Phoenix Capital Research

The Central Bank intervention fiasco continues to unravel before our eyes.

Globally all Central Banks have kept an eye on the Bank of Japan, which announced the single largest QE program relative to its GDP in history. That one single QE program announced in April 2013 is equal to over 20% of Japan’s GDP.

Japan experienced two brief quarters of improved economic activity, before things turned south again. Turns out that printing trillions of dollars to buy bonds doesn’t create growth.

The latest example is Sony, the Japanese electronics giant which just announced a 70% COLLAPSE in its profit outlook. Sony’s CEO had stated previously that a weak Yen, caused by the Bank of Japan’s QE program was actually a “disadvantage.”

We now have concrete proof as Sony’s profits outlook evaporates.

This is the death knell of QE. We now know for a fact that the Fed and other Central Banks are aware that QE doesn’t create jobs nor does it improve the broader economy.

All that leaves is stocks… which have benefitted enormously from QE, with the S&P 500 rising to new record highs boosted by the Fed’s money printing.

However, ultimately stocks react to profits. And as Sony has proven, QE hurts rather than helps profits. Indeed, Sony’s stock is down over 1.5% on the earnings outlook drop. And it’s essentially breakeven since the Bank of Japan announced its massive QE program.

 

 

 

 

 

 

The writing is on the wall. QE is good for very little these days. If the Bank of Japan can spend over $1.4 TRILLION and corporate profits fall while stocks go nowhere, it’s the end of the line for Central Bank money printing.

Be aware, there are warning signs flashing throughout the financial system…

With that in mind, We’ve already urged Private Wealth Advisory clients to start prepping. We’ve opened three targeted trades to profit from the stock bubble bursting. As we write this, all of them are roaring higher.

We’ve helped thousands of investors manage their risk and profit from market collapses. During the EU Crisis we locked in 72 straight winning trades and not one loser, including gains of 18%, 28% and more.

All for the the small price of $179: the annual cost of a Private Wealth Advisory subscription.

To take action to prepare for what’s coming… and start taking steps to insure that when this bubble bursts you don’t lose your shirt.

Click Here Now!

Phoenix Capital Research

Historically, the Fed has claimed to have two mandates: maintaining stable prices and maximum employment.

However, the Dodd-Frank bill, which passed in 2010, unveiled a new, third mandate for the Fed.

Dodd-Frank instituted a third official mandate for the Fed, empowering it to regulate systemic risk and preserve financial stability. The Fed is now required to present its findings on risky, non-bank financial firms to the Financial Stability Oversight Council, which instructs the Fed on how to sanction those institutions.

http://www.cfr.org/international-finance/role-us-federal-reserve/p21020

Bernanke, obviously didn’t take this mandate to heart as his policies helped increase financial instability rather than reduce it.

With Janet Yellen’s Fed, however, the focus is different.

While I am not necessarily a fan of Yellen or her policies, I have to give her credit that she did perceive the housing bubble in advance (unlike Bernanke). In fact, she even advocated raising interest rates at the time.

On some level Yellen is aware that the Bernanke Fed’s policies have run counter to the third mandate implemented by the Dodd-Frank bill. Indeed, during a key hearing in November 2013 before she was appointed next Fed Chairman, Yellen openly stated that QE created “potential risks for financial stability.”

This theme of increased focus on financial stability continued into her instatement as Fed Chairman. Indeed, the entire final portion of Yellen’s first semi-annual monetary policy report to Congress focused on strengthening the financial system AKA increasing financial stability.

Yellen is evidently aware that stocks are bubbling. As Fed Chairman she cannot admit it (no Central Banker will ever say the markets are in a bubble), but the signs that she is aware of this are present.

Yellen is also aware on some level that Wall Street believes she will be even more dovish than Bernanke was. For this reason, her first Q& A as Fed Chairman saw her even mentioning raising interest rates in the future.

The financial media lambasted Yellen as a fool who is damaging the markets. But the reality is that Yellen is attempting to talk stocks down without bringing about a collapse.

We get additional evidence of this from the fact that the Fed’s stress tests failed Citibank. The Fed also requested Bank of America and Goldman Sachs to resubmit their capital plans.

I am not naïve enough to claim that Yellen wouldn’t do anything to hold the system together if the stuff hit the fan again a la 2008. But the market right now is not in 2008 mode. It is in 2006-2007 bubble mode. And Yellen’s Fed is working to get this under control without creating a panic.

If you need additional evidence that Yellen is taking a different route from Bernanke, consider the recent speech from NY Fed President and uber-dove Bill Dudley in which he admitted that one could argue…

… that Fed policy has been too accommodative for too long, creating risks for financial stability worldwide.

This is Bill Dudley we’re talking about. A man who has done nothing in the last five years but clamor for more QE.

Be aware, there are warning signs flashing throughout the financial system…

With that in mind, We’ve already urged Private Wealth Advisory clients to start prepping. We’ve opened three targeted trades to profit from the stock bubble bursting. As we write this, all of them are roaring higher.

We’ve helped thousands of investors manage their risk and profit from market collapses. During the EU Crisis we locked in 72 straight winning trades and not one loser, including gains of 18%, 28% and more.

All for the the small price of $179: the annual cost of a Private Wealth Advisory subscription.

To take action to prepare for what’s coming… and start taking steps to insure that when this bubble bursts you don’t lose your shirt.

Click Here Now!

Phoenix Capital Research
 

Central Bankers will never openly admit that they or their policies have failed. Moreover, they do not rush into sudden tightening (more on this in a moment). But one can begin to notice subtle changes in their language and actions that indicate they have noticed what’s happening in Japan (the failure of the BoJ’s “shock and awe” QE program to generate growth).

Nowhere is this more clear than at the US’s Federal Reserve or Fed. Indeed, starting in August 2013, various Fed officials began questioning the efficacy of QE.

First came the San Francisco Fed with a study revealing that QE generally doesn’t appear to generate economic growth:

Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation. Research suggests that the key reason these effects are limited is that bond market segmentation is small.

Moreover, the magnitude of LSAP effects depends greatly on expectations for interest rate policy, but those effects are weaker and more uncertain than conventional interest rate policy. This suggests that communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases.

http://www.frbsf.org/economic-research/publications/economic-letter/2013/august/large-scale-asset-purchase-stimulus-interest-rate/

A few months later, the former Fed official in charge of the Fed’s first round of QE, penned a Wall Street Journal article stating that QE was in fact a Wall Street bailout.

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time…

It wasn’t long before my old doubts resurfaced. Despite the Fed’s rhetoric, my program [QE] wasn’t helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn’t getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.

http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884

Around this time, the Fed began to taper QE first by $10 billion in December… and another $10 billion in January. By this point even uber-dove Fed President Bill Dudley (he formerly claimed inflation is low because iPads are getting cheaper) even admitted the following:

We don’t understand fully how large-scale asset purchase programs work to ease financial market conditions—is it the effect of the purchases on the portfolios of private investors, or alternatively is the major channel one of signaling?

http://www.ny.frb.org/newsevents/speeches/2014/dud140104.html

At this point, Ben Bernanke handed off the reins for Fed Chairman to Janet Yellen. Yellen has since continued Bernanke’s tapering projects, reducing the monthly QE spend from $65 billion to $55 billion.

The failure of the Bank of Japan’s massive QE program and the Fed’s decision to taper are not unrelated. Take a look at the timeline.

• April 2013: Japan announces a “shock and awe” QE program.
• August 2013: San Francisco Fed economists (where future Chairman of the Fed Janet Yellen is President) write a study showing QE is ineffective at generating economic growth.
• November 2013: Former Fed officials admit QE was not meant to help Main Street.
• December 2013: the Fed begins to taper its QE programs by $10 billion
• January 2014: Bernanke’s last FOMC as Fed Chairman, Fed announces another $10 billion taper
• March 2014: Janet Yellen takes over at the Fed and announces another $10 billion QE taper.

This represents a tectonic shift in the financial markets. It does not mean that Central Banks will never engage in QE again. But it does show that they are increasingly aware that QE is no longer the “be all, end all” for monetary policy.

Investors take note. One of the primary market props of the last five years is being removed. What happens when the markets finally catch on?

Be aware, there are warning signs flashing throughout the financial system…

With that in mind, We’ve already urged Private Wealth Advisory clients to start prepping. We’ve opened six targeted trades to profit from the stock bubble bursting.

We’ve helped thousands of investors manage their risk and profit from market collapses. During the EU Crisis we locked in 72 straight winning trades and not one loser, including gains of 18%, 28% and more.

All for the the small price of $179: the annual cost of a Private Wealth Advisory subscription.

To take action to prepare for what’s coming… and start taking steps to insure that when this bubble bursts you don’t lose your shirt.

Click Here Now!

Yours in Profits,

Phoenix Capital Research

 

The market leaders are collapsing.

Market tops usually feature something called rotation. This occurs when investors move out of former top performing companies or market leaders, into safer investments.

Because of this, one of the most critical items to observe is how market leaders are performing.

Right now they’re breaking down in a big way.

Twitter, which nearly doubled after its IPO in late 2013, has absolutely collapsed.

 

 

 

 

 

 

 

LinkedIn, another former market leader, has broken down, destroying its upward momentum.

 

 

 

 

 

 

 

Netflix is also in big trouble:

 

 

 

 

 

 

 

And the biotech sector as a whole (one of the top performing sectors in 2013) looks to be collapsing:

 

 

 

 

 

 

 

 

So while the market as a whole remains in a solid uptrend, these stocks are hinting that more serious danger lies ahead.

 

 

 

 

 

 

 

Be aware, there are warning signs flashing throughout the financial system…

With that in mind, We’ve already urged my Private Wealth Advisory clients to start prepping. We’ve opened six targeted trades to profit from the stock bubble bursting.

We’ve helped thousands of investors manage their risk and profit from market collapses. During the EU Crisis we locked in 72 straight winning trades and not one loser, including gains of 18%, 28% and more.

All for the the small price of $179: the annual cost of a Private Wealth Advisory subscription.

To take action to prepare for what’s coming… and start taking steps to insure that when this bubble bursts you don’t lose your shirt.

Click Here Now!

Yours in Profits,

Phoenix Capital Research

Good Morning Investors

The big story developing in the US markets regards the sudden crackdown by regulators, most notably the SEC and Justice Department, on High Frequency Trading or HFT.

For well over five years now, certain trading firms have been using high-speed computers to front-run orders from other investors.

In simple terms, the market exchanges, like the NYSE, would let these firms (for a price of course) see when someone put in a market order to buy or sell shares on the market.

The trading firm would then use super fast computer programs to buy or sell shares in front of that order, before turning around and selling the shares to the investor at a slightly higher price. The trading program may only make a $0.01 profit by doing this, but because they were doing it millions of times a day, they were making billions of Dollars per year.

At one point, this practice accounted for as much as 70% of all market volume. Put another way, 70% of all shares being traded on the market were not from investors actually placing buy and sell orders, but from computers front-running investors and each other.

These firms argued that they were providing liquidity to the markets (an outright lie). The reality is that they spent millions of dollars lobbying in Washington DC to make sure that the regulators didn’t crack down on them.

However, it would appear that things have finally hit a boiling point with author Michael Lewis publishing a book exposing HFT as the immoral and illegal activity it is.

Between this, and a number of high profile media appearances, Lewis has finally raised public awareness on the issue of HFT. And the public is not happy about it As a result both the SEC and Justice Department have opened investigations.

As far as stocks are concerned, we’ve seen a sharp drop in the companies that were highly favored by HFT firms.

Amazon, an HFT favorite, has imploded from its highs.

 

 

 

 

 

 

 

The same goes for Facebook:

 

 

 

 

 

 

 

This was always the problem with HFT: that these firms were pushing prices higher, through artificial pressure, not real buying power. Now that they’re moving out of the market, we’re seeing the consequences of this.

Indeed, the sharp drop in those companies favored by HFT firms predicted the recent collapse in the NASDAQ index as a whole:

 

 

 

 

 

 

 

Today, the NASDAQ is resting on its 100-day moving average. As you can see in the above chart, this line has help during every correction since 2013.

IF we see a breakdown here (meaning this line doesn’t hold), then the HFT crackdown could become a very serious issue for the markets. With these programs dominating trading so much, removing them from the market will have serious consequences for prices.

The whole situation is very reminiscent of the computer trading, which led to the 1987 Crash.

Could the markets crash again? We’ll see. But smart investors should be prepared for whatever may come.

On that note, if you’re seeking investment recommendations on how to position your portfolio, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day refund period. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

Click Here Now!

Best Regards

Phoenix Capital Research

 

 

 

The global Central Banks are relying increasing on verbal intervention.

The reasoning here is very simple: actual monetary policy is proving to have marginal effects. In the US, every new wave of QE has had less and less impact on the stocks.

I mention stocks specifically because it is now obvious even to the most ignorant commentator that QE was designed to aid Wall Street and few others (see recent admissions by both former and current Fed officials that QE was a “backdoor Wall Street bailout” and “gift intended to boost wealth.”

These admissions are creating a secondary issue, namely that QE is proving to become increasingly toxic from a political perspective. Indeed, even the mainstream media has picked up this theme.

This is not to say that QE will suddenly be dropped entirely (note that the Fed is tapering its programs gradually, the act of tapering simply reducing the pace of asset purchases rather than ceasing them altogether).

However, the point remains, that if promises of QE can produce the desired effects (higher asset prices) without eliciting the same level of political consequences, why bother even launching it?

The EU seems to have learned this lesson better than the US. European Central Bank (ECB) President Mario Draghi managed to pull its entire financial system from the brink of collapse in 2012 simply by promising to do “whatever it takes.”

The European markets erupted higher and haven’t looked back. The fact that the ECB would face a tangled web of politics and legal issues to actually back this claim up was irrelevant, investors knew the ECB wanted to act and so poured into the markets.

Two years later, Europe’s economy remains excruciatingly weak. Bank lending is virtually non-existent and the human cost is becoming outright horrific (over 25% of Europeans are now living in poverty).

What does the ECB do? It cannot force EU banks to lend. And it cannot force EU consumers to take out loans (or trust bankers for that matter). So the ECB leaks that it has “modeled” a €1 trillion QE campaign.

After all, verbal intervention worked well before. Why wouldn’t it now? If the goal is to lower yields further and boost asset prices, it’s a lot easier (and less legally problematic) to simply hint at something than to actually do it.

You can see the Yellen Fed playing off of this as well. Yellen’s first FOMC meeting saw her not only proving more hawkish than Wall Street expected… she actually went so far as to even hint at raising interest rates in the future.

The markets balked and Yellen did an about face, stating within a few weeks that the economy would need “extraordinary commitment… for some time” and that she believes that “view is widely shared” by her fellow policy makers.

Again, if the promise of help and liquidity can have the intended impact, why bother even announcing a new program?

Look for this theme to increase going forward both in Europe and elsewhere. Central Bankers are aware that their monetary efforts are failing to produce the allegedly intended results. Moreover, they know that these efforts are becoming increasingly unpopular with citizens.

So Central Bankers will be increasingly relying on verbal intervention. At least until the next asset price collapse occurs.

On that note, if you’re seeking investment recommendations along with laser pinpointed investment research, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day money back guarantee. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

Best Regards

Phoenix Capital Research

 

 

 

 

 

 

 

As noted previous articles… the global central banks have begun to realize that the success of their reflationary efforts has resulted in yet another speculative bubble in asset classes, specifically stocks and real estate.

Nowhere are these issues more evident today than in China.

Many commentators have spent a great deal of ink proclaiming China to be the next great economic power. While it is true China has seen dramatic improvements in its economy over the last 30 years, my view has been and remains that most of the “growth” of the China “miracle” is just a debt-fueled bubble built upon a loose foundation of Government corruption and fraud.

The reason 99% of investors fail to see this is because:

1)   They believe Chinese economic data as gospel.

2)   They fail to understand China’s economic policies from a political perspective.

Regarding #1, Chinese economic data is absurdly gimmicked to the point of making the US’s look clean in comparison (no small feat).  Indeed, back in 2007, no less than current First Vice Premiere of China, Li Keqiang, admitted to the US ambassador to China that ALL Chinese data, outside of electricity consumption, railroad cargo, and bank lending is for “reference only.”

Put another way, one of the top-level Chinese politicians admitted in private that China’s economic data is a total fiction. However, the reality is even worse than this admission. The truth is that even China’s electrical consumption data is dodgy at best as it has become a political tool for the Chinese Government to illustrate its “growth” much like China’s GDP.

The reason for this economic gimmicking pertains to #2 above: the political perspective of China’s economic data. As a communist regime, China’s government has one focus and one focus only. It’s not economic growth for growth’s sake, nor is it improving the quality of life for China’s population.

No, China’s Government is obsessed solely with remaining in power.

The reasoning for this is that a Government job remains the easiest, cushiest means of becoming wealthy in the People’s Republic. Case in point, last year Chinese officials are known to have stolen at a minimum the equivalent of $157 billion.

The CDIC report, which was obtained by the Economic Observer newspaper, suggested that nearly 10,000 luxury homes had been sold by government officials in Guangzhou and Shanghai alone last year.

It also claimed that an astonishing $1 trillion (£630 billion), equivalent to 40 per cent of Britain’s annual GDP, had been smuggled out of China illegally in 2012.

Economists and experts cast doubt on the figure, but said the flow of money from China was dramatic. Li Chengyan, a professor at Peking University, suggested that a total of roughly 10,000 officials had absconded from China with as much as £100 billion.

Source: the Telegraph

To put the above numbers in perspective, this theft is equal to roughly 2% of China’s total GDP. On a per official basis, we’re looking at roughly $15.7 million… not over the course of a decade but in ONE year.

In contrast, the average college graduate in China makes $2,500 per year. So you’re talking about an average theft equal to over 6,250 years’ worth of work for a college educated Chinese civilian.

A few other indications of just who is getting ahead in China:

• Immediate family members of Premiere Wen Jiabao control assets worth at least $2.7 billion.
• Gong Aiai, a deputy chief of a county bank, (not even a major bank) was found to have assets worth $160.2 million.
• Zhang Xiuting, an anticorruption official, is currently under investigation for amassing 19 properties along with his former wife.

In simple terms, many, if not most of the people who have gotten wealthy in China over the last few decades were corrupt Government officials or those close to them. In this light, you can see that China’s Governmental policies are all really aimed at one issue: keeping the Government in power by keeping the Chinese population content enough not to demand real change.

All other issues (economic growth, improved air quality, stimulus projects, etc.) are secondary to this issue. And the single biggest threat to Chinese officials’ abilities to live high on the hog is inflation.

Nearly 40% of China lives off of $2 a day. Your average college graduate in China makes just $2,500 per year. In an economy such as this, a rise in prices in costs of living can be devastating for the population.

Inflation is a stealth tax and one that is terrifying officials in China. Note the recent publicity campaigns to crack down on corruption and maintain price stability. Whenever things reach a boiling point, we could very well see a “China Spring” similar to the Arab Spring that shook the Middle East in late 2010/ early 2011.

On that note, if you’re seeking investment recommendations along with laser pinpointed investment research, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day money back guarantee. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

Click Here Now!

Best Regards

Phoenix Capital Research

 

 

 

Warren Buffett once noted, Gold doesn’t do anything “but look at you.” It doesn’t pay a dividend or produce cash flow.

However, the fact of the matter is that Gold has dramatically outperformed the stock market for the better part of 40 years.

I say 40 years because there is no point comparing Gold to stocks during periods in which Gold was pegged to world currencies. Most of the analysis I see comparing the benefits of owning Gold to stocks goes back to the early 20^th century.

However Gold was pegged to global currencies up until 1967. Stocks weren’t. Comparing the two during this time period is just bad analysis.

However, once the Gold peg officially ended with France dropping it in 1967, the precious metal has outperformed both the Dow and the S&P 500 by a massive margin.

See for yourself… the below chart is in normalized terms courtesy of Bill King’s The King Report.

According to King, Gold has risen 37.43 fold since 1967. That is more than twice the performance of the Dow over the same time period (18.45 fold). So much for the claim that stocks are a better investment than Gold long-term.

Indeed, once Gold was no longer pegged to world currencies there was only a single period in which stocks outperformed the precious metal. That period was from 1997-2000 during the height of the Tech Bubble (the single biggest stock market bubble in over 100 years).

In simple terms, as a long-term investment, Gold has been better than stocks.

Now, let’s compare Gold to the US Dollar.

Every asset in the financial system trades based on relative value. Ultimately, this value is denominated in US Dollars because the Dollar is the reserve currency of the world.

However, even the US Dollar itself trades based on relative value. Remember the Dollar is merely a sheet of linen and cotton that is printed by the Fed and is backed by the full faith and credit of the Unites States.

In this sense, the Dollar’s value is derived from the confidence investors that the US will honor its debts.

Moreover, the Dollar’s value today also derived from the Fed’s money printing. Indeed, a Dollar today, is worth only 5% of a Dollar’s value from the early 20^th century because the Fed has debased the currency.

As a result of this the world has adjusted to this change in relative “value” resulting in a Dollar buying less today than it did 100 years ago.

In this sense, Gold’s value is derived from investors’ faith in the Financial System (ultimately backstopped by the Dollar) and the Fed’s actions.

If you remove this confidence, then the entire system collapses as the reserve currency is no longer perceived has having value.

The problem with this setup however is that the US, like almost every other country in the world (I’m including China which is sporting a Debt to GDP ratio north of 200% if you account for its Shadow Banking liabilities), has made promises that it cannot possibly keep.

The US “officially” owes nearly $17 trillion in debt. However, if you include unfunded liabilities this amount surges to at least over $80 trillion and likely north of $100 trillion.

These are promises the US has made. And the US Dollar’s value is based on the belief that the US will honor these promises.

The US is not isolated in this regard. Indeed, the problem of unfunded liabilities exists throughout the world.

In the case of Europe, the situation is so bad that the average EU country would need to have an amount equal to over 400% of its GDP sitting in the bank, earning interest at the government’s borrowing rate, in order to fund its unfunded liabilities.

The same goes for Japan and even China where the shadow banking system has liabilities north of 200% of China’s GDP.

These are promises that cannot be kept. And when these promises are broken confidence in the system will be broken. This will inevitably lead to a period of currency collapse. After this, ultimately there will be a need to restore confidence in the system.

The only way to do this will be by backing currencies with Gold again (or a basket of items that includes Gold).

Given the limited amount of Gold in the world, (a little over 171,000 tons) and the enormous amount of US Dollars in the world, this would require a revaluation of Gold to north of $10,000. Dylan Grice formerly of Societe General lays this out beautifully in the below chart.

I cannot possibly predict when all of this would happen. All I can state with 100% certainty is that ALL fiat currencies throughout history have failed.

This failure has been based on a loss of confidence. And the only way to restore confidence is to limit the ability of Central Banks to print money.

This will inevitably lead to some form of a Gold backed currency. Gold has been used as currency for over 5,000 years. It will be considered currency again in the future. When it does, the price of Gold will be much higher (remember, Gold has risen over 34 fold in the last 40 years).

On that note, if you’re seeking investment recommendations along with laser pinpointed investment research, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day money back guarantee. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

Click Here Now!

Best Regards

Phoenix Capital Research

 

 

As we noted earlier this week, the Fed is growing increasingly concerned of a bubble forming in the financial markets. Previously we noted that Janet Yellen was concerned about another bubble forming.

Now St Louis Fed President James Bullard is saying the same thing.

St. Louis Federal Reserve Bank President James Bullard said Thursday that the key risk for U.S. economy would be a bubble forming as the central bank removes monetary-policy accommodations, while he also raised concerns about financial stability in the U.S. economy.

“I don’t see a major bubble right now, but one will form as we are trying to remove the accommodation in the years ahead, because that’s what exactly had happened in the 2004-2006 period,” Bullard told the Credit Suisse Asian Investment Conference in Hong Kong. “I do think that’s a key risk going forward,” he said.

Bullard related the risk to the situation in 2006, the housing prices had already started to peak at the same time as the central bank was in a tightening cycle. “Just because you are moving away accomodation doesn’t mean the risk of bubble forming is going away,” he said.

Bullard also emphasized that financial stability concerns are “looming large,” as policy makers are thinking about how to accommodate those concerns. He said macroprudential tools, which have been strengthened, can be used to address emerging bubbles. Bullard is a non-voting member of Federal Open Market Committee this year.

http://www.marketwatch.com/story/feds-bullard-financial-stability-concerns-loom-large-2014-03-26?mod=BreakingNewsMain&link=sfmw

Granted Bullard is a non-voting member, but his sentiments are beginning to echo throughout the Fed in general.

To whit, Bill Dudley, who is Fed President of the NY Fed and possibly the single biggest dove at the Fed, made a speech yesterday. Instead of issuing the usual “the Fed should print more money mantra,” he actually commented:

In my view, the fact that our large scale asset purchase programs affect the size of term risk premia globally is important.  This set of monetary policies affects financial asset prices in a different way compared to changes in short-term interest rates, and we should be humble about what we claim about understanding the importance of this distinction…  There is, of course, the argument that Fed policy has been too accommodative for too long, creating risks for financial stability worldwide.

http://www.newyorkfed.org/newsevents/speeches/2014/dud140327.html

Bill Dudley is never going to say that the Fed has made mistakes or created bubbles. So the fact that his comments indicate that he is thinking about financial stability is highly significant.

These kinds of changes in Fed policy are never blatant. You have to dig deep to find the hints that are being dropped. We’re doing that, and we’re already aligning our investors’ portfolios to accommodate the coming changes.

On that note, if you’re seeking investment recommendations along with laser pinpointed investment research, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day money back guarantee. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

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Best Regards

Phoenix Capital Research

 

Many commentators witnessed the first Q&A session with Janet Yellen as a disaster.

We don’t see it that way at all.

Yellen is widely believed to be a super dove at the Fed. This is largely due to her being a firm advocate for QE in the past few years.

However, Yellen is at least intelligent enough to know when the markets are out of control (something neither Bernanke nor Greenspan could do). To whit, Yellen publicly stated that housing was in a bubble in 2005. At the time she suggested deflating it (but was concerned about the deflation being too intense).

So, regardless of her various flaws as a forecaster and economist, Yellen has shown herself capable of:

1)   Identify bubbles.
2)   Calling for action for rein them in.

With that in mind, Yellen’s decision to continue tapering QE indicates that she is aware of the fact the markets are getting out of control again or are approaching a bubble.

This is further confirmed this by her decision to drop the 6.5% unemployment threshold as well as her suggestion that interest rate hikes could come as soon as six months after QE ends this coming December.

In simple terms, Yellen is alerting Wall Street that she will not be the second coming of Bernanke (at least for now) and that she is going to be removing the punchbowl.

The markets typically take a while to register this. The fact that last week was a quadruple witching options expiration helped hold things together. But now that options expiration is over, we’re running out of reasons for the markets to hold up.

Moreover, we’ve recently seen a number of high profile investors (Icahn, Grantham) warn that the markets are overvalued and primed for a sharp drop.

Thus we find the following:

1)   Yellen is moving to rein in the markets.
2)   Investment legends are warning of a potential drop in asset prices.
3)   Corporate profits falling.

This environment is ripe for a market pullback. Smart investors should take this opportunity to prepare for it.

On that note, if you’re seeking investment recommendations along with laser pinpointed investment research, you should check out our paid monthly newsletter Private Wealth Advisory.

Private Wealth Advisory is a monthly investment advisory that outlines the market action and shows you how to profit from what’s to come. On that note, we currently are sitting on over 17 winners in our Private Wealth Advisory portfolio, with gains as large as 18%, 21%, even 33%… all opened in the last year.

Every Private Wealth Advisory subscription comes with a iron clad 90 day money back guarantee. So if you find Private Wealth Advisory is not for you at any point in the next three months, simply drop us a line and we’ll issue a full refund.

The reports you download and investment ideas you get between now and then are yours to keep.

To subscribe now to Private Wealth Advisory for just $179 (a 40% discount from the normal market price of $300)…

Click Here Now!

Best Regards

Phoenix Capital Research

A growing concern for the global economy is inflation.

We’ve recently detailed this issue for the US economy earlier this week.

Global Central Banks, concerned with a potential deflationary collapse, have allowed inflation to seep into the financial system. In developed nations like the US, this puts a squeeze on consumers. But in emerging markets like China, inflation is outright disastrous.

Nearly 40% of China lives off of $2 a day. Your average college graduate in China makes just $2,500 per year. In an economy such as this, a rise in prices in costs of living can be devastating for the population.

Why are we not seeing this in the Chinese stock market?

In China, the banking monetary mechanism tends to funnel cash directly into the economy, rather than stocks (note that bank lending remains anemic in the US, while the stock market roars higher).

Indeed, China’s shadow banking (financial transactions outside of formal banks) has expanded to over 200% of China’s GDP or well north of $18 trillion in dollar terms.

This situation favors the well-connected Chinese political elite and lends itself to corruption on an epic scale.

Consider the following:

1)   In 2010 alone, 146,000 cases of corruption were launched in China (that’s 400 PER DAY).

2)   Between 1995 and 2008, it’s estimated that between 16,000-18,000 Chinese officials fled China taking 800 BILLION RMB (roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.

3)   It’s believed that $100 billion in corrupt money fled China through Government officials in 2012 alone.

Corrupt officials favor real estate as a means of acquiring assets because they can put properties in relatives’ names. Between this and the fact that stock investing has yet to become a cultural phenomenon in China as it is in the US, China’s stock market has languished while its real estate market has boomed.

However, the fact that so much “funny money” has moved into the Chinese economy via so many shadowy conduits makes the Chinese economy a potential inflationary nightmare.

The “official” Chinese inflation data won’t show this, but you can see the clear signs:

1)   Wage protests have become commonplace in China (a clear sign that the cost of living has outpaced wage growth).

2)   Wage increases have grown to the point than numerous US factories have begun moving their manufacturing bases back to the US (the profit differential is no longer big enough that it’s worth the expenses in shipping).

3)   China’s Government has made an official show of clamping down on inflation.

Inflation is already present in the financial system. The signs are there if you know where to look. The question now is how the markets will adjust as it spreads.

If you’re looking for specific investment ideas on how to play the markets, we highly recommend you look into our monthly investment newsletter Private Wealth Advisory.

Written by our Chief Market Strategist, Graham Summers, Private Wealth Advisory focuses on finding “contrarian” investments that will show investors large returns.

Case in point: of the  25 positions currently open in our portfolio, 17 of them are profitable with gains of 20%, 21%, 28%, and even 31%.

Graham has been showing investors how to outperform the markets for years. And he can do the same for you with Private Wealth Advisory… for the price of just $179 per year.

That includes:

1. 12 issues of Private Wealth Advisory delivered to your inbox every month.
2. 5 unique an hard-hitting Special Reports, outlining investment ideas you won’t hear anywhere else.
3. Real time trade alerts as needed.

All for just $179.

To sign up for Private Wealth Advisory and start putting your capital to work…

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Best Regards

Phoenix Capital Research

 

 

The US today is facing a serious issue of stagflation.

Stagflation is an economic term for a weak economy with higher than usual inflation. This is what crippled the 1970s. And it looks like we might be in for another similar period.

Let’s first consider the economic weakness, the “stag” in the stagflation term.

The US economy is weaker than most know, largely because the official economic data is massaged to make things look better than they really are.

How do you massage economic data?

Let’s take jobs for instance.

According to the “official numbers” the US economy added 113,000 jobs in January and another 175,000 in February. So, one could argue the US has added nearly 300,000 new jobs to its economy in the first two months of 2014.

The problem with this is that other metrics negate this alleged growth. The Wall Street Journal notes that the average hours worked in the US economy FELL by 3/10ths of an hour in the last six months.

When you account for this, you will find that in actual terms, the US has effectively LOST the equivalent of 100,000 jobs since September 2013.

Put another way, the US seems to be adding jobs to its economy, but given that on average workers are working less, the economic output in the US has been that of LOSING 100,000 jobs in the last six months.

One can find other similar issues with the US’s GDP numbers, alleged manufacturing renaissance and other key economic metrics.  And all of these issues point to our economy being WEAKER than the headline numbers claim.

Indeed, perhaps the most glaring issues in our GDP numbers relates the CPI or Consumer Price Index, which measures the official inflation numbers in the US (the “flation” portion of stagflation).

The official CPI measure for the US claims that inflation has risen 1.6% in the last 12 months.

This is rather extraordinary given that food, energy, housing, and just about every other item consumers need has risen in price significantly more than this Indeed, if you remove the accounting hocus pocus from the “official” inflation measures, you’d find that inflation today is over 5%.

So we have an economy that is weaker than the headline numbers claim with inflation that is higher than the headline numbers claim.

That is STAGFLATION. And given that the Fed is behind the curve on it, it’s only going to get worse before it gets better.

Best Regards

Phoenix Capital Research

 

Yesterday, we warned that the Fed was playing a dangerous game with inflation.

Today, we want to take note that the Fed is in fact just one of the Central Banks doing this.

Indeed, in Japan inflation has already begun to take off, driven by the Bank of Japan’s $1.4 trillion QE program.

Bloomberg notes that inflation has weakened the yen by 6.8% in the past 12 months… and the cost of living in Japan is now at a five year high.

We’ve highlighted the critical parts in the below article for your review.

The misery index, which adds the jobless rate to the level of inflation, will climb to 7 percentage points in the three months starting April 1 when Japan raises its sales levy to 8 percent from 5 percent, based on the median estimates of economists in Bloomberg News surveys of unemployment and consumer prices. That would be the highest level for the measure since June 1981 when Japan was emerging out of depression after the oil shocks in the 1970s.

Bank of Japan monetary stimulus designed to spur economic growth and achieve 2 percent inflation has weakened the yen by 6.8 percent in the past 12 months, eroding the value of wages to a record low. Abe, the son of an ex-foreign minister who grew up in a house with servants, is under fire from the opposition party after the cost of living surged to a five-year high.

http://www.bloomberg.com/news/2014-03-11/misery-index-rising-to-33-year-high-on-abenomics-japan-credit.html

Japan’s Prime Minister ran on a platform of creating inflation to drive growth. He’s now finding out that inflation and growth do not go hand in hand (inflation actually eats into growth by debasing the currency).

This is a real problem for Japan… and the rest of the world. Global Central Banks have printed over $10 trillion in the last five years. This money is seeping into the financial system, pushing up the cost of living everywhere.

In Japan, it’s pushed the misery index to a 33 year high. Who knows what it will do for the rest of us.

Phoenix Capital Research

The Fed is Playing a Dangerous Game With Inflation

In the last few months, something major has begun.

That something is inflation.

Regardless of what the CPI inflation measure tells you, the core items that affect most consumers’ pockets are healthcare, housing (rental or home prices), and food.

All of these are rising in price.

Take a stroll down the food aisles at the grocery store…Turkey has risen 34% year over year from its January 2013 price. Boneless chicken breasts are up 11%. Grapefruits are up 13%. Strawberries are up 39%. Spaghetti and macaronic is up 8.4%.

As far as housing goes, prices are beginning to move sharply upwards. The homeowners equivalent rent index rose 2.5% from its January 2013 levels. This is a sharper increase from the 2% year over year changes of 2011 and 2012.

Healthcare costs are rising sharply as well.

And yet, despite this, the Fed believes that inflation is too low.

Fed optimistic on growth, wary of bubbles
Yellen and her supporters are optimistic, but believe the economy has a long way to go

New Fed Chairwoman Janet Yellen and her core supporters on the Fed’s policy committee “are optimistic the economy is on the mend, but believe it has a long way to go,” said Jim Glassman, economist at J.P. Morgan Chase.

This core majority on the Fed don’t think the unemployment rate is telling the whole story on the economy.

They see inflation as running too low, signaling “the economy is not there,” Glassman said.

http://www.marketwatch.com/story/fed-optimistic-on-growth-wary-of-bubbles-2014-02-28?mod=latestnewssocialflow&link=sfmw

Fed’s Evans Is Willing to Risk Higher Inflation to Boost Hiring
Federal Reserve Bank of Chicago President Charles Evans said Friday the central bank should be willing to allow inflation to go over its 2% target if that will help the economy get back on track more quickly.

“We need to repeatedly state clearly that our 2% objective is not a ceiling for inflation,” Mr. Evans said in the text of a speech.

http://blogs.wsj.com/economics/2014/02/28/feds-evans-is-willing-to-risk-higher-inflation-to-boost-hiring/

The Fed is playing a very dangerous game here.

It was way behind the curve on deflation and economic weakness going into the crash of 2008. Today, it continues to worry about deflation when the clear signs show that inflation is already on the rise.

As anyone who remembers the 1970s can tell you, once inflation hits, it has a bad tendency to become a REAL problem before the Fed acts.

Investors should take note now. Inflation began to appear in early 2014. Given that the Fed is proclaiming that inflation is too low, it’s only going to get worse.

Be warned!

For a FREE Special Report on how to protect your portfolio from inflation, swing by
www.gainspainscapital.com

Best Regards
Phoenix Capital Research

We find it truly extraordinary that anyone is surprised the financial system is under duress again.

After all, what have the Central Banks accomplished in the last five years?

1)   Did they clear out the bad debts that caused the 2008 collapse? NOPE

2)   Did they implement structural reforms to insure another 2008 didn’t happen? NOPE

3)   Did they punish fraud or corruption in any way to insure that the system was clean? NOPE

So what did they do?

They cut interest rates over 500 times and funneled over $10 trillion into the financial system, over 98% of which went to the very players (key banks) who nearly blew up the world in 2008.

And people are actually surprised that the system is back in trouble again? Would you be surprised if giving another shot of heroin to a drug addict who was in a coma didn’t bring him to health?

Honestly, did anyone think this would really work? I know that the connected elites loved it because the whole process allowed them to hand off their garbage investments to the public while leveraging up to acquire more assets via the Fed’s cheap money… but what about those who DON’T work for a top 20 global financial institutions? Did anyone actually believe this would work?

So here we are today, Europe’s already insolvent banks are now potentially on the hook for $3 trillion in Emerging Market investments.

When your entire banking system is leveraged at 26-to-1 it really doesn’t matter who you lend to… you’re bust. But in this case, the bad emerging market investments are just the icing on the rotten cake that is Europe’s banking balance sheets.

Hopefully Mario Draghi can “promise” something again and the whole system will hold together. After all, THAT and Bernanke’s decision to engage in more and more QE (despite NO evidence that QE benefits the economy) are what brought us back from the brink in June 2012… maybe Janet Yellen and Mario Draghi can repeat this.

Then of course there’s China… which has created the single biggest credit bubble relative to GDP in history. Nevermind, that they literally blow up buildings to build new ones to pad their GDP numbers… China is a miracle and its economy is on the verge of becoming another US.

The world believes China can become more driven by consumers… though the data shows consumer spending has grown by 9% a year for 30 years there… so hoping that things are going to erupt higher there is a little misguided.

And of course there’s the US, which is STILL printing $65 billion per month despite two QE tapers… which folks claim were terrible for the world (how exactly is printing $65 billion per month five years into an alleged recovery, a good thing? Doesn’t that NEGATE the entire claim of a recovery at all?).

You can build a house on a rotten foundation (bad debt, fraud, corruption) and it will stand for a while. But eventually it will collapse.

This will again happen with the markets. The only difference is that this time around, the Central banks have already spent most if not ALL of their ammo propping up the system.

If you’re looking for actionable investment strategies on playing the markets, take a look at my monthly investment newsletter, Private Wealth Advisory.

Published on the third Wednesday of every month after the market closes, Private Wealth Advisory, shows individual investors how to beat the market with well-timed unique investments.

To whit Private Wealth Advisory is the only newsletter to have shown investors 72 straight winning trades and no losers during a 12-month period.

Indeed, in the last four months alone we’ve locked in gains of 8%, 12%, 21% and even 28%... with an average holding period of 3-4 weeks.

To find out more about Private Wealth Advisory and how it can help you beat the market with your investments…

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Best Regards

Graham Summers

 

 

 

 

One of the biggest issues facing investors today is finding reliable income.

Unbeknownst to most folks, most of stocks’ returns come from dividends, NOT capital gains.

Indeed, according to a study performed by the London Business School, when you remove dividends, stocks have returned a mere 1.7% in average annual gains over the last 109 years.

To put this into perspective, this is less than you’d make from owning long-term US Treasury bonds (2.1%) over the same time period.

Indeed, if you’d invested $1 in stocks in 1900 and reinvested your dividends, by 2009, you’d have made $582 (adjusted for inflation). Take out dividends and you’d have only seen $6 from price appreciation. Yes, $6 from 109 years’ worth of capital gains.

The fact of the matter is that most businesses fail overtime. Trying to pick winners (stocks that will rally) is extremely hard.

So by focusing on those companies that pay dividends, you’re effectively focusing on those that have already succeeded because:

1)   The company has to have generated some kind of cash flow to pay the dividend in the first place

2)   The company has exhibited a commitment to shareholder returns by paying dividends (at the end of the day management’s culture sets apart winners from losers.

This is why I like big dividend companies so much… you KNOW you’re going to get paid for putting your capital to good use!

With my Big Dividends Investor newsletter, I show investors how to lock in BIG dividends for HUGE returns.

Already our two most recent picks are cranking out cash for our subscribers. One sports a massive 7% yield that is virtually tax free. The other pays out a whopping 12% dividend in monthly payments.

As a result, we’re crushing the market AND lock in massive dividend payments to secure their retirement.

If you’re an investor looking for a second stream of income to grow your wealth during retirement, you simply couldn’t ask for a better newsletter than Big Dividend Investor.

For just $99 a year, you get:

1. 12 issues of Big Dividend Investor featuring at least 12 investment ideas
2. All of Buck’s Special Investment Reports outlining special situations.
3. Real time email alerts when it’s time to sell
4. The peace of mind knowing that your retirement is secure

To sign up for Big Dividend Investor… and take action to start receiving massive dividend payments as soon as this month…

Click Here Now!!!

Buck Wilson

 

 

 

One of the biggest mistakes investors make when it comes to dividend investing is assuming that BIG dividends= GREAT dividends.

Dividends are paid based on cash flow. A company can sometimes pay out a dividend through financial innovation (issuing shares as dividends, etc.), but if you are looking for REAL income from your investments, you NEED the company to be producing CASH.

No cash= no dividends= no yield.

This is why dividend investing is a tricky business. You cannot simply assume that because a company paid out a big dividend before, that it will continue to do so.

Moreover, you don’t just want the dividend to be constant, you want it to GROW!

This is why I focus on a particular type of dividend paying investments… investments that GROW their dividend consistently over time… which I call “Low Risk Dividend Growers” or LRDGs.

Consider Exxon for example.

Exxon has increased its dividend for over 30 YEARS. Indeed, if you bought Exxon as late as 2000, you would be collecting a 7-8% yield today based on DIVIDENDS alone (share price in 2000 was roughly $32, and dividends paid in 2013 were roughly $2.50).

At the same time, your initial position in Exxon’s stock would have risen 400%!

So you’d have made 400% in capital gains… and would continue collecting 7-8% per year in dividends.

And the best part is… the dividend keeps growing!

This is how you get truly rich from investing. Find investments that are Low Risk Dividend Growers and HOLD ON for the long-term.

With my Big Dividends Investor newsletter, I show investors how to lock in BIG dividends for HUGE returns.

Already our two most recent picks are cranking out cash for our subscribers. One sports a massive 7% yield that is virtually tax free. The other pays out a whopping 12% dividend in monthly payments.

As a result, we’re crushing the market AND lock in massive dividend payments to secure their retirement.

If you’re an investor looking for a second stream of income to grow your wealth during retirement, you simply couldn’t ask for a better newsletter than Big Dividend Investor.

For just $99 a year, you get:

1. 12 issues of Big Dividend Investor featuring at least 12 investment ideas
2. All of Buck’s Special Investment Reports outlining special situations.
3. Real time email alerts when it’s time to sell
4. The peace of mind knowing that your retirement is secure

To sign up for Big Dividend Investor… and take action to start receiving massive dividend payments as soon as this month…

Click Here Now!!!

Buck Wilson

 

 

 

One of Warren Buffett’s greatest investment ideas concerned “economic moats.”

What he meant by this was to invest in companies with significant competitive advantage that stops competitors from breaking into their market share. These competitive advantages served as “moats” around these businesses, much as a moat of water would protect a castle from intruders in medieval times.

To consider how “moat” investing works in the real world, let’s consider McDonalds (MCD).

For starters, MCD has a moat. MCD was launched in 1940. Burger King was launched in 1953. Wendy’s was launched in 1969.

Despite these competitors moving into its space, MCD has thrived, growing to become the largest hamburger based business in the world: its 2012 revenues were $27 billion compared to Burger King’s $1.9 billion and Wendy’s $2.5 billion.

Today, MCD has over 34,000 restaurants based in 199 countries employing 1.8 million people. Obviously the company is able to defend its market share from competitors. That’s an economic moat.

Between this and the company’s focus on producing returns to shareholders, those who invested in MCD and held for the long-term have dramatically outperformed the market and built literal fortunes.

Indeed, had you in McDonalds in 1986, you would have outperformed the S&P 500 by a simply enormous margin (see Figure 1 below). Not only that but you would have crushed every asset manager on planet earth with very few exceptions.

Regarding returns to shareholders, MCD has paid dividends every year for 37 years and has increased its dividend at least once per year.

Dividends per share have increased from $0.11 in 1986 to $2.87 in 2012. Those who invested in MCD shares in 1986 are receiving a yield of nearly 30% per year on their initial investment today just from dividends alone.

MCD is so focused on producing returns for shareholders that the company has bought back 23% of its shares outstanding in the last ten years. So even investors who bought in 2000 have experienced a synthetic yield of roughly 5% per year.

However, the most dramatic returns produced by “moat” investing are evident through the power of compounding as illustrated by MCD’s Dividend Re-Investment Plan or DRIP (a plan through which cash dividend payouts were  automatically used to buy more MCD shares).

If you had invested in MCD’s DRIP program in 1988, you would have turned $1,000 into over $23,000 by the end of 2012. This is not by adding to your positions, this is the result of one single $1000 purchase of MCD stock.

This example of “moat” investing is precisely the kind of wealth generating investment that has made Warren Buffett a billionaire.

We invest solely in businesses with economic moats in our value investment newsletter Cigar Butts and Moats. And it has paid off BIG TIME.

Of the seven investments we’ve made in 2013, FIVE made money including gains of 6% (still open), 15% (still open) and 28% (closed in one month).

And because we’re focusing on these businesses as long-term investments, I have very little doubt that we’ll not only BEAT the market with them… but we’ll also outperform the vast majority of professional investors.

This is the beauty of investing in Cigar Butts and Moats: you have such a wide margin of safety that if a company temporarily trades down, you actually end up wanting to buy MORE.

To find out what these companies are all you need to do is take out an annual subscription to Cigar Butts & Moats.

The price of an annual subscription is just $79.99.

For that price you get:

• 12 monthly issues of Cigar Butts & Moats
• All of our Special Investment Reports outlining special investment opportunities you won’t hear about anywhere else.
• Real time investment updates as needed
• The investment knowledge to build a safe and stable retirement.

All of this for just $79.99

To take out an annual subscription to Cigar Butts & Moats…

Click Here Now!

Yours in Profits,

Graham Summers

Editor

Cigar Butts and Moats

 

 

… is making sure you get paid.

When you buy shares in a company, you want to make money.

However, there is no guarantee that the shares will rise in price. Indeed, if you are investing simply because you believe prices will rise, you are essentially betting that someone else will want to pay more for your shares at a later date.

No matter how much research you perform, there is no guarantee this will happen.

Dividends, however, DO make sure you make money. Because the company is actually paying you to own shares. And this makes a heck of a difference.

If you had invested $1 in stocks in 1950 and held onto your position until 2010, you would have made EIGHT TIMES more money through dividends than share appreciation.

Let me restate that: by receiving and reinvesting dividends you’d make 800% more money than without them between 1950 and 2010.

The difference is even more incredible if you go back further.

Historically dividends have accounted for 70% of all stock market gains.

According to a study performed by the London Business School, when you remove dividends, stocks have returned a mere 1.7% in average annual gains over the last 109 years. To put this into perspective, this is less than you’d make from owning long-term US Treasury bonds (2.1%) over the same time period.

Indeed, if you’d invested $1 in stocks in 1900 and reinvested your dividends, by 2009, you’d have made $582 (adjusted for inflation). Take out dividends and you’d have only seen $6 from price appreciation. Yes, $6 from 109 years’ worth of capital gains.

Put another way, by focusing solely on capital gains when it comes to stock investing you’re only doubling your money about every 18 years (remember, this analysis simply focuses on the returns generated by the market… which outperforms most professional and individual investors).

So unless you’re buying stocks with dividends, you’re likely not making diddly in the long-term.

Again, if you’re going to buy stocks… make sure you get PAID. And there’s no better way to do this than with dividends.

With my Big Dividends Investor newsletter, I show investors how to lock in BIG dividends for HUGE returns.

Already our two most recent picks are cranking out cash for our subscribers. One sports a massive 7% yield that is virtually tax free. The other pays out a whopping 12% dividend in monthly payments.

As a result, we’re crushing the market AND lock in massive dividend payments to secure their retirement.

If you’re an investor looking for a second stream of income to grow your wealth during retirement, you simply couldn’t ask for a better newsletter than Big Dividend Investor.

For just $99 a year, you get:

1. 12 issues of Big Dividend Investor featuring at least 12 investment ideas
2. All of Buck’s Special Investment Reports outlining special situations.
3. Real time email alerts when it’s time to sell
4. The peace of mind knowing that your retirement is secure

To sign up for Big Dividend Investor… and take action to start receiving massive dividend payments as soon as this month…

Click Here Now!!!

Buck Wilson

 

 

Over the last five years, the US Federal Reserve has substantially changed the investing landscape of the capital markets in the last 12 months. In particular we need to assess how ongoing QE programs affect notions of “risk” and rates.

In the period from March 2008 to late 2013, the Federal took a series of strategic steps to attempt to rein in the financial crisis and to support certain financial institutions that it deemed most critical to the health of the financial system.

These steps consisted of cutting interest rates to zero and engaging in rounds of Quantitative Easing, commonly referred to as QE.

QE in its simplest form consists of printing new money that is then used to buy US debt, called Treasuries. The Fed has made a myriad of claims for why it did this (to help housing, the help the economy, etc.) but the blunt reality is that this policy was primarily a means of financing the US deficit, which swelled in the post-2008 period as the public sector expanded rapidly in an effort to pick up the economic slack in the private sector.

The US went into the 2007-2008 Crisis with a national debt of $5 trillion and unfunded liabilities  (Medicare, social security) somewhere in the ballpark of $50 trillion. And as the debt ballooned in the post-2008 era due to Government spending, it became more and more important for the Fed to maintain low rates: any increase in interest rates would mean much larger interest payments on a rapidly growing debt load.

This is why the Fed has maintained near zero interest rates as the US nati0nal debt swelled to $16 trillion. It’s also why the Fed continues to engage in QE despite the clear evidence over the last four and a half years that it is not an effective tool for stimulating economic growth or a rise in employment.

Regarding this latter point, I want to draw your attention to the labor participation rate below. The official unemployment rate is highly charged politically as it is used by the media to gauge how well a particular administration is doing at generating job growth.

As such the unemployment numbers are routinely massaged to the point of no longer reflecting the true number of unemployed Americans. For this reason, I prefer to use the labor participation rate when gauging the health of the US jobs markets: this metric represents the number of Americans who are currently employed as a percentage of the total number of Americans of working age.

As you can see, the number of employed Americans of working age peaked in the late ‘90s. It has since fallen to levels not seen since the early ‘80s. Moreover, looking at this chart it is clear that job creation has failed to keep up with population growth.

This negates any claims of “recovery” in the jobs market.

In particular, I want to draw your attention to the last five years of this chart below. The US Federal Reserve began its first QE program, called QE 1, in November 2008. Since that time it has launched three other such programs, spending over $2 trillion in the process.

During this period, the labor participation rate has not once experience a sustained uptrend. Put another way, job creation has never outpaced population growth to the point of creating a significant turnaround in the jobs market. This has happened despite the recession officially “ending” in mid-2009.

The evidence here is clear. QE does not generate jobs in the broad economy.

Best Regards

Phoenix Capital Research