October 14, 2013
- Shutdown, ceiling, blah, blah, blah: The 5 seeks out investing opportunity
- Chris Mayer describes how to collect 5% on your cash
- “Poised for a strong comeback:” Byron King names a stock to watch
- Neil George on where to go bargain-hunting for income
- China’s latest dollar warning… an intriguing lesson from WWII… converting savings to precious metals… and more!
“Hey, this Christmas party’s getting a little too quiet. I think it’s time we liven it up with my favorite Christmas gift…”
Your editor’s admittedly peculiar stream of consciousness drifted this morning to the classic TV commercial for Mr. Microphone. You remember that, right? “Hey, good-looking, we’ll be back to pick you up later!”
The “Christmas party” we’ve been having in The 5 the last two weeks has been, frankly, a drag. Obamacare dysfunction, the partial government shutdown, the debt ceiling theater, the Yellen nomination… It’s a wonder you even bother to open our daily missive anymore, although we’re grateful you do.
As we said last week, the rest of the country is moving on. Companies are competing, startups are innovating, investors are pursuing lucrative opportunities of the moment. So that’s what we’ll zero in on today.
For instance, we’re onto a near-term catalyst in America’s reborn energy patch that could deliver explosive short-term gains. We’re anticipating a government approval — hey, a lot of wheels in Washington are still turning — that could generate triple-digit gains in a 48-hour span. That’s what happened last time after one of these approvals — an unusual investment that shot up 193% in two days.
The opportunity is so juicy we’re organizing our first-ever live online briefing, led by an expert with 30 years of experience in the oil and gas industry. We’re doing it Thursday at 6:00 p.m. EDT. You can eavesdrop on this session absolutely free. We simply ask that you reserve your spot at this link.
“Decent interest rates on U.S. bank deposits used to be common,” observes our recovering banker Chris Mayer. “Now the rate you get on a bank account or a certificate of deposit is so small it might as well not exist.”
Chris recently uncovered a way to collect rates of 5% or better — dollar-denominated foreign deposits overseas.
If you’ve been following our virtual pages for a while, you know many foreign banks are slamming their doors in the faces of U.S. customers: IRS regulations are becoming too onerous. And even if you could open a foreign account, you open yourself up to currency fluctuations that might keep you up at night.
Enter an innovative fund that sets you up with dollar-denominated deposits in frontier markets. “A lot of frontier banks have a strong demand for dollars,” Kevin Virgil of the Pathfinder Capital recently explained to Chris. “And if you are a big client, they will negotiate rates.”
Pathfinder has launched the Frontier Liquidity Fund — pooling the resources of ordinary investors to become that proverbial “big client.” Check out the returns offered by sound banks in growing frontier markets on the right side of this chart. Then compare them with what you could get in the U.S. And compare them with the “official” U.S. inflation rate.
A typical money market account pays about 0.4% at present. “A yield of 5% is 12.5 times more than 0.4%,” Chris sums up. “The fund structure makes it easy to participate, instead of you trying to open accounts around the world yourself.” Note that depending on your means, the account minimum is on the steep side — $10,000.
[Ed. Note: It takes a lot less money to put yourself into another of Chris’ off-the-beaten path opportunities. And the potential payout is much more substantial — up to 500% more than traditional stocks. Check out one of the most compelling ways to “make money in your sleep” at this link.]
“Shares may be poised for a strong comeback,” says our natural resource specialist Byron King, eyeing a storied American company. “But you might have to wait awhile.”
Byron listened in last week on Alcoa’s quarterly conference call. “I’ve always liked aluminum,” says Byron. “It’s a very useful, versatile metal. It’s abundant in the Earth’s crust, but hard to obtain.”
It’s also a very competitive business. Alcoa’s down to about $8, after touching $18 two years ago. But the firm delivered good numbers last week. “Management has focused on restructuring the company away from primarily supplying commodity metal, while also adding value to every molecule of alloy that it ships.”
In other words, Alcoa these days is about much more than smelting aluminum and casting it into ingots. Alcoa’s business “ranges from super-high-strength alloy for military aircraft to lightweight drill pipe for the oil and gas industry,” Byron explains. That makes it less vulnerable to the price of aluminum itself.
“Alcoa has focused on what the company can control and done well even during otherwise hard times,” Byron sums up. “This company definitely ought to be on your radar screen because of its importance to global industry and as a barometer for market sentiment.” When the time comes to buy, subscribers to Outstanding Investments will be first to know.
“Investors Seek Bargains in Battered Munis,” trumpets today’s Wall Street Journal — almost as if someone at the paper were reading our income specialist Neil George’s recent comments to subscribers of Lifetime Income Report.
According to data from Lipper, investors have yanked $44 billion out of municipal bond funds this year. The sector has taken a hit from the bankruptcy of Detroit and the dicey finances of Puerto Rico’s government.
“The key to remember,” says Neil, “is that these are extreme cases and not the norm. The norm is that municipal bond issuers pay their bills. Even when a tiny fraction of them do go bust, muni holders typically get between 99-100 cents on the dollar.
“The bulk of muni selling has been overwhelmingly by individual investors. Meanwhile, professional investors not just inside the United States but around the world have been buying with both hands.”
And no wonder: “Flush with new tax flows and after some belt-tightening from the last financial crisis, state and local governments are actually in better shape right now. This year overall, taxes are up — particularly in sales and income tax receipts (up 6.2% and 4.4%, respectively). And labor costs have been cut by 33%. All of this puts munis in much better condition.”
And the tax-free angle is hard to beat. Look here for Neil’s favorite strategies.
OK, to the markets. Stocks got slammed on the open today since progress on the shutdown-debt ceiling appeared to stall over the weekend.
But after a few soothing sound bites from select senators, the Dow is now off only 45 points as we write, to 15,194. The S&P is less than two points below 1,700.
Treasury yields are backing up a bit, the 10-year at 2.69%.
Gold is trying to pick itself up after Friday’s slam-down in which someone dumped 2 million ounces in a single trade. At last check, the bid is up $7, to $1,280.
“U.S. fiscal failure warrants a de-Americanized world,” says the editorial at China’s official news agency Xinhua.
Xinhua is jumping on the dysfunction in Washington to call for a new international reserve currency to supplant the U.S. dollar. Not exactly new, as we pointed out only last Friday, but the timing is surely ripe.
“What may also be included as a key part of an effective reform,” it reads, “is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”
We’re hearing the voice of Currency Wars author Jim Rickards from our interview last summer, specifically about China’s epic gold accumulation: “Now when the international monetary system collapses and the world has to reconfigure the system, [China gets] a big seat at the table.”
It’s a scenario our macro strategist Dan Amoss believes is entirely credible: “A new global reserve currency would likely involve gold,” he says. “China is quietly accumulating gold in order to exert more influence over the future evolution of the global monetary system. Investors should do the same.”
In today’s 5 PRO, Dan features a way for U.S. investors to buy gold at a 7% discount in a brokerage account.If you don’t have PRO-level access, you can remedy that here.
You may want to thumb through the old, but very famous, WWII book, God Is My Co-Pilot, set in China during the early years of the war,” a reader writes after our previous China dollar musings on Friday.
“In this riveting story, the author tells of a time where an American Flying Tigers P-41 had crashed into a river. The Americans, with all their ingenuity, tried everything in their power to raise it — to no avail. After giving up in frustration, the Chinese began swimming down with bamboo sticks, one at a time, and placing them under the wings.
“The Americans looked on with a mixture of amusement and disdain… while the Chinese kept this up day after day after day. It took a while, but the plane did eventually surface, and it was towed to shore and salvaged.
“The Chinese are doing the exact same thing today with gold, while jettisoning their U.S. dollars. Nothing precipitous, just one bamboo stick at a time.”
The 5: The trick is in the timing. When exactly will China make its move and announce it has enough gold to have that “seat at the table” Jim Rickards speaks of?
We bandied about that question around the office only this morning. We’re in the process of formulating an answer… and a strategy. Stay tuned…
“I agree with Doug Casey,” a reader writes, “the most likely national debt scenario is default through inflation. We don’t know when, but it is the only logical course the Fed and the government will take. This government will not default in any other form.
“I am just a poor, average working-for-a-living man. I have always had an emergency fund in my savings account. I still struggle with the decision to convert this to gold and silver on the basis of liquidity, but I am considering it seriously.
“My thought is if I do this, yes, I could lose value, but I could lose more to inflation or a bank holiday or collapse of the system. Barring that, since the world has moved to digital transactions, I may be safer with physical gold and silver; they are liquid as long as the Internet is up and running and I can sell easily to the various online businesses.
“If it gets so bad that I cannot exchange my physical products online through the various brokers, how dire would one think the banking system would be? If I couldn’t make a transaction with a broker online to sell my holdings, I doubt that I would be able to make a withdrawal or pay my bills via my digital bank account.
“Like all of us I am a creature of normalcy and habits. It can’t happen here. But every day, I get closer to holding emergency funds in silver and gold and a bit of cash.”
The 5: We’re mulling over yet another strategy you might want to consider. We’re just starting to unpack it for a future issue of Apogee Advisory.
“Sixty percent of Americans would ‘fire’ Congress,” a reader reacts to something we spotted on Saturday — “100% turnover. Outstanding!!
“In November 2014, I will be the first to congratulate both of the sheeple who actually remember this period of sterling government achievement and cast an intelligent vote.”
The 5: Two? You’re generous. Of course, as we’ve long suggested, the wisest contingent will simply stay home.
“These poll results,” another reader chimes in, “have been pretty consistent over the last three elections, at least. In 2008, 2010 and 2012, several polls showed that if given the opportunity, 60%-plus of Americans would vote to toss out the entire Congress. What happens in November? NINETY FIVE PERCENT of them get re-elected.
“Is it any wonder that they hold us in such contempt?
“What we, the People, need is a sustained, grass-roots effort to get ourselves a whole new Congress. (Seriously, how much worse could we do?) It doesn’t matter who the official is, what committee they serve on, how much seniority they have or which party they belong to. They’re incumbents, they’re part of the problem and they need to go. Let’s begin to re-establish who works for whom.
“Thanks for letting me vent.”
The 5: Careful there. “Since World War II,” according to Congress.org, “the number of seats in Congress occupied by former congressional staffers has dramatically increased, with many in the positions once held by their former bosses.”
Indeed, Congressional Quarterly’s “Politics in America” found 75 former staffers were sitting representatives or senators in 2010. It’s like an infestation…
The 5 Min. Forecast
P.S. “Debt Ceiling Deal in Sight,” says a headline that just crossed our screen. The major indexes are almost back to breakeven for the day.
No, we’re not surprised either. It’s why we’re moving on with business like everyone else outside Washington, hosting our first-ever live online event this Thursday — the very day of the “default.”
If you want to be clued in to an explosive opportunity within the U.S. energy patch — something that could triple your money in a 48-hour span — you really don’t want to miss out. It doesn’t cost a thing to listen in to this live briefing Thursday at 6:00 p.m. EDT (with a replay at 9:00). Make sure you’ll have access by signing up at this link.