It seems like most U.S. financial media cannot quit gushing about the new tax laws. The coverage is universally positive – I’m waiting to hear that the tax cut will cure the common cold.

However, the media ignores the fact that some companies will end up paying higher tax bills. All thanks to the provision in the law that limits deductions on interest payments.

The law limits deductions for interest payments to 30% of EBITDA earnings (earnings before interest, tax, depreciation and amortization) between 2018 and 2021. The restriction become even tighter from 2022 onward with deductions limited to 30% of earnings before interest and taxes.

This is a major negative for any companies with a heavy debt load.

As David Fann, CEO of the private equity advisory firm Torrey Cove Capital Partners LLC, told Reuters, “It [the new tax law] is a deviation from what has been allowed in the last 50 years. This is a radical change.”

Big Effects

The new restrictions on interest deductibility will mean that companies that have EBITDA less than double their interest payments will see “little or no benefit” from the tax reform package, according to Standard & Poor’s, the credit rating agency.

And some firms will suffer under the new rules. S&P Global Ratings estimates that about 70% of companies whose debt amounts to more than five times EBITDA would be negatively affected by the interest deductibility cap.

Prime among the companies affected will be those shaped by private equity, which loves to saddle companies with lots of debt. According to Moody’s around a third of all leveraged buyouts will be worse off under the new tax system.

The changes in tax law could mean that a company like Toy “R” Us may be less able to come out of bankruptcy proceedings. It also puts into question the future of companies such as WebMD Health that was bought by private equity firm KKR. Dell Technologies will now have to shoulder more of the burden of its $2 billion in annual interest payments from its $60 billion merger with EMC Corporation in 2016.

As far as sectors go, there are leveraged companies in just about every sector. Although Moody’s says that the sectors with the most buyout activity are technology, healthcare and aerospace. The trade finance firm Greensill Capital says it feels that these industries should be watched for companies with a lot of debt: oil and gas, coal mining, casinos and trucking.

Greensill said that, based on 2016 earnings in the exploration and segment of the oil industry, firms would have been unable to claim tax relief on 39% of their interest payments, and for 2022 onwards, they would be unable to claim relief on 97% of those payments. Of course, with higher oil prices now
the calculations would not be quite as severe.

Bottom line – there really isn’t just one sector you should avoid. You must look at individual companies on a case-by-case basis. Here are just a few companies on the must avoid list.

Three Companies on the Avoid List

First Data (NYSE: FDC) provides merchant transaction processing; credit, debit and retail card issuing and processing; prepaid services and check verification and other similar services.

This company was bought by KKR in 2007, at the height of the leveraged buyout boom, for $29 billion. KKR then brought First Data back as a public company, via an IPO, in October 2015.  As of a recent 2016 filing, First Data is still burdened with a whopping $18.5 billion in junk-rated debt, which generated the company nearly $1 billion in interest expense over the past year.

The limiting of interest deductibility will mean a lowering of its net income going forward. I doubt that the stock will perform as well over the next year as it did over the past year (up 15%).

Tenet Healthcare (NYSE: THC) owns and operates hospitals and other healthcare facilities. It is one of the largest investor-owned healthcare delivery systems in the United States.

However, it had problems even before the passage of the new tax law. Its revenues have actually declined over the past two quarters. And its debt has been on the rise, climbing in 2016 by 5% year-over-year to $14.4 billion.

And even though its debt declined slightly in 2017, its interest expense rose 6.2% over the first nine months of the year. It already deploys much of its existing cash flow toward the payment of the interest on its debt. No wonder its stock is down 14% over the past year. And now it’s likely to get worse.

JC Penney (NYSE: JCP) is a well-known department store chain with still 875 stores across the U.S. It is almost a poster child for being Amazoned. Adding to all the woes it faces on the competitive front is its heavy debt burden in excess of $4 billion.

At the end of the latest quarter, JCP had a debt-to-capitalization ratio of nearly 79%. In its SEC filing in November, the company said that disallowing tax deductions on interest “could have a material adverse effect on our results of operations and liquidity.”

The company, which has experienced a pickup in its business recently, has said that its goal is to reduce the net debt to EBITDA ratio to less than three times. The change in the tax law has made that goal even more of a priority. If it does not succeed, the stock – down over 43% during the past year – will continue on the slippery slope toward zero.

What does the change in the tax law mean to your portfolio?

It should be mainly good. But I would check to see if you own any highly-leveraged companies. Especially check any that may have been IPO’d by a private equity firm. If you do own any of these type of companies, it may be time to sell them. The tax law changes mean tougher times ahead for these financially-engineered firms.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley

What are the top analysts who consistently get it right recommending strong buy stocks for 2018? TipRanks tracks and measures the performance of over 4,700 analysts to identify the top expertsin each sector who consistently outperform the market.

Analysts are ranked based on two crucial factors: success rate and average return per recommendation. Following the top analysts of 2017 is also an effortless way to find under-the-radar stocks that experts believe have strong investing potential. For this piece, however, I went one step further.

I searched for the double whammy of 1) stocks specifically recommended by the Street’s top analysts and 2) strong buy stocks that also have the backing of Wall Street.

That’s why here I only include stocks with a ‘Strong Buy’ analyst consensus based on the past three months of ratings. Using this consensus, investors can be reassured that these stocks are the crème de la crème as far as the Street is concerned.

Bearing this in mind, let’s dive in and take a closer look now:

Strong Buy Stocks: Lam Research (LRCX)

B Riley FBR analyst Craig Ellis is the No.1 analyst out of over 4,700 analysts tracked by TipRanks. No wonder — he has an impressive 81% success rate and 37% average return over 391 ratings. Right now he is singing the praises of chip equipment maker Lam Research Corporation (NASDAQ:LRCX). He says the recent blow out results for chipmaker Micron “support the case for Memory strength to continue well into C18 albeit with DRAM tighter than NAND.”

Positive factors include “steadily increasing end demand diversification and rising system content to meet the Tech industry’s various next-generation initiatives.” As a result, Ellis is confident that bear concerns about a massive NAND correction next year are overblown.

Indeed, he sees LRCX spiking from $192 to $250- the Street’s highest price target yet.

Overall this ‘Strong Buy’ stock scores 11 buy ratings versus just two hold ratings from top analysts in the previous three months. These analysts have an average LRCX price target of $222- –15% upside from the current share price.

Strong Buy Stocks: First Data (FDC)

First Data Corporation (NYSE:FDC) offers retailers card and mobile payment acceptance capabilities for both online and point-of-sale transactions. Right now, it’s one of the largest payment processing companies in the world with 6 million business locations. Top Barclays analyst Darrin Peller sees First Data soaring 44% to hit $24 in the coming year.

Peller reiterated his “buy” rating on the stock on Dec. 5. He says his channel checks and “deep dive” analysis reveal that First Data’s risk/reward ratio is “compelling” into 2018. The analyst sees 2018 as an inflection point for the company’s joint venture channel growth.

In total, First Data has received seven buy ratings and two hold ratings from analysts in the past three months. While Peller is much more bullish than consensus, the average analyst price target of $21 still suggests 26% upside from the $16.60 share price.

Note that Peller is one of the Top 100 analysts tracked by TipRanks.

Strong Buy Stocks: Apple (AAPL)

Heading into 2018, Apple Inc. (NASDAQ:AAPL) has retained its ‘Strong Buy’ analyst consensus rating. In the previous three months, analysts have published 21 buy ratings and seven more cautious hold ratings. If we look at the $191 average price target from all these analysts, we find potential upside of 11%.

Encouragingly Key Banc’s Andy Hargreaves is optimistic on AAPL, even without blockbuster iPhone sales. He says: “We do not expect upside to consensus iPhone unit estimates [of 240 million] in FY18.” Instead, he is looking for sales of 237 million units for 2018 and warns that the multi-year sale cycle could be short-lived.

Ultimately, however, this doesn’t dampen his overall take on the stock:

“Despite our slightly dour view of iPhone units, we continue to believe the combination of increased iPhone prices and growing services revenue will drive upside to consensus gross margin estimates in FY18. This should drive upside to consensus EPS expectations, even if iPhone units are only in line.”

This five-star analyst reiterated his buy rating with a $192 price target (12% upside).

Strong Buy Stocks: Alexion Pharma (ALXN)

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is a U.S. pharma company best known for its development of Soliris, a drug used to treat rare blood disorders. ALXN has the thumbs up from top Cowen & Co analyst Eric Schmidt. Bear in mind this analyst is generating one of the highest average returns of over 40% per rating.

Schmidt is confident that Alexion can explode 44% from just $125 to $180. He calls Alexion a “top large-cap pick” with a $1 billion opportunity in autoimmune disorder generalized myasthenia gravis (gMG). Soliris has now been approved in Europe, the U.S. and, on Jan. 3, Japan. Schmidt is now expecting a “robust” launch for one of the world’s most expensive drugs, at $700,000 per patient per year.

In total, Alexion has scored 11 buy ratings and only one hold rating from analysts in the past three months. These analysts are predicting that Alexion will rise 31% to reach $164.

Strong Buy Stocks: Chevron (CVX)

California-based oil giant Chevron Corporation (NYSE:CVX) is an interesting pick. Why? Well initially it only has a “Moderate Buy” analyst consensus rating. But if we look at only top analyst ratings the consensus shifts to Strong Buy.

In fact, top analysts have 100% support for CVX with only buy ratings in the last three months. These best-performing analysts see the stock rising over 9% to hit $140.

Cowen & Co’s Sam Margolin gets it right 87% of the time. He also has an average return of over 20% per rating. In respect of Chevron, Margolin is the Street’s most bullish analyst. On Dec. 20, Margolin ramped up his price target from just $122 all the way to $160 (24.5% upside). Chevron is looking appealing right now for three key reasons: 1) accelerating free cash flow; 2) increasing Permian asset value due to operational execution; 3) its dividend yield of 3.36%.

“We see progress along those fronts in 2018 accelerating, and it should be relatively easy for investors to keep track of the data outcomes that can drive the stock directionally. With metrics trending in the right direction, the ultimate valuation of the stock, in our view, can be underpinned by 30-year averages in key cash-based metrics” comments Margolin.

Strong Buy Stocks: Centene Corp (CNC)

‘Strong Buy’ healthcare stock Centene Corporation (NYSE:CNC) is winning analyst acclaim after publishing strong 2018 guidance. The company is a multi-line healthcare enterprise that provides services to government healthcare programs. Following an upbeat investor day, top Oppenheimer analyst Michael Wiederhorn boosted his price target from $111 to $122 (17% upside).

He says the day “highlighted the strong growth opportunities within a $1.9T pipeline ($255B targeted), largely consisting of new Medicaid populations, along with the promising opportunities within the Medicare Advantage and Exchange markets.” And this is a long-term investing prospect says Wiederhorn. He sees Centene “continuing to boast strong revenue and earnings growth prospects for years to come.”

The overall Street picture on Centene is also very promising. In the past three months, CNC has received seven buy ratings and one hold rating. This includes Wells Fargo’s Peter Costa adding Centene to Wells Fargo’s Priority Stock List on Dec. 19 as he believes shares look undervalued right now.

So, too, does the Street: the stock’s $119 average analyst price target suggests 15% upside potential.

Strong Buy Stocks: FedEx (FDX)

Five-star Argus Research analyst John Eade is betting on courier leader FedEx Corporation (NYSE:FDX) for 2018. On Dec. 26, he bumped up his price target to $290 from $245 previously. Given the stock is currently trading at $262, this indicates upside potential of over 10%. The move came following an impressive Q2 earnings beat and raised FY18 outlook.

He says the company should execute with future efficiencies and margin improvement thanks to the “well-respected management’s” continued cash injections. Specifically, management is showing increased focus on expense control in the Ground segment. On top of this Argus believes that FY18 will reap the benefits of falling fuel costs and higher shipping demand.

Following a flurry of analyst “buy” ratings and price target increases, 14 out of 15 top analysts are bullish on the stock. The average price target from these analysts: $278.

Strong Buy Stocks: Owens Corning (OC)

Owens Corning Inc (NYSE:OC) is a key analyst pick for 2018. This is a global company that develops and produces insulation, roofing and fiberglass composites. Top RBC Capital analyst Robert Wetenhall is the most bullish analyst on OC right now. He says the stock will go to $112 (19% upside) because of recent M&A activity and strong execution.

On Dec. 4, Wetenhall underscored his confidence in the stock when he upgraded Owens Corning from outperform to “top pick.” He explained: “Our expectations for double-digit EBITDA growth, robust free cash flow generation and multiple expansion inform our Top Pick rating and give us confidence that the stock will rise even after strong year-to-date performance (+70%).”

Overall, Owens Corning has a “strong buy” top analyst consensus with a $94 average price target. This breaks down into six buy ratings and one hold rating in the last three months.

Strong Buy Stocks: Alibaba (BABA)

Chinese e-commerce leader Alibaba Group Holding Ltd (NASDAQ:BABA) is currently trading near the high end of its one-year range. But analysts are optimistic the stock has even further room to grow in 2018.

Indeed, Alibaba has received only bullish buy ratings from analysts for over half a year now. The average price target from the last three months of ratings alone comes out at $213- 14% above the current share price.

Five-star Stifel Nicolaus analyst Scott Devitt recommends buying BABA for exposure to China’s rapidly growing middle class. He points out that the Chinese eCommerce market can exceed $1 trillion worth of sales by 2019. And BABA looks set to capitalize on this with “well-managed and well-positioned leaders”.

Meanwhile, BABA also has the technical support from China’s broad and efficient telecommunications infrastructure. This continues to increase BABA’s ability to grow its online customer base. And at the same time, BABA’s online/ offline new retail strategy means it has all shopping preferences covered.

Strong Buy Stocks: Broadcom (AVGO)

Semiconductor behemoth Broadcom Limited (NASDAQ:AVGO) is consistently one of the Street’s top stocks. And it looks like the situation is no different for 2018. In the last three months, AVGO has received an incredible 26 consecutive buy ratings.

No hold ratings or sell ratings here. These analysts see the stock trading up by over 18% from the current share price. Top Oppenheimer analyst Rick Schafer has just called AVGO his best stock idea for December-January. He says, “We believe AVGO has one of the most strategically and financially attractive business models in semiconductors.”

Schafer lists four key reasons for his positive outlook on AVGO. The company has 1) a sustained competitive advantage in the growing high-end filter market; 2) a highly diversified, differentiated and “sticky” non-mobile business offering; 3) and efficiently managed manufacturing advantage; 4) substantial EPS and free cash flow accretion heading its way from the Broadcom and Brocade acquisitions.

So far Schafer seems to know what he is talking about when it comes to AVGO. Across his 37 ratings on the stock, he boasts an impressive 93% success rate and 41% average return. Even better, the company is also an attractive dividend stock and recently paid a dividend of $1.75, up from $1.02 the previous quarter.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Place

In order to survive in the 21^st century, companies are demanding greater speed and efficiencies in their processes and robots are ever increasingly the answer. That’s why robot armies are spreading throughout factories and warehouses around the world as automation transforms an ever widening number of industries.

Global sales of industrial robots rose by 18% to a record $13.1 billion (1.828 million units) in 2016, according to the International Federation of Robotics (IFR). The IFR forecasts the number of units will jump to 3.053 million units by 2020, transforming many manufacturing operations into ‘factories of the future’.

Many of these robots will be ones that can work safely alongside humans. These are known as collaborative robots, or cobots. As components become ever smaller and complex, these type of robots can perform vital functions as they can handle the intricacies of manufacturing in ways humans cannot.  Or mundane tasks, such as filling your favorite box of chocolates with individual candies.

Crucial to these type of robotics systems is the rapid advancements being made in software, sensors and robotic vision systems. This looks to be the richest seam to mine when investing in the robotics sector. The IFR estimates this is already a $40 billion market.

Most important among these is robotic vision systems. These vision recognition systems, coupled with artificial intelligence and cameras, allow robots to not only identify objects, but to learn from experience to improve their performance over time.

Foremost in this sector is Cognex (Nasdaq: CGNX), which is the leader globally in providing vision systems, vision software, vision sensors and industrial ID readers. It sells its vision systems to most of the big players in the industrial robotics industry including ABB, Yaskawa Electric and Germany’s Kuka AG. The only exception is Fanuc, which makes its own vision systems. This translates to Cognex having a 30% share of the vision systems market.

Its business is quite profitable, with Cognex enjoying nearly 80% gross profit margins. And with much of the growth in robotics overseas, it is not surprising that 45% of its 2016 revenues came from Europe. Another 30% came from the Americas and 25% from Asia. The Greater China region – the fastest growing region – alone accounted for 12%.

Cognex is expanding rapidly into the fastest-growing segments of industries that are becoming more automated. For example, the logistics sector (warehouses, etc.) accounts for only 10% of Cognex’s revenues, but is currently growing at a 50% annual rate.

Another example is 3D vision, which is a necessity for cobots. Here the acquisitions of companies including Germany’s EnShape, Spain’s AQSense and Colorado-headquartered Chiaro Technologies gave Cognex’s products a lot of traction. Its 3D products grew well in excess of 100% in 2016 and that growth should only accelerate going forward.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley

I remember when I first heard about cryptocurrencies. It was in 2013; a Libertarian friend of mine mentioned how he was dabbling in something called “bitcoin.”

“This is the new, new thing,” he said. It would sweep away the need for central banks. The underlying blockchain technology would kill off big paper-shuffling bureaucracies. “People need advice on how to make money from this new digital asset.”

Alas, it was a tough business proposition back then. Ask most people about bitcoin or Ethereum and you got a shrug of the shoulders. But that wouldn’t be the case forever.

So when we created Banyan Hill, we knew we wanted a cryptocurrency expert on the staff. The tough part was finding one with the right experience and credentials for the job.

By that I mean we wanted a pro — someone who “ran money” professionally on Wall Street, someone who didn’t just write about bitcoin but bought and sold it too. And we wanted someone who could explain how to do it to mainstream Americans in simple, clear language.

Quite frankly, that’s a whole other level of expertise. So I’m pleased to announce that, after a long search, we found the right person for the job…

His name is Ian King, Banyan Hill’s new cryptocurrency editor.

Ian believes in the future of cryptocurrencies so much, he broke off from a successful hedge fund career to create his own website teaching people how to buy and sell the likes of bitcoin, Ripple, Litecoin, Monero and other cryptos.

So when we came upon Ian’s work, the team and I here at Banyan Hill all looked at each other and said: “We have to hire this guy.” 

Real-Life Crypto Trader

Ian has quite a resume.

He started out as a desk clerk at Salomon Brothers’ famed mortgage bond trading department, then moved on to credit derivatives at Citigroup. From there, he spent a decade as head trader at Peahi Capital, a New York-based hedge fund.

After spotting the opportunity in cryptocurrencies, Ian started his own firm to educate and advise crypto speculators. And that’s where we nabbed him, so he could do the same for Banyan Hill’s subscribers.

That seems like a good point to introduce Ian himself…

Q. First, Ian — welcome to Banyan Hill! We’re all very excited to have you join us as our cryptocurrency trading expert. Tell us a little bit about yourself.

I grew up on the Jersey Shore, where I spent summers as an ocean lifeguard. At 19, I was appointed captain of the busiest beach in Belmar, New Jersey.

It was common to have upward of 50 rescues on days when the ocean was rough.

And, although it may sound odd, this is where I started learning the tools that would lead to my success in trading.

See, lifesaving teaches you how to analyze a situation and react quickly. When charging into the surf to help someone, you need to trust your instincts and think on your feet — skills that have become invaluable in my trading career.

Later, in college, I studied psychology and premed in hopes of becoming a psychiatrist. But in my spare time, I started trading dot-com stocks from my dorm room — and I found that I loved analyzing trends too. So while I received a B.S. in psychology, I decided to grab an internship at Merrill Lynch in the middle of the ‘90s bull market.

Trading fascinates me. It requires a better understanding of oneself — of human psychology —  as much as an understanding of the market. After all, markets are comprised of individuals acting in groups. So it all comes down to the same question: Why do we do what we do?

Now I use that question to drive my investigation of the cryptocurrency market from my home in New York City, where I’ve spent the last 20 years.

Q. When did you first get an inkling that cryptocurrencies were going to be the next big thing?

I’ve been thinking about digital money since the end of the financial crisis, when the Fed lowered interest rates to zero.

In 2012, I met with a startup in Silicon Valley that was piloting an e-currency to allow central banks to print and distribute a digital form of money.

To be clear, this was not a cryptocurrency because the value was backed by whatever central bank was issuing it. But the experience sparked my thinking about how digital money can be used to incentivize better citizenry. And how the transfer of value outside the banking system could solve the space and time problem of physical money without the need for a middleman.

There was a need for digital currency here. And the timing was perfect…

Every 10 years, a new technology arrives that changes civilization for the better and creates tremendous wealth for investors.

In the ‘70s, mainframe computing allowed for bulk data processing.

In the ‘80s, personal computers allowed corporations and consumers to run these applications.

In the ‘90s, the rise of the internet democratized information.

In the 2000s, we started sharing that information with “friends” on social media.

And now, in the 2010s, crypto assets permit anyone, anywhere in the world, to transfer something of digital value without the need for an intermediary.

Bitcoin is one such form. However, the bigger picture here is the rise of a whole new crypto asset class that investors are just beginning to discover.

This dispersion of capital among new crypto asset ventures is just beginning, as newly minted bitcoin millionaires reinvest their crypto fortunes, and a fresh wave of entrepreneurs look to capitalize on the current rush of capital.

Q. You worked on Wall Street for years, both at Salomon Brothers, then in credit derivatives at Citigroup, and then became head trader at an equities hedge fund. What did you learn on Wall Street that most prepared you for your second career as one of the world’s best cryptocurrency traders?

For one, in trading, you are only as good as your last trade. That always keeps me searching for the best opportunities.

Another thing my experience has taught me: The asset class may have changed, but the investment behavior here is the same as it always is in new markets.

For example, these markets remind me of the dot-com days in the late ‘90s when 22-year-old day traders were making tens of thousands of dollars a day just by being in the right place at the right time.

The crypto markets are in full mania mode right now — and that means anyone who bought within the last six months has witnessed a 500% return.

But there’s much more upside ahead. See, the good news is that with the institutional money still flowing into crypto, we are years away from the end.

That’s what my career on Wall Street has taught me, and that’s why now is the time to get in if you haven’t already.

Despite the fact that everyone has heard about crypto, only a few people actually own it, and even fewer understand it. So you can still get ahead of the pack.

Q. For people who are unfamiliar with cryptocurrencies … what exactly are they?

Cryptocurrencies are a fundamental change in the way people can exchange something of value.

Every transaction is built on trust. Economies thrive in societies where people trust one another.

In a typical economic transaction, I give you something of value (for instance, $10), and you deliver me a good or service in return. (Let’s say it’s a ride somewhere in an Uber.)

Historically, in order for this transaction to happen, there has to be a middleman to oversee the transaction and punish bad actors.

But “smart” digital money that can be programmed is going to change all of that…

For the first time, an internet user can transfer a unique piece of digital property to another internet user in a way that is safe and secure. Everyone knows this transfer occurred, and nobody can oppose it.

This digital property can be exchanged through a decentralized network of trust that gets rid of the need for a bank or middleman to oversee its validity.

No middleman, no fees to pay the middleman! It’s all verifiable without it. This is a huge breakthrough.

When you see just how big it is (something I’ll continue to write about here in Sovereign Investor Daily), you can understand why smart investors are quickly snapping up new crypto assets.

Keep in mind that I’m saying “crypto assets.” Cryptocurrencies were only the first iteration of this new technology, a subclass of crypto assets.

Crypto assets include new projects such as Filecoin, which raised over $200 million this summer and allows consumers to share computer storage over the blockchain.

Or IOTA, which is the platform that will permit the Internet of Things to exchange something of value. Think about your refrigerator ordering groceries for you or your car paying the parking meter.

So you can see why investors are going crazy for this new type of investment…

Q. We’ve read plenty about the price advances in bitcoin and other forms. Is there still money to be made in cryptocurrencies after the big gains we’ve heard about already?

Absolutely. If the dot-com bubble is a roadmap, we are still in the very early innings of the bubble.

As I said before, the good news is that with the institutional money still flowing into crypto, we are years away from the end.

In fact, in my most recent piece for Banyan Hill, which everyone can read Friday in Sovereign Investor Daily, I explain that bitcoin has finally reached a tipping point … but that it just means there are great opportunities in the offing for those who know where to look.

Just keep in mind that this bubble is particularly odd because it’s the first time in history where Wall Street arrived late to the party. That’s why we’re hearing such skepticism about this market.

In fact, I believe most of Wall Street’s cynicism is simply because it hasn’t yet figured out how to skim its profits off this new financial marketplace. JPMorgan CEO Jamie Dimon has labeled bitcoin as a “fraud,” but he was awfully quiet when his bank was raking in tens of billions by securitizing fraudulent mortgages.

Q. Coming soon, you’ll be launching a cryptocurrency trading service at Banyan Hill. Can you give us some insights into your trading strategy(s) for cryptocurrencies? Are they actually “tradeable”? If so, how?

I’m in the midst of putting this service together, and I’m extremely excited about sharing these opportunities with everyone — because yes, they are tradeable.

See, I look for three big things in a crypto trade before I believe it’s viable:

1. Does the crypto asset solve a real-world problem? Is there an immediate use for this new asset? For instance, the insurance company AXA is already using the Ethereum blockchain to run a decentralized flight insurance program. Now when you purchase flight insurance, you will be automatically compensated if the flight doesn’t leave on time. This process is fully autonomous on the blockchain.

2. What is the crypto asset’s supply schedule? Is there a limited amount of supply that will give this asset value in the future? Bitcoin has a limited supply of coins, with approximately 80% of the total supply issued. That’s not the case for all cryptocurrencies, where investors risk the chance of future dilution.

3. Are the technicals favorable? Is there a strong uptrend in increasing volume? This factor is arguably the most important because strong technicals can be a buy signal to other traders, and higher prices become a self-fulfilling prophecy.

These three factors led me to purchase Litecoin just a few months ago and ride it for 1,000% gains. Many consider this cryptocurrency as “silver” to bitcoin’s “gold,” as it has similar properties …  but it’s able to transact four times faster.

Now I’m compiling that type of experience into a service that will help traders — either new to the market or not — experience the gains that Wall Street has said it has missed.

I just want to stress this point — there are plenty of gains still yet to be made in this market. And I want to make sure the everyday investor has clear and easy access to that.

Q: Ian, that seems like a good place to wrap things up. Any last thoughts?

Right now, cryptocurrencies are this new thing. Mainstream Americans are starting to get used to them. The whole thing is sort of a novel experience right now.

So take us into the future. How will we be thinking about cryptocurrencies in five or 10 years from now?

What will our experience or interaction be with these new forms of exchange down the road?

Coming into this year, bitcoin was the only game in town, capturing 87% of the total cryptocoin market cap. That dominant market share has been halved to about 45% (even though bitcoin’s price has quadrupled at the same time).

So it’s clear to me that this thriving market is just getting started, and I’m excited to pinpoint these new trends here.

We are still early in the investment and discovery cycle, and that’s why crypto will end up being much bigger than even the first wave of dot-coms.

If history is any guide, when the first dot-com investment cycle peaked in March 2000, the 280 stocks in the Bloomberg U.S. Internet Index reached a combined market value of $2.94 trillion.

At $600 billion, crypto’s total market cap is still one-fifth of the dot-com peak. However, this is the first bubble in human history where everyone on the planet (at least if you own a mobile phone) can participate.

Kind regards,

Jeff L. Yastine
Editor, Total Wealth Insider

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Source: Banyan Hill

In today’s world, there is one certainty when it comes to investing that you need to be aware of… new technologies will disrupt nearly every industry.

Take the stodgy airline industry. The Internet of Things (IoT) is about to make airlines more profitable than they’ve ever been in the past. I’m sure you’re wondering how this will be accomplished. Simple – instead of treating their passengers as mere travelers, airlines are beginning to look at them as online consumers that just happen to be on their plane.

Before I delve into more details, let me fill you in on more background on the industry.

Airlines and Ancillary Revenues

In this age of low-cost airlines, the days of when airlines made the majority of their money from airfares are largely gone. Thanks to low-cost airlines, so-called ancillary services have become a mainstay and an important source of revenues for all of them.

A report last month from the research firm IdeaWorksCompany in conjunction with the online car rental company CarTrawler gave insight into the growth of ancillary fees. The report projected that for 2017 airlines will have received a total of $82.2 billion in ancillary revenues. That is about 10.6% of their projected total revenues for 2017.

That $82.2 billion number is also a 22% increase from 2016, with most of the ancillary revenues being garnered by the traditional airlines. Quite a contrast from just 10 years ago when the top 10 airlines (ranked by add-on services) earned only $2.1 billion from ancillary services.

One main reason is the fact that, within the domestic U.S. market and the short-haul operations of airlines outside the U.S., the prevalence of a ‘Basic Economy’ product has driven ancillary sales. The aforementioned report cites airline estimates that over 50% of passengers who purchase this product opt for higher priced bundling options.

Since IdeaWorksCompany released its first report in 2010, the growth of ancillary revenue for airlines has been significant. At that time, the total figure was $22.6 billion with an average spend per passenger of $8.42. Utilizing worldwide passenger numbers provided by IATA (International Air Transport Association), the latest report showed an average spend per passenger of $20.13, with $13.96 being accounted for by to a la carte services, up from just $4.54 in 2010.

However, the lure of buying duty-free goods on airlines is becoming stale for passengers. A 2016 report from m1nd-set Generation forecast such sales would experience an annual growth rate of minus 1.5% for airlines through 2025.

Another revenue source has to be found and quickly. And it’s there… awaiting the airlines that adopt in-flight broadband and Wi-Fi – the Internet of Things in the air.

Passengers Want to Be Connected

Passengers’ expectations of the in-flight experience is changing rapidly. They now expect the same level of connectivity at an altitude of 30,000 feet as they do on the ground.

That much was pretty clear in a study conducted by the market research firm GfK and Inmarsat PLC (OTC: IMASY), the world’s leading provider of global mobile satellite communications. Here are the quite interesting results:

• 60% of passengers believe in-flight WiFi is a necessity, not a luxury.
• 61% of passengers said Wi-Fi is more important than onboard entertainment.
• 45% of passengers said they would gladly pay for WiFi rather being stuck with the onboard entertainment options.
• 66% of passengers traveling with children would consider in-flight internet a “life saver”.

Connectivity now ranks behind only ticket prices and flight slots as a priority for passengers. That could be seen when that same survey revealed 44% of passengers would switch airlines within a year if what they considered to be a minimal level of connectivity was not available. This is especially true of business travelers, as 56% said they want the ability to work while in flight.

Shopping at 30,000 Feet

Yet, most airlines still lag in offering connectivity to their passengers. The aforementioned report from IdeaWorks found that a mere 53 of the world’s estimated 5,000 airlines offer “in-flight broadband connectivity.”

Many seem unaware that they now have access to a global, reliable broadband network in-flight. As David Coiley of Inmarsat Aviation told the Financial Times, “Airlines have to adapt to this new opportunity.”

And it is an opportunity. Consider shopping an online store at 30,000 feet filled with everything from ground transport options to tours to other destination-related activities. Or returning passengers could do their grocery shopping while in-flight to have the groceries delivered when they arrive home. The possibilities are almost endless.

Related: The Bull Market Case for Buying Airline Stocks

A study conducted by the London School of Economics and Inmarsat said that in-flight broadband – offering streaming and online shopping to passengers could create a $130 billion global market within the next 20 years. The study estimated that the airlines’ share of that total could amount to $30 billion in 2035. That’s quite a jump from the forecast $900 million in 2018.

Investing in Airlines Buffett Used to Hate

With this possibility of e-commerce revenue streams in the not too distant future, it may be time to look at the airlines. Even long-time skeptic Warren Buffett now owns airline stocks including Southwest Airlines, AmericanAirlines, Delta Air Lines (NYSE: DAL) and United Continental Holdings (NYSE: UAL).

If you are thinking of going the same route as Warren Buffett, I would stick with the airlines that have the best Wi-Fi connectivity. Conde Nast Traveler magazine reports that a survey from Routehappy found that U.S. airlines are leading the way, with at least a chance of Wi-Fi on 83% of the total seating capacity.

Two of the top three airlines globally with the highest percentage of seats with Wi-Fi connectivity, according to the survey, are Delta Air Lines and United. Other smaller airlines with good connectivity are JetBlue and Virgin America, which was sold to Alaska Air Group (NYSE: ALK). I would focus on Delta, United, and Alaska Air.

Delta operates a fleet of over 700 aircraft and serves more than 170 million customers annually.

Despite two major U.S. hurricanes, passenger revenue per available seat mile rose 1.9% year-over-year in the third quarter. The company forecast that in the fourth quarter this metric would climb somewhere between 2% and 4%, which is encouraging.

The company’s stock is up nearly 10% year-to-date. Nevertheless, it is trying to enhance its shareholders’ wealth through dividends and share buybacks. In May 2017, Delta announced that its board of directors approved a new share repurchase program worth $5 billion and raised its quarterly dividend by more than 50%. In the third quarter, Delta returned $769 million to its shareholders through dividends ($219 million) and buybacks ($769 million).

Another plus is the company’s discipline, which is sometimes a rarity in the airline industry. In the third quarter, Delta expanded capacity less than traffic growth and thus improved load factor by 150 basis points to 86.9%.

United is the world’s largest airline, operating about 5,000 flights a day. Unlike Delta, it is not showing growth in its passenger revenue per available seat mile. But it is showing improvement – the company’s latest estimate is for it to be flat to down 2% year-over-year. That compares to the previous estimate of down 1% to 3%.

Its return on equity (ROE) is 25.3% should support its robust expansion plans. Its ROE is impressive too when compared to that of the S&P 500, which comes in at only 16.1%.  And it is cheap. Its trailing 12-month enterprise value to earnings before interest, tax, depreciation and amortization ratio is only 4.6. That compares to the value for the S&P 500 of 11.7.

The company’s stock has had a tough year and is down 13.25% year-to-date. Maybe that’s why it has stepped up its efforts to reward its shareholders. It has bought back $1.3 billion of stock in the first nine months of 2017. And in December, its board of directors gave the go-ahead for an additional share repurchase program worth $3 billion.

Alaska Air operations cover the western U.S., Canada and Mexico as well as, of course, Alaska. I like its purchase of Virgin America this year, despite the rise in the amount of debt it now has. The company also owns Horizon Air.

No denying that 2017 has not been a good year for its shareholders, with the stock down 21.5%. And like its airline peers, Alaska Air management is attempting to reward its patient shareholders through share buybacks and dividends. The company has increased its dividend every year since inception and will spend about $145 million on dividends in 2017.

Its after-tax return on invested capital (ROIC) is a very respectable 21.3% and its estimated 2017 pre-tax margin of 25% should lead the industry. In the first nine months of 2017, Alaska Air generated revenues passenger mile of just over 39 billion (up 6.6% year over year). Its load factor stood at 84.6%, compared with 84.2% in the first nine months last year.

The bottom line is that it has been a turbulent year for airline stocks as the combination of natural disasters and terrorist attacks have taken their toll. Not to mention industry overcapacity, high labor costs, and now rising fuel costs.

But now may be the time for contrarian investors to look past the short-term turbulence and take a small position in the airlines that are forward-looking. I fully expect we won’t recognize the industry in a decade as technology disrupts it.

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Source: Investors Alley

Many analysts claim fundamental ratios show that stocks are overpriced.

One popular long-term ratio is Dr. Robert Shiller’s cyclically adjusted price-to-earnings ratio, or CAPE ratio. With a recent reading of more than 32, the CAPE is higher than it was before the 2008 market crash.

Other ratios are also above their 2008 peaks. But these ratios don’t tell us very much by themselves. They need context.

One important factor is interest rates.

Over time, the Federal Reserve used different theories to set interest rates. The chart below shows those theories matter to the CAPE ratio.

Now the Fed includes the Federal Open Market Committee (FOMC), the Board of Governors and regional banks.

Regional banks controlled policy for about 20 years after the Fed’s founding in 1913. That structure failed in the Great Depression.

Since no one knew who was really in charge, stock prices were volatile. The chart shows wide swings in the CAPE ratio were normal at that time.

As the country emerged from the Great Depression, the Banking Act of 1935 established the FOMC. That group maintains significant control over monetary policy.

This was also a time when countries adhered to the gold standard. Policies under the Bretton Woods Agreement maintained relatively stable foreign exchange rates.

Each of those factors contributed, in part, to fairly stable CAPE ratios.

But stability was short-lived. International events moved rapidly in the 1960s. As the U.S. abandoned the gold standard, inflation rose, and policy makers searched for new tools.

By the early 1990s, central banks around the world started targeting inflation. Now they use monetary policy to nudge inflation toward 2%.

We don’t know if inflation targeting is ultimately the best policy. But the chart shows that policy led to higher CAPE ratios.

This makes sense. Inflation is now an official goal of governments around the world.

Moderate inflation generally leads to higher prices for stocks. That means stocks should be worth more.

The CAPE ratio is one of the ways to measure what stocks are worth. So, CAPE should be higher when inflation is near 2%.

The chart shows that the right level of CAPE changes as Fed policy changes. So, we should ignore long-term historical comparisons.

CAPE has averaged 26 under the inflation-targeting regime. At 32, its current level, CAPE is at the upper limit of its expected range.

However, that will change.

Central banks are not hitting their target of 2% inflation. They will probably shoot through that target, and we will have a higher-than-desired inflation soon. That could lead to new policy tools, and that would reset the fair value of CAPE.

When that happens, we will adapt to the new market environment. Until that happens, we should remain invested in stocks and enjoy the bull market.

Regards,

Michael Carr, CMT
Editor, Peak Velocity Trader

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Source: Banyan Hill

“This is an aging bull market. A crash is coming.”

“This bubble market fueled by the Fed is going to crash.”

“Trump’s going to cause the market to crash.”

For nearly all of 2016 and most of 2017, investors have been reading these kinds of headlines.

When I joined Banyan Hill, my first article, “Stocks: The Big Opportunity You’re Missing,”made many investors so angry that they wrote my publisher asking him to have me fired.

In that article, I told you that stocks were a good deal. And I told people that they should be buying stocks instead of panicking and selling them.

 Congratulations!

My suggestion to readers was to simply buy the SPDR Dow Jones Industrial Average ETF (NYSE: DIA).

If you were one of the readers who bought this exchange-traded fund, you are now up 65%. Well done and congratulations!

You deserve this because I know how hard it can be to buy when the markets are down.

It also took a lot of guts on your part to buy when most people told you to sell.

Those gains were hard-won by you.

But now that buying stocks is no longer scary, you might be wondering if it’s time for you to cash in your hard-won gains and sell everything.

 My GoingUpness System

For sure, stocks are a more popular trade than when I told you to buy in February 2016.

After all, the Dow Jones Industrial Average was up 28% in 2017 alone.

However, 2017’s large gains mean there’s a good chance that 2018’s gains will be smaller. My best guess is something like 8% to 10%, perhaps as high as 15%.

The way I come up with this estimate is by using my GoingUpness system. GoingUpness is the system that I use to pick stocks in my three paid services.

The GoingUpness system is based around the potential demand and supply for stocks. GoingUpness focuses on the most important benefit of owning shares: a rising stock price.

After two years of gains, my GoingUpness system says that at higher prices there are fewer people who are going to come in to buy stocks than in 2016 or 2017. That also means you’ll see some periods where some people cash in and sell.

The bottom line: Less demand and more supply means that you’re going to see smaller gains in 2018.

 A Focus on Mega Trends Reveals the Best Stocks to Invest In

However, for certain segments of the market, like the ones I focus on in my paid services, I believe we’ll see much higher returns.

The reason for that is because these stocks are going to be experiencing more growth. More growth means more demand for their stocks and bigger gains.

This is why readers in my Profits Unlimited  service have seen gains of over 200% in the Internet of Things (IoT).

Nearly every stock in the Profits Unlimited portfolio is up today. And I fully expect that we’ll see more big winners in 2018.

The reason for these gains, I believe, is a focus on mega trends like the IoT, precision medicine and the millennial generation.

And in 2018, we’ll add new trends:

• Financial technology, or fintech (which includes using technologies like blockchain, mobile payments, peer-to-peer lending and artificial intelligence agents).
• New energy (which includes natural, sustainable, renewable energy, lithium- and hydrogen-based energy sources, and portable, storable and local sourcing).

This focus on mega trends is the reason why I believe Profits Unlimited stocks are going to keep outperforming. And their contributions to market indices like the Dow and the S&P 500 are the reasons why I expect the overall market to keep going up.

That means while stocks are still a good bet for your money, the big mega trends like the ones in Profits Unlimited are going to be an even better bet for your money in 2018.

Regards,

Paul Mampilly
Editor, Profits Unlimited

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Source: Banyan Hill

U.S. equities pushed confidently higher on Tuesday, the first trading day of the new year, resulting in the best kickoff for the tech-heavy Nasdaq since 2013. Bitcoin was hot. Gold well bid. But bonds were slammed, pushing up yields, in a possible sign that inflation and economic growth expectations are rising and will put further pressure on the fixed-income market.

In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained 0.8%, the Nasdaq Composite gained 1.5% and the Russell 2000 gained 0.9%. Treasury bonds declined, the dollar weakened again, gold gained 0.5% for its eighth consecutive gain and crude oil lost 0.1% after a run of strength.

Energy stocks led the way, in what could be possible sector rotation as crude oil tests above the $60-a-barrel threshold for the first time since 2015. Utilities were the laggards on yield pressure, falling 0.9%.

Netflix, Inc. (NASDAQ:NFLX) gained 4.8% after being upgraded by analysts at Macquarie noting changing consumer preferences to ad-free television and the impact of a second round of price increases. Citigroup analysts believe there is a 40% chance the company is acquired by Apple Inc. (NASDAQ:AAPL).

Nordstrom, Inc. (NYSE:JWN) gained 3.7% on an upgrade at JPMorgan on expected tailwinds from stock market gains and tax cut stimulus. On the downside, Sirius XM Holdings Inc. (NASDAQ:SIRI) lost 2.9% on a downgrade from JPMorgan on increased royalty costs.

On the economic front, the Market U.S. Manufacturing PMI came in slightly better than the flash reading, indicating the strong pace of factory activity in 11 months. Job growth was at the strongest since September 2014. And Eurozone activity increased to its best level since the survey began in June 1997.

Conclusion

With the books closed on 2017, the die has been cast: It was a record year, with stocks rising on a total return basis in each and every month for the first time in history.

For now, the consensus on Wall Street is that the uptrend will continue.

Goldman Sachs is looking for “rational exuberance” in 2018 on a combination of strong GDP growth, low and slowly rising interest rates, and profit growth driven by the recently passed GOP tax cut legislation. JPMorgan says investors should “Eat, drink, and be merry” in the new year on higher consumer spending and an even tighter labor market.

The latter, courtesy of strategist Michael Hartnett, fears a 1987/1994/1998-style “flash crash” within the next three months caused by rising interest rates.

Checking in with seasonality, the folks at the Almanac Trader note that January has had a volatile reputation since 2000, with 10 of the last 18 years featuring nasty declines starting with the 5.1% pullback that kicked off the dot-com collapse. January 2009 featured a 8.6% loss that was the worst January on record going back to 1930.

Mid-term election year performances were also tepid, as shown above. SentimenTrader notes that options traders are betting heavily on a spike in volatility in the coming weeks. And these folks tend to be right at extremes.  

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Source: Investors Place

I love it when a plan comes together.

In early November, I wrote about Brazil’s airplane maker, Embraer (NYSE: ERJ), and its promising lineup of defense and civilian aircraft manufacturing contracts.

Separately, in December, I said: “If you’re looking for the best place to invest in 2018, one of your best bets is to put on your investment banker’s hat and bet on ‘M&As’ — mergers and acquisitions.”

Both predictions converged just before Christmas. Embraer’s shareholders reaped an instant 30% windfall when Boeing announced it was in talks for a “potential combination” with the company.

It’s not a done deal, of course.

As Embraer’s largest shareholder, Brazil’s government may only want to sell a big piece, not the entire company. Or perhaps it demands onerous financial terms.

But the point is, in a wide swath of industries — not just aerospace, but pharmaceuticals, chip manufacturing, packaging, chemicals, consumer goods, media, telecommunications and more — the game of M&A “musical chairs” is already underway.

And no one wants to be left without a seat when the music stops.

Amazon Competitors to Invest In

Another sector where I expect to see a lot of M&A activity this year? The U.S. retail sector.

A major theme I expect to emerge this year are Amazon competitors pairing off with the goal of better competing against Amazon.com Inc. (Nasdaq: AMZN).

For instance, eBay Inc. (Nasdaq: EBAY) is a likely buyout candidate.

Potential buyers? Google, among many possible suitors. It desperately needs an internet retail arm of its own if it wants to go head to head as one of the Amazon competitors.

EBay, as one of the most venerable internet retail brand names, and with an existing network of fulfillment warehouses, would be a good place to start.

The Kroger Co. (NYSE: KR) is another buyout possibility for Amazon competitors. Its stock is down 35% from last year’s highs owing to worries about whether it can compete with Amazon — an overblown fear as far as I’m concerned.

The grocer has nearly 3,000 stores around the U.S. Its success in selling organic foods is a major reason Whole Foods leaped into the arms of Amazon to begin with.

Kroger is no laggard in “retail tech” either — a few days ago, the chain said it will roll out “cashierless” checkout technology in its stores this year.

W.W. Grainger Inc. (NYSE: GWW) is yet another candidate for a merger deal, in my opinion.

Grainger isn’t usually thought of as a retailer. It’s considered an “industrial supply” business, selling everything under the sun — cleaning products, paper clips, shelving systems, you name it — to other businesses.

Like Kroger, the stock was knocked down last year as investors fled in fear of Amazon. But Grainger’s network of warehouses and distribution centers are ready-made assets for any company hoping to “bulk up” and compete effectively against Amazon.

Best of all, these three companies aren’t fixer-uppers. They’re already successful, profitable companies.

Together, they’ll report $15 a share in profits in 2018. Two of the three pay dividends of around 2% as well.

Kind regards,

Jeff L. Yastine

Editor, Total Wealth Insider

In this exciting NEW VIDEO, Wall Street legend and former multibillion hedge fund manager Paul Mampilly pulls back the curtain on the biggest investment opportunity in the market today. What insiders are calling “The Greatest Innovation in History,” this revolution will mint more millionaires and billions than any technology that came before it. Right now, the current market for this technology is just $235 billion, but given how fast this technology is moving experts predict it will soar to $19 trillion by 2020. But 8,000% growth is just the beginning—and now’s your chance to get in on the action. [CONTINUE TO VIDEO]

Source: Banyan Hill

The remains of the Spanish galleon Nuestra Señora de Atocha sat on the bottom of the ocean for over 380 years. The famous treasure-laden ship sank in 1622. In 2005, Capt. Jack Jowers of the R/V Dare lifted a 4-foot-long golden chain from the sea floor.

The gold sparkled in the sunshine as if no time had passed.

It was a fantastic discovery that whetted the appetites of treasure seekers all over. There’s nothing more alluring than seeing a diver, still in the sea, holding up sparkling gold.

The fact that gold keeps its luster even in the ocean speaks to the secret of its longevity and desirability.

The Superman of Elements

There aren’t many substances that don’t break down in seawater. Most metals in seawater become something else. Silver, zinc, copper and iron all happily combine with oxygen and rust.

Gold, on the other hand, does not rust. It takes high temperatures and pressures to make gold form compounds with other elements. The reason is simple: It’s a happy element.

Gold isn’t like that. It’s happy all by itself, which makes it the Superman of elements. It’s so durable that nearly all the gold ever mined is still around today. That’s roughly 187,200 metric tons, according to the World Gold Council.

To put that in perspective, we produced about 3,100 metric tons of gold in 2015, a record volume. That means, on our best year ever, we added just over 1% to the total gold available.

For investors, that means we can’t rely on fundamentals such as supply and demand to give us hints on the direction of gold prices. The price of gold is much more about economic conditions around the world. To understand the price of gold, we have to understand money.

Scraps of Paper and Cloth

Money is actually just a fiction that we all agree upon. We say that this scrap of paper and cloth with writing on it has value, so it does. The price of gold, on the other hand, is set by people hedging their bets on that fiction.

Sometimes we feel less confident about the value of a currency. When that happens, we want to own fewer scraps of paper and more “stuff.” Gold is a good choice. It has a long history of being a store of value because of its appearance and utility.

The price of gold shows the long-term confidence of investors versus their faith in the dollar:

As you can see, gold is more than four times more valuable today than it was in 2001.

The reason is simple: There is a finite pool of gold. The amount added to the total every year is minimal. On the other hand, the number of new dollars in circulation is unlimited. The stated goal of most governments today is to create inflation. They do that by flooding the world with currency.

Think of the volume of gold in the world as a big pie. There are only so many pieces of that pie. The more money we add, the smaller the slice of the pie you can afford becomes. On the other hand, if you already have a slice, it becomes worth more and more money.

That’s why owning some amount of gold is critical for every investor. It’s insurance against inflation. It doesn’t have to be bars or coins either. Jewelry makes a great investment … and it looks nice too.

Good investing,

Matt Badiali
Editor, Real Wealth Strategist

In this exciting NEW VIDEO, Wall Street legend and former multibillion hedge fund manager Paul Mampilly pulls back the curtain on the biggest investment opportunity in the market today. What insiders are calling “The Greatest Innovation in History,” this revolution will mint more millionaires and billions than any technology that came before it. Right now, the current market for this technology is just $235 billion, but given how fast this technology is moving experts predict it will soar to $19 trillion by 2020. But 8,000% growth is just the beginning—and now’s your chance to get in on the action. [CONTINUE TO VIDEO]

Source: Banyan Hill