will be more details in the invitation letter.
In today's mailbag, we're adding toothpaste and shampoo to our stockpiling list. Anything we're missing? feedback@stansberryresearch.com.
"Just a quick note. First, you all do an excellent job and don't change the S&A Report for nothing... Bricks of 22 shells would be good for bartering as would be the travel or sample bottles of shampoo, tooth paste etc. plus they have a long shelf life. I bet toilet paper would be as gold, look at Cuba's current problem. Kotex napkins can also double as bandages if someone gets seriously hurt (shot/stabbed) and I bet they're high up on the barter list. My three precious metals? Gold, Silver & Lead." – Paid-up subscriber Craig
"Ok first of all of you goof balls burring your gold? You must be kidding? Go buy a fire proof gun safe! You can get a good one for about 1000.00 if you want to go LARGE about 2000.00, bolt that dude down to the wall or the floor and fill it up. If it gets so bad that you have to have your stash your goodies in a hole in the ground your screwed anyway. (IE OBAMA knocking on your door) I think we will have plenty of warning before they start door knocking. Ammo, this will be one of the best things to have to barter with, the folks that are late to the party (most of them) will most likely pay dearly for the ability to protect them self's and their family. A gun without ammo is a like a car without GAS! Having a few guns to trade will help too. Rule of thumb, 1000 round for each gun. If you have a semi-auto/clip feed, minimum of 5 clips for each gun. I do 10 but... that's just me." – Anonymous
"You might be a little late to the party on this one, but it just might be the solution to the ammo shortage. Reload your own. I have been reloading my own ammo for years. Where does one find all of this stuff? Plenty of places like Bass Pro, Cabellas, Midway USA have not only the reloading equipment, but the components as well. Usually I save 50% or more on ammo by 'rolling' my own. Yes it will cost several hundred to get set up, but once you have the tools, they last forever. Granted, some of the components are hard to find at times, but it is much easier to find componants than loaded ammo. Does it work, you ask? Most of the time, better than what you can buy." – Paid-up subscriber Kip W.
"I believe that the FDIC is financed by the banks themselves, not the taxpayers." – Paid-up subscriber HM
Goldsmith comment: The fees banks pay the FDIC are laughable. As we're currently seeing, they don't come close to covering the trillions of dollars of deposits U.S. financial institutions hold. At the end of June, the FDIC had $10.4 billion to insure some $4.5 trillion of reserves. And some economists are predicting another 1,000 banks will fail.
When that $10.4 billion runs dry, the FDIC will turn to the U.S. government, aka the taxpayer. Sure, the Federal Reserve will likely print that money... But even if you believe the Federal Reserve is "the deposit insurer of last resort," as Dan suggested yesterday, it's still the taxpayers who will eventually foot the bill by way of inflation.
Regards,
Sean Goldsmith
Baltimore, Maryland
September 2, 2009