Silver coins sell out...

 Silver is down to $15.70 an ounce, near its lowest level since early 2010.

 

As a result, investors flooded into silver coins... causing the U.S. Mint to run out of American Silver Eagles.

 

Since the beginning of November, the U.S. Mint sold nearly 1.3 million ounces of American Silver Eagle coins.

 

 The news follows strong demand in October, when the Mint sold 5.8 million ounces of American Silver Eagles... a 40% increase from September sales.

 

We asked rare-coin expert Van Simmons for his opinion on the recent action...

 

Silver demand is not as strong as it was two years ago. But silver is very active in here, and there is significant buying from people who think this is the last chance to get silver at these price levels.   People who believe in the precious-metal investment thesis think that depreciation in prices will stop at some point and at these levels, it's a good time to buy.   Strong demand also remains from long-term gold buyers.

 

 Van believes there will be enough supply for investors to buy the silver they want. The U.S. Mint confirmed Van's thought, announcing it will make another 1 million ounces of American Silver Eagles available by next Monday, according to several industry sources.

 

But the recent surge in demand has caused American Silver Eagles to sell for a huge premium. The coins now sell for nearly $20 per ounce, a $4 premium over silver's spot price. Coins always sell at a premium... but a 25% premium over the spot price is extreme.

 

Meanwhile, generic one-ounce bars of silver are selling for around $17.90 per ounce, a large 14% premium over the spot price.

 

 Gold – silver's more expensive cousin – is currently trading around $1,160 per ounce. But the "gold forward rate" – the interest charged in swapping gold for dollars – just went negative.

 

We saw the same situation pop up last year. As we explained in the August 19, 2013 Digest...

 

Say you're holding gold but need dollars for liquidity. You can use gold as collateral. Normally, you would pay for this privilege. But today, the folks with the dollars are willing to pay a bit extra to borrow gold. In short, gold in hand today is worth more than dollars.   We previously discussed gold forward rates going negative. This has only happened five times in the past 14 years (1999, 2000/2001, 2006, 2008, and 2013). And each time, it has marked a bottom in the gold market.   Today, the one-, two-, and three-month gold forward rates are all negative. The question we have is what happens when the folks swapping their gold want it back... Will it be there?

 

Today, one-, two-, and three-month gold forward rates are all negative again, according to the London Bullion Market Association. At least on a short-term basis, the gold forward rate is pricing in a shortage of physical gold and concerns regarding delivery.

 

 In the October 27 Digest, we detailed the latest in the ongoing saga with Brazilian oil giant Petrobras (PBR). We shared Porter's thoughts detailing the company's mounting debt and declining cash flow from his presentation at the New Orleans Investment Conference. As he explained...

 

In addition to cash flow problems, Brazil refuses to let Petrobras raise domestic fuel prices in line with world prices. Thanks to the government, gasoline in Brazil sells for close to 25% less than the cost of importing it. That boosts domestic demand, but crushes Petrobras' earnings potential.

 

 The country recently reelected President Dilma Rousseff. In her first term, Petrobras reported $44 billion in operating losses from selling fuel at below-market prices.

 

Brazilians currently pay around $5 per gallon of gasoline... a price subsidized by Petrobras investors.

 

Now, it appears the market is starting to force the hand of Brazil's government... which will lead to higher prices for Brazilian residents. Petrobras will raise gasoline prices 3% and diesel prices 5%.

 

Petrobras can't continue to report multibillion-dollar operating losses with no consequences to shareholders. As the debt load becomes unsustainable, share dilution and potential restructuring loom.

 

 Petrobras is another example of why state enterprises are not good allocators of capital. In the October 31 DailyWealth, Editor in Chief Brian Hunt republished a classic essay explaining why investing with the government is always a bad idea...

 

Remember how your average government agency works (or doesn't work). The bureaucrats running government agencies are not incentivized to produce profits. They are not incentivized to improve the long-term value of a business. Bureaucrats are incentivized to spend their entire budgets and grow larger. This allows them to acquire more power... and bigger budgets for next year... which allows them to acquire more power and bigger budgets for the year after that.   Compare this to an entrepreneur who has his own money on the line. He's going to do his best to keep costs down, instead of intentionally blowing his budget. He's going to do his best to hire only employees he needs... rather than hire as many people as possible. He's going to keep a close eye on his cash flow, or he'll go broke.   Most smart people know this is the difference between government and business. But when it comes to investment, even "small government" republicans and libertarians lose their minds and line up to buy shares in inefficiently managed, state-owned companies. It defies belief. They'd be better off partnering up with a crack addict.

 

 Petrobras shares are down nearly 50% since the beginning of September. According to Bloomberg, it's the worst-performing major oil company over the past four years.

 

Which would you rather invest your hard-earned money in... Petrobras, or a company that gushes cash, raises its dividend like clockwork, and has fortress-like balance sheets?

 

 In February, Dr. David "Doc" Eifrig recommended a company in the latter category.

 

He told subscribers it was a great time to buy shares of retailer Target (TGT) after the company got caught up in a data-breach scandal.

 

Doc knew Target was a great company to own over the long term and encouraged Retirement Millionaire subscribers to scoop up shares while they were "on sale" because of a short-term problem. As he explained in his initial recommendation...

 

You don't often get a chance to buy a company that has raised its dividend for 46 straight years after it has fallen 23% in six months. I can't even recall a bargain this good.

 

 Despite the concern surrounding the cyber attack, Target's sales have rebounded (and more). The company reported sales rose from $17.1 billion in the third quarter of 2013 to $17.4 billion today.

 

Plus, Target is getting serious about competing with online retailers. Its digital sales rose 30% in the third quarter versus the same period a year ago. And now, Target is doing even more to compete online...

 

In an effort to compete with Amazon and other retailers, last month, Target announced free shipping for all online orders from now until December 20. The holiday shopping season accounts for 20% of the retail industry's total sales... Target wants a head start.

 

Target also recently hiked its quarterly dividend 21%, from $0.43 per share to $0.52. Since Doc's recommendation in February, Retirement Millionaire subscribers are up 17%.

 

 In October 2013, Doc recommended shares of another high-quality company – Express Scripts (ESRX), the country's largest pharmacy benefit manager (PBM).

 

Express Scripts is responsible for processing and paying prescription drug claims. It handles more than 1 billion prescriptions a year. And as Doc pointed out in his original recommendation, it's a great way to profit off the aging Baby Boomer generation...

 

Health care spending currently accounts for about 18% of U.S. GDP. That should easily grow to 24% by 2040.   There will be an additional 32 million elderly by 2030. Older people use three to four times the amount of prescription drugs as folks under 50.   PBMs take a $1-$2 fee on each transaction. In 2013, 90% of Americans get their drugs through a PBM. So those transaction fees add up to a huge amount of money and a great business.   No matter how the new federal health care regime – "Obamacare" – plays out, the U.S. health care system needs middlemen like Express Scripts.

 

 Plus, Express Scripts just announced positive quarterly results.

 

Net income rose from $427 million in the third quarter of 2013 to $582 million today. Earnings per share rose from $0.54 to $0.78 over the same period.

 

 Express Scripts is also rewarding shareholders... It spent $1 billion on share repurchases and plans to repurchase another 29 million shares ($2.2 billion) under its current program.

 

Since Doc's recommendation, Retirement Millionaire subscribers are up 25%.

 

 In the November issue of Retirement Millionaire, Doc recommended shares of another familiar blue-chip company. One-third of the country uses this company's services... In the past five years, its subscriber base has grown from 81 million to 108 million last year.

 

Over the last 12 months, the company has done more than $100 billion in sales. It sports thick margins... trades at a discount to the S&P 500... and has grown its dividend every year for nearly three straight decades. Today, it sports a thick yield nearly 75% larger than its industry average.

 

Out of fairness to Doc's readers, we can't reveal the name of the company here. But Retirement Millionaire subscribers can read the November issue for more on this company. If you're interested in a risk-free trial subscription to Retirement Millionaire, click here to learn more (without sitting through a long promotional video).

 

 New 52-week highs (as of 11/10/14): Automatic Data Processing (ADP), Amgen (AMGN), Deutsche X-trackers Harvest China A-Shares Fund (ASHR), Brookfield Asset Management (BAM), Brookfield Property Partners (BPY), Berkshire Hathaway (BRK), Chubb (CB), CDK Global (CDK), CVS Health (CVS), Dominion Resources (D), Discover Financial Services (DFS), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Nuveen Quality Preferred Income Fund 2 (JPS), Eli Lilly (LLY), 3M (MMM), Microsoft (MSFT), Nuveen Municipal Opportunity Fund (NIO), Pepsico (PEP), Procter & Gamble (PG), PowerShares Buyback Achievers Fund (PKW), PowerShares QQQ Fund (QQQ), ProShares Ultra S&P 500 Fund (SS0), Constellation Brands (STZ), Travelers (TRV), UIL Holdings (UIL), Union Pacific (UNP), and Alleghany (Y).

 

 In today's mailbag, a subscriber expresses his appreciation for Stansberry Research. Let us know what's on your mind lately at feedback@stansberryresearch.com.

 

 "You all... If you ever want someone to speak on behalf of private wealth alliance just ask me. It is so very money well spent that I don't always realize it. Certainly I can't read everything that comes my way. But the real value lies in the variety of what becomes available. The premium reports... the premium dailies and so on. If anyone ever asks if you get your money's worth send them my way. Truth be told you get so much more.  Porter, your business is successful for a couple of very simple reasons. It is unfortunate that most companies don't get it. You give way more value than what people pay for. Thanks for so much that all of you give. I am honored to be a Private Wealth member." – Paid-up subscriber Jeff Spranger

 

Regards,

 

Bill McGilton

Baltimore, Maryland

November 11, 2014