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There Are Much Bigger Stock Market Gains to ComeBy
Thursday, September 13, 2012
"It is a certainty that Bernanke will keep rates lower than people expect, for longer than people expect..."
I wrote that in 2009 in my True Wealth newsletter...
The important insight for investors back then was that stocks could soar... As long as I was right about interest rates staying low longer than anyone expected, I knew stocks could "go higher than you can possibly imagine."
I wrote that Bernanke keeping interest rates at zero would give us "all the fuel for a silly bubble in stocks again."
It's happening... Stocks are now at multiyear highs. The great part is, you haven't missed a thing yet...
Today's investing script is actually the same script we've been using for years, simply updated to continue out to 2015 and beyond...
Our script all along has been for us to enter what I call the Bernanke Asset Bubble. (And my friend, we are in it now, with much bigger gains to come.)
The basic idea is that Bernanke will keep interest rates lower than anyone can imagine, for longer than anyone can imagine... and that will cause asset prices to soar. That includes stocks... as well as real estate and precious metals.
Now (according to Bloomberg news), it looks like Bernanke will keep interest rates at zero until mid-2015.
Once again, we will stick with our original script: Interest rates in the U.S. could stay near zero for much longer than that... causing asset bubbles.
Bernanke won't mind if stock prices or real estate prices soar. Heck, he welcomes the day that happens. He's trying to make that happen. If stocks and real estate prices soar, people won't feel broke, and that will get the economy going again.
Keeping rates at zero for many years will simply force savers out of their savings (which are earning near zero percent) and into the stock market.
My advice is to beat 'em to it...
Get yourself invested in stocks now. It's not even that important how you do it... a simple, broad stock market fund will do the job. It's just important that you do it...
Residential real estate is an even better deal than stocks... Homes are dirt-cheap right now, and the tax situation is much more favorable in your primary residence than in stocks.
The Bernanke Asset Bubble is in full swing. Residential real estate prices have a "free pass" to soar for the next three years (as rates will stay low through mid-2015). And stocks should soar, too.
So don't sit on your hands. Get on board...
Good investing,
Steve
Further Reading:
In July 2011, Steve checked in on the Bernanke Asset Bubble. "From the bottom in March 2009 to the top this year, stocks doubled," he wrote.
"But where do we go from here? Doesn't this bull run in stocks have to end already? Absolutely not." The takeaway: If you're following the script, you know there's money at your feet. Read more here.
Earlier this year, Steve quoted legendary market analyst Jeremy Grantham: "To avoid exploiting bubbles is intellectual laziness or pure chickenry." Get more from Grantham here: Secrets from the Man Who Trades Bubbles.
Market NotesA REMINDER ABOUT THE BEST STRATEGY FOR TECH INVESTORS Today's chart shows two investing strategies in the tech sector. One leads to solid gains... the other results in solid losses.
Amateur investors often mistakenly think they need to invest in risky, unproven companies to make big gains. Take social media companies like Facebook and Groupon, for example... Their initial public offerings (IPOs) earlier this year generated massive hype. And frenzied investors – who paid ridiculous prices for shares of companies with lackluster financial results – were left "holding the bag"...
Sticking with dominant, cash-gushing companies is nearly always the better strategy. For example, shares of Google just touched their highest level in over four years. Unlike social media stocks, Google has a steady, profitable business and a growing pile of cash on its balance sheet. It focuses on being the go-to search engine for the majority of Internet users. Google's dominant position allows it to rake in billions of advertising dollars every year.
As you can see in the chart below, sticking with the dominant Internet company netted investors a healthy 35% gain over the past 12 months. On the other hand, IPO investors who got caught up in the social media hype have lost 50%-80%.
– Larsen Kusick
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