Why This Stock Rally Won’t Last…And What You Need to Do With Your Money Today

By Justin Spittler

Silver is sending us an important warning. Yesterday, the price of silver closed at $20.30, its highest price since July 2014. Silver is now up 45% this year. That’s nearly eight times better than the S&P 500’s 5.9% return. And it’s almost double gold’s 25% gain this year. If you’ve been reading the Dispatch, you know silver is rallying for the same reason gold’s taken off. Investors are worried about the economy and financial system.

Like gold, silver is real money. It’s also a safe haven asset that investors buy when they’re nervous. Unlike gold, silver is an industrial metal. It goes into everything from batteries to solar panels. Because of this, it's more sensitive to economic slowdowns. That’s why many folks think of silver as gold’s more volatile cousin.
Lately, silver has been acting more like a precious metal than an industrial metal. It’s soaring because the global economy is in serious trouble. Today, we’ll explain why silver is likely headed much higher. And we’ll show you the best way to profit from rising silver prices.

Silver has been in a bear market for the better part of the last five years..…
From April 2011 to December 2015, the price of silver plummeted 72%. This 56 month downturn was the longest silver bear market on record. As brutal as this bear market was, we knew it wouldn’t go on forever. That’s because silver, like other commodities, is cyclical. It experiences booms and busts. As you just saw, the losses in commodity bear markets can be huge. But the gains in commodity bull markets can be even bigger. During its 2008–2011 bull market, silver soared an incredible 441%. That’s why we watch commodities so closely. Every few years, they give you the chance to make huge gains in a short period of time.

On December 18, Casey Research founder Doug Casey said silver wouldn’t get much cheaper..…
Doug told Kitco, one of the world’s biggest precious metals retailers, that gold and silver were near a bottom:

My opinion is if it's not the bottom, it's close enough to the bottom. So, I have to be an aggressive buyer of both gold and silver at this point.

Doug’s call was dead on. Silver bottomed at $13.70 an ounce on December 17. That same day, gold bottomed at $1,051 an ounce. In other words, Doug was one day off from perfectly calling the bottom in gold and silver.

The price of silver has soared 49% since December..…
But it could head much higher in the coming years. Remember, silver soared 441% during its last bull market.
Silver is “cheap” too. It’s trading 58% below its 2011 high, even after this year’s monster rally. It’s also never been more important to own “real money.” That’s because it looks like the world is on the cusp of a major financial crisis. Doug explains:

Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.

As longtime readers know, the last financial crisis caused the S&P 500 to plunge 57%. It sparked America’s worst economic downturn since the Great Depression. And it allowed the government to launch a series of radical “stimulus” measures, none which actually helped the economy.

BlackRock (BLK) sees tough times ahead too..…
BlackRock is the world’s biggest asset manager. It oversees $4.6 trillion. That’s more than the annual economic output of Japan, the world’s third biggest economy. BlackRock manages more money than Goldman Sachs (GS), JPMorgan Chase (JPM), and Bank of America (BAC). This makes it one of the world’s most important financial institutions…and one that probably understands the global economy better than almost any other company on the planet. Like us, BlackRock’s chief investment strategist, Richard Turnill, thinks the next few years could be very difficult. CNBC reported on Monday:

"This feels more and more like we're in an environment of low returns and high volatility for some time," Richard Turnill said on "Squawk Box.” "The period of political [Brexit] uncertainty ahead of us isn't going to last for weeks or quarters, but potentially for years," he said.

According to BlackRock, the “Brexit” made the global economy more unstable..…
If you’ve been reading the Dispatch, you know Great Britain voted to leave the European Union (EU) on June 23. The Brexit, as folks are calling it, shook financial markets from Tokyo to New York. It erased more than $3 trillion from the global stock market in two days. 

Then, stocks started to rally. By this Tuesday, global stocks fully “recovered” from the Brexit bloodbath. The S&P 500 and Dow Jones Industrial Average even hit new all time highs this week.

Many investors took this as proof that the worst was over. We, on the other hand, reminded readers to not lose sight of the big picture. We explained that stocks were rallying because they’re the least bad place to put your money right now. We encouraged you to not “get sucked back into the stock market.”

Larry Fink doesn’t think U.S. stocks should be rallying either..…
Fink is the chairman and CEO of BlackRock. That makes him one of the most powerful people in the world.
Like us, Fink isn’t “buying” this stock rally. CNBC reported yesterday:

"I don't think we have enough evidence to justify these levels in the equity market at this moment," Fink said Thursday on CNBC's "Squawk Box."

According to Fink, stocks are rallying for the wrong reasons:

He said the recent rally has been supported by institutional investors covering shorts, or bets that stocks would fall, and not individual investors feeling bullish.
"Since Brexit, we've seen ETF flows almost at record levels … $18 billion of inflows," Fink said. "However, in the mutual fund area, we're continuing to see outflows."
What that tells you is retail investors are pulling out, he said. "You're seeing institutions who were short going into Brexit … all now rushing in to recalibrate their portfolios."

In other words, this rally could fizzle out any day.

We recommend you invest with great caution right now..…
If you still own stocks, consider selling your weakest positions. Get rid of your most expensive stocks. Only hang on to companies that you know can make money in a long economic downturn. We also encourage you to own gold. As we said earlier, it’s real money. It’s preserved wealth for centuries because it possesses a unique set of attributes: It’s durable, easy to transport, and easily divisible. You can take a gold coin anywhere in the world and folks will instantly recognize its value.

We recommend most folks to hold 10% to 15% of their wealth in gold. Once you own enough gold, consider putting money into silver. It could deliver even bigger gains than gold in the years to come. To learn why, watch this short video presentation. It explains why the biggest threat to your wealth right now isn’t an economic recession, a stock market crash, or even a global banking crisis.

It’s something much bigger and far more dangerous. The good news is that you can protect yourself from this coming crisis. Watch this free video to learn how.

REMINDER: Our friends at Bonner & Partners are holding a special training series..…  
If you’ve been reading the Dispatch, you know part of our job is to share exciting opportunities with you when we hear about them. Today, we invite you to take part in a special training series hosted by Jeff Brown, editor of Exponential Tech Investor.

If you haven’t heard of Jeff, he’s an aerospace engineer, tech insider, and angel investor. His advisory, Exponential Tech Investor, focuses on young technology companies with big upside. For example, Jeff recommended an IT security company in October that’s already up 72%. Another one of Jeff’s picks has jumped 38% since February. And one is up 178% in less than a month.

In Jeff's training series, he reveals his secret to making money in technology stocks. He also talks about a HUGE opportunity taking shape in the technology space.  Click here to sign up for Jeff’s training series.

It’s 100% free and will take up less than 15 minutes of your time. Click here to register.

Chart of the Day

Silver stocks just hit a new three year high. Today’s chart shows the performance of iShares MSCI Global Silver Miners ETF (SLVP), which tracks large silver miners. As regular readers know, silver stocks are leveraged to the price of silver. It doesn’t take a big jump by silver for them to skyrocket. This year, silver’s 45% jump caused SLVP to soar 171%. It’s now trading at its highest level since April 2013.

If you think gold and silver are headed much higher like we do, you could put some of your money into gold and silver stocks. According to Doug Casey, these stocks could enter a “super bubble” in the coming years. Keep in mind, these are some of the most volatile stocks on the planet. Many gold and silver stocks can swing 5% or more in a day. If you can stomach that kind of volatility, you could see huge returns in gold and silver stocks over the next few years.

The article Why This Stock Rally Won’t Last…And What You Need to Do With Your Money Today was originally published at caseyresearch.com.

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Why Now Is the Best Time to Buy Gold in a While

By Justin Spittler

Bank stocks are slumping. Wells Fargo (WFC), the largest U.S. bank, has fallen 11% this year. JPMorgan Chase (JPM), the second largest, has fallen 14%. Bank of America (BAC), the third largest, has plunged 21%. And those are just the household names.

The Standard & Poor’s 500 Financials Index, which tracks 87 large U.S. financial stocks, has dropped 12% this year. For comparison, the S&P 500 has dropped 8%. On Monday, Bloomberg Business reported that financial stocks are off to their worst start in years.

The Standard & Poor’s 500 Financials Index has tumbled 11 percent in 2016, putting it on track for its worst month in more than four years. More than $360 billion of market value has been wiped out of financial companies in January, more than all but one month since data began in 1990.

The performance of banks says a lot about the health of an economy..…

Banks make money by loaning money to businesses and real estate buyers. The more good loans a bank makes, the more interest paid to the bank. But when an economy is doing badly, demand for loans falls. Also, when an economy is doing badly, some borrowers don’t pay loans back in full. This increases the cost of bad loans…which is one of a bank’s biggest expenses. This eats away profits from the bottom line.

When the economy slows, people cut back on extra expenses like vacations. People shop less. There are fewer dollars around at the end of each month, so less money ends up in the bank…giving the bank less money to loan out. Since banks “touch” almost every aspect of the economy, bad performance by banks is often an early sign that the economy is turning down.

While bank stocks are down big, bank profits are still solid..…

JPMorgan Chase’s profits jumped 10% from the prior year...Bank of America’s rose 9%...and Wells Fargo’s were flat. You’d expect to see much worse results in an industry where stocks are breaking down. This likely means investors are expecting bank profits to shrink soon. Markets tend to “price-in” things before they happen.

Bloomberg Business reports:

Commercial and industrial loans have flat lined in recent weeks after steadily climbing throughout 2015…Growth in such loans offers investors an idea of potential interest income, as C&I loans typically produce more revenue for banks than parking funds in cash or Treasuries.

Bloomberg Business also explained that banks are bracing for losses on oil loans.

Bigger picture uncertainties are weighing on the group, not least of which is how wounds at energy companies will bleed into this sector. Bank of America, Citigroup Inc., JPMorgan and Wells Fargo have set aside more than $2.5 billion to cover souring energy loans and will add to that if oil prices remain low.

If you’ve been reading the Dispatch, you know the oil industry is in crisis mode..…

The price of oil has plunged 70% since June 2014. Yesterday, oil closed at $32. Energy consulting company Wood Mackenzie estimates $1.5 trillion worth of oil projects in North America can’t make money even at $50 oil. With oil at $32 today, the value of money-losing projects has likely climbed above $2 trillion.

Many oil companies are struggling to pay back loans. Credit rating agency Fitch expects 11% of U.S. energy bonds to default this year. That would be the highest default rate for the energy sector since 1999. This is bad news for banks that have loaned money to oil companies.

Moving along, if you’ve been reading Crisis Investing, you know the “opening up” of Cuba is a huge investment opportunity..…

Nick Giambruno, editor of Crisis Investing, expects to make a lot of money investing in Cuba. Nick specializes in buying high-quality assets made cheap by crisis. According to Nick, a crisis is the only time you can be sure to get assets at bargain prices.

Cuba has been in a slow-motion crisis for decades. In short, its Communist government has wrecked the economy. And the United States’ ban on trade with Cuba killed any chance at economic growth. However, after decades of isolating Cuba, the U.S. government recently changed its policy. It reopened an embassy in Cuba in August. And last week, the U.S. took another promising step toward Cuba.

Here’s the New York Times:

The Obama administration announced Tuesday that it was removing major impediments to contact between the United States and Cuba by lifting restrictions on American financing of exports to the island nation and relaxing limits on the shipping of an array of products, from tractors to art supplies.

The revised rules that will take effect on Wednesday will allow United States banks to provide direct financing for the export of any product other than agricultural commodities, still walled off under the trade embargo.

Nick notes that American companies are pushing to do business in Cuba. He says the “cat’s out of the bag,” and Cuba will soon open up.

Cuba has over 2,000 miles of pristine coastline and the potential to be a top tourist destination. When the embargo ends, the U.S. government estimates 12 million Americans will visit Cuba within the first year.

There’s no denying it. If Cuba ever opens up, there’s potential to make a fortune. Doug Casey has long been interested in the investment potential of Cuba, and I couldn’t agree more that there is huge opportunity there.

You can learn how Nick is playing the “opening up” of Cuba by taking a risk-free trial of Crisis Investing. It’s an investment Americans can easily buy with a standard brokerage account…and it yields 9.3%.

Our friend Tom Dyson just came back from a trip to Cuba..…

If you don’t know Tom, he's founder of Palm Beach Research Group, a publishing company dedicated to helping readers get a little bit richer every day. Since he launched The Palm Beach Letter in 2011, it has built a reputation as one of the world’s most respected investment advisories. You can check it out here.

Tom was in Cuba looking for investment opportunities. Here’s his take…

There are billions of dollars just waiting to flood into Cuba the moment their economy opens. There’s a whole industry poised to invest in Cuba: Cuban people living in Florida and other parts of America...the big hotel chains...the big real estate companies.

Tom says it’s not easy for Americans to invest in Cuba yet…but the potential is huge.

It’s a beautiful island with amazing beaches. Cuba could also be a huge cruise ship destination. It could end up looking like Cancun.

Chart of the Day

Gold has climbed to a three month high. Yesterday, the price of gold closed at $1,125 an ounce, its highest level since November. Gold is also up 6.1% since the start of the year. U.S. stocks are down 8% in the same period.
Today’s chart shows that gold is “carving out a bottom”.  On Monday, we explained why “carved out bottoms” are important. An asset carves out a bottom when it stops falling…forms a bottom for a period of time…then starts climbing higher. A stock that’s carving out a bottom should hold above a certain price for a period of time. This is a key signal that buyers are stepping in at this price, giving it a floor.

Buying an asset that has carved out a bottom is much less risky than buying an asset that’s trending down. As you likely know, gold has been in a downtrend since 2011. However, since November, gold has stopped going down. It has held above $1,050. This is a clue that gold prices are heading higher.

Casey readers know we own gold because it preserves wealth over the long term. We try not to get caught up in its daily price movements. However, gold is at a potential “turning point” today. If you’ve been meaning to buy gold, now’s a good time.

The article Why Now Is the Best Time to Buy Gold in a While was originally published at caseyresearch.com.

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Are Your Bullish Calls Plagued with Divergences?

By now everyone has a prediction about where the S&P 500 Index (SPX) is going to be heading in the future. Most of the sell side and their ilk are all rolling out the green bullish carpet and predicting that a major bull run is right around the corner.

If you are a contrarian investor by nature and tend to sell when others are buying this will be of great interest to you. When retail investors are buying and the professional sell side is quickly reducing their long equity exposure we get increasingly more bearish.

This recent report was accompanied by some eye opening charts...... 

View report and charts courtesy of Bank of America Merrill Lynch


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