The Bernanke Asset Bubble goes offshore...

The Bernanke Asset Bubble goes offshore... Icahn gets cautious on stocks... One of Europe's largest investors is worried... Why Steve is buying silver... And why precious metals will do well over the long term...
 

 The "Bernanke Asset Bubble" has moved offshore...

 

We're nearing the end of the artificially rising asset prices we've experienced since former Federal Reserve Chairman Ben Bernanke cut interest rates to zero and started printing money. In fact, in the July issue of True Wealth, Steve Sjuggerud predicts the final inning of the Bernanke Asset Bubble will begin next April.

 

That's when he says the Fed will start raising interest rates. Stocks could still move higher following the rate hikes. But at that point, the future gains likely won't be worth the risk. (To see how stocks have historically reacted to interest-rate increases, read Steve's March 10 DailyWealth.)

 

 But Steve says European stocks still have plenty of upside thanks to the "Draghi Asset Bubble" – the rise in asset prices following European Central Bank President Mario Draghi's announcement that Europe will also start printing money. He estimates we're in the fourth inning of the European bull market.

 

Take a look at this chart he presented in the June issue of True Wealth...

 

 

As you can see, U.S. stocks have returned to their pre-crisis highs. But European stocks are still trading for significantly less than they were in 2007.

 

 While printing money temporarily boosts asset prices, it doesn't deal with the basic solvency issues – the ability to meet long-term financial obligations. Piling debt atop debt has never been the answer.

 

 Several prominent investors – including Barry Sternlicht and Wilbur Ross – are urging caution today.

 

Fellow billionaire investor Carl Icahn joined the fray last week... He told news service Reuters, "In my mind, it is time to be cautious about the U.S. stock markets. While we are having a great year, I am being very selective about the companies I purchase."

 

 We're still long... But we're getting more cautious. Remember, often times, the biggest gains are made at the end of a bull market. As Steve noted in the July issue of True Wealth, "In late 1999, the Nasdaq Index soared about 80% five months before peaking in March 2000... You don't want to miss out on the final innings."

 

 Steve recommends having "one finger on the eject button" in the case of a downturn.

 

Maximilian Zimmerer, chief investment officer of Europe's largest insurer, candidly addressed the issues with Europe and the rest of the world in an interview last week with Bloomberg.

 

"The fundamental problems are not solved and everybody knows it," Zimmerer, who oversees $757 billion for Allianz, said. The "euro crisis is not over."

 

 His comments were well-timed, considering last week's news of a potential default from Portugal's largest bank, Banco Espirito Santo. Zimmerer continued...

 

There is only one country where the debt level last year was lower than 2012 and this is a signal the debt crisis can't be over, only a recognition that the debt crisis has changed. If the debt levels are not going down, in the end we will have a problem, that is for sure.

 

 As Zimmerer said, the day of reckoning will eventually come... Countries will have to address their debt problems. And that's one main reason we're bullish on precious metals for the long term.

 

In True Wealth, Steve explained why he was bullish on silver. Silver had plummeted from its 2011 peak. And sentiment toward the metal was terrible. Steve wrote...

 

It is the best opportunity to buy silver in over a decade – and possibly one of the best times you will ever see in your life.   Silver is down by 60% from its peak in April 2011. Compare that to gold – which is down just 20% over that same period – and you can see just how extreme the bust in silver has been...   I like to look at "real money" bets on commodities and currencies to gauge investor sentiment. I do this by looking at the government's commitment of traders report. It shows what real futures traders are doing with their money. And right now, based on the real money, silver is more hated today than any time in the last decade.   You would have done extremely well in silver if you had bought it one of the last times it was this hated... in 1997, 2001, and 2003. Take a look:     Sometimes it took a while for the price of silver to get going after being so hated. So silver could grind sideways for a few months from here.   But I'm optimistic that silver bottomed in late May, and the next move up has started. Regardless, I'm perfectly happy to buy silver today – at the most hated point in over a decade.

 

 Last week, silver closed at a four-month high – its sixth winning week in a row. That's the longest streak since silver's April 2011 high. The metal is up just over 10% this year. And with the trend in place, we can expect to see more traders squeezed out of their short positions.

 

True Wealth subscribers are already up 9% in about three weeks on Steve's recommended way to invest in silver.

 

 Regardless of whether today's monetary policy leads to inflation or deflation, you'll want to own gold and silver. You have to be prepared for either outcome...

 

And in his new book The Death of Money, Wall Street veteran Jim Rickards argues precious metals will soar in either outcome. He says the upside potential is huge... Rickards thinks gold will hit $7,000 an ounce.

 

 It's these bold predictions – and Jim's impressive knowledge of monetary policy and the potential outcomes – that have made his new book so popular. In fact, it has been one of the most popular offers we've ever made. Thousands of readers have already claimed their free copy of The Death of Money.

 

It's not too late... we still have some free copies left. You just have to pay less than $5 for shipping. Given the current economic environment – and Rickards' predictions on how this will end – it could be the most important thing you read this year.

 

Jim also agreed to write a bonus chapter just for S&A subscribers that gives more actionable advice to protect yourself for what's coming. To claim your free book, click here.

 

 

 New 52-week highs (as of 7/11/14): Alcoa (AA), AllianceBernstein (AB), Aware (AWRE), Dorchester Minerals (DMLP), Lorillard (LO), Altria Group (MO), and Royal Gold (RGLD).

 

 In today's mailbag, another subscriber writes in praising Porter's nine-day Digest series. Send us your e-mails and thoughts at feedback@stansberryresearch.com.

 

 "Porter I enjoyed your letters and think it was the best outline I have seen for laying out a foundation for lifetime financial planning. Thank you very much. I am going to use it to help my kids & grandkids set up their programs. They will thank you later in life. I met you in Annapolis with Oxford club years & years ago when you were just starting out. I owned my own business so did not do much investing but always remembered you. I'm glad for you and all your success in your businesses." – Paid-up subscriber Duane Sather

 

Regards,

 

Sean Goldsmith

July 14, 2014

 

If people want to keep the lights on, uranium will soar...

 

Today, we conclude our three-part series with investing legend Rick Rule, who spoke at our natural resources event in Dallas in May.

 

In today's Digest Premium, Rick explains why demand for the hated commodity will never go away...

 

To subscribe to Digest Premium and receive a free copy of Jim Rogers' latest book, click here.

If people want to keep the lights on, uranium will soar...
 

Editor's note: Today, we conclude our three-part series with investing legend Rick Rule, who spoke at our natural resources event in Dallas in May. So far, we've shared why Rick says uranium is the most hated commodity in the world... and why prices have to go up from here. In today's Digest Premium, Rick explains why demand for the hated commodity will never go away...

 

 

 At the beginning of the uranium bull market – or rather, at the end of the uranium bear market – there were five uranium juniors. Who wanted to invest in a commodity that was responsible for Chernobyl or Three Mile Island during a 20-year bear market? There are very few people in the world like me who really desire to be despised... who get some form of gratification knowing they're right by the number of people who hate them.

 

What was interesting is that when the uranium price had to go up, nobody cared. The epicenter of the uranium boom was in 2005. The price had gone from $10 a pound to $130 a pound. Obviously, at $130 a pound, the price didn't have to go up anymore, right?

 

But people's expectations of the future are set by their experience in the immediate past. So, the number of companies looking for uranium went from five to 500.

 

 Now, the really interesting thing about that from a contrarian's point of view is that after a 20-year bear market, there were probably 15 teams capable of finding (and maybe even selling) uranium in the world. At the top of the boom, the probability that your junior miner had a competent management team was a simple fact of dividing the number of available teams (15) by the number of competitors (500). Wonderful math.

 

And at the top of the market – and this is the most amusing to me – I get off the podium and the same people who reviled me for advocating Chernobyl and Three Mile Island were saying, "Rick, do you have any uranium stocks you could give me?" It's a trained set of circumstances, but it's also interesting because we're back there again.

 

 People hate uranium. People went long uranium in 2004 only to lose half their money in 2006. Not a good introduction. They watched the number of uranium companies implode. And at the same time, uranium prices declined from $135 a pound to $28 a pound. What has changed? Nothing. It costs us $70 a pound to make the stuff. It sells for $28 a pound.

 

We lose a whole bunch of money on every pound that we try to make up in volume. But ongoing demand for uranium is assured by virtue of the fact that in the summer, you want air conditioning. When we walk into a room, we want the lights to come on.

 

There is ongoing demand for electricity. That's the way it works. How much carbon comes out of a nuclear power point? It's a green fuel. President Obama should be all about it.

 

This stuff is really despised. Will it turn this year? Will it turn next year? Will it turn the year after? I don't know.

 

– Rick Rule