The dollar's "moment of truth," delayed... World governments are dumping the yen... Steve's "incredibly bullish" on Japan... Cameco soars... Dollar vs. Gold...
The "moment of truth" for the dollar has been delayed. The dollar rallied today... as Japan dumped massive amounts of yen. Later, the Group of Seven (G7) dumped yen and purchased U.S. dollars. It's the first time the G7 jointly intervened in the currency market in 11 years, though it only sold some 2 trillion yen ($25 billion). A weakening yen helps Japanese exports – a cornerstone of the Japanese economy.
The government selling successfully pushed the yen lower, though it recovered in midday trading... The dollar jumped to 82 yen (¥) in Asian trade and fell to ¥81.11 in afternoon New York trade (still above yesterday's close, a postwar high of ¥76.25).
The G7 is showing it won't tolerate a rapid surge in the yen... And it's forcing speculators to rethink their bullish yen positions. Speculators are betting the yen will appreciate as companies buy yen to repair Japan.
The currency intervention was also bullish for the markets... Japan's Nikkei index closed the day up 2.7% (though it's still down more than 10% for the week). True Wealth editor Steve Sjuggerud, who we quoted in Wednesday's Digest, is bullish on Japan. He dedicated his latest issue, due out today, to the opportunities in Japan.
Steve likes to buy markets once they go from "bad to less bad." And we had an initial move toward "less bad" in Japan today. Steve's thesis is simple, "People have given up on Japanese stocks, more so than any other developed country I have seen in my entire career." The worst-case scenario, Steve argues, is a large swath of Japanese land will be uninhabitable, but the business of the rest of Japan will go on. Japan stocks are record cheap. And Steve's "incredibly optimistic." He believes you can make "hundreds of percent" buying Japan today. To sign up for True Wealth, click here.
While the Japanese market got hammered... It was nothing like the carnage in uranium stocks. Uranium fuels nuclear reactors. And if Japan's reactors melt down, uranium stocks lose earnings power. During the crisis, we've been following Cameco (CCJ), the bellwether uranium stock. In Wednesday's Digest we wrote:
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The "ExxonMobil of uranium," Cameco, took a swan dive from the $40 level down to near $32. Many of the smaller companies in this space have lost 33%-50%. It's a washout in the nuclear-fuel business. |
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Just like Japanese stocks, this massive shakeout should lead to a terrific buying opportunity in uranium stocks. Nuclear power provides about 20% of U.S. electricity... And it factors heavily into China's and India's spectacular future energy demand. What's happening in Japan is terrible, but the world isn't going to suddenly shut down this vital energy source. The world is just too strapped for energy resources to turn its back on nuclear. |
On Thursday – your first opportunity to purchase Cameco after we published the above comments – the stock fell another 7.8%. If you held your nose and bought, you'd be sitting on a nice profit... Cameco's up more than 5%, to $29.50 today. It's still down 27% from its pre-crisis levels. We stand by our thesis... The world isn't giving up on nuclear energy.
Traditionally, you would expect the dollar to rally and gold to drop (as speculators were shaken from the position) during the Japan crisis. Take a look at the chart below... Since the earthquake hit Japan on March 11, gold is outperforming the dollar.
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An interesting factoid about one of Dan Ferris' World Dominators, Coca-Cola (KO): Diet Coke topped Pepsi cola for the first time last year to become the second-most popular drink in the country behind regular Coke. Now, Coca-Cola holds the top two spots in the U.S. Coca-Cola sold nearly 927 million cases of Diet Coke in 2010, besting Pepsi's 892 million.
Another World Dominator, Cisco Systems (CSCO), declared its first dividend in history today. The company will pay a $0.06-per-share (1.4%) quarterly dividend starting April 20. While this is Cisco's first dividend, it's not the only time the company has returned cash to shareholders. In the third quarter 2010, it spent $2.7 billion on share repurchases. Only five S&P 500 companies spent more (Hewlett-Packard, Wal-Mart, IBM, ExxonMobil, and Procter & Gamble). Since 2003, it's spent more than $65 billion on share repurchases.
Treating shareholders well is an important quality of World Dominators. Too often, greedy managements use funds to grow the business through questionable diversification strategies (often dubbed "deworsification"). Buying companies provides a tangible record of growth, which looks good at bonus time, though it often harms the business.
Today is your last chance to sign up for our newest advisory service, the S&A Grail Trader, at a generous discount. (Please note... We will never sell this service at this low price again). Our S&A Grail Trader uses a proprietary trading algorithm to pinpoint stocks and commodities poised for big "compression" and "divergence" moves. You can read the full story of how this powerful technology works in this "Best of the Digest" issue of our free e-letter, Growth Stock Wire. (Again, you have until midnight tonight to sign up for the S&A Grail Trader at the introductory subscription price.) Click here to learn more...
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New highs: Tejon Ranch (TRC) and Barnes & Noble (BKS, short).
One subscriber accuses us of laughing at Porter behind his back. I wonder if he's a former employee. Send us your feedback here... feedback@stansberryresearch.com.
"Porter, I know you can stand up to some of the readers that want to give you a beating because they are just so unhappy about what is going on in our Country. I commend you for being patient and understanding with some of the comments. I would beat you up today but I just can't find a good reason for it. As anyone knows that has been watching the news on Japan it has been very tragic. The entire world economy has suffered from the terrible loss of life and property.
"All this said I have to tell you that all of my investments were green today. I have only invested in stocks that you and Matt Badiali have recommend. I only started a few months ago so I don't have the two, three, four and hundred 500% percent etc. etc. increases in my stocks. Unfortunately as I mentioned I just started. I would not be investing if it were not for your and Matt's hard work and thorough research.
"When I read your analysis I always feel that there is no way I could have been as thorough. I have a full time job in commercial real estate and am very busy trying to save the real estate investments that we have spent the last 20 years developing, owning and managing. The one year subscriptions that you charge are the price of a dinner on Friday night. I look at it as one of the best investments I have made this year. Please notify me at least two months in advance if you or Matt get tired and decide to quit and lay in the sun in Florida. I will need some time to sell off the stocks that you have recommended. Thanks for your hard work." – Paid-up subscriber Paul Gamst
"Although I agree whole heartily with the accolades given to Porter from Robert Lunder, I'm quite certain Porter's ego didn't need stoking. As I read it, I couldn't help but to picture Porter's staff chuckling or mockingly bowing to the wise sage. I wonder how close my vision was to reality? Keep up all the FANTASTIC work. I can't remember how I found this precious gem of a company, I assume Google, but I'm glad I did." – Paid-up subscriber Les Wilmot
Goldsmith comment: Les, we would never...
Regards,
Sean Goldsmith
Baltimore, Maryland
March 18, 2011