What to Buy When Everything Is Expensive

More stimulus and low rates... What to buy when everything is expensive... A pandemic success story... $20,000 gold and $100,000 bitcoin?... A health care boom is just starting... A taste of the good life...

The story continues...

As we write today, Congress is nearing some kind of stimulus package. This one is designed to pick up where the CARES Act left off...

Negotiations started six months ago, but since our dear representatives down I-95 in Washington are working against a hard deadline of midnight Friday, this time it might actually happen...

The details are still being talked about. But the point is, a reported $900 billion that didn't exist before could be hitting the economy soon... to go along with the trillions that already arrived this year alone. And signs point to more stimulus in early 2021...

In the meantime, in a building across the National Mall from Capitol Hill, the Federal Reserve economy puppeteers aren't making any moves yet, even as a COVID-19 vaccine has arrived...

This afternoon, Fed Chair Jerome Powell and friends said that the central bank is keeping its benchmark interest rate near zero. The Fed will also continue buying tens of billions of dollars' worth of assets every month, and it has no plans to stop yet.

As Stansberry NewsWire analyst Nick Koziol reported this afternoon...

The central bank left interest rates unchanged, as expected. But it also said it will continue to buy at least $80 billion worth of Treasurys every month, as well as at least $40 billion worth of mortgage-backed securities...

On the broader economy, the Fed said that the ongoing pandemic will continue to weigh on economic activity, employment, and inflation in the near term. In the medium term, the Fed said COVID-19 provides "considerable risks" to the economic outlook.

All in all, we hate to sound like a broken record. But it's what we would want to hear ourselves today...

For better or worse, when it comes to the major economic themes and state of the markets since the pandemic hit the U.S., the plot may have changed, but the story is still the same...

Stocks are still 'expensive'...

In fact, the stocks that make up the benchmark S&P 500 Index are on track to record their highest price-to-earnings ("P/E") ratio over the past 30 years...

According to Compound Capital Advisors' Charlie Bilello, the S&P 500's P/E ratio has moved from 20.6 at the start of 2020 to 30.3 today... That means stocks across the board have gotten about 50% more expensive this year.

But as we've seen, they can still get more expensive – especially when governments are encouraging higher stock prices with more stimulus and low interest rates. As we shared via our Director of Research Austin Root in Monday's Digest, stocks in general are looking more attractive than low-paying bonds.

To this point, back in September, we cited the insightful, anonymous blogger and Wall Street veteran John Street Capital on the cascade of effects of next-to-nothing yields. And the same idea applies today...

I used to say that QE turned your checking account into cash, the savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the venture market into the equity market and it gave rise to the crypto market.

It pushed everybody up the risk curve. People were chasing the highest risky assets because, given this liquidity, it's where they thought you would see the greatest return.

That's all we're doing [today], and we're doing it on steroids...

But if you're concerned about risk, don't go chasing all stocks or headlines... Great, capital-efficient companies are the ones to invest in. That's crystal clear today. Why?

This advice from our founder Porter Stansberry on the "only sure way to get rich in stocks" gets better with every "easy money" move we see from the Fed or any other entity or person...

When a company can maintain its prices and profit margins because of the value placed on its product by the purchaser rather than its production cost... that business can produce excess returns – returns that aren't explainable by rational economics.

Those, my friend, are exactly the kind of companies you want to own.

And... you especially want to own these stocks during inflationary periods. As things get more and more expensive in the coming years, capital-efficient companies will have to buy less than other companies, on average.

The result will be that inflation tends to lift their profits, rather than reduce them. In the inflationary crisis I see ahead, this is the single best way for stock investors to grow wealth rather than lose it.

Look at what coffee retailer Starbucks (SBUX) is doing...

This is a very timely example...

Because of the sustained demand for its (addictive) products, its well-run business, and its great balance sheet, Starbucks has been able to weather the COVID-19 pandemic better than most companies (and certainly better than independent coffee shops, which have been closing nationwide).

And it's well positioned for continued growth in the years ahead... During its every-other-year investor meeting last week, the company forecasted growth of more than 20% in its 2022 fiscal year. As Nick reported in the NewsWire...

The positive forecast is just an indication that demand for SBUX products didn't go away during the pandemic – it was just disrupted slightly. And the company has made moves to adapt to the COVID-19 environment, placing an added focus on drive-thru and online pickup orders.

Starbucks CEO Kevin Johnson was confident, saying, "People will be back in Starbucks stores at a rate far beyond what they were pre-pandemic." And he shared a lot of insight on the company's plans during the investor meeting.

More from the weekly The Street Sheet e-mail newsletter...

The pandemic has given Starbucks an opportunity to rethink its strategies around store layouts and locations. The pandemic revealed that Starbucks is perhaps too dependent on foot traffic in city centers. It has also highlighted the opportunities for growth using a drive-thru model.

Starbucks expects demand for drive-thru coffee to be strong even once people return to pre-pandemic routines, and it is responding accordingly. As part of this new strategy, the chain will close 1,050 Starbucks branches and will open 2,150 new shops in different locations.

But Starbucks is not giving up on its walk-in-and-smell-the-coffee ethos in favor of the drive-thru model. No... they're doubling down on it, expecting that when the pandemic is over, people will come back – and quick.

As Nick reported, Starbucks 'plans to continue expanding rapidly'...

The company said it wants to reach 55,000 locations by 2030, up from about 33,000 today. A lot of this expansion will be coming from China, where SBUX estimates annual store growth in the "low teens."

While a lot of other companies are facing bankruptcy, Starbucks is investing in technology that will allow employees to spend less time on inventory and administrative tasks and more time on customer service.

Related to this, Starbucks announced it will increase wages for its workers in the U.S. by at least 10%. And you can bet investors will be rewarded, too – like they were in October, when the company boosted its dividend by 10%. As Nick wrote in the NewsWire back then...

In a statement announcing the boosted payout, CEO Kevin Johnson said the move highlights "confidence in the strength of our recovery and the robustness of our long-term growth model." Johnson also said that the company continues to generate strong cash flow.

We shared the thesis for Starbucks back in May, when it was a "Stock of the Week." Shares are up roughly 20% so far this year, and they've surged around 80% since March's bottom.

This is exactly the kind of stock you want to own when everything is expensive.

In this climate, you also want to own 'hard assets'...

We've said this repeatedly throughout the year... Assets like gold, real estate, and even bitcoin have a place in a low-rate, easy-money, pandemic playbook. They can help you protect and grow your wealth.

With central banks flooding the market with more money supply, it's simple math. The value of a U.S. dollar goes down every time a new one is created... or sent directly to the American people via benefits, checks, or debit cards.

We talked about the tailwinds for real estate last week. The Fed can't print land and buildings, but it can make them more affordable. At the very least, if you haven't considered refinancing your home, that's a must-do today with mortgage interest rates at continued record lows.

Moving on to gold...

Gold Stock Analyst editor John Doody is on record predicting that the price of gold will surpass $3,000 per ounce... and others think it will go even higher. One of those is esteemed gold investor Pierre Lassonde, who says that $15,000 or 20,000 gold isn't out of the question.

He's talking about gold trading in "parity" with the Dow Jones Industrial Average...

Lassonde, who co-founded gold-royalty company Franco-Nevada (FNV) and was president of gold miner Newmont (NEM) among other accomplishments, recently shared why he thinks gold could go into the tens of thousands of dollars in an exclusive interview with our editor-at-large Daniela Cambone...

It's COVID, and it's the worldwide response of governments and the amount of debt that they've taken on and the amount of debt that is essentially being monetized is what is going to cause the ratio to go to 1:1.

COVID has done the same for social media and online shopping and everything else. It's compressed the timeline of adoption from five years to five months because of necessity.

If you look at government debt, all of a sudden COVID happens and what would have taken 10 years to issue $3 trillion or $5 trillion of debt all happened in one year.

This is essentially the root cause of the gold price going higher... the U.S. dollar is going to go lower because they're going to issue tons and tons of money.

DailyWealth Trader editors Ben Morris and Drew McConnell noted the performance of precious metals just this morning in their latest issue...

Gold and silver are up 22% and 38%, respectively, since the start of 2020. That's far better than the S&P 500 and Russell 2000, which are up 14% and 17%, respectively, so far this year. And the Nasdaq Composite is up just a little more than silver with a 40% gain.

So if you've been holding precious metals in your portfolio for the majority of 2020, you can hardly complain. This year's returns have been fantastic.

And second, the precious metals – especially silver – look like they're ready to make another big move higher any day now...

They went on to show what their technical indicators were showing and recommended a pair of new trades for interested subscribers. Gold, silver... check. Up next? Bitcoin...

What would you do if bitcoin hits $100,000?

On the bitcoin front, the cryptocurrency is becoming increasingly popular on Wall Street as a "store of value," just as we discussed could happen way back in May.

Tech companies and institutional investors have been piling into bitcoin over the past few months. And we just saw insurance company MassMutual do the same... It bought $100 million worth of bitcoin for its general investment account.

This move – done with the company's pension investments in mind – could ultimately send a wave of billions of dollars into bitcoin, according to investment bank JPMorgan Chase.

Already, bitcoin's price has gone higher than $20,000 for the first time ever. It's nearing a 200% year-to-date return.

Crypto Capital editor Eric Wade told his subscribers, who may have bought bitcoin when it was trading at much lower prices, that it's time to start making a plan for $100,000 bitcoin (en route to $1 million, as Eric has said before).

He addressed the topic during a great "philosophical discussion" with lead researcher Fred Marion last Friday that's available to their subscribers. Eric noted that bitcoin hitting triple digits in U.S. dollars could be very real sooner than a lot of folks think...

[Then] you've got a real decision to make... While we talk about the rules a lot, position, size, make a mental rule for yourself, right, of how will I behave if bitcoin's $50,000 or $70,000 or $100,000? Do I have something out there that means more to me than getting the perfect trade?

Do I have a note on my house? Pay off my practice, a boat, something I want to accumulate, that means more to me than the perfect trade. If you don't, you seek out that perfect trade. [But] if you do, that's what you do with it.

Was that too philosophical? That was a good segment. I like that. I like thinking about that. If you don't think about what you will do when bitcoin hits $100,000, you won't know what you'll do when bitcoin hits $100,000.

It was a great segment from Eric. If you're a subscriber, don't miss it. And if you're not a subscriber, we urge you to consider signing up for Crypto Capital today.

You won't find a better newsletter and service about all things crypto anywhere else.

We've got our eyes on more health care recommendations, too...

Retirement Millionaire editor Dr. David "Doc" Eifrig and his research team talked about this trend in their latest issue, published last Wednesday...

COVID-19 vaccines could be just the start of a likely health care boom in the years ahead.

It's pure demographics, for one... As Baby Boomers get older, there will be bigger needs in the industry. Doc shared this chart with his Retirement Millionaire subscribers...

We've talked about the aging of America here before. The number of Americans aged 65 and older will increase by nearly 20 million people in the next 10 years. The average working-age person requires about $7,000 per year in health care costs. The average person aged 65 and older requires about $19,000 per year.

No matter which way you slice it, health care spending is going to rise due to simple demographics.

Consultancy firm PwC forecasts that global health care spending will grow as high as 42% per person from 2018 to 2030. That's the demand argument.

But there's more...

The lingering "COVID conversation" that we expect in the years ahead will also only help to provide a headline-grabbing backdrop for any advances in science and technology going forward... things that were happening more in the shadows beforehand.

The post-pandemic world will remember COVID-19 very well...

It will remember that health matters and that scientific breakthroughs are worth pursuing. This factor can't be measured just yet, but it will be huge on our economy...

For starters, Doc recommended investing in a fantastic, under-the-radar health care company with a great balance sheet to his Retirement Millionaire subscribers.

This company isn't in the headlines as the developer of a new COVID-19 vaccine. But it has done as much for folks through the pandemic as any company, through its investments in "life sciences."

As Doc put it, if you've ever taken a high-school chemistry class, you probably saw this company's devices lining the room. But more important, it's also everywhere in professional laboratories today.

We really enjoyed Doc's most recent issue, as usual. He also gave his take on vaccine maker Moderna's (MRNA) shares today. If you don't already subscribe to Doc's Retirement Millionaire, you can find out more about how to get a trial subscription right here.

We hope you'll stay tuned here for more health care ideas in the coming weeks and months... Doc, Stansberry Venture Technology editor Dave Lashmet, Stansberry Innovations Report editor John Engel, and longtime health care analyst and Cannabis Capitalist editor Thomas Carroll all have their eyes on this area.

Finally, we'll end today with another great idea from Doc...

Last week, in lieu of our regular holiday get-together here in Baltimore, several of us at Stansberry Research gathered virtually for a celebratory wine tasting arranged by Doc.

For those unaware, in addition to writing financial newsletters and his various interests, Doc owns his own wine label, Eifrig Cellars. But we weren't tasting his wines on this night...

Instead, we enjoyed those of his longtime friend and winemaker Brenda Lynch. Brenda is a multidecade award winner and owner of Mutt Lynch Winery in Sonoma, California.

She hosted a great, enlightening, and delicious night... running through six different hand-picked wines that all have dog-themed names (like Rosie Rosé or MBF, for Man's Best Friend) and label art (like a bulldog), which is a trademark of her products.

As Doc shared over the weekend in his free Health & Wealth Bulletin newsletter, 13% of the winery's proceeds go to a hundred or so animal shelters around the U.S.

If you're looking for a gift or simply want to get your money's worth of great wine, you can get the same Stansberry Tasting Flight box of the six that we enjoyed by clicking right here. (The box includes a bottle of Chardonnay, Rosé, Merlot, Zinfandel, Cabernet Sauvignon, and a dessert wine for only $136.77.)

Happy holidays.

New 52-week highs (as of 12/15/20): ARK Fintech Innovation Fund (ARKF), ProShares Ultra Nasdaq Biotechnology Fund (BIB), BlackLine (BL), Siren Nasdaq NexGen Economy Fund (BLCN), Cognex (CGNX), Corteva (CTVA), Green Thumb Industries (GTBIF), Innovative Industrial Properties (IIPR), LCI Industries (LCII), Match Group (MTCH), OptimizeRx (OPRX), Palo Alto Networks (PANW), Flutter Entertainment (PDYPY), First Trust Cloud Computing Fund (SKYY), Square (SQ), Seagate Technology (STX), Trulieve Cannabis (TCNNF), The Trade Desk (TTD), Vanguard Inflation-Protected Securities Fund (VIPSX), Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP), and Vestas Wind Systems (VWDRY).

In today's mailbag, feedback on yesterday's Digest by Kim Iskyan on a potential Cold War 2.0. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Another excellent, timely piece. I appreciate very much the fact that Kim, and most of the other Stansberry writers for that matter, dig deeper than the hype and put current trends in an appropriate context. Rather than cramming a new recommendation into my inbox, I am given the opportunity to think. My Chinese friends concur with Kim's views, although I recognize that the very fact that they live in the U.S. is pertinent. Thanks for the seemingly daily gems from your stable of analysts/writers." – Paid-up subscriber E.L.

"I appreciate Kim's thorough and insightful article on the economic and political competition between the U.S. and China. I've been following this conflict for years, and noting my own feelings, positive and negative toward China, sometimes I think, 'Who do they think they are, claiming sovereignty over Taiwan or interning Uighers?' Then I think about American behavior and feelings of exceptionalism and the internment of Japanese-Americans and ongoing racial oppression of black and brown citizens. Who do we think we are?

"Our best chance for peaceful coexistence is to team up with Europe and others and compete on a level field, acting in concert to demand it where necessary. We should also rebuild our domestic manufacturing capabilities so we aren't so dependent on China or other exporters. I agree that investing in technology to keep our systems strong if not dominant is particularly important. We are just now putting PV solar on our roof and the panels come from China. Why can't we compete economically or technologically on this significant and timely product, given the cost of shipping, etc.?

"Kim, thanks for stirring things up and focusing on the big picture!" – Paid-up subscriber Ken S.

"The war is well underway. China is winning. The war is not conventional. It is more of a coup d'état. It has unfolded before our unseeing eyes." – Paid-up subscriber Cam G.

"Masterful analysis by Kim Iskyan regarding the possible direction of future relations between the world's superpowers. A well-reasoned thesis presented with a nice tie-in to past historical events and a modern twist based on the headlong race to control the technological agenda.

"But maybe there's another issue that needs to be considered – the impact of technology, especially AI, on everybody's life in the future. Maybe misapplied or out-of-control technology will be the common enemy we face. The Terminator is a stark warning that we should be mindful of." – Paid-up subscriber David B.

All the best,

Corey McLaughlin
Baltimore, Maryland
December 16, 2020