The Biggest Winner of the Fed's Latest Decision
The biggest winner of the Fed's latest decision... More bullish signs for gold... Another 'blackout' is approaching... The Atlas 400 returns from New Zealand...
No one should have been surprised...
In its March policy decision yesterday, the Federal Reserve decided to leave short-term interest rates unchanged. Fed officials said they now expect to increase rates just two times this year. They also noted a "cautious stance" on the U.S. economy.
Just three months ago, these same officials painted a much rosier picture of the U.S. economy. They raised short-term rates for the first time in nearly a decade, and said they would increase them again four more times this year. They even predicted an incredible 18 more rate increases over the next three years.
As always, we take what the Fed says with a big grain of salt.
Despite its bluster, the Federal Reserve is no better at predicting where the economy is going – or what interest rates should be – than any of us.
In fact, given its history – like blowing a massive bubble in Internet stocks in the late 1990s, or being completely blindsided by the financial crisis, despite years of warning signs – we would argue they're worse.
The Fed is reactive... It looks at last month's data and projects it into the future. If the market turns down again, don't be surprised if rate cuts – or even negative interest rates – are quickly back on the table.
As has often been the case recently, the cautious Fed statement was seen as bullish for assets. It implies the Fed's "easy-money" policies will stick around a while longer.
Most markets rallied following the announcement... but gold was the biggest winner, rallying nearly 3% on the news.
But it didn't just rally here in the U.S. Gold also surged in nearly every major currency, including the euro, the British pound, the Japanese yen, the Swiss franc, the Canadian dollar, and the Australian dollar.
As we've discussed before, seeing gold rally in many currencies at the same time is an incredibly bullish sign.
But that isn't the only positive sign for gold today...
Seeing gold stocks outperform gold itself is also often a super-bullish signal.
For example, from its bear-market bottom in 2000 through its all-time high in 2011, gold rallied 600%. But over that same time period, gold stocks – as measured by the NYSE Arca Gold Bugs Index (the "HUI") – soared nearly 1,600%.
On the other hand, gold stocks often underperform gold during bear markets. For example, gold fell as much as 43% over the bear market of the past four years... but gold stocks plunged more than 80%.
As you can see in the chart below, since bottoming in late January, gold stocks have been dramatically outperforming gold itself...
There are never any guarantees in the markets, but this is one more sign the brutal, four-year bear market in gold could finally be over.
After the big rally of the past couple of months, we expect gold to take a "breather" soon. But we continue to believe the coming weeks could offer one of the best buying opportunities in gold we've had in years.
On Monday, we discussed the record divergence between how much money individual investors are withdrawing from stocks and how much money companies are plowing into stocks through share buybacks.
As we showed, this year's early stock market plunge lined up almost perfectly with the so-called earnings "blackout" period, where companies restrict buybacks until after they report earnings.
The situation has become so extreme, some analysts believe share buybacks are the only thing keeping the bull market alive.
If this is correct, we could be in for some more volatility soon...
Again, many companies restrict buybacks starting about five weeks before they report quarterly earnings, and don't begin buying again until about 48 hours after the report is released.
According to Dave Lutz, macro strategist at JonesTrading, the companies accounting for the majority of buybacks in the first quarter of this year reported 2015 first-quarter earnings April 13-27.
Assuming these firms report at a similar time this year – which is typically the case – this means the latest blackout period is starting right now.
Are you prepared for a repeat of January's declines? Have you diversified appropriately and "hedged" your portfolio... or are you simply hoping for the best?
On the other hand, are you prepared if the market heads higher instead... or have you gone "all in" on bearish bets that could cost you a big chunk of your hard-earned savings if you're wrong (or early)?
Regular readers know we believe a bear market is unavoidable... but they also know that no one can predict exactly when it will begin.
Successful investors know how to make (and protect) money in up and down markets. You can do this, too. All it takes is a desire to learn, and a little bit of effort on your part.
We've compiled everything we know about trading into our new Bear Market Trading Program.
While this program will be incredibly valuable in the coming bear market, it's much more than that. It will give you the tools – strategies like merger arbitrage, pairs trading, and "market-neutral" options trading – to make consistent, short-term profits in bear and bull markets alike.
This is hands down the best trading education we've offered... and it will show you step-by-step how to use these tools for yourself. Click here to learn more.
And if you're looking for help with the "basics" of building a balanced bear-market portfolio that's prepared for whatever comes next, consider our first educational series – the Bear Market Survival Program. You can learn more here.
We'll close today with an update from The Atlas 400 director Gray Zurbruegg, who just returned from the group's trip to New Zealand...
Atlas members just returned from a 15-day trip exploring New Zealand's North and South Islands.
We rafted the Mohaka River... drove ATVs on the beach... and rode horses through wine country. But nothing compared to our visit to Milford Sound on our final day.
There's no coastline. Mountains rise out of the water, towering a mile above sea level. The surroundings make cruise ships look like toy boats. And since it had been raining, hundreds of waterfalls flowed from the mountains.
While exploring Milford Sound, our guide shared an old myth from the Maori people.
The Maoris arrived in New Zealand from East Polynesia in the 13th century. They were notorious for hunting seals and large birds, and were also capable farmers.
Legend has it that one evening, a Maori man named Māui and his brothers finished a day of planting and fishing. The brothers began cooking their evening meal around the fire. Just as they finished heating the stones, the sun went down. It quickly became too dark to see. Māui was annoyed with having to eat his food in the dark. He stood in the light of the fire and proclaimed...
Every day we have to rush to do our chores and gather our food before the sun sets. Why should we be slaves to the sun? I will catch the sun before it rises and teach it to travel slowly across the sky.
The legend explains how Māui caught the sun with a homemade lasso and succeeded in slowing the sun's path through sky – thus creating daylight savings.
Hearing the local myth was another reminder of how precious time is.
Our busy, type-A lifestyle is nothing new. Humanity has always been rushing forward, and we've always needed reminders to slow down and savor the world around us. Māui and his brothers spent time each night talking and learning from one another's experience. They knew this wasn't something to be rushed.
In a way, the story also reminded me why we founded The Atlas 400 eight years ago. The goal was to gather successful, like-minded people and put us in settings where we could foster deeper, more meaningful relationships than we typically do in our day-to-day lives. As our founder, Porter Stansberry, has explained...
The value of Atlas is its network. The people you share your life with... the people you spend time with... the people you trust influence you in profound ways over time. Almost everything good that's happened in my life happened because of someone I knew... a relationship I built.
That's the idea behind The Atlas 400: To grow this network of friends... to have incredible experiences together... to deepen relationships.
Atlas members understand the importance of slowing down. They make time to share and experience the best things life has to offer. On our trip, members gathered for dinner each evening. While dining, conversations ignited from discussion of the day's events and experiences. Often, they carried long into the night.
Though lodges like Wharekauhau and its bungalows – where we called home for much of the trip – are beautiful, they take a back seat to the relationship building that takes place on our trips.
It's easy to open up and be true when you've spent the day in a racecar with someone or ziplined across Patagonia with them. It's different from your typical business conference interaction.
For those interested, please pay close attention... We only accept new members twice a year. And our spring window is now open.
This club is for successful people. It costs $30,000 to join, and our excursions aren't cheap. But if you're at a point in your life where meaning is paramount and you're in a position to enjoy the fruits of your labor, I would urge you to learn more about this opportunity. You can do so by clicking here. Or feel free to call me (Gray) directly at (410) 864-0878.
I look forward to hearing from you. And who knows what adventures we'll share in the future...
New 52-week highs (as of 3/16/16): Franco-Nevada (FNV), Market Vectors Junior Gold Miners Fund (GDXJ), Lundin Gold (LUG.TO), NovaGold Resources (NG), Public Storage (PSA), short position in Santander Consumer USA (SC), Sysco (SYY), and AT&T (T).
In today's mailbag, a reader has a question about our recent warning. What's on your mind? Let us know at feedback@stansberryresearch.com.
"I'm 81 years old and retired. I was an employee of a member of the NYSE. I'm a recent joiner to Stansberry Research. I wish I'd been with you from the beginning, but I just became aware of your organization last November. Stansberry Research produces the best material I've ever read.
"I'm a recent Lifetime subscriber to Stansberry's Credit Opportunities and intend to become a Lifetime subscriber of the Stansberry's Investment Advisory and Stansberry Resource Report once my renewals of these subscriptions become due in November. I have five successful children in their 40's who I am beginning to familiarize with your efforts.
"I'm concerned about Justin Brill's most recent article (March 15) The Stansberry Digest, "Urgent: The most important Digest of the year so far..." How much additional risk am I exposed to in my Stansberry's Credit Opportunities investment? Thank you for your reply." – Paid-up subscriber Dennis M.
Brill comment: Dennis, Stansberry's Credit Opportunities is designed to take advantage of the turmoil in the credit markets.
You can learn everything you need to know in the Stansberry's Credit Opportunities Primer that came with your subscription. Porter also explained these ideas in detail in his five-part Digest series last fall. If you missed it, you can read it right here.
Regards,
Justin Brill
Baltimore, Maryland
March 17, 2016
|