This is it...
This is it... The 'lions' are hunting again... More new lows for oil... These critical markets have turned lower...
Tonight, we start with a reminder...
By now, you've probably heard our warnings.
You know a period of vast credit default – or "the greatest legal transfer of wealth in history" as Porter has called it – is approaching.
And you know we've launched a new distressed-debt service to help our readers navigate (and profit from) the turmoil ahead.
But if you're still on the fence, time is running out. Your last chance to claim a charter subscription to Stansberry's Credit Opportunities ends tonight.
As Porter explained in yesterday's Digest...
If you don't know what's happening and you don't know what to do about it, you will almost surely be a victim in this coming crisis.
On the other hand... if you have access to our comprehensive research on the bond market (our analysis starts with almost 40,000 separate issues), there's no doubt in my mind that you will see the greatest investment opportunities of your life unfold. You'll be able to earn annual yields of between 10% and 25% AND make substantial capital gains of 15% to 50% (or more).
Don't go into 2016 without knowing what's happening in the bond market. The risks are too high. And the opportunities are too valuable.
If you've considered joining, we hope you'll take advantage of our 30-day risk-free guarantee and try it tonight. But again, you must act now... This offer will be taken offline at midnight.
Claim your charter subscription to Stansberry's Credit Opportunities (without having to watch a long promotional video) by clicking here.
Now, while we believe the biggest problems (and opportunities) will arise in the bond market, they won't be limited to bonds alone.
As we saw in August when the Dow Jones Industrial Average plunged more than 2,000 points, these problems matter to the stock market, too.
Regular readers know we've been tracking stress in the bond market with the iShares iBoxx High-Yield Corporate Bond Fund (HYG).
But high-yield bonds are just one of the "lions" we've been watching for signs of trouble. As Porter explained in the September 11 Digest...
The "lions" in the current correction have been the oil industry, the ongoing bear market in emerging-market stocks, and falling prices of speculative corporate debt. These downward trends are powerful. The shale-fracking fund (FRAK) is down almost 50% in the last year. High-yield bonds are down almost 10% over the last year – a massive move for bonds. Emerging-market stocks are down nearly 25% over the last year. These "lions" have, and will continue to have, a major influence on the U.S. stock market.
At the very least, before I become bullish on U.S. stocks, I want to see these "lions" – emerging-market stocks, U.S. oil companies, U.S. transports, and the high-yield corporate-bond market – stabilize. As long as these critical pieces of the global economy remain in significant downtrends, there's no way U.S. stocks can sustain a rebound...
The lions are still hunting. Don't be a zebra. Don't ignore these problems. Wait for some concrete signs of stability in the oil industry, emerging markets, corporate high-yield debt, and in the Dow Jones Transportation Average before you make any major investments in U.S. stocks.
Yesterday, we told you HYG hit a new four-year low.
Unfortunately, it's not the only "lion" that's plunging again...
As you can see from the following chart, FRAK is hitting new lows, too... In fact, it just hit a new all-time low yesterday...
And as you'd probably guess, the moves in FRAK are mirroring another big selloff in oil prices...
West Texas Intermediate ("WTI") crude oil – the U.S. benchmark for prices – hit a new seven-year low on Tuesday. WTI is now trading for less than $38 per barrel.
Brent crude oil – the international benchmark that usually trades at a premium to WTI – also fell near a seven-year low of less than $40 per barrel.
The latest wave of selling started Friday afternoon, following the latest biannual meeting of the Organization of the Petroleum Exporting Countries ("OPEC").
The Saudi-led group announced it has no plans to lower its production targets as some analysts had hoped. In fact, it's essentially abandoning its production targets altogether. From an article in the Wall Street Journal...
OPEC's decision underscored that the group is sticking to its year-old strategy of battling for market share rather than cutting production to force prices higher, as the cartel has done during past downturns. The group's production could rise further in 2016 if sanctions are lifted on Iran, allowing the country to increase its exports.
"OPEC will not and cannot do the balancing of the market," because its production accounts for less than half of global output, said Bjarne Schieldrop, chief commodities analyst at SEB Markets, in a note. "Any tiny risk that OPEC actually might do something during the next six months is completely off the table after Friday's meeting. With this risk out of the picture, the oil price declines further."
In other words, OPEC's game of "chicken" with U.S. shale producers will continue.
The last two "lions" – emerging markets and transportation stocks – have been relative bright spots.
But now, even that is changing...
Emerging markets – as represented by the iShares MSCI Emerging Markets Fund (EEM) – rallied more than 15% from late August to late October.
But shares have been falling since November and have given up nearly half those gains...
Transportation stocks have turned down, too...
The rally in the Dow Jones Transportation Average lasted until late last month, with the index gaining more than 10% from late August to late November.
But it has given up nearly all those gains in just the past couple weeks and is now just 2% from a new low...
In short, these "lions" are hunting again. It's not too late to prepare... but it may be soon. As Porter wrote last Friday...
Winter is coming, friends...
This is how a huge credit-default cycle begins. Hopefully, you will heed these warnings. Hopefully, you have raised cash (and will continue to do so). Hopefully, you'll join us in our strategies to take advantage of the opportunities that are already emerging in distressed credit.
New 52-week highs (as of 12/8/15): Activision Blizzard (ATVI), short position in iShares MSCI Canada Index Fund (EWC), National Beverage (FIZZ), McDonald's (MCD), and Public Storage (PSA).
A wide variety of reader e-mails in today's mailbag. Send your notes to feedback@stansberryresearch.com.
"Porter: My patience has been rewarded... bought both recommended distressed bonds today below your buy-up-to price. Thank you for your prescience." – Paid-up subscriber Dick L.
"Dear Porter, I don't know if anyone will read this but I thought I would reach out in any event. I love your Publication. I have made a lot of money on farm land and timber which were recommendations made by Dr. Sjuggerud many years ago. I remember when I met you and S in Florida and wrote my cheque for a life time membership. I have never regretted it. All the best to you and your team. Keep up the great work." – Paid-up subscriber Casey O'Byrne
"I understand how the corporate bond crisis will unfold and why it is unfolding right now. Can you clearly state what the effect will be up on the stock market? Or point me to the date of some earlier comments you made in this publication?" – Paid-up subscriber Fred S.
Brill comment: As we mentioned today, Porter's September 11 Digest explained some of the potential ramifications on the stock market. And you can find Porter's advice on how to prepare your portfolio for a bear market in the October 2 Digest.
Regards,
Justin Brill
Baltimore, Maryland
December 9, 2015
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