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Tuesday, January 31, 2017

Forget Dow 20,000… This Indicator Tells the Real Story

By Justin Spittler

It finally happened. For the last six weeks, the Dow Jones Industrial Average has been bumping against a ceiling. Yesterday, it broke through. The Dow topped 20,000 for the first time ever. Most investors are excited about this. After all, 20,000 is a big, round number. It feels like a psychological win for the bulls.

But it’s not an invitation to dive into stocks…not yet, at least. We need to see if the Dow can hold this level.
If it closes the week above 20,000, stocks could keep rallying. If it doesn’t, nothing has really changed. It could even be a warning sign. Until then, sit tight. Don’t chase stocks higher…stick to your stop losses…and hold on to your gold.

Don’t lose sight of the big picture, either.…

Remember, U.S. stocks are still very risky:
➢ They’re expensive. The S&P 500 is trading at a cyclically adjusted price-to-earnings ratio (CAPE) of 28.4. That means large U.S. stocks are 70% more expensive than their historical average.
➢ We’re still in a profits recession. Profits for companies in the S&P 500 stopped growing in 2014.
➢ And Donald Trump is president of the United States. Trump could do wonders for the economy and stock market. But he could also unleash a major financial crisis. It's still too early to tell.

As you can see, "Dow 2,000" isn't necessarily a reason to celebrate. In fact, as we told you two weeks ago, there's something much more important you should be watching right now.

The bond market is flashing danger.…
The bond market is where companies borrow money. It’s the cornerstone of the global financial system.
It’s also bigger and more liquid than the stock market. This is why the bond market often signals danger long before it shows up in stocks.

The bond market started to unravel last summer.…
Just look at U.S. Treasury bonds. In July, the 10-year U.S. Treasury hit a record low of 1.37%. Since then, it’s nearly doubled to 2.55%. This is a serious red flag. You see, a bond’s yield rises when its price falls. In this case, yields skyrocketed because bond prices tanked. The same thing has happened in long term Treasury, municipal, and corporate bonds.

Bill Gross thinks bonds are entering a long-term bear market.…
Gross is one of the world’s top bond experts. He founded PIMCO, one of the world’s largest asset managers. He now runs a giant bond fund at Janus Capital. Two weeks ago, Gross said the bull market in bonds would come to an end when the 10-year yield tops 2.6%. Keep in mind, bonds have technically been in a bull market since the 1980s.

According to Gross, this number is far more important than Dow 20,000. And we’re only 50 basis points (0.5%) from hitting it. In other words, the nearly four-decade bull market in bonds could end any day now.
When it does, Gross says bonds will enter a secular bear market... meaning bonds could fall for years, even decades. This is why Casey Research founder Doug Casey has urged you to “sell all your bonds.”

If you haven’t already taken Doug’s advice, we encourage you to do so now.…
You should also take a good look at your other holdings. After all, problems in the bond market could soon spill over into the stock market. If this happens, utility stocks could be in big trouble. Utility companies provide electricity, gas, and water to our homes and businesses. They sell things we can’t live without. Because of this, most utility companies generate steady revenues. This helps them pay dependable dividends.

Many investors own utility stocks just for their dividends.…
That’s why a lot of people call them “bond proxies.” Utility stocks don’t just pay generous income like bonds, either. They also trade with bonds. You can see this in the chart below. It compares the performance of the Utilities Select Sector SPDR ETF (XLU) with the iShares 20+ Year Treasury Bond ETF (TLT). XLU holds 28 utility stocks. TLT holds long-term Treasury bonds. XLU has traded with TLT for the better part of the last year. Both funds crashed after the election, too. But XLU has since rebounded.




You might find this odd. After all, the two funds basically moved in lockstep until a couple months ago.
But there’s a perfectly good explanation for this.…

Utility stocks pay more than Treasury bonds.…
Right now, XLU yields 3.4%. TLT yields 2.6%. That might not sound like big deal. But those extra 80 basis points (0.8%) provide a margin of safety. You see, the annual inflation rate is currently running at about 2.1%. That means the U.S. dollar is losing 2.1% of its value every year.

That’s bad news for everyday Americans. It’s also bad for bondholders. It means investors who own TLT are earning a “real” return (its dividend yield minus inflation) of 0.5%. Meanwhile, you’d be earning a real return of 1.3% if you owned XLU. Of course, utility stocks should pay more than government bonds. They’re riskier, after all. Unlike the government, utility companies can’t print money whenever they want. If they run into financial problems, they could go out of business.

Today, investors don’t seem to mind taking on extra risk for more income. But that could soon change…

Inflation could skyrocket under Donald Trump.…
If you’ve been reading the Dispatch, you know why. For one, Trump wants to spend $1 trillion on infrastructure projects. While this could help the economy in the short run, the U.S. government will have to borrow money to fix the country’s decrepit roads, bridges, and power lines. This would likely produce a lot more inflation. If that happens, real returns could shrink even more. And that could trigger a selloff in utility stocks and other "bond proxies," like telecom and real estate stocks. In short, if you own these types of stocks just for their dividends, you might want to consider selling them now.

We recommend sticking to dividend-paying stocks that meet the following criteria.…
The company should be growing. If it isn’t, you probably own the stock just for its dividend. That’s a bad strategy right now. It should have a low payout ratio. A payout ratio can tell us if a company’s dividend is sustainable or not. A payout ratio above 100% means a company is paying out more in dividends than it earns in income. Avoid these companies whenever possible.

It shouldn’t depend on cheap credit. After the 2008 financial crisis, a lot of companies borrowed money at rock-bottom rates to pay out dividends. If rates keep rising, these companies could have a tough time paying those dividends. If you own stocks that check these boxes, your income stream should be in good shape for now.


Chart of the Day

“Trump Years” stocks are on a tear. We all know U.S. stocks took off after the election. But some stocks did better than others. Bank stocks spiked on hopes that Trump would deregulate the financial sector. Oil and gas stocks rallied because Trump is pro-energy. Industrial stocks have also surged since Election Day.

Industrial companies manufacture and distribute goods. They include construction companies and equipment makers. E.B. Tucker, editor of The Casey Report, thinks these companies will stay very busy while Trump rebuilds America’s hollowed out economy.

He’s so sure of it that he recommended four “Trump Years” stocks last month. One of those stocks is up 11% in just six weeks. Yesterday, it spiked 8% after the company crushed its fourth quarter earnings report.
The company announced higher sales, fatter profits, and lower taxes. It raised its guidance for the year. In other words, it expects to make a lot more money this year…now that Trump’s in charge.

You can learn about this company and E.B.’s other “Trump Years” stocks by signing up for The Casey Report. Click here to begin your free trial.




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Tuesday, January 24, 2017

Wall Street’s Smoking Gun….Why Stocks Get Weird on Fridays

What if I told you there was proof that Wall Street was manipulating the markets? Every Friday, they fraudulently shift Blue Chip stock prices to the tune of $9.1 billion. This isn’t a tin foil hat conspiracy either. It’s been reported in Bloomberg, Fortune and the NY Times.

If you’ve been in the market at all over the last few years, you’re likely a victim. Your wealth, and your trading performance HAVE been impacted by this phenomenon.

Do NOT place another trade until you’ve watched this short video....watch Get The Truth

Now what if that’s actually good news? Former hedge fund manager, Roger, has identified an opportunity in the scandal. It’s a unique “income trade” that pops up 7-8 times a month - which could have paid you…

$1,670 in 10 Days....$1,616 in 6 Days....And $1,475 in 4 Days.

And, you’d still get paid even if you have no idea which way stocks are going. Even if you couldn’t time the market with a crystal ball… even if you screwed up 100% of your trades.

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The Stock Market Club

Thursday, January 19, 2017

One Big, Fat, Ugly Bubble

By Nick Giambruno

The establishment is setting up Donald Trump. The mainstream media hates him. Hollywood hates him. The “Intellectual Yet Idiot” academia class hates him. The CIA hates him. So does the rest of the Deep State, or the permanently entrenched “national security” bureaucracy. They did everything possible to stop Trump from taking office. None of it worked. They fired all of their bullets, but he still wouldn’t go down.

Of course, the Deep State could still try to assassinate Trump. It’s obvious the possibility has crossed his mind. He’s taken the unusual step of supplementing his Secret Service protection with loyal private security.
The Deep State’s next move is to pin the coming stock market collapse on Trump. When people think “Greater Depression,” they’ll think “Donald Trump.” 

The economy has been on life support since the 2008 financial crisis. The Fed has pumped it up with unprecedented amounts of “stimulus.” This has created enormous distortions and misallocations of capital that need to be flushed. Think of the trillions of dollars in money printing programs—euphemistically called quantitative easing (QE) 1, 2, and 3.

Meanwhile, with zero and even negative interest rates in many countries, rates are the lowest they’ve been in 5,000 years of recorded human history. This is not hyperbole. We’re really in uncharted territory. (Interest rates were never lower than 6% in ancient Greece, and ranged from 4% to over 12% in ancient Rome.) The too big to fail banks are even bigger than they were in 2008. They have more derivatives, and they’re much more dangerous.

If the Deep State wants to trigger a stock market collapse on par with 1929, it just has to pull the plug on the extraordinary life support measures it’s used since the last crisis. It’s already baked in the cake. It’s just a matter of when they decide to trigger the controlled demolition. Donald Trump is the perfect fall guy. And there are signs the Deep State is already starting to get its revenge. The most important variable to watch is the Federal Reserve—the quintessential establishment institution.




Source: Ben Garrison

Even though most politicians, economists, and pundits in the mainstream media won’t admit it, central banks exist to help governments finance themselves, at the expense of the average man. It’s the hidden, but real, reason they exist. The Fed accommodated Obama—effectively financing his regime’s deficits by creating new currency units. I doubt they will do Trump the same favor. And Trump will likely run up enormous deficits. Don’t forget about the $1 trillion in stimulus spending he has planned. If the Fed doesn’t gobble up the debt used to finance Trump’s spending, it will only work to push up interest rates.

Interest Rates

Manipulating interest rates to near 5,000-year lows is a crucial part of the life-support system. Now the Fed is set to pull the plug and leave Trump holding the bag. In December 2015 the Fed raised interest rates for the first time in almost a decade, from 0% to a mere 0.25%. The Fed kept rates there until last month, when it raised them to 0.50%. It also announced it would accelerate rate hikes throughout 2017—three in total.

There’s a good chance the Fed will announce these rate hikes during the eight Federal Open Market Committee (FOMC) meetings it has scheduled in 2017.

2017 FOMC Meetings
February 1 July 26
  March 15 September 20
  May 3 November 1
  June 14 December 13

I think some of these rate hikes will be much bigger than the 0.25% most expect. They could pull a series of 0.50% rate hikes… or go even bigger. Anything greater than the normal 0.25% tempo would shock the market—and seem designed to hurt Trump.

The establishment will get its revenge on Trump. The Federal Reserve is its weapon of choice.

Trump seems aware of the situation. He recently said, “They’re keeping the rates down so that everything else doesn’t go down.” He’s also said that “We have a very false economy” and the stock market is a “big, fat, ugly bubble.” During the campaign, Trump called Fed Chair Janet Yellen “highly political.” He said the Fed should raise interest rates but won’t because of “political reasons.” (Raising rates before the election would have hurt Hillary Clinton.)

The Media

The mainstream media is another variable to watch. Paul Krugman, a New York Times economist—or, more accurately, witch doctor economist—has come out against Trump’s $1 trillion infrastructure stimulus. It’s bizarre because Krugman, a die-hard Keynesian, had previously never seen a “stimulus” program he didn’t like. Once, he even advocated faking a space-alien invasion to stimulate the economy. It shows that Krugman is not only a fool, but a hypocrite. This is a clue.

I bet the rest of the mainstream financial media—CNBC, Bloomberg, The Economist, etc.—will morph from bullish cheerleaders into pessimistic doom-and-gloomers after Trump takes office. Don’t expect them to find any “green shoots” after the market tanks on Trump’s watch. All this is why what happens after Trump’s inauguration could change everything… in sudden, unexpected ways. This is exactly why Doug Casey and I put together a time-sensitive video explaining how it could all go down.

You absolutely must see this urgent video before Trump’s inauguration in two days. Click here to watch it now.





The article One Big, Fat, Ugly Bubble was originally published at caseyresearch.com.


Thursday, January 12, 2017

Why Gold Could Soar Another 353%

By Justin Spittler

Gold is on the rise again. It’s climbed for two straight weeks, and it’s now up nearly 5% since December 15. Many precious metals investors couldn’t be happier about this. You see, gold stormed out of the gate last year. It had its strongest first quarter since 1986. By the end of June, it had risen 25%. Things were looking up. Then, the market changed course. Gold plunged 18% in just four months. Last month, it hit its lowest level since last February.

• The sharp pullback spooked precious metals investors….
But regular Dispatch readers knew that gold would rebound. After such an explosive start to 2016, it was only natural for gold to “take a breather.” We urged you to not lose sight of the big picture. As we often remind you, gold’s a safe-haven asset. Investors buy it when they’re worried about the economy, financial system, or politics. And right now, investors have plenty of reasons to be worried, even if some are still enjoying the “Trump Honeymoon” phase.

• Louis James thinks gold will keep rising….
Louis is our chief resource expert. He is the editor of International Speculator and Casey Resource Investor, our advisories dedicated to resource stocks with big upside. According to Louis, gold has struggled recently because investors expect interest rates to rise. They have good reason to think this, too. After all, the Federal Reserve just raised its key interest rate… but for only the second time since 2006. It also said that it plans to lift rates three more times this year. Conventional wisdom tells us that this is bad for gold. Since gold doesn’t pay interest like a bond, most investors don’t want to own it when rates are rising or are likely to rise.

• According to Louis, the market has already “priced in” higher interest rates….
This means gold shouldn’t fall if the Fed sticks to its plan and raises rates three more times this year. Of course, that’s a big “if.” Heading into last year, the Fed said it wanted to raise rates four times. But it only raised rates once last year, and it waited until the eleventh hour to pull the trigger. We wouldn’t be surprised if the Fed sits on its hands again. If that happens, investors will know something is very wrong with the economy. Many folks will start buying gold hand over fist.

• But that’s not the only reason Louis is bullish on gold.…
Last week, he gave his subscribers several reasons why gold should keep rising:
➢ Rumors of new gold curbs in India have not panned out.
➢ Fear of the fall of New Rome [the EU] is driving Europeans into [U.S.] dollars and gold.
➢ The escalation of the “other” Cold War with China increases uncertainty in global markets.
➢ Even Trump’s best ideas (cuts in taxes and regulations) will cause disruptions that will have to work through the economy before things can improve.
• Gold is incredibly cheap, too.…
Louis explains:
Gold needs to rise another US$900 or so to hit a new inflation-adjusted high. Given the trillions and trillions of new dollars, euros, yen, yuan, and so forth printed over the last 45 years, it should do much more than that.
Right now, gold is trading for about $1,180. In other words, it would have to climb about 75% to reach its previous inflation-adjusted high.
But Louis thinks gold could race well past that in the coming years:
Many analysts see the current market as analogous to the great gold bull of the 1970s, only bigger and longer. Adjusted for inflation, gold rose about 353% from its mid-1970s trough to its 1980 peak. If that pattern repeats itself, gold would have to rise from its December 2015 low to just above US$5,200 per ounce by October 2022.
If gold does anything close to what it did during the ’70s, precious metals investors could see explosive gains in the very near future. Just take a look at the chart below.




• Louis is so convinced that gold’s headed higher, he just made a giant bet on it…

He wrote last week:
I’m so sure, I put my money where my mouth is last week. As advised last month, I entered the market during the peak of Tax Loss Season. I’m not allowed to buy the same stocks I recommend (to avoid possible conflicts of interest), so I bought ETFs instead. In fact, I put about twice as much of my own cash into these proxies for gold stocks than I ever put into gold stocks before.
Louis also plans to buy more gold at the first chance he gets:
I think that 2016 was an overture for what’s ahead. I intend to profit from it. And I’m not worried about any fluctuations in the near term. If prices drop, I’ll hope to buy more. If prices rise, it’s off to the races.
• You, too, can make huge profits from rising gold prices.…
The key is to buy gold mining stocks. Gold miners are leveraged to the price of gold. This means gold doesn’t have to rise much for them to take off. During the 2000–2003 gold bull market, the average gold stock gained 602%. The best ones soared 1,000% or more. Of course, not every gold company is a winner. In fact, many gold stocks are total duds. That’s because gold mining is an incredibly difficult business. To protect your capital and make monster gains, you have to own the right gold stocks. Unfortunately, most folks have no clue what to look for in a gold stock.

That’s where we can help.…

You see, Louis is a true industry insider. He’s visited mining projects all around the world. He’s on a first name basis with many of the world’s top mining CEOs. And he understands the geology inside and out. Louis also has a proprietary system for finding the best gold stocks. Casey Research founder Doug Casey actually taught Louis this system… after he spent decades perfecting it.

You can learn more about Louis’ system by clicking here. As you’ll see, it’s delivered giant gains over and over again. Just don’t wait too long. Gold probably won’t stay cheap for much longer… meaning you’ll want to take action soon to have a shot at truly life changing gains. Click here to learn more.

Chart of the Day

Gold stocks are dirt cheap, too.

Today’s chart compares the NYSE Arca Gold BUGS Index (HUI), which tracks large gold stocks, with the price of gold. The lower the ratio, the cheaper gold stocks are relative to gold. According to this ratio, gold stocks are cheaper today than they ever were during the dot com bubble. They’re also cheaper than they ever were during the last housing bubble.

Keep in mind, stocks were trading near record highs during these periods. Most investors were extremely bullish. They owned too many mainstream stocks and not enough gold stocks. Right now, this key ratio is lower than it was during either period. This tells us that today could be one of the best times to buy gold stocks since the turn of the century.

If you would like to add gold stocks to your portfolio, we encourage you to sign up for International Speculator. As we said earlier, this is our publication dedicated to gold stocks with the most upside. 

Click here to begin your risk-free trial.



The article Why Gold Could Soar Another 353% was originally published at caseyresearch.com.




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