The Next Leg of the Gold Bull Market Is Approaching
The opioid crisis claims its first major bankruptcy... This could be the next 'domino' to fall... A legendary trader shares his favorite trade... The next leg of the gold bull market is approaching... Steve Sjuggerud: 'It's not un-American to face the truth'...
Regular Digest readers know the U.S. opioid crisis isn't just devastating lives...
It's also creating a huge financial burden as well.
U.S. taxpayers spend as much as $37 billion a year on health care, criminal justice, and family services related to opioid abuse. Add indirect costs like lost productivity of workers and absenteeism, and the total economic costs are likely closer to $80 billion a year.
And more and more, families, states, and local governments alike are turning to the courts for a solution. As we explained in the May 23 Digest...
To date, plaintiffs have brought around 2,000 lawsuits accusing various companies in the pharmaceutical supply chain of fueling the opioid epidemic.
This trend is already putting some of these companies under serious pressure. For example, just this month, drugmaker Insys Therapeutics (INSY) said it may file for bankruptcy due to legal costs. The company agreed to a $150 million settlement with the government last August to resolve claims that it paid doctors to prescribe its powerful opioid spray, Subsys.
This week, Insys officially became the first major corporate 'casualty' of this trend...
Just days after agreeing to pay another $225 million to settle claims against Subsys, the company filed for Chapter 11 bankruptcy protection on Monday.
Shares plunged more than 89% through Tuesday's close before rebounding today. As we write, they're down "just" 74% for the week.
Of course, as we noted last month, Stansberry's Big Trade editor Bill McGilton believes this trend is just beginning. He shared his thoughts on the news in a private note on Monday...
INSY is just the start. The legal fees and penalties are going to be too much for already heavily indebted opioid manufacturers to handle. Every company's debt structure and liability are different. There are more companies with so much debt that they can't handle the additional expenses. They will last as long as they can, but more bankruptcies are coming.
Which company could be next to go under?
Our colleague Nick Koziol highlighted one potential candidate on the Stansberry NewsWire earlier this week...
On Teva Pharmaceutical's (TEVA) most recent earnings call, CEO Kåre Schultz basically told plaintiffs to look elsewhere for large settlements.
"As you know, we have a lot of debt, so we don't have that much money," he said. "So I think [opioid plaintiffs will] have to find somebody else if they want big settlements. It won't be with us."
TEVA could be the next domino to fall if the plaintiffs do go after a large settlement, given its financial standing. TEVA, which has a market cap just under $11 billion, has $29 billion in debt. And only about $5 billion in EBITDA, giving it a debt-to-EBITDA ratio of almost 6x. Remember, we consider any company over 4x to be highly leveraged.
Switching gears, regular readers also know several of our analysts are bullish on gold today...
Our colleague Steve Sjuggerud turned bullish last summer for the first time in years. Dr. David "Doc" Eifrig made a brand-new gold recommendation a few months later. And Porter and the Stansberry's Investment Advisory team joined them a couple of months after that.
These weren't popular calls when they made them. In fact, despite gold's 13% rally since last August, most folks still have little interest in owning it today.
But if one legendary trader is correct, that may not be the case for long...
This morning, billionaire Paul Tudor Jones – who famously tripled his money during the 1987 stock market crash – called gold his "favorite trade for the next 12-24 months." He predicted that if gold can rise above $1,400 an ounce – roughly $70 an ounce higher than its current price – it could quickly "scream higher" to $1,700 or more.
Now, Jones pointed to the growing risk of additional Federal Reserve "easing" as a potential catalyst for this move. And for good reason... Despite a strong economy and a buoyant stock market, Wall Street analysts now believe the Fed could cut interest rates as many as three times this year.
But we suspect he's also looking at the same long-term chart we are...
As you can see above, the area between $1,350 and $1,400 has been strong "resistance" since 2013. And after the sharp rally off the lows in 2016, gold has been consolidating below this area ever since.
Yet, you can also see that the next area of potential resistance doesn't come into play until $1,600 or above. And gold's multiyear "breather" suggests it has stored up plenty of energy for a big move higher.
Jones is right... If gold can break through $1,400 an ounce, it could rally several hundred dollars in a hurry.
Finally, if you've been with us for long, you know Steve Sjuggerud is also bullish on China...
In particular, Steve has been at the forefront of sharing the incredible technological advancements happening on the other side of the world. Back in 2016, he first told his readers about the shift happening as China moved to a "cashless society."
This major change happened in just a few years. People went from paying for just about everything in cash to paying for just about everything with mobile apps.
Similar technology has been slow to catch on in the U.S. But as Steve has noted, adoption happens at a blistering pace in China.
However, Steve has learned that it's difficult to share stories like these...
Many Americans – including many of our readers – simply don't want to hear them. And we've received plenty of pointed feedback telling us so.
Now, it's no surprise that lots of folks have a hard time believing Steve's reports from his China trips. It's hard to understand the reality of what's happening. It's easier to paint the messenger as un-American.
But Steve isn't ready to back down. As he explained in a private e-mail this morning...
I hate having to say things like this. And I hate the dirty looks I get when I share the reality of today's China. But at some point, we've got to face the facts.
When it comes to technology, China's beating us. On-the-ground life in China is simpler and smoother thanks to the technological revolution happening right now.
It's not un-American to face the truth.
Steve was fired up today for a reason you might not expect...
Electric buses.
As Steve noted, buses appear to be an ideal opportunity to go electric. They run the same routes every day. And they tend to be some of the worst polluters, so the environmental benefit is even more pronounced.
Still, the U.S. has only a few hundred electric buses in operation. They're practically nonexistent.
That's not the case in China, though. Shenzhen – a city of 12.5 million residents – built the world's first fully electric bus fleet. According to a recent report, a staggering 16,000 electric buses operate in the city. And the taxi fleet is 99% electric, too. That's another 21,000 electric taxis driving around.
Is it un-American to say that this reality is far more advanced than what we see here in the U.S.?
Steve doesn't think so.
Again, he's been telling his readers about these kinds of changes for years. He's taken dozens of subscribers to China in recent years, as well. As he says, "taking someone to China is the best way to convert a China skeptic into a China believer."
Still, there are only so many people Steve can bus around Beijing. That's why we spent nearly a year and more than $1 million producing our first feature-length documentary, New Money.
Steve knew he couldn't take all of his readers to China. But he believed he could bring the amazing changes happening in China to his readers here in the U.S. That's exactly what he's done in New Money.
The movie is eye-opening. And if you haven't seen it yet, it could be what turns you from a China skeptic into a China believer. To learn more, click here.
New 52-week highs (as of 6/11/19): American Express (AXP), Blackstone (BX), Equity Commonwealth (EQC), Essex Property Trust (ESS), Invesco Value Municipal Income Trust (IIM), Nuveen Preferred Securities Income Fund (JPS), Legg Mason (LM), Procter & Gamble (PG), and Under Armour (UAA).
Have you watched New Money yet? We'd love to hear what you thought. As always, send your notes to feedback@stansberryresearch.com.
Regards,
Justin Brill
Baltimore, Maryland
June 12, 2019