The Fed stands pat... Waiting for the 'dust' to clear... One of the market's few bright spots... These stocks could lead the next rally... An unusual opportunity in gold... A letter from Doc Eifrig...
The Federal Reserve decided not to raise interest rates this month...
According to the Wall Street Journal, one sentence in today's Fed statement explained why...
Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.
In other words, despite recent comments to the contrary, the Federal Reserve's Open Market Committee ("FOMC") is worried about the recent turmoil in China... and the big stock market decline here in the U.S.
But outside of that short-term concern, the Fed's outlook was little changed. Most Fed members still expect to raise rates before year-end... meaning the uncertainty over interest rates will continue for at least another month, until the FOMC's October meeting.
Following the announcement, we saw a bit of the volatility we were expecting...
U.S. stocks initially moved higher then lower, before turning higher again and rallying more than 1%. The benchmark S&P 500 then gave up all those gains to close near flat for the day. The U.S. dollar fell more than 1%, while U.S. Treasurys, gold, and silver all moved higher.
Don't be surprised to see some more volatility over the next few days as the market digests the news and the "dust" clears...
In the meantime, we'll share another bullish opportunity to keep on your radar today...
As longtime Digest readers know, our colleague and True Wealth editor Steve Sjuggerud has been bullish on housing for several years.
His thesis is simple: With housing prices and mortgage rates still low, homes are still incredibly affordable today. Plus, housing starts – the number of single-family homes getting built each year – are well below their long-term historical averages.
Steve has recommended several ways to profit from this trend, from purchasing a home directly to buying homebuilder stocks.
As we explained in the August 12 Digest, Steve isn't the only one bullish on housing. DailyWealth Trader co-editors Brian Hunt and Ben Morris are also optimistic on the future in U.S. housing.
They're also bullish on homebuilders and recommend the SPDR S&P Homebuilders Index Fund (XHB) – which holds a basket of related stocks including homebuilders (like D.R. Horton), home-furnishing stores (like Williams-Sonoma), and companies that sell building materials (like Home Depot).
And if the latest headlines are any indication, Stansberry Research analysts aren't the only ones who feel that way...
A new report yesterday showed homebuilder "confidence" is hitting new highs...
The National Association of Home Builders' ("NAHB") monthly sentiment index – known as the Housing Market Index ("HMI") – rose to a level of 62 this month. This is its highest level since 2005. The index first crossed 50 – the threshold between positive and negative sentiment – in July 2014.
In addition, the latest data show that U.S construction spending hit a seven-year high in July, according to a recent Wall Street Journal article. The article noted that construction spending during the first seven months of 2015 was up more than 9% compared with the same period last year.
A separate article in the Journal pointed out that in July, new-home sales were up 21% compared with July 2014 sales.
And these trends have been good news for investors...
While the benchmark S&P 500 index is down around 5% over the last month, XHB is down just 2.5%.
That outperformance isn't a "one-time" event, either...
XHB is up nearly 20% over the last year, while the S&P is flat. Plus, according to the Wall Street Journal, XHB "is on track for its first year of inflows since 2012," as folks invested nearly $300 million into the fund through July.
And last Friday, investment banks Bank of America Merrill Lynch and JPMorgan Chase upgraded several homebuilders. Bank of America upgraded D.R. Horton and Toll Brothers to a buy, while JPMorgan upgraded Toll Brothers and Pulte Group from sell to neutral. Those companies make up more than 10% of XHM's holdings.
Homebuilders have been showing great "relative strength." If the market does re-enter an uptrend, homebuilders could be one of the best bets to lead the market higher.
Switching gears a bit, our friends at Casey Research just alerted us to an unusual opportunity in the gold sector...
Longtime readers know we always recommend putting a small portion of your savings in physical gold and silver. We view these holdings as an alternative form of savings... as "real" money.
As we often say, when it comes to our physical gold and silver, we aren't looking to profit when prices soar, and we don't lose sleep when prices fall. (If you're new to the five reasons gold is considered "real" money, you can learn more in the Stansberry Research Education Center here.)
On the other hand, it can sometimes make sense to speculate – to make a calculated "bet" – on higher gold and silver prices, through vehicles like royalty companies or mining stocks.
This is because gold isn't just money. It's also a commodity...
Gold has held its value for thousands of years... The old adage is one ounce of gold has always bought a fine men's suit. No other form of money or currency in history can say the same.
But over shorter periods of time, gold can be subject to the same forces of supply and demand (and greed and pessimism) as other commodities.
It can go through big "busts"... like we've seen over the past several years. But like in other cyclical commodities, huge booms inevitably follow the huge busts.
This is what we expect to see over the next several years... and it's why we recommend building a position in high-quality gold stocks today.
But today's opportunity falls somewhere in between...
It's not a replacement for your physical, "hold in your hand" gold and silver bullion. But it's not like buying speculative gold stocks, either.
It is, however, extremely time-sensitive. Our friend E.B. Tucker, editor of The Casey Report, shares the details in a note below...
Central GoldTrust (GTU) is one of the largest gold trusts.
A gold trust is a convenient way to own gold. They trade just like stocks but have units instead of shares. One unit is supposed to represent an equivalent amount of gold. For instance, a $1,000 in investment in GTU should represent $1,000 worth of gold in the company's vault.
But that's not the case with GTU right now. Its unit price is 5.6% below the value of its gold holdings. One of GTU's top competitors thinks this is unacceptable...
Our friend Eric Sprott of the Sprott Physical Gold Trust (PHYS) has challenged the company to fix the problem... or to merge with his trust.
PHYS is a gold trust similar to GTU... but with one big difference. PHYS will deliver physical gold to investors, while GTU won't. That's why units of PHYS are always worth the same as the underlying gold... while units of GTU are worth less than the underlying gold.
This presents a potential opportunity to earn a 6% gain in minutes...
Tomorrow at 5 p.m. Eastern, unit holders of GTU will vote on whether to keep the current arrangement or to merge with Sprott instead. If Sprott is chosen, the discount on GTU units will disappear. They will suddenly be 5.6% more valuable.
E.B. regularly tells his readers about unique, profitable opportunities like this in The Casey Report.
Led by multimillionaire speculator and New York Times best-selling author Doug Casey, The Casey Report has been a "must read" around our office for years. We believe so strongly in the work produced by Doug and his team that we recently invested in his company.
Each month, Doug and E.B. share their top investment ideas and insights. You can access all their recommendations – including an unusual way to make money on the "digital revolution" in money – with a risk-free trial of The Casey Report. Click here for the details.
Finally, a quick note to end today's Digest...
Our colleague Dr. David "Doc" Eifrig and a handful of Stansberry Research subscribers recently returned from Rancho Santana – Agora founder Bill Bonner's gorgeous beachfront development on the Pacific coast of Nicaragua.
As we mentioned last month, "The Ranch" has been featured recently on the front page of the Wall Street Journal, the New York Times, the Financial Times, and several other popular publications as one of the world's next great "up-and-coming" travel and retirement destinations.
Doc has visited several times, but says his latest trip may have been the best yet. He asked us to pass along this note to interested readers...
Once again, the food and the ambience were spectacular. The shrimp, the fresh fish... the food is unbeatable anywhere I've ever been in the U.S. That is not an exaggeration.
Several folks joined me last month and we had a blast. We played golf at Guacalito de la Isla, a course designed by David McLay Kidd, the award-winning designer of Bandon Dunes and the Seventh Course at St. Andrews in Scotland. It was spectacular, with not a soul in site except for our own forecaddie.
The new hotel is as luxurious as any place I've ever been. The local infrastructure is in place and growing with the new international airport opening next month. And just like Porter recommends in his book America 2020, it hits many of the "check boxes" you need to feel safe to move some assets overseas...
Agora is developing the property. So you'll be joining folks that are committed to its success. Like-minded people abound. In fact, over a hundred folks like you and I have already purchased property here... including several of my colleagues you likely know by name. It's a real community.
I also like the ability to easily get a permanent visa and open a real bank account in Nicaragua, which Porter also recommends in his book.
Rancho Santana is one of only two places I can highly recommend... The other is in the northwest corner of Argentina, in wine country. A gorgeous, mountain valley floor, Grand Canyon-esque place that takes a day to get to.
Both are incredible... but only the Ranch is just a few short hours from the U.S. on the Pacific coast. My friend Marc Brown will be hosting another small group of potential investors in December. I urge any readers interested in protecting some assets overseas to consider visiting. I guarantee you won't regret it... In fact, every reader who joined me on our last trip has already decided to invest in property there or is seriously considering it. You can reach Marc at marcb@ranchosantana.com. Be sure to tell him Doc sent you.
New 52-week highs (as of 9/16/15): Activision Blizzard (ATVI), National Beverage (FIZZ), Inogen (INGN), and Constellation Brands (STZ).
In the mailbag, a new subscriber is confused about trailing stops. Send your question, comments, and criticisms to feedback@stansberryresearch.com.
"I was taking your advice on how to place an order for Junior Mining Company stocks. You're suggesting to place a limit order with a trailing stop loss of 50% based on the highest price. My brokerage firm Fidelity does not offer a trailing stop loss based on the highest price. My only options are Last, Bid, or Ask.
"Do you have a list of, or know of another discount brokerage firm that would allow me to place that type of order. I like the concept, it gives me a piece of mind that there is a trigger in place to sell when the time is right. Thank You." – Paid-up subscriber Bill B.
Brill comment: We're always happy to hear folks are using trailing stops. But it seems you've misunderstood...
Most brokerage firms will allow you to place a trailing stop order of some sort on your positions. But placing these orders in the market allows "market makers" – individuals and firms that facilitate buy and sell orders – to see where your stops are. That makes it easy for them to pick you off. It's like playing poker with your cards showing.
Instead, we recommend tracking your trailing stops privately... either through a service like TradeStops, in a computer spreadsheet, or even on paper if you prefer. You can learn more about our trailing stops recommendations right here.
Regards,
Justin Brill
Baltimore, Maryland
September 17, 2015
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