Some Bullish News for a Change
Some bullish news for a change... Sensible financial reform could soon be here... How to profit from this trend... Your last chance to reserve a seat for tomorrow night's special event... In the mailbag: How to follow Porter's advice...
We'll begin today with some bullish news for a change...
After months of anticipation, Congress' "rollback" of the 2010 Dodd-Frank financial regulations could soon become law.
As regular Digest readers know, the bill – which could be a boon for small and midsize banks – was introduced to the Senate Banking Committee late last year. It easily passed the Senate in a bipartisan 67-31 vote in March. And if all goes well, it could now be on the president's desk by the end of the month. As the Wall Street Journal reported this morning...
The House will soon vote on a Senate-approved bill to ease rules for small and midsize banks, House Speaker Paul Ryan said, a move that would allow the bill to clear Congress and become law...
House action is expected before Memorial Day. The Trump administration has requested House action by that date...
A core piece of the Senate bill could cut to 12 from 38 the number of banks subject to heightened Federal Reserve oversight by raising a key regulatory threshold to $250 billion in assets from the current $50 billion.
The measure also includes provisions to relax paperwork and compliance burdens for smaller banks, such as a provision to exclude banks that originate fewer than 500 mortgages annually from having to report certain racial and income data on their mortgages, unless they perform poorly on tests of lending discrimination.
And Ryan said House leaders expect to introduce a separate bill with additional deregulatory measures soon.
Of course, more sensible regulations aren't the only reasons banks could continue to do well from here...
As we've discussed, the entire financial sector is benefiting from the combination of lower taxes and rising interest rates. That should continue.
In addition, regular readers know the Federal Reserve granted banks approval to boost capital payouts (via dividends and share buybacks) by more than 40%, following its annual "stress test" last June. And according to Goldman Sachs banks analyst Richard Ramsden, the Fed is likely to approve another double-digit increase in payouts following its 2018 stress test next month.
As usual, we don't make official recommendations in the Digest...
But investors can take advantage of this trend in a number of ways.
The easiest "
You could take our colleague Dr. David Eifrig's advice and buy the best... the safest and most profitable bank in the sector. "Doc's" Retirement Millionaire subscribers are up roughly 30% since he originally recommended the stock last summer, but he still rates it a "strong buy" today.
You could also buy the small and midsize banks that are likely to benefit the most from deregulation...
Again, a one-click way to do so would be to buy one of the regional bank ETFs, like the SPDR S&P Regional Banking Fund (KRE) or the iShares U.S. Regional Banks Fund (IAT).
You could also take the suggestion of our colleague Scott Garliss – who has been covering this trend closely in the Stansberry NewsWire for months – and buy some of these banks directly. He shared a list of these names in the December 6 Digest...
The financial institutions that would be affected by [these changes] (i.e. ones with assets between $50 billion and $250 billion) are:
The names toward the bottom of this list would be prime candidates to either go on an acquisition spree (increasing their assets and revenue potential) or would be likely to get acquired.
We'll also note that our friend and TradeStops founder Dr. Richard Smith agrees...
Of course, at TradeStops, Richard doesn't typically make recommendations of his own.
But he does occasionally alert subscribers to opportunities that his proprietary TradeStops indicators have uncovered. And late last month, he highlighted regional banks as a potential "hedge" against higher interest rates and a potential "trade war" with China. As he explained...
Regional banks do most of their lending locally rather than internationally, so they don't have as much exposure to vulnerable emerging markets. [They] are also seeing a positive bottom line benefit from rising rates, through the ability to earn a higher profit on their lending spreads. As a bonus, because of their domestic focus, regional banks aren't as exposed to other international worry factors (like trade war).
One simple way to gain exposure to regional banks is through KRE. As you can see from the chart below, KRE remains in the green zone and has an overall positive trend.
We wouldn't be surprised to see more capital flow into KRE, and into regional banks generally, if rising interest rate fears persist. Many industries have negative exposure to the rising rate trend, but for regional banks it's a positive.
Speaking of Richard, you've likely heard he'll be joining us for a special event tomorrow night...
He'll be sitting down with Porter and Steve Sjuggerud at 8 p.m. Eastern time to explain how his TradeStops system can help you make much more money – while far taking less risk – in the exact same stocks you already own.
But even if you're not interested in learning more about TradeStops, we still urge you to tune in...
The roundtable discussion alone – where Porter, Steve, and Richard will share their latest thoughts on the market – is sure to be worth your time.
You'll learn when to sell many of our most popular open recommendations... again, no purchase required.
And you'll hear about Richard's exciting new research... In short, Richard has discovered a way to use his proprietary TradeStops algorithms to look "under the hood" of the markets.
He says these new tools can precisely measure the underlying "health" of the major indexes, as well as the many sectors within them.
These tools can not only warn of a potential bear market, they can also tell you which stocks and sectors offer the best risk to reward potential at any time. And Richard will tell you exactly what they're saying today.
Again, this special event kicks off tomorrow night at 8 p.m. Eastern time. And it is absolutely FREE for all interested Stansberry Research subscribers. Click here to reserve your spot now.
On May 10 at 8 p.m. Eastern time, Porter & Steve will reveal:
The FINAL INVESTMENT You Need to Make in This Bull Market
It's the discovery of a Cal-trained mathematician and
You'll discover how to know when to buy and sell shares of Disney, Microsoft, Johnson and Johnson, Apple, Hershey... Two Harbors, Tencent, Naspers, MercadoLibre... and other widely held Stansberry Research recommendations...
You'll even hear the exact day when this bull market will end! Click here to reserve your FREE spot now.
New 52-week highs (as of 5/8/18): Apple (AAPL), Automatic Data Processing (ADP), First Trust Nasdaq Cybersecurity Fund (CIBR), Eaton Vance Enhanced Equity Income Fund (EOI), Genco Shipping & Trading (GNK), Intel (INTC), and Okta (OKTA).
In the mailbag: Several folks weigh in on the complaint from paid-up subscriber David S... and Stansberry Portfolio Solutions portfolio manager Austin Root responds to a question. What can we do for you? Let us know at feedback@stansberryresearch.com.
"I just read the letter from David S. and Porter's reply, to which I can only say, Amen." – Paid-up subscriber Phil B.
"Beautiful... I couldn't have said it better. Pension funds are now investing in crypto.
"I don't know why folks like David S. insist on striding into the OK Corral to face off with Porter armed with nothing but a rhetorical squirt gun. But it sure is popcorn-worthy." – Paid-up subscriber William S.
"I subscribe to Stansberry Portfolio Solutions and various other products, and my portfolio only holds stocks (and bonds) that they have recommended over the years. So, I'm confused by Porter's advice in the 4/27/18 Digest to: '... lower your exposure to the equity markets to less than 60% of your portfolio.'
"Does this essentially mean to reduce the percentage of all holdings to free up capital? If so, then that hurts the recommendations for great, rock-steady companies like WDDGs. And if not, then he's implying that some Stansberry recommendations are not as safe as others.
"But that's rarely made clear most of the time – several of your authors being notable exceptions. Even there, though, some recommendations say to hold on for 6 months or 1-2 years, which seems to be outside the 'safe' period – and would thereby exclude 'Golden Triangle' stocks.
"I don't believe I'm asking for individual advice; I'm just asking for clarity of action on Porter's advice to 'lower [my] exposure.' How about having each publication be more specific about reductions?
Austin Root comment: Roger, you packed a lot of questions in there. Let me try to address each one. First, for other readers, here's Porter's full quote from that section of the April 27 Digest...
Time is running out on this bull market.
You don't need to sell everything, but lower your exposure to the equity markets to less than 60% of your portfolio. Put some of your capital some place safe. Buy some gold. Buy very safe bonds. Buy some local real estate that you know well and can always rent. Get out of debt.
Follow your trailing stops. Raise cash when you stop out. Realize that over the next 12-36 months, the investors who win will be the ones who survive. You can choose to be one of them. You really can. But you need to act now.
So yes, Porter is recommending that readers should reduce their exposure to the riskier parts of the equity markets. But he is not suggesting you sell or trim each of your stock holdings by the same amount. As longtime Stansberry Research readers know, not all stocks are equal in terms of risk. And risk factors can vary greatly among stocks. For example, high oil prices and terrorist attacks are among the greatest risks facing an airline stock, while a newspaper publisher faces a different set of challenges.
Porter also isn't suggesting that folks sell all their risky investments. Rather, he suggests holding investments with meaningful upside potential to compensate for the risks. Many of Steve Sjuggerud's "
Of course, the best way to put Porter's recommendations to work is to follow our advice in Stansberry Portfolio Solutions. In recent months, The Total Portfolio has reduced exposure to risk and increased exposure to safer investment opportunities. Roughly speaking, The Total Portfolio now has 20% of its capital invested in more speculative "Melt Up," commodity, and "special situations" opportunities.
In addition, we have about 37% dedicated to world-class "core" investments and capital-efficient companies. This combined 57% makes up most of the risk in the portfolio. The balance of the portfolio is spread over gold investments, safer income plays (i.e. bonds and bond-like, income-generating instruments), property & casualty insurance companies (what we call "the world's best business"), short positions on riskier stocks, and cash.
The goal of this portfolio is to invest in well-run, sturdy businesses with significant upside potential... while at the same time protecting capital from inevitable downdrafts in the market.
So far, that's what we've done. Last year – from February 1 (when we launched Stansberry Portfolio Solutions) – the portfolio produced a gain of more than 18%, with lower volatility and risk than the overall market. This year, the market is down 5% since February, but The Total Portfolio is down just half that much. (Interested readers can learn more about Stansberry Portfolio Solutions right here.)
As for determining the risk level of specific stocks and investment strategies, I suggest the following steps: First, the Products & Services tab of the Stansberry Research website provides a high-level safety rating for every research product we publish. While the recommendations within each publication will differ, in general, you can assume, for example, that a True Wealth China Opportunities pick will be riskier than an Income Intelligence pick.
Beyond that, most of our publications do some type of a stock-specific risk measure at the time of recommendation. For instance, Stansberry's Investment Advisory assigns a risk ranking between 1 and 5 for all of its picks (listed on the portfolio summary) and often bases its trailing-stop level on the stock's risk. In other words, the wider the stop, the more volatile and risky the stock tends to be.
That leads me to my final suggestion: Use TradeStops! TradeStops will provide a risk profile estimate for each of your investments. The higher the volatility quotient (or "VQ"), the riskier the stock.
You don't have to sell all your stocks with higher VQs, but it pays to know where you're taking more risk... and limiting those bets only to your high-conviction ideas with the biggest upside potential.
I hope that helps. If you're interested in learning more about TradeStops, be sure to tune in for tomorrow night's free event. TradeStops founder Dr. Richard Smith will be joining Porter and Steve Sjuggerud to show how his service can help take all the guesswork out of properly managing the risk in your portfolio. Click here to reserve your spot.
Regards,
Justin Brill
Baltimore, Maryland
May 9, 2018