Attempting to escape the clenches of the credit crunch, nervous investors ran screaming toward Treasury bills.
So much so, they drove the three-month Treasury bill rate to negative territory for the first time since 1929, creating an over-inflated bubble set for failure.
Yep, the next bubble is here... and most people can't wait for it to happen. It may not have the characteristics of the Internet, energy or housing bubbles, but the unbelievable rally in U.S. Treasury bonds is just as doomed as commodities and housing stocks.
You see, most bubbles form because people believe there's a lot of money to be made. But when the frenzy dies, as it did with commodities, prices come down... hard. With Treasuries, the bubble inflates as people become afraid of other markets.
Eventually, and hopefully, the fear will drain, and Treasury investors will return to stocks and corporate bonds, selling off Treasuries... then pop goes the bubble.
Even Michael R. Sesit, author of Bloomberg's "Treasuries Walk, Talk like an Old-Time Bubble," agrees. He'll tell you it's tough to argue that the Treasury bubble won't eventually pop, seeing that a T-bill priced at zero percent is ridiculously overvalued. And we agree with him.
So does Bill Gross of PIMCO fame, who believes that the Treasury market is overvalued and exhibiting bubble-like characteristics. He even acknowledges a doomed dollar:
"Certainly the government and the Fed cannot continue to talk about the trillions of dollars of expansion of the Fed's balance sheet without the risk of the dollar going south. It is fair to say other economies are doing much the same thing. The dollar doesn't have to go south if all the economies reflate at the same time."
The Fear Is "When" and "How Big of a Failure" It'll Be... Not "If."
Fed helicopter drops, interest rate cuts, and big Treasury borrowings can't keep Treasuries overvalued forever. Plus, we're watching as financial recipients of the $700 billion bailout plan buy Treasuries to recapitalize and improve ratios, instead of lending the money to customers, which is driving up Treasury demand.
Even banks in Asia and Europe are attempting to recapitalize by buying up U.S. Treasuries.
And the Fed isn't exactly helping. On November 25, the Fed announced it would buy up to $100 billion in mortgages from Fannie Mae, Freddie Mac, and Federal Home Loan Banks, which will eventually push more money into Treasuries.
And according to my colleague, Steve Christ:
Fed Chairman Ben Bernanke only managed to push the herd even deeper into bonds when he basically admitted the Fed had run out of bullets. The Fed, Bernanke said, could buy "longer-term Treasury or agency securities on the open market in substantial quantities." "This approach," he said, "might influence the yields on these securities, thus helping to spur aggregate demand."
Needless to say, that was music to the ears of traders in the bond pits as they rushed to get in line ahead of a Fed that now seemed determined to force rates lower by buying Treasuries. T-note yields have fallen to multi-decade lows as a result.
And it's done nothing but create a bubble that's doomed for failure.
What Happens When the Bubble Pops?
First, according to Sesit, a popped bubble would cause big losses for millions of people, especially those who are retiring and regard Treasuries as safe investment vehicles.
Second, the "pop" could destroy "the international stature of the U.S. foreigners, who own about half of all Treasures..."
And third, a "pop" could destroy any economic growth efforts under the Obama Administration, undermining the "dollar's reserve currency status."
So how do you profit from the eventual demise?
One way is to buy put options on the obvious play, the iShares Lehman 20+ Year Treasury Bond. The three other ways will soon be revealed to Options Trading Pit readers, following required due diligence.
With the historic election now over, it's back to business in America.
That's means that along with the new administration, will come a renewed push for the "cap and trade" legislation embodied in the Climate Security Act.
That has once again put king coal back in the crosshairs, leaving nuclear power as one of the top answers to greenhouse gases.
Because the truth is without a big increase in the number of nuclear plants, the goals of cap and trade legislation are nothing but a fantasy.
That means big gains for the nuclear power industry as the push to revive the Climate Security Act unfolds.
In fact, cap and trade legislation is what candidate Obama was referring to when the news broke earlier that he was going to "bankrupt" the coal industry.
In an earlier interview, the President-elect told the San Francisco Chronicle:
"What I've said is that we would put a cap and trade system in place that is as aggressive, if not more aggressive, than anybody else's out there...
So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted..."
That makes cap and trade an idea that now must be reckoned with -- perhaps as early as next spring.
And when the dust settles on this one, nuclear power will end up one of its biggest winners. After all, it is the only energy source today that can come close to replacing what will be lost as coal comes under attack.
But while most Americans spent the summer fixated on the cost of oil, America's "other energy crisis" went largely unnoticed by the thundering herd.
I'm talking about a potential future shortage of the domestic enriched uranium that will run all of those new plants. And unfortunately, it is a shortage that could put the U.S. at the mercy of imports again in the future... that is, unless we do something about it, at once.
You see, while everyone knows we're addicted to foreign oil, fewer of us are aware of this startling fact:
We currently import some 92% of the enriched uranium necessary to run our domestic nuclear plants.
It's a current danger that we can ill-afford... and Washington knows it!
What's more... The situation will get worse once a 20-year program with Russia called Megatons to Megawatts runs its course in 2013.
After that, all bets are off. We could be completely on our own, unable to meet our own needs.
That's where our "government-aided nuclear monopoly" enters the picture... and why its share price is set for an extraordinary run-up.
Because just like Freddie and Fannie, this is one monopoly that's too important to our security to fail.
The reality is, the government won't let it fail.
You see, without this former "government-sponsored enterprise," there would be no domestic producer of nuclear fuel. And that's simply unthinkable in today's world -- especially in a cap and trade environment.
And that is precisely why the U.S. government has every interest in aiding this nuclear power house... and why Uncle Sam is literally helping the company build the kinds of moats Warren Buffett would be proud of.
Plus, with America right now on the brink of a nuclear renaissance, this is one domestic monopoly squarely in the right place at the right time.
The nuclear tide is clearly turning... as the looming crises of energy and climate change force all of us to get sensible about nuclear.
Here's how it's all unfolding...
The Energy Crisis and the Nuclear Renaissance
Of course, we wouldn't be talking about this at all if it wasn't for the recent lessons we learned in the face of our most recent brush with the energy crisis.
That's because huge sums of money will be needed to fix the problems that sent the price of crude to the moon this summer. And needless to say, numerous industries will benefit from these massive expenditures -- like our nuclear monopoly, for instance.
In fact, the energy crisis has now gotten so serious that the International Energy Agency (IEA) estimates it'll take well over $22 trillion in spending -- worldwide -- to fix.
That's an inescapable truth -- no matter how low oil falls.
After all, when demand eventually rebounds -- as it will -- we will right back where we started.
That's a ton of dough... but the truth is that figure is probably just the beginning.
So, in reality, $22 trillion is just the starting point on a journey that could easily double before it's all said and done.
Those are the figures that have put alternative sources such as nuclear power on the uptrend while the alternative energy complex climbs higher across the boards.
Which is why I'm so bullish on nuclear power investments these days... and why you should be, too.
Take a look at nuclear's resurgence in this chart...
And despite the long shadow cast by those cooling towers in Pennsylvania, nuclear power -- like it or not -- is in the throes of a dramatic comeback -- one that will only grow if cap and trade becomes law.
When that happens, it'll be a stunning reversal of fortune for an industry that had to fight tooth and nail just to survive over the last two decades.
Now consider this the next time you open your monthly power bill...
The US Department of Energy reports nuclear power costs 1.72 cents per kilowatt-hour (including operations and maintenance costs).
Now compare that to:
・ Coal at 2.37 cents per kilowatt-hour;
・ Natural gas at 6.75 cents per kilowatt-hour; and
・ Oil at 9.63 cents per kilowatt-hour
The numbers don't lie. Nuclear power is the cheapest and most reliable power source by far... day or night... windy or calm. Nuclear power delivers.
Nuclear's "Carbon-Free" Advantage
That's right. Aside from being cheap and reliable, nuclear energy is also carbon free. That makes the industry an even bigger winner if the Climate Security Act becomes law.
That's all part of the equation that has 17 companies preparing license applications for as many as 31 new U.S Reactors.
(And that's on top of the 15 construction and operating permits already under review by the US Nuclear Regulatory Commission.)
And while that doesn't exactly match the 112 new nuclear reactors that were built between 1957 and 1990, it is definitely the start of a trend... one that investors will soon catch wind of.
You see -- despite the recent pullback -- energy prices have simply gotten too high to stomach... and nuclear makes too much sense to ignore it.
Nuclear Energy Powers the World... and, Now, Your Portfolio
For investors, that means following a growth trend that is already firmly in place in the rest of the developing world.
It's no secret that while America allowed its nuclear industry to wither on the vine out of fear, the rest of the world moved forward.
While we dithered, everyone else kept building... and building... and building.
In fact, according to the Nuclear Energy Institute, as of March 2008, 30 countries worldwide were operating 439 nuclear reactors for electricity generation. Additionally, 35 new nuclear plants are currently under construction in 14 countries.
Naturally, that includes numerous new plants in both China and India, where power demand is expected to nearly triple between now and 2030.
But no matter where all these new plants will be built, the majority of them will be fueled with enriched uranium... which will inevitably become...
The "End Product" of our Domestic Nuclear Monopoly
You see, when this single company begins to open up its new production facility in late 2009, it will hit the market at precisely the right moment.
Moreover, the U.S. government has basically set up the company with a protected U.S. market... by restricting cheaper foreign imports, largely from Europe. That includes a restriction on imports from Russia into 2020.
But make no mistake... While this company may be aided by the federal government, it's certainly no start up. To the contrary, it has an established foothold... with its roots going back to the beginnings of the U.S. nuclear power industry.
In fact, just last year this company supplied nearly 1/3 of the world's enriched uranium supply, fueling 150 reactors on 3 continents. All this while meeting over 50% of the U.S. supply.
But as I mentioned earlier, that feat was only possible using fuel from old Soviet warheads... and that program is rapidly coming to an end. Without the program, only 12% of our enriched uranium would come from domestic sources.
That has this particular company working feverishly on a plan to replace those resources before they run out for good -- one that will help the country rebuild its enrichment capacity before it's lost to foreign competition.
Now, understand this... The plant itself has been costly and subject to big cost overruns. And without explicit government backing, investors have been harder to find.
But with a $2 billion government loan guarantee likely on the way -- sooner rather than later -- the news itself will catapult shares of this vital company much higher... as investors begin to pour in on the announcement.
This One Could Be a Double as the News Crosses the Wire!
And here's the kicker...
The stock price is cheap. In fact, it's trading well below both its book value and its cash per share.
(But don't expect this key piece of the nuclear infrastructure to be on the bargain rack for long.)
Fundamentally and technically, it's forming an investment springboard that will send its share price on a long, long run.
The key, then, is catching it at the right time.
And that time is now.
But before you go any further, you have to ask yourself one critical question:
Would you really let $79 stand between you and the insight that could double your money in a bear market?
Now think about that for a minute.
Because that's a micro-fraction of the fees and commissions investors dole out every year to their brokers and those 401K guys. Meanwhile all they do is spend half their day thinking of new ways to bleed you over a 10% annual return.
And don't even think about trying to get one of those dinosaurs on the phone when you really need them.
Fortunately, there's a better way...
The Sure Way To Wealth
My name is Steve Christ, and I developed The Wealth Advisory newsletter specifically for the individual investor.
It's a weekly look at the markets that matter, along with the detailed investment insights that winning portfolios are made of.
Because let's face it... Making serious money in the stock market is a ton of hard work. I'm not going to candy coat it for you.
It takes patience, savvy, and a certain level of market smarts if you want to play with the big boys. And the cold hard truth is that if you don't possess each of these traits, the big boys will drain your portfolio dry.
"Due diligence" simply can't be done by watching a show or two on CNBC. It just doesn't work that way.
The market eats naive investors for breakfast. Sure, it might work for a while in a bull market, but in a bear market it is another story entirely.
That's why I hope that you'll join The Wealth Advisory today.
You see, the Wealth Advisory goes well beyond winning stock picks. We don't just deliver the stock recommendations that can help members build a lifetime of wealth. We know it's just as important to teach investors how to think for themselves...
The Wealth Advisory Investment Philosophy
As for our philosophy, it's as simple as the man who taught it to me over 25 years ago. And it has served me well ever since. We will look to buy stocks that have been heavily discounted and sell them at a time when others will pay any price.
This was the philosophy taught to me by my uncle Charlie, a man who hadn't held a job, in the traditional sense, since the Great Depression. My uncle was very much out of the Benjamin Graham school when it came to investing.
Of course, if you were behind him in line at the grocery store that's the last thing you would've expected. But it's true -- he was a self-made man and he owed it all to his winning investment philosophy.
"It's all about taking and managing risks," he'd say. "It's just that simple."
"Figure that out, and you'll never have to work again."
And to be honest, it's not much more complicated than that -- as long as you know how to keep your risks to a minimum.
You see, if there is one thing that I have consistently discovered in talking to retail investors, it's this: they simply take on too much risk. And that, in the end, is what ruins their portfolios.
That to me is the big lesson in it all. The markets really are more than happy to reward you. It's just a matter of having enough patience to protect your principal, and be willing to learn along the way.
That much I'm sure of.
So Here's the Bottom Line:
If you are willing to part with less than two bucks a week, you can gain full access to everything The Wealth Advisory has to offer, including detailed information on how to invest in our play on the 'nuclear monopoly.'
I'll also include, at no charge, the following two new investment reports:
- My new "money machine" report: How to Sit Back and Become a Millionaire. (In it, you'll find every last detail on my new income investing strategy, including how you can easily create an income-producing money machine of your own.)
- The Govt-Aided Nuclear Monopoly: The emerging nuclear power play set to deliver triple-digit gains.
All for only $79 a year!
And here's my guarantee to you:
If, for any reason, you're not completely satisfied with The Wealth Advisory, the stocks in it, or the level of research presented, simply let me know within your first 30 days, and I'll personally refund every penny. No questions asked.
And, by the way, you can hold on to my two newest investor reports. They're yours to keep.
Now, look. If you're still on the fence, be assured...
The Wealth Advisory has consistently posted impressive gains, at a time when other investment newsletters are struggling to come up with ANY positive returns.
Bull market or Bear market... it doesn't matter.
In fact, here's a peek at how we've done so far on our closed positions since we opened the service:
- Adobe Systems Inc. (ADBE:NASDAQ) closed with a 32.28% gain in 11 weeks.
- Converted Organics Inc. (COIN:NASDAQ) closed with a 42.11% gain in two weeks.
- FXP UltraShort FTSE/Xinhua China 25 Proshare (FXP:AMEX) closed with a 27.23% gain in four weeks.
- Morgan Stanley China -- SHORT POSITION (CAF:NYSE) a 32.51% gain in four weeks.
- PowerShares DB Commodity Idx Trking Fund (DBC:AMEX) a 14.26% gain in eight weeks.
- PowerShares DB Energy (DBE:AMEX) a 15% gain in nine weeks.
- VMware Inc. (VMW:NASDAQ) a 44.44% gain in eight weeks.
- Chesapeake Energy (CHK:NYSE) a 15.4% gain in 6 weeks
- UltraShort QQQ ProShares (QID:NASDAQ) - an 11% gain 4 weeks
- SonoSite Inc. (SONO:NASDAQ) - a 9% gain in 12 weeks
- PowerShares DB Oil (DBO:AMEX) - a 49% gain in 5 months
- Medtronics Inc. (MDT:NYSE)- a 6.45% gain in 3 weeks
- Becton, Dickinson and Company(BDX:NYSE)-a 8.33% gain in 3 weeks
- PowerShares DB US Dollar Index Bullish(UUP:NYSE)-a 7.17% gain in 3 months
- UltraShort FTSE/Xinhua China 25 Proshare(FXP:AMEX)-a gain of 16.45% in 2 days
- UltraShort MSCI Emerging Markets Proshare(EEV:AMEX)-a gain of 19.62% in 2 days
That's a cumulative gain of 349% vs losses of only 62.5%... or a net gain of 286%!
