Phoenix Capital Research

The market is overpriced, to be sure. I’m gauging this on the single most important valuation metric in finance: the cyclically adjusted price-to-earnings ratio or CAPE ratio.

Generally speaking, most investors price a company based on its current Price to Earnings or P/E ratio. Essentially what you’re doing is comparing the price of the company today to its ability to produce earnings (cash).

However, corporate earnings are heavily influenced by the business cycle.

Typically the US experiences a boom and bust once every ten years or so. As such, companies will naturally have higher P/E’s at some points and lower P/E’s at other. This is based solely on the business cycle and nothing else.

CAPE adjusts for this by measuring the price of stocks against the average of ten years’ worth of earnings, adjusted for inflation. By doing this, it presents you with a clearer, more objective picture of a company’s ability to produce cash in any economic environment.

I mentioned before that CAPE is the single most important metric for long-term investors. I wasn’t saying that for impact.

Based on a study completed Vanguard, CAPE was the single best metric for measuring future stock returns. Indeed, CAPE outperformed

1. P/E ratios
2. Government Debt/ GDP
3. Dividend yield
4. The Fed Model,

…and many other metrics used by investors to predict market value.

So what is CAPE telling us today?

Today the S&P 500 has a CAPE of over 24.  This means the market as a whole is trading at 24 times its average earnings of the last ten years.

Put another way, if you bought the entire stock market today, it would take you roughly 24 years to make your money back.

That’s expensive. Indeed, the market has only been this expensive a handful of times in the last 100+ years. Every time we’ve been closer to a market top than a new bull market run.

However, this is not to say that there are not tremendous opportunities for stock pickers in this environment.

Indeed, recently, subscribers of our value stock picking newsletter Cigar Butts & Moats  locked in a 28% gain on our latest stock pick in less than one month.

We did this by buying a deeply undervalued business. Based on its market valuation, this company could easily take itself private, using the cash generated from operations to pay the loan required to buyback all of its shares on the open market.

In fact, this business was so cheap that it could do this even if its earnings fell in HALF.

That’s one heck of a margin of safety. We bought on October 3 2013. And we closed out on October 23 2013 for a 28% gain.

Over the same time period, the S&P 500 rose just 4%.

This is how to make a killing in the market today: by focusing on value stock picking. It’s the very reason we launched Cigar Butts & Moats.

The price of an annual subscription to Cigar Butts & Moats is just $79.99.

For that price you get:

• 12 monthly issues of Cigar Butts & Moats
• Our proprietary deep value Investment Special Report How to Make a Fortune With Value Investing (a $199 value) which outlines specifically how Warren Buffett made his fortune investing in stocks.
• All of our other Special Investment Reports outlining special investment opportunities.
• Real time investment updates as needed (like the one that told investors to lock in a 28% gain).

All of this for just $79.99.

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

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Best Regards

Phoenix Capital Research

 

 

 

Here’s the news worth knowing about today:

1)   Europe is not fixed. The EU just announced record high unemployment with unemployment numbers rising nearly one million thus far in 2013.Greece, which was hoping to increase taxes or grow its way out its debt problems has just revealed that over 500,000 companies cannot pay their taxes (up from 182,000 last month). So much for the “Europe is fixed” theme.

We believe the crisis will re-emerge later in 2013 or early 2014. The key item to watch is the German Dax. Whenever it comes back to test the upper trendline in the chart below, things will start getting messy again.

2)   China is engaging in the same taper/no-taper verbal interventions as the US. The Chinese premiere warned against loose monetary policy last night and China’s market dropped.

The People’s has a major problem on its hands (several actually). The primary one pertains to inflation. China has flooded its financial system with credit and easy money in ways that Ben Bernanke never dreamed of.

As a result of this inflation is rising, which leads to wage strikes, which erases profit differentials between China and other manufacturing centers, which leads to manufacturers pulling out of China, which results in a weaker Chinese economy, which results in the need for more credit to sustain growth and finance more projects.

This has resulted in a sideways Chinese stock market with every new flood of liquidity kicking off rallies and every talk or taper or tightening causing corrections. At some point this will break and we’ll either collapse or skyrocket depending on whether we see a debt deflationary collapse or a debt deflationary collapse accommodated by rampant monetization which would result in a  Zimbabwe-esque stock market rally.

3)   In the US, the housing market is definitively in a bubble. And it is once again popping.

Over 50% of all home purchases are cash only. In California, the amount of median income needed to buy a home is virtually identical to the Bubble Years of 2005-2006.

Mortgage applications are plunging and sales are stalling (we’ve been flat for two months but are down 27% since June). Be aware of this. Homebuilder stocks seem to be sensing something is amiss. We’ve been moving sideways since the peak in May 2013.

These are the trends to be away of.

Best Regards

Phoenix Capital Research

Dear Investor,

I have a business I would like to sell you.

Let’s run over the numbers first.

First and foremost, I have to be honest, this business has not implemented a budget in five years. I know that seems like an insane way to run a business, but I can assure you that management is comprised of highly intelligent, ethical people.

These folks would never take advantage of shareholders. They’re all highly educated. And their corporate presentations and conference calls are extremely well written. Trust me, they know what they’re doing.

Having said that I also need to disclose that this business hasn’t been growing much at all. Indeed, it hasn’t even maintained annual growth of 3% in the last five years. On top of this, management has been caught fudging the company’s financials by several outside auditors. An honest assessment of its topline shows zero growth for the last few years.

I know I mentioned before that management are highly ethical. I can assure you they have a good reason to overstate their growth numbers: if the numbers reflected reality, they’d all be fired! We can’t have that can we? So they just “massage” things a bit to make the company’s growth look better than it is and to downplay the rise in costs that are squeezing its margins.

Speaking of which, this company isn’t profitable. In fact, it hasn’t been profitable for five years… actually it has only been profitable a few years out of the last five decades. And those years were “profitable” based on some really massaged numbers.

I know this sounds strange, but those honest folks in management think the best means for this company to grow is to spend way more than the company makes in its topline revenues. Sounds weird, I know. But again, these are very intelligent and ethical people. And none of the analysts covering the company ever ask about this. So what’s the problem?

Oh, and I almost forgot, the company has debt. A lot of it. Currently its debt is running north of 100% of its total market cap. Of course, this is based on some unusual accounting practices. If this company actually followed GAAP accounting rule for its pension expenses its debt load if over 400% of its market cap.

So, would you like to buy this business? How much would you pay for it?

Oh, I understand, you’d like to do some more due diligence. OK, I’ll give you this company’s stock symbol so you can look at its filings (good luck finding accurate ones). Do you have a pen and paper ready? OK the stock symbol is:

USA.

Our new Special Investment Report titled, Preparing For a US Debt Crisis, is now available to the public.

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Best Regards,

Phoenix Capital Research

 

 

 

 

 

 

 

Investors need to be aware of a significant dynamic emerging in the markets.

That dynamic is one of corporations missing revenues estimates while beating earnings estimates.

The majority of investors focus on earnings when it comes to valuing the stock market or an individual stock. Indeed, Price to Earnings or P/E ratios might be the single most popular stock valuation metric in the world.

However, there is a danger to pricing the market based on earnings alone. Earnings can be massaged in countless ways to beat estimates. You can release loan loss reserves, massage depreciation numbers, implement one time charges or writedowns, reprice bonds, etc.

Indeed, a study performed by Duke University found that roughly 20% of publicly traded firms manipulate their earnings to make them appear better than they really are. The folks who were surveyed for this study about this practice were the actual CFOs at the firms themselves.

For this reason, when you look at the markets, you need to look at how many companies are beating sales estimates as opposed to simply earnings estimates.

Unfortunately the news is not particularly good for this today. As Bloomberg notes, of those companies who have reported results so far in 3Q13, only 38% of S&P 500 companies are beating revenues estimates. This follows just 46% who beat in 2Q13 and only 37% who beat in 1Q13.

Bloomberg notes that this is the first time there have been three consecutive quarters of less than 50% of corporations beating revenues estimates going back to 2009.

Moreover, taken as a whole, the market is trading at a Price to Sales ration of 1.6. Historically, before we entered the period of Fed-induced serial bubbles, the market has traded at an average of 0.8.

So the market is expensive. And the most sensitive economic indicator (sales) are falling and failing to beat estimates.

But this doesn’t mean there are no incredible opportunities to make money in the markets today.

It does mean that investors will have to look beyond simply “buy and hold” strategies (the P/S ratio predicts real annual returns of 2.6% going forward) to accomplish outsized returns.

Our Options day trading newsletter, THE PERFECT TRADE was designed for precisely this.

THE PERFECT TRADE uses options to juice the returns from small, but predictable market patterns. And boy does it work. Year to Date THE PERFECT TRADE’s model portfolio is up over 200%.

Indeed, 11 of out last 13 trades have made money, including gains of 24%, 46%, 33% and an incredible 129% just earlier this week.

If you’d traded just $10K based on our recommendations, you’d be up over $30K today… just from 2013 alone.

However, we’ll soon be closing this product to the public. We simply cannot produce these returns with thousands of traders following this system.

So this Friday at midnight, the doors close on THE PERFECT TRADE.

AT THAT TIME WE WILL NO LONGER ACCEPT NEW CLIENTS. ANYONE WHO WANTS TO SUBSCRIBE WILL HAVE TO WAIT UNTIL ONE OF OUR CURRENT CLIENTS’ SUBSCRIPTIONS EXPIRE A YEAR FROM NOW.

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Phoenix Capital Research

 

 

Today I’m going to show you how to trade the market successfully.

It is commonly thought that in order to trade and make money in the markets, you need to trade all asset classes. I am always asked by people, “what do you think of Gold? Is the Dollar going up or down? What are you trading today?” and on and on from subject to subject.

The biggest problem with this is that it is hard enough to get good at trading just one item, let alone trading multiple items at once. Trading multiple asset classes requires a level of sophistication and understanding that 99% of folks simply do no have (you’ll note that even Wall Street traders tend to specialize in one asset class or theme).

So forget about becoming a “Master of the Universe.” Trading is not about having your money in every asset class under the sun (I’m talking about trading not investing here).

No, to be a successful trader, all you need to focus on is making money. And the easiest way to make money trading the markets is to find one thing that works and keep doing it.

I’m speaking from experience here. The Perfect Trade newsletter which I write, trades options on just one ETF. It sounds boring, but there is nothing boring about the profits.

On average, The Perfect Trade makes money 80% of the time. By focusing on this ONE trade and by using strict discipline in terms of position sizing and stop losses, we have produced a REAL return on invested capital of 160% so far this year.

That’s correct, 10 months into 2013 we have already more than doubled our money. In the last two months alone we’ve seen the following results:

Date	Gain/ Loss
7/24/13	12.90%
7/30/13	-31.58%
8/6/13	46.15%
8/13/13	24.07%
8/20/13	33.80%
8/27/13	17.65%
9/3/13	-24.66%
9/11/13	2.20%
9/18/13	35.71%
9/26/13	-36.11%*
10/9/13	8.33%
10/15/13	12.05%
10/22/13	5.45%

It’s impossible to avoid losers. But by using careful position sizing (the * above was a trade where we used 25% of our usual position based thus minimizing the dollar losses) we’ve have a terrific run.

The rest of 2013 has been just as good. Like I said, we’re up over 160%.

In fact, this newsletter has gathered so much momentum that we’re closing the door to new subscribers this Friday at midnight. We simply cannot continue to produce these returns with a large client list.

So on Friday at midnight, we will no longer be accepting new orders for this newsletter.

So if you are interested in joining this newsletter you have until Friday at midnight.

After that the doors are closed and we will not be accepting any future subscriptions

To join now…

Click Here Now

Graham Summers

 

 

 

 

The following is an excerpt from our value investing newsletter Stock Picker Elite

On that note, I want to point out that some of the best businesses in the world are beginning to approach valuations that are attractive (see Figure 1 below).

In terms of valuing a company, there are two key metrics I like. One is Enterprise Value (EV) divided by Earnings Before Taxes Interest Depreciation and Appreciation (EBITDA) or EV/ EBITDA.

I prefer this metric to the more traditional Price to Earnings (P/E) valuation metric because both Price (Market Cap) and Earnings are not very accurate measurements of a company’s health.

Regarding price, consider the following… a company that has a market cap of $10 billion, earnings $2 billion, has $2 billion in cash and has $9 billion in debt will look cheap with a P/E of 5… even though its debt load could bankrupt it.

Enterprise Value clears this issue up by including a company’s debt and cash on hand in the valuation process: EV is a company’s market cap, plus its debt, minus its cash. As such it is a much closer approximation of a company’s health than market cap.

Regarding earnings, as I noted in last issue of Cigar Butts & Moats there are dozens and I literally mean dozens of ways to craft earnings to be better than reality.

For that reason I prefer Earnings Before Taxes Interest Depreciation and Appreciation (EBITDA) as a metric for a company’s earning potential.

I realize this term sounds confusing, but EBITDA is essentially the money a company generates before it pays taxes or manipulates the value of the assets on its balance sheet. As such it’s a much cleaner representation of the cash a company generates.

Thus, EV/ EBITDA is a much better valuation metric than P/E. For that reason I’ve priced the businesses in Figure 1 by EV/ EBITDA.

Another term you need to know about is earnings yield. For those of you who are unfamiliar with earnings yield, this is essentially a ratio made by dividing a company’s Earnings Per Share by its Price Per Share.

I like to use this ratio relative to the yield on the ten-year Treasury (which is considered risk free) to asset the benefit of owning a stock. Given the increased risk of owning a stock, the earnings yield should be dramatically higher than the yield on the Ten Year Treasury.

However, the cash a company generates does not necessarily equal the cash it pays its owners. So I also like to consider a businesses’ dividend yield relative to the yield on the Ten Year Treasury as well.

These three metrics (EV/ EBITDA, Earnings Yield, Dividend Yield) can be used to give a decent “back of the envelope” assessment of the value of a stock.

As you can see in Figure 1 above, some of the best businesses in the world are beginning to trade at attractive valuations from an EV/EBITDA and Earnings Yield perspective.

However, the dividend yield is generally less attractive for most of these companies than the yield on the Ten Year Treasury. And given that stocks are far more volatile, I believe there is simply too much risk here relative to the cash reward for owning them at this time.

I bring all of this up, because I want to make you aware that the bargain basement sale I predicted last issue is only just beginning. And while it is tempting to start backing up the truck to invest, we need to consider the old adage that the fact a stock is cheap doesn’t mean it cannot get cheaper.

Between the low dividends and the risk to the global economy I’ve outlined in last issue, these valuations, while attractive, are not nearly as attractive as I’d like.

When you can buy a business like Apple at a dividend yield of 4+% at a time when the 10 Year Treasury is yielding 2.0% or less, THEN it’s time to go shopping based on the potential risk reward.

This time is coming. But it’s not here yet. The macro picture for the world is dangerous. And high quality companies will not be spared the carnage if a market onslaught begins (which is looking increasingly likely).

Stock Picker Elite is our long-term value-investing newsletter based on the investment methodologies of the Godfather of value investing, Benjamin Graham, and his legendary pupil Warren Buffett.

We launched Stock Picker Elite in May 2013. Since that time we’ve outperformed the stock market every year, often by double digits.

A subscription to Stock Picker Elite costs $99.99 and comes with:

• 12 monthly issues of Stock Picker Elite
• Our Special Report How to Make a Fortune With Value Investing which outlines how Warren Buffett and Benjamin Graham did what they did (a $199 value).
• Real time investment alerts as needed

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To sign up for Stock Picker Elite

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Best Regards

Phoenix Capital Research

 

The US can now collectively breathe a sigh of relief that we’ve averted the “debt ceiling debacle.”

The only problem is that this entire “crisis” was a lie. The US actually hit its debt ceiling back in May 2013, a full five months ago.

At that time neither the Treasury Department, nor the White House, nor Congress talked about this.

So for five months, the US debt level was frozen. The reason was because the Treasury was resorting to “extraordinary measures” to keep us below the debt ceiling. It’s interesting that no one in the media talked about this, nor that anyone seemed to care at all.

Then, suddenly we had yet another “crisis” in which the world would literally end if the political class didn’t get their way. The US would default if we don’t spend more money now!

Our President and other political “leaders” fussed about this for two weeks and basically wasted all of our time. The whole exercise was totally pointless outside of setting up an “issue” on which to campaign for the 2014 Congressional elections.

How do I know it was pointless?

Because the deal they made doesn’t raise the debt ceiling. All it did was make the debt ceiling unenforced for a few months… until February 17 2014 specifically.

So we hit the debt ceiling in May… manufactured a crisis in October… just to ignore the issue another three months…

THIS is the state of Government in the US today. The fact the media in this country goes along with this as “news” tells you everything you need to know about the “objectivity” of the fifth estate.

If you want to talk about a real debt crisis, let’s talk about the US Federal Reserve.

The Fed’s current balance sheet is $3.86 trillion. It will be over $4 trillion before the end of 2013 and over $5 trillion before the end of 2014.

THE FED is the debt problem. It is allowing the deficit and the debt to swell like this for the sake of benefiting a handful of banks and screwing the economy. QE doesn’t create jobs. It never has.

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.

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Best Regards

Graham Summers

 

 

The big news as far as the markets are concerned is the Government reopening and the debt ceiling being extended. The debt ceiling technically was hit last May but no one bother to discuss that in the media. Why let a potential good crisis go to waste?

So the “debt ceiling” debate was pushed back to February 17 2014… just in time for the usual BS political campaigns to start for the 2014 Congressional elections. Honestly, if the whole situation wasn’t so pathetic it’d be amusing.

The markets have largely priced in a resolution at this point which is why they’re pulling back this morning. Gold and the precious metals are up significantly and the US Dollar is falling.

We’re now at support on the US Dollar. Let’s hope it holds.

Between this development and the nomination of Janet Yellen to Fed Chair, the monetary backdrop for the US will be more spending and more monetization. Yellen is yet another academic with no banking or business experience what-so-ever. This makes three in a row (Greenspan, Bernanke, and now Yellen). The results speak for themselves.

By the way, I continue to hear how great the Fed is for stocks. However, since we were taken off the Gold standard Gold has outperformed stocks dramatically. In fact the only period in which stocks outperformed Gold as an asset class was the Tech Bubble.

We offer a Special Report on how to purchase Gold Bullion safe and securely with every subscription to Private Wealth Advisory. In it we outline why every investor should have some exposure to bullion, how to buy it and the key questions you should ask every bullion deal.

Along with this report, every Private Wealth Advisory subscription comes with:

1. The Inflation Secrets Your Broker Won’t Tell You About.
2. The Secret FDIC Legislation That Puts Your Savings At Risk.
3. 12 monthly issues of Private Wealth Advisory.
4. Real time investment alerts to Buy and Sell our recommendations as needed.

All this for $179.99… to subscribe to Private Wealth Advisory…

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Best Regards

Phoenix Capital Research

 

 

 

 

 

 

At this point the Gold manipulation is outright absurd.

For years there have been rumors that Gold and Silver were being manipulated lower. For the most part these rumors were thought to be in the realm of “conspiracy theory” by most of the investing crowd.

However, at this point the evidence is clear. Someone is clearly manipulating Gold lower. This is happening almost every morning when someone dumps Gold in massive sell orders, pushing the precious metal’s price sharply lower.

The reason we know that this is a clear intervention, and not simply a large institution selling concerns the pattern of selling.

On Friday morning last week, someone staged an order to dump 5,000 futures contracts of Gold. That amounts to over $640 million in Gold. In one order. Placed all at once.

When it happened, Gold dropped $25 per ounce in a matter of two minutes. It doesn’t matter that the sell order was cancelled half way through, the damage was done and Gold continued to languish as it has (extraordinary given the systemic risks in the US and Europe today).

No one and I mean NO ONE would place an order like this. It simply doesn’t happen. Anyone who is trying to unload a position of this size would do it in chunks over a period of time in order to not push the price sharply lower.

Put it this way, if you happened to own this much Gold and were looking to unload your position, you would not want the price of Gold to be lower because that would mean you make less per ounce sold.

So you would be very careful to unload this position with as little impact on the market as possible, so that you could get the best prices. You wouldn’t just hit “sell” and dump the whole batch in one go.

Again, no one would do this. That sell order came from intervention. Someone was trying to send a message to the market. Gold futures were halted for 10 seconds as liquidity dried up.

I keep hearing how this sell order could have been a “mistake.” If that were the case, it wouldn’t keep happening because the person who made the mistake would be fired.

The “mistake” has happened repeatedly over the last few weeks. So either some institution has a whole roster of numbskulls trading Gold, or the individual numbskulls at different institutions are all making the same mistake in roughly the same time period.

The odds of this are next to none.

Which begs the question, just who is trying to push Gold lower right now? Just about any sensible investor would be buying the precious metal to hedge against the default risk/ debt ceiling risk in the US.

We offer a Special Report on how to purchase Gold Bullion safe and securely with every subscription to Private Wealth Advisory. In it we outline why every investor should have some exposure to bullion, how to buy it and the key questions you should ask every bullion deal.

Along with this report, every Private Wealth Advisory subscription comes with:

1. The Inflation Secrets Your Broker Won’t Tell You About.
2. The Secret FDIC Legislation That Puts Your Savings At Risk.
3. 12 monthly issues of Private Wealth Advisory.
4. Real time investment alerts to Buy and Sell our recommendations as needed.

All this for $179.99… Private Wealth Advisory.

Click Here Now!

Best Regards

Phoenix Capital Research

 

 

 

 

 

While the US continues to bumble its way towards a debt ceiling crisis (somehow our President doesn’t have time to meet work on solving this, but does have time to make sandwiches with volunteers and give press statements about how we wants to work), Europe continues to make us look good by comparison.

Remember how we were told time and again that Europe was saved? Remember how repeatedly we were told that the European Central Bank (ECB) would do “whatever it takes” to fix things?

Turns out all of that was a total load of BS. Indeed, the IMF just announced the following:

Nobody knows the true scale of potential losses at Europe’s banks, but the International Monetary Fund hinted at the enormity of the problem this month, saying that Spanish and Italian banks face 230 billion euros ($310 billion) of losses alone on credit to companies in the next two years.

Yet five years after the United States demanded its big banks take on new capital to reassure investors, Europe is still struggling to impose order on its financial system, having given emergency aid to five countries.

http://www.reuters.com/article/2013/10/13/us-eurozone-banks-idUSBRE99C03Y20131013

Remember, Spain was the banking system that was great right up until it demanded a 100 billion Euro bailout. Then only six months later, one of its largest problem banks (which had taken 18 billion Euros in bailout funds) announced it still had a negative valuation.

The entire EU banking system is insolvent. Unlike the US where the banks raised capital to address their problems, EU banks have not raised capital nor have they reduced their leverage (of 26 to 1 by the way). Instead, they’ve simply swapped garbage assets as collateral to the ECB, which counts this garbage at 100 cents on the Euro, and issues liquidity to the banks.

The whole thing is one giant lie. You have banks lying about what they own to the ECB which lies about the real risk of the banks which swaps out debt from EU countries that are lying about their finances in exchange for free money so the banks can keep lying.

Honestly, this whole mess makes the US look good by comparison. The bad loans, leverage and every other negative issue is worse for EU banks than for the US.

Makes you wonder why investors are piling into EU financials, doesn’t it? In general share prices in this space have doubled since the 2012 lows. The fact they’ve doubled on a colossal lie doesn’t bode well.

I expect we’ll see the European banking crisis back with a vengeance in the first half of 2014. Now that the German elections are over and Merkel has won, the “reality” of Europe should start leaking out (it’s not coincidence that the IMF released this report about Spanish and Italian bank woes just now after the German election as though this was suddenly “news”).

Best Regards

Graham Summers

 

 

 

 

 

The political class in Washington has failed to reach a deal. They are effectively playing a game of chicken with the markets to see who blinks first. As usual, there are plenty of lies and spin swirling around this situation.

The US Treasury has stated it will run out of cash on October 17.

This in of itself is a strange claim as technically we hit the debt limit back in May and have been resorting to “extraordinary” measures since then. I don’t recall anyone in at the Treasury talking about the importance of the “debt ceiling” then, do you?

Secondly, the Government has effectively been running a Ponzi scheme with our debt for the greater part of 20 years. Over $5.7 trillion of our debt is owned by the Federal Government, ($2.1 trillion is owned by the Fed, $2.6 trillion is owned by Social Security, and over $1 trillion is owned by various Federal Retirement entities).

Indeed, the single largest owner of US debt is not in fact China, but our own Government. We’ve been running this kind of scheme for over 20 years.

Now this is not to say that a debt ceiling breach or a possible default on some payments are NOT huge issues. What I am saying is that the US Government can shuffle money around just as it has for the last 20 years to insure that we meet our debt obligations.

So the debt ceiling “we’re going to run out of money and the world ends” talk is not accurate. What is accurate is that playing games with your debt limits impacts other investors’ psychologies. And THAT is the real issue here.

The Fed has already screwed this up royally. Indeed, by engaging in QE, the Fed alters the very structure of risk in the financial system. Traders on Wall Street, knowing full well that the Fed would be soaking up Treasuries, rushed into new debt issuance with the intention of flipping over these assets to the Fed in the near future.

This became a self-fulfilling prophecy as the “front-running the Fed” trade became a dominant theme for Wall Street. By piling into bonds, traders forced prices higher and yields lower: precisely what the Fed wanted.

It is critical to note that a significant percentage of these investors had no interest in actually owning US debt as an asset class in the long run. They were simply looking for an easy trade that made money. As a result, interest rates were driven even lower by the “investment herd”.

We saw this when Treasuries dived soon after the Fed hinted at “tapering” QE. At that time, traders realized the “front-run” the Fed trade may be ending and dumped Treasuries. Rates rose, mortgage rates rose, mortgage applications collapsed, and the slew of other problems surfaced.

My point with all of this is that Central planning is always a disaster. We are now watching another Central-Planning debacle in the form of the debt ceiling fiasco. These folks got us into this mess, expecting them to get us out of it is foolish.

With that in mind, I’ve already urged my Private Wealth 
Advisory clients to start prepping. We’ve opened six 
targeted trades to profit from the US’s debt crisis.

We’ve also taken care to prepare our finances and our 
loved ones for what’s coming, by following simple 
easy to follow steps concerning our savings, portfolios, 
and personal security via my Protect Your Family, 
Protect Your Savings & Protect Your Portfolio 
reports.

I’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.

In fact, we’re currently on another winning streak 
having locked in FOURTEEN winning trades in the last 
two months, including gains of 10%, 11%, 21% and 25%.

All for the small price of $299: 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 debt crisis 
bursts you don’t lose your shirt.

Click Here Now!

Yours in Profits,

Graham Summers

The markets are finally beginning to realize that the debt ceiling debacle, economic contraction in the US, housing bubble 2.0 bursting, China slowdown, Japan stagflation and European banking crisis are not good for stocks.

With that in mind, the S&P 500 has briefly taken out the trendline that has supported it since QE 4 was announced.

Remember, the Fed is printing $2 billion per day and funneling it into the system. So if the markets begin to break down NOW, the only thing the Fed can do is print more money.

However, this combined with the debt ceiling debacle could make a REAL mess. Yesterday the US issued a 4-week Treasury bill that came darn close to outright failure. With investors beginning to question whether the US might indeed have a debt crisis on its hands, investors are beginning to shun some US Treasuries and T-Bills for others based on priority of payments.

Remember, every single Treasury and T-bill out there is utilized as collateral for millions of Dollars worth of trades. So if the big financial institutions begin to refuse to accept some US debt as collateral based on the perceived risk of a deb ceiling debacle there could quickly be capital call in the market similar to what happened when Lehman failed.

This is not to say that the US will default on its debt. Rather this is to say that the mess the Government created is affecting things behind the scenes in the financial system. And this is where the next crisis could emerge.

With that in mind, investors should be prepping now for a potential run of systemic risk. If you are not already receiving powerful investment insights and recommendations on how to navigate this mess, I strongly suggest you take our a trial subscription to Private Wealth Advisory our monthly investment advisory devoted to helping individual investors hedge risk and protect their portfolios.

Few newsletters do a better job of navigating crisis than Private Wealth Advisory. During the EU Crisis of 2011-2012, we locked in 74 STRAIGHT winning positions and not one single loser.

We just started another winning streak in May.

Since then, Private Wealth Advisory subscribers have locked in 14 straight winners trades with gains between 7% and 25%. During this period we haven’t closed a single loser.

I just outlined six new positions that will produce huge gains when the market collapses from the Debt Ceiling Crisis.

To find out what they are, all you need to do is take out a trial subscription to Private Wealth Advisory.

The price of an annual subscription is just $299.99.

For that price you get:

• 12 monthly issues of Private Wealth Advisory
• All of our Special Investment Reports outlining special investment opportunities.
• Real time investment updates as needed

All of this for just $299.99.

To take out an annual subscription to Private Wealth Advisory…

Click Here Now!

Graham Summers

 

Are we headed for another September Crisis?

In general the period from May until November is a time for market underperformance. The average performance for the period from May 1 through October 31 each year since 1950 is just 1.2%. The average performance for the other six months of the year (November 1 through April 30) each year since 1950 is 7.0%

Historically, September is has been the single worst month for stocks over the last 80 years. Since 1929, on average the S&P 500 has fallen 1.1% in September.

This is only one of three months to have an average negative return over this period. And it is the single worst month of the year (the other two are May with an average return of -0.1% and February with an average return of  -0.2%).

Moreover, it is the Autumn when banking and financial crises have a tendency to occur. In terms of specific months, September and October are the worst with issues that lead up crashes erupting in September with October being when the actual crashes finally hit. There were Crashes during these months in 1907, 1929, 1987, and 2008.

All told, there have been a total of 147 crises since 1970 in the world. September accounted for 27 of them, the single largest month.

For certain stocks are definitively in a bubble. Based simply on CAPE (cyclical adjusted price to earnings) the market is significantly overvalued with a reading of nearly 24 (anything over 15 is overvalued).

Indeed, we’ve only been at this level of valuation during major stock tops (1929, 1966, 2000, and 2007)

Now we have the Government potentially shutting down. The markets are open on Monday which will be the last day in September.

Are we going to get another September Crisis a day late?

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 two 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…

Click Here Now!

Best Regards

Graham Summers

 

 

Best Regards

Graham Summers

 

It’s often argued that they don’t a bell at the top.

I would argue that we numerous bells ringing in the financial markets today.

Carl Icahn wants Apple to leverage up to boost returns to shareholders. Apple has maintained next to no debt for the better part of ten years.

Now share price is lagging and the goal is to issue a load of debt to buy back shares. Leveraging up companies that have long had little debt is a classic market mania indicator

Hilton is trying to go public. Put another way, one of the largest commercial real estate/ hospitality chains in the world is going public after being private for over 40 years…

Why go public now? Because you can raise funds cheaply in today’s high liquidity environment and you don’t want to be holding the bag when the economy slumps again.

The large financial institutions that bought homes and real estate in the slump are looking to exit. These groups and their clients didn’t get rich by being wrong.

They’ve made their profits by buying when no one else wanted to and now they’re getting out. Hedge fund Och-Ziff, PE firm Blackstone, and others are unloading their real estate portfolios.

The smart money is getting out of the market. Fortress Investment Group, Apollo Investment Group and other large “smart money” investors are literally “selling everything” they can. They’re not doing this because they expect things to improve and the market to continue to move sharply higher.

Indeed, even investment legend Warren Buffett, who has virtually never advocated against investing in stocks (with the exception of the Tech Bubble) has stated the market is “fully valued” at today’s levels.

Buffett loves stocks. He’s made his fortune investing in them. He is a near eternal optimist. For him to state the markets are fully valued and be sitting in the single largest cash hoard of his investment life is a major indicator that stocks are topping.

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 two 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…

Click Here Now!

Best Regards

Graham Summers

 

Let’s put another nail in the coffin of the “recovery” talk.

Bernanke and the Fed allege that the purpose of QE is to help housing recovery. But rising home prices do not actually equate to increased “wealth” for the average American.

Homes, unlike most purchases (well at least in the past), are financed via debt. In this regard the “homeowner” doesn’t actually “own” the home; the bank does. And anyone who looks at how much money banks make from mortgage lending can easily assess who comes out on top from that deal: hint it’s not the homeowner.

Say I buy a home for $200K with a down payment of $40K. I only own $40K worth of home. And if the home rises in value to $220K, I still owe the bank $180K. Sure, you could technically argue that I’ve made $20K off my initial $40K, but that would only count if I sold the house right then and there.

If I don’t sell the house, then technically I’m not wealthier, I’m just slightly less in debt (on paper). This fact becomes abundantly clear the minute I stop paying my mortgage and the bank comes knocking.

With that in mind, we need to ask, just who is wealthier as a result of the new housing bubble the Fed has created?

It’s not most Americans. According to the US census only 29% of us own our homes outright. Rather, it’s the banks and the large institutional investors who bought up thousands of homes in cash during the “recovery.”

This is not rocket science; it’s common sense. But the Fed keeps talking about a housing “recovery” like it’s helping Main Street. It’s doing no such thing. All of the Fed’s policies have been aimed at helping the large banks. They’re the ones who own the US’s homes.

If you’re concerned about your portfolio taking a hit when the bubble bursts, I strongly urge you to consider an annual subscription to my Private Wealth Advisory newsletter.

Private Wealth Advisory specializes in helping individual investors profit from any market environment. In 2008 the Private Wealth Advisory portfolio returned 7%. In 2011 it returned 9% (the market was flat). And from July 2011-July 2012, Private Wealth Advisory set a record for the investment newsletter industry, closing out 74 straight winning investments.

During this entire 12 month period, we didn’t close a single loser.

In fact, we’re currently on another winning streak having locked in FOURTEEN winning trades in the last two months, including gains of 10%, 11%, 21% and 25%. And our portfolio is on the move with winners number 15, 16, and 17 just waiting in the wings.

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,

Graham Summers

 

 

 

 

 

 

 

 

 

 

 

 

 

Finally the mainstream media is beginning to get the problems with the Federal Reserve.

The Fed claims it can generate a “recovery.” It cannot. The Fed’s devaluation of our currency is the very reason why the economy is a disaster.

According to the NY Times the average net worth for Middle class Americans in 2010 was 6% lower adjusted for inflation than their average net worth in 1989.

As the Times notes, these folks are “more educated and worked more hours, on average, and had children at a later age” than their 1989 counterparts. But none of these compensated for the fact that costs of living have skyrocketed between then and now.

As the articles notes, housing costs 56% more than in 1989, our of pocket healthcare expenses rose 155%, college expenses are up in the double digits.

The Fed is responsible for the Dollar devaluation that caused this. The Fed is the one that eviscerated the Middle Class. Its policies have lowered the quality of life for Americans. Period. End of story.

The fact that we’re now relying on these same folks to somehow fix the problems they created by endorsing even more aggressive versions of the very policies that created these problems is a dead end.

Sure, stocks will rise, but adjusted for inflation, Gold was a better investment since we left the Gold standard in 1968. Indeed, the only time stocks outperformed Gold from 1968 onward was during the Tech Bubble.

And the Fed wants us to pile into stocks now while it’s boosting inflation?

We all know how bubbles end: BADLY.

The time to prepare for this is not once the collapse begins, but NOW, while stocks are still rallying. Stocks take their time moving up, but when they crash it happens VERY quickly.

With that in mind, I’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 also taken care to prepare our finances and our loved ones for what’s coming, by following simple
easy to follow steps concerning our savings, portfolios, and personal security via my Protect Your Family, Protect Your Savings & Protect Your Portfolio reports.

I’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.

In fact, we’re currently on another winning streak having locked in FOURTEEN winning trades in the last two months, including gains of 10%, 11%, 21% and 25%.

All for the the small price of $299: 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,

Graham Summers

 

 

Market tops always involve insanity. And today we have that in abundance.

On Wednesday the Fed surprised the world by not announcing a QE taper. Stocks and all “risk” assets exploded higher. Today, a mere 48 hours later, Fed President Bullard says the Fed should taper soon. Stocks collapse.

For the markets to react so significantly to such issues is a tell-tale sign that we are near a major top. The reliance on Fed stimulus has never been greater with even a hint of Fed policy actually having more impact that the policy itself.

Rumors, whispers and threats dominate trading. This is the sign of market mania.

The most important element is that this mania has been driven by the Fed, not some new technology (the Internet in the tech bubble), new asset growth (housing), but the Central Bank.

In the past, the Fed has been the fuel for bubbles. This time around, the Fed IS the bubble itself, with its balance sheet expansion driving ALL assets higher.

So when this bubble bursts, it will be truly catastrophic because no one can bail out the Fed. Interest rates are already at Zero. QE is already running non-stop. There will literally be nothing the Fed can do.

I cannot say the top is in today, nor can I say it will be here in a week. But THE top is forming. And it will be absolutely awful when it’s done. We’ve now had three SERIAL bubbles in the markets in the last 13 years. Each bubble’s bursting has been worse than the last. The next one will be THE biggest one yet.

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 two 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…

Click Here Now!

Best Regards

Graham Summers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Fed failed to announce a Taper yesterday of any kind.

It is positively outrageous, but it does inform us of many things.

First and foremost, the Fed has made it clear that it cannot be hawkish is any way. We had just two months of hinting at tapering QE from the Fed (Bernanke was back talking up how accommodating he’d be by July).

So for all the talk of taper and shifting to a more hawkish tone, the Fed’s actions speak louder than words: the Fed is totally and completely incapable of being hawkish at this time.

Secondly, the Fed knows that the US economy is a total disaster. If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.

Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.

Finally, the Fed has proven that it has absolutely no exit strategy. The Fed is going to print money and buy bonds until the entire financial system collapses. Any time stocks fall it will try to rescue the markets. And it is going to do this ad infinitum because it has no clue what else to do.

In plain terms, the Fed has proven beyond even a hint of a doubt that it is simply flying by the seat of its pants, with no clear game plan or eventual outcome in mind. The Fed is simply going to keep doing what it’s done for five years until something breaks.

That something will be the entire financial system. We will have a crisis that is substantially worse than 2008. It is coming. In fact it is now coming much sooner than it would have had the Fed announced a taper yesterday.

In the meantime, inflation is soaring. The Fed continues to lie about CPI and inflation but the reality is that the cost of everything is going up. I’m sure you’ve noticed prices have begun rising already. This is only going to be getting worse going forward. Which is why now is the time to be preparing ourselves and our portfolios for this. Inflation can take its time to arrive. But once it does… things move very very quickly.

If you’re concerned about inflation… and want to learn more about simple bit highly effective ways you can shield yourself from it…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

The markets roared higher over the weekend when Larry Summers withdrew his candidacy for Fed Chairman. This makes Janet Yellen of the San Francisco Fed the current favorite for next Fed Chair.

Truth of the matter is that neither candidate should be considered for Fed Chairman.

Summers was one of the chief architects for the 2008 meltdown, repeatedly pushing back on anyone who wanted to regulate the derivatives markets. This in of itself should bar him from ever being considered for a position of influence in the financial markets.

Yellen on the other hand is yet another academic with no business or banking experience. She was one of the primary forces behind QE at the Fed and has repeatedly advocated for more QE despite the fact that there is no evidence it has succeeded now (nor is there any evidence that it succeeded in the past).

Thus, we literally had a choice between one candidate who helped blow up the entire financial system and another candidate who has no idea of how the economy works outside of textbooks.

Regardless, the markets perceived Summers as hawkish and so they are ripping higher today believing that the next Fed chair will continue to maintain Bernanke’s policy of leaving a paper weight on the “print” button.

The markets are going positively manic on the news.

This feels like the final push before a more serious correction. The Fed meets on Wednesday at which point it is expected we’ll see a QE taper announcement.

The fact of the matter however is that Bernanke has created a bubble that is even bigger than that of 2007.

We all know how bubbles end: BADLY.

The time to prepare for this is not once the collapse begins, but NOW, while stocks are still rallying. Stocks take their time moving up, but when they crash it happens VERY quickly.

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

We’ve also taken care to prepare our finances and our loved ones for what’s coming, by following simple
easy to follow steps concerning our savings, portfolios, and personal security via my Protect Your Family, Protect Your Savings & Protect Your Portfolio reports.

I’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.

In fact, we’re currently on another winning streak having locked in FOURTEEN winning trades in the last two months, including gains of 10%, 11%, 21% and 25%.

All for the the small price of $299: 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,

Graham Summers

 

 

The following is an excerpt from a recent issue of Private Wealth Advisory.

As noted yesterday, generally speaking stocks today are showing all of the hallmark signs of topping out. The market is overpriced, overbought, the smart money is selling, CEOs are bearish, market breadth is shrinking and earnings growth looks poor.

Now, I am not officially calling a top in the market today. But I do want to alert you that a top of some kind, possibly major, is forming.

In terms of predicting how far the market will fall, we first need to consider that the stock market is in a bubble. Historically, bear markets feature a drop of 32%. Bursting bubbles on the other hand, usually feature a drop of 50%. Indeed, if you look at the last two market Crashes over the last 13 year, all of them featured drops of roughly 50% or so.

Based on this measurement, this would mean the S&P 500 falling to sub-900.

Other indications of a market top forming can be drawn from historical price movements. Mark Hulbert from Marketwatch recently noted that of 35 market tops since the 1920s, the preceding bull market has seen stocks rise 21% in the previous 12 months.

The S&P 500 just hit a 23% gain in the last 12 months (see Figure 5 below). So we’re on track with a market top in terms of historic price trends.

Finally, there are major valuation concerns for the markets today. Since the S&P 500’s founding in 1926, stocks have returned an average of 11% per year.

Consider the following: had you invested $10,000 in the S&P 500 in 1926 (at that time it was the S&P 90) with dividends reinvested today it would be worth over $33 million.

Without dividends reinvested, it would be worth $1.9 million. Put another way, without dividends, which are paid out of earnings, stocks return only slightly more than Treasuries, though with considerably more risk.

Thus, the ideal time to invest in stocks is a time in which future earnings yields from stocks are expected to grow considerably. This would indicate that dividends are likely to grow, thus allowing for a considering stock market “premium” in terms of returns.

Today is not such a time. As famed value investor John Hussman notes, the 10-year Treasury bond is currently yielding 2.6%. Hussman believes stocks will average 2.8% per year going forward for the next 10 years.

Thus, there is literally no “equity risk premium” at this time. Put another way, the benefits of owning stocks based on future earnings is simply NON-existent.

The time to prepare for this is not once the collapse begins, but NOW, while stocks are still rallying. Stocks take their time moving up, but when they crash it happens VERY quickly.

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

We’ve also taken care to prepare our finances and our loved ones for what’s coming, by following simple
easy to follow steps concerning our savings, portfolios, and personal security via my Protect Your Family, Protect Your Savings & Protect Your Portfolio reports.

I’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.

In fact, we’re currently on another winning streak having locked in FOURTEEN winning trades in the last two months, including gains of 10%, 11%, 21% and 25%.

All for the the small price of $299: 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,

Graham Summers