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Three Reasons a Trade Deal Is Closer Than Ever

By C. Scott Garliss, editor, True Wealth Opportunities: China

Trade talks are unlikely to breach the divide between the U.S. and China…

At least, that’s what the financial media told us in mid-September when officials from the two countries re-engaged in talks. Commentators said differences were so far apart, it would be near impossible for either side to meet the other in the middle.

Headlines said that the talks had hardened into a political and ideological battle. It might take decades before the two sides could fix anything.

After those dire predictions, the market began to drop… By the beginning of October, the S&P 500 Index had lost 3.2%. Investors were scared tariffs would keep rising and the growth outlook would worsen.

That’s because the U.S. had recently imposed additional tariffs on Chinese imports. And it was preparing to raise tariffs even further on October 1. When negotiators sat down together again, it was the first time the two sides had conducted face-to-face meetings since July.

And that’s when the dialogue began to change.

Now, all the signs say we should expect a deal soon – possibly within weeks. Today, I’ll share three reasons why… And I’ll show you why it could lead to powerful gains from here.

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There’s an old saying about negotiations in American politics – when it seems like the two sides are farthest apart, they’ve never been closer together. That’s what appears to have happened here…

Both sides agreed they would rather work things out diplomatically. Soon, reports began to surface from both the U.S. and China that talks were moving forward.

This past Monday, high-ranking officials from China and the U.S. met to discuss a potential visit to the U.S. from China’s President Xi Jinping… And if all goes well, the visit will be the occasion for Xi and President Donald Trump to sign a “phase one” deal.

A signing was already planned for the Asia-Pacific Economic Cooperation (“APEC”) Summit in Chile on November 16-17. But it was canceled in the wake of violent protests there. Now, the two sides are searching for an alternate venue.

Trump has said he would like to hold a signing in the U.S. Many are saying that Iowa would be an ideal spot. Given that the U.S. has put pressure on China to boost agricultural purchases from U.S. farmers, a signing in Iowa could make for a great photo opportunity.

Chinese officials have also said they would like Xi’s trip to the U.S. to be an official state visit, in addition to the signing.

All this good news has had a profound effect on the market. Take a look at this chart of world stocks from index provider FTSE. You can see the rally since talks resumed…

Of course, trade-war talks have been a roller-coaster over the past year. And the market followed the headlines… with major drawdowns when negotiations took a turn for the worse. So how do we know things won’t suddenly change again?

We don’t. But there are several reasons why what seemed a total impossibility two months ago is now looking likely…

First, the Chinese economy is increasingly feeling the pain of the U.S.-imposed tariffs. More companies are moving their manufacturing operations out of the country – and they may not come back. The threat of lasting harm to the Chinese economy is real if the U.S. doesn’t lift its tariffs. So China has a strong incentive to make a deal.

Second, the effects of the global slowdown are clearly showing up in U.S. economic data. For instance, third-quarter gross domestic product (“GDP”) growth came in at 1.9% – better than expected, but much lower than last year’s growth of 2.4%. If Trump can make it through impeachment proceedings, the economic effects of the trade war will threaten his re-election chances – and he doesn’t want that.

Lastly, the U.S. reversed course and agreed to China’s proposal to make an agreement in phases. That means many of the more contentious issues can wait until later… which gives both parties no reason to hold off on a partial agreement in the short term.

So, after investors and the media nearly gave it up for dead, a trade deal now looks all but certain.

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China and the U.S. won’t resolve their differences all at once. That much is true. Still, even a phase-one deal should mean at least some of the tariffs will end.

This could do a lot to get global growth back on track. Plus, it would lift one of the biggest sources of uncertainty in the market… which means investors should get more confident about putting their money into stocks.

We’ve already seen the beginnings of this. Stocks have rallied to new highs. Now, a trade deal is incredibly close. So stay long… We could see a powerful run-up from here.

How to Predict Which Biotech Stocks Could Soar 100% or More

By David Lashmet, editor, Stansberry Venture Technology

This is the biggest mistake you may be making…

If you don’t invest in medicine… biotechnology… or drugmakers… you’re missing out on a massive part of the economy. Health care spending makes up more than one-sixth of the entire U.S. gross domestic product.

Many investors “buy biotech” by investing in one or two blue-chip Big Pharma companies like Pfizer (PFE). Or perhaps they buy an exchange-traded fund, like the iShares Nasdaq Biotechnology Fund (IBB), which holds a basket of about 200 biotech and specialty pharma companies.

Both choices can be incredibly profitable. As my colleague Steve Sjuggerud says, “If you catch just one biotech bull market in your lifetime, you may never have to work again.”

But what if instead of buying the current large-cap winners or a full index, you could simply buy the future winners?

By that, I mean the most promising 1% of small-cap biotechs – the few contenders with the potential to soar 100%… 200%… even 500%.

We’ve identified a group of stocks that are so small… they don’t offer options.

Yet they’re some of the most explosive stocks on the market today – spiking 226%, 495%, even 1,000% or more – in a short amount of time.

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Predicting this probably sounds impossible. But more than any other sector, biotech companies show off their future products. That means we can get a glimpse of which companies have the best prospects.

Legally, they have to do this. Prospective drugs and medical devices are tested in clinical trials. And for the past decade, all the new trials that are starting have been collected in one place, thanks to the U.S. Food and Drug Administration (“FDA”).

This clearinghouse of information for patients and investors is all hosted online, for free, at clinicaltrials.gov. You can search drugs, conditions, devices, and some 320,000 studies.

Of course, making sense of this flood of information isn’t easy. And the trials aren’t cheap.

That’s why today, more than half of new drugs were not invented by the Big Pharma companies that now sell them…

Bean counters at Big Pharma got tired of paying the research costs for so many clinical-trial failures. Instead, the new business model is to let investors take the risk… then Big Pharma steps in to buy the successes.

Fortunately, this means picking the right small firms can lead to huge gains when the takeover happens.

Most small firms have no sales force, and Big Pharma companies have thousands of field reps. So there’s a virtuous economic payoff when the big companies and smaller firms get together.

The hard part is finding the successes before the Big Pharma sharks can beat us to them. That’s what we specialize in at Stansberry Venture Technology. We use three drug guidelines when recommending a company…

Minimal side effects. We figure that as long as they’re safe, the drugs we back could still be supplemental drugs even if a better treatment is developed in the future.

Strong positive effects. By that, I simply mean that the drug works and does what doctors need it to do.

Huge market potential. We like to see treatments that can help hundreds of thousands of people per year, if not millions.

Plus – and this is important – we focus on early stage clinical trials. These are Phase I and Phase II trials, when researchers have moved past animal testing into treating people with the diseases.

That’s our edge – our informational advantage. We don’t have to wait for the final answer, usually found in Phase III trials… We predict it.

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Let me give you a real-world example of successful Phase III clinical data – the Kisqali cancer pill from drug giant Novartis (NVS). Long before this new drug was for sale, it was tested in breast-cancer patients. Here’s the first look at the Phase III data from back then:

Of the 670 patients in the trial, half got chemotherapy and a placebo, while the other half got chemo plus Kisqali.

The group that got chemo and Kisqali had, on average, 23.8 months of progression-free survival – no hint of cancer for almost two years.

The group that got chemo and a placebo had progression-free survival of 13 months – just over a year. So the absolute difference was 11 months in favor of Kisqali.

In the latest update on this trial, 70% of people treated with Kisqali were still alive three and a half years later, versus less than half (46%) of those who did not get Kisqali. So this drug offers a clear survival advantage.

This, of course, is the ultimate goal of any cancer treatment. So as well as being a promising sign for new patients, this new data should boost sales.

Now, even Phase III results come before FDA approval… that is, before any sales are possible. They run at a negative return on investment: no revenue and no profits. In accounting terms, it’s still a loss. These are invisible assets for a firm.

Big Pharma firms don’t usually wait for Phase III trial data to buy up drug candidates, though. That gets expensive – particularly in parsing out sales royalties, which after Phase III trials can be a 50/50 split.

At the Phase II stage, there is a more reasonable 80/20 split – Big Pharma likes that. But Big Pharma can also sweeten the deal for its smaller counterparts: namely, by doling out “milestone payments” that can climb up to a billion dollars over time.

For a small-cap company, a deal can be a huge booster – one that early investors share.

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That’s why if we see stellar results early on, it’s possible to predict where the later winners will be… and get in on their successes.

In this case, Novartis has Kisqali on the path to becoming a blockbuster drug, with sales already hitting $110 million per quarter. And revenue for the drug is up 94% compared with last year.

But again, Novartis is a Big Pharma company. So for Novartis’ investors, the numbers aren’t as exceptional yet…

Novartis is a behemoth with a $220 billion market cap. Shares have gone up 39% in the two and a half years since Kisqali won FDA approval. But the S&P 500 Index also went up 33% over that time frame. So this major leap forward in cancer treatment barely allowed Novartis to outpace the benchmark index.

But imagine if Kisqali were owned by a small, one-drug company, with these same promising trial results… If that tiny company was able to make a deal for its drug, it could absolutely soar in value.

That’s why we focus on small-cap companies in Stansberry Venture Technology, where successful trial results and eventual approval can mean gains of 100% or more.

It’s no coincidence that we bring up Kisqali. One drug we are tracking in my Stansberry Venture Technology newsletter works when Kisqali fails…

Breast cancer is the most common cancer. We see nearly 270,000 new patients per year in the U.S. – and 75% can take Kisqali for the kind of cancer they have. For many of them, this will be a lifesaving treatment. But roughly 100,000 people will need a second-chance drug.

That’s where the drug we’re tracking comes in. Fortunately, about one in four people who progress on Kisqali are responding to this new safety net.

Again, that’s based on early trial data. This still needs to be confirmed. But the small company behind this second-chance drug has now started pivotal Phase III trials, with the FDA’s consent.

How long will Big Pharma firms wait before the company licenses this drug? Will they wait for these trials to finish to get in a bidding war? Probably not…

Already, patients who otherwise would be dead are alive today because of this promising new compound. And that also means that if a deal happens, early investors are in for a huge payout.

That’s how we find the biotech firms with the biggest upside – using positive early trial results to find the top 1% of small stocks.

This Rare Anomaly Is a Screaming Buy for Stocks

By Dr. Steve Sjuggerud – True Wealth

We’ve only seen this setup three times since the 1980s.

The yield on long-term 30-year U.S. Treasury bonds was recently below the dividend yield of the benchmark S&P 500 Index.

That’s a crazy situation – one that shouldn’t happen. But here we are.

Yesterday, I showed you exactly why this anomaly is so unusual. And make no mistake – it’s rare. We’ve seen only two other cases… in 2008 and 2016.

Both of those occurrences turned out to be fantastic times to own stocks. And I have no doubt that when folks look back at this situation in a few years, they’ll wish they’d stepped up and bought now, too.

Let me explain…

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The first time that 30-year Treasury bond yields dipped below the S&P 500 yield was in November 2008…

Stocks were getting crushed in the months leading up to it. U.S. stocks had plummeted 47% from their May peak. And investors wanted nothing to do with them.

Heck, the entire financial system was in question. Back then, the idea of buying was insanity. The housing market was crashing for the first time in history, and everyone was scared the U.S. government couldn’t handle the situation.

The consensus in late 2008 was that the beating in stocks would continue. Investors fled to safe-haven assets like bonds to stop the bleeding.

Looking back, though, buying bonds instead of stocks in November 2008 was a terrible idea. It was the exact opposite of what you should have done.

That month wasn’t quite the ultimate bottom for the stock market. It fell to slightly lower levels a few months later. But still, if you’d bought in November and held for just one year, you’d have done fantastically. Take a look…

The market soared 45% in a single year. This has only happened a few times throughout history… But it’s what’s possible when this crazy anomaly appears.

Simply put, you would have done incredibly well betting against the crowd. Owning stocks – not bonds – was the right move. And the same story played out again in 2016…

After a brutal first few months in 2016, we saw another rare occurrence like the one we’re seeing today. Stocks were down 13% in just three months, ending in early February. Investors fled to bonds as a result.

This drove Treasury bond prices higher. And since bond prices and bond yields move in opposite directions, it drove the 30-year Treasury bond yield below the S&P 500 dividend yield once again.

But again… buying bonds instead of stocks in July 2016 was a terrible idea. If you followed the crowd, you would’ve missed an impressive move higher in stocks.

The S&P 500 took off over the next year. Check it out…

Stocks were up 21% over the next year. Today, the market is up 57% in total since then. Again, buying bonds was the wrong call in 2016… You really wanted to own stocks.

It wasn’t easy, of course. It was a scary time. And when everyone agrees that stocks are a bad bet, it’s hard to be bold and make the opposite move.

That’s true again today. We’re hovering around all-time highs in the stock market right now. But most folks are scared. The consensus view is that stocks are a bad bet… So the crowd believes moving to bonds is the smart move, as I explained yesterday.

That belief recently pushed the 30-year Treasury bond yield below the S&P 500 dividend yield for the third time in 40 years. If the past two examples are any indication, you want to own stocks… And you want to own them NOW.

Investors Are More Scared Today Than They Were in 2009

By Dr. Steve Sjuggerud – True Wealth

This is not what we’d expect to see at the end of a major bull market.

We should see euphoria – investors throwing caution to the wind, taking big (and even foolish) risks.

That’s what happened as the dot-com bubble approached its peak. I saw friends getting “paper rich” with stock options. Others quit their jobs to day trade full time. It was madness.

The same thing happened with housing in the mid-2000s. It seemed like everyone I knew had gotten their real estate license. I knew plumbers and contractors who quit their jobs to flip houses.

This idea just isn’t playing out today. Investors haven’t thrown caution to the wind. They haven’t gone “all in.”

In fact, investors are downright scared…

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You only have to ask the investment community to figure out that fear is rampant today.

That’s exactly what the American Association of Individual Investors (“AAII”) does each week. Using a simple survey, it asks a group of investors if they are bullish, bearish, or neutral on stocks over the next six months.

This late in a bull market, we’d expect investors to be excited. We’d expect them to be bullish. But as you can probably guess, that’s not the case.

Right now, investors are more bearish than they’ve been since 2009. It’s crazy – but true!

According to the AAII Sentiment Survey, investors are more scared today than they were during the most recent stock market correction… the U.S. credit downgrade in 2011… and even the depths of the financial crisis.

That’s nuts for a simple reason. We’re not in a major crisis today… It’s quite the opposite.

After 10 years of higher stock prices, the S&P 500 remains near all-time highs. The economy continues to show signs of strength. And interest rates are incredibly low, which tends to be rocket fuel for stock prices.

Still, instead of going “all in” like we would expect, individual investors are scared. You can’t make this stuff up!

This is another reason why I’m so bullish on the broader market. Stocks are a better deal than most realize. And with bonds yielding next to nothing, investors should change course and buy equities in the search for yield.

Sure, there are plenty of reasons to worry. We’re in an environment where a presidential tweet can move markets 2% higher or lower. It’s new and unsettling, no doubt. But you have to ask yourself…

Do these fears matter, or are they just a passing phase?

To me, every doubt out there today is a short-term worry, not a long-term concern. And when you look at the big picture, there are plenty of reasons to be excited.

That’s why I believe you must own stocks today. Most investors don’t agree. They’re at 2009 levels of fear. But that’s creating an opportunity, my friend… Don’t miss it.

The Yield Curve Just Inverted… Time to Sell, or Buy?

By Dr. Steve Sjuggerud – True Wealth

Last month, one of my major “red flags” for a recession went up…

Specifically, the rate on long-term bonds (10-year Treasury bonds) fell below the rate on short-term bonds (two-year Treasury bonds).

It’s called an “inverted yield curve.” And trust me, it’s big news…

You’ve probably noticed the financial media has been eating this story up. But what you probably don’t realize is that they’ve got it all wrong.

They see the inverted yield curve as a bad sign. But in the short term, this is hugely positive for stocks.

Let me explain…

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It was the middle of last month when the yield curve I’ve been tracking first inverted. It happened only briefly during the day. But the financial media was all over the story.

Here was the headline on Yahoo Finance…

CNBC followed suit with a similar message…

The clear reaction was fear. And that fear has continued… especially after the yield curve inverted again for several days in a row at the end of last month.

The financial media, and most investors, believe an inverted yield curve is the sign that the end is near. And ultimately, it is.

However…

The yield-curve inversion is actually a major bullish sign for stocks in the near term. No kidding.

First, remember that an inverted yield curve is an odd scenario… After all, if you’re locking your money up for 10 years, you should demand a higher interest rate than if you’re locking it up for only a year or two. The reduced flexibility (and heightened risk) of long-term bonds should come with higher yields.

When this isn’t true, it means something wonky is happening in the economy. And you can usually point the finger at the Federal Reserve.

You see, the market controls long-term rates, while the Federal Reserve controls short-term rates. If the Fed artificially pushes short-term rates higher, it slows down the economy. And it’s usually a sign that a peak is coming.

Until July, the Fed had been on a rate-hiking spree. It has since reversed course – but that didn’t stop the yield curve from inverting.

Now, let me be clear on a couple of things…

An inverted yield curve is the best recession indicator I know of. It’s as good as it gets at spotting potential hiccups in the U.S. economy.

In addition, stocks tend to have their biggest falls during recessions. So if a recession is coming, the odds of a stock market bust are higher than ever.

There’s an important caveat, though… Neither of those things mean a crash is imminent. I explained this back in January when the yield curve was getting close to inverting. But the story is worth repeating today.

Now that the yield curve has inverted, history says we should expect big gains over the next six to 18 months.

The financial media has completely missed this part of the picture. Instead, they play on our fears and start wailing that the end is here. That couldn’t be further from the truth.

The last three times the yield curve inverted, the market didn’t peak until 18 months later… each time. And stocks gained 21% on average.

In 1998, the inversion happened almost two years before stocks eventually peaked. Stocks soared 40% over that time.

Now isn’t the time to be fearful and sell. It’s the time to know your history… and stay long.

History says it should be a year or more until stocks eventually peak. And we’ll likely see big gains between now and then. That’s why I continue to recommend staying long.

Stocks Are Cheap… And You Want to Own Them Now

By Dr. Steve Sjuggerud – True Wealth

No, I haven’t lost it.

I feel like the rest of the world has, honestly.

For years, I’ve been saying that stocks were the best place for your money. And for years, prices – and valuations – have risen.

You’d assume that after a 10-year bull market, stocks would be expensive. But as I explained yesterday, that’s not the case.

Stocks are cheaper than just about anyone realizes. And it’s all thanks to incredibly low interest rates. Today, I’ll explain exactly how to see this… and exactly what it means for your money.

In short, this isn’t the time to give up and sell. Stocks are cheap… and you want to own them now.

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Before we get to the details, we need to take another look at the chart I shared yesterday…

Again, it shows stock market affordability… a measure of stock prices, valuations, and interest rates.

Historically, this measure has done a great job of pegging the major tops and bottoms in the market. Take a look…

Surprisingly, this measure also says stocks are dirt-cheap today – even after a 10-year bull market.

I’m not some kook making up numbers to prove my point, though. I’m simply comparing stock valuations with interest rates to come up with a simple “fair value” for the market.

The math here is pretty simple…

In order to compare apples to apples – and look at stock yields versus Treasury yields – I invert the price-to-earnings (P/E) ratio. As I said yesterday, the P/E ratio is the most common benchmark for stock valuations.

Flipping the ratio still shows us whether stocks are expensive or cheap. It’s just the E/P ratio instead of the P/E ratio. In finance, we call it the “earnings yield.” So, if the P/E ratio is 20, then the earnings yield is 5% (1 divided by 20).

Now that you know all the “ingredients,” here’s the secret to how my stock market affordability indicator works…

Whenever interest rates are high relative to the earnings yield, stocks are expensive. And whenever the earnings yield is high relative to interest rates, stocks are cheap.

This is crucial to understand if you’re worried about how to invest today.

Just take a look at the next chart. You can see these two yields broken out separately. And if you look closely, you’ll notice something interesting…

Over history, the relationship between the earnings yield and interest rates has held up pretty well. When it gets out of whack, something big happens to push the relationship back into place.

In late 1999 for example, bonds paid nearly 7% interest. But the earnings yield on stocks was around 3.5%. So stocks were a terrible deal in late 1999 relative to bonds.

We all know what happened next… Stock prices crashed, and the earnings yield soared (remember, yields and prices move in opposite directions). Meanwhile, investors fled to safety… pushing bond prices up and yields down.

By 2004, both lines on this chart were moving together again. And that brings us to today…

This month, astonishingly, 10-year Treasury yields fell to a crazy low level – below 1.5%. Meanwhile, at a P/E ratio of 19, the earnings yield on stocks is above 5%.

So this time, bonds are a terrible deal compared with stocks.

To get this relationship back on track, either stocks need to absolutely soar, or interest rates need to skyrocket… or both.

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Now, don’t get me wrong. While this relationship has highlighted some key market moves, it doesn’t have to be perfectly one-to-one today. It doesn’t guarantee stocks will continue higher.

But it does tell us something about the relative value of different investments. And that’s important when deciding what to do with your money now. It’s the only way to determine what’s cheap or expensive… and what’s a good deal or a bad deal.

Our takeaway from all this is simple, but powerful. Right now, stocks are an incredible deal relative to bonds. Plus, we can see that we’re nowhere near a bubble today.

I urge you to take advantage of this. Stocks are cheap today… cheaper than anyone realizes. Now isn’t the time to sell. It’s the time to buy.

It’s Crazy, But Yes… Stocks Are Cheap

By Dr. Steve Sjuggerud – True Wealth

I know what you’re thinking…

“How could you even consider buying stocks, Steve? How can you STILL be bullish when stocks are so expensive?”

Yes, I’m fully aware that stocks have soared since bottoming out in 2009. And I’m fully aware that the Nasdaq has practically soared from “lower left to upper right” over the last 40 years (with the exception of the dot-com bubble and bust in 2000).

But I look at stocks differently…

I explained a bit about this last week in regards to the housing market. You can’t just look at price when it comes to housing. You have to look at value. It’s all about what you’re getting for your money.

The same is true when it comes to stocks. And right now, looking at value proves that stocks are CHEAP.

Let me explain…

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As I explained for housing, price isn’t the only thing to consider. You have to look at affordability… which includes incomes and interest rates.

Today, I want to value stocks relative to interest rates. I want to look at stock market affordability.

I look at stock values relative to interest rates because all investing is relative…

If you could earn 20% interest at the bank, you would have zero incentive to invest in the stock market. But if the bank pays you zero percent, and stocks have averaged 8% a year over time, then you have an incentive to invest in stocks.

Investing is all relative… Investors make decisions every day, asking the one question that matters: “Which investment is best today, relative to the other investing choices today?”

So please take a look at the chart below. It’s my chart of stock market affordability, extending through the end of the last bear market in 2009.

Like housing affordability, I look at three things here: stock prices, stock earnings, and interest rates. Here’s what it looks like when you put it all together…

Just like our housing chart from last week, readings at the lower end of the chart mean the market is more affordable, and less expensive.

As you can see, my indicator shows that stocks were dangerously overpriced in 1987 – right before Black Monday hit on October 19. And you can also see that stocks were extremely overpriced at the peak of the dot-com bubble in 2000.

When were stocks the cheapest by this measure? After the collapse of Lehman Brothers, near the stock market bottom of 2009.

This means in hindsight, my stock market affordability indicator did a good job showing peaks in 1987 and 2000 and finding the last great stock market bottom.

So where do you think we are today, 10 years after the market bottom in 2009?

Wouldn’t you think – after 10 years of soaring stock prices – that stocks would no longer be affordable? Wouldn’t you think that stocks would be extremely expensive?

Well, take a look at this next chart. It’s the same as the one before, updated to the present…

Isn’t it crazy – after 10 years of soaring stock prices – that stocks are still cheap based on this measure?

You may not believe it… but I’m simply comparing the benchmark of interest rates (the 10-year U.S. Treasury yield) to the benchmark of stock valuations (the price-to-earnings ratio, or P/E ratio for short).

There’s a little more to it, of course. But for today, just know that relative to interest rates, stocks are a good deal. It’s easy to see why…

Interest rates have been low for the last decade as stocks soared. And they’ve crashed again recently.

Ten-year government Treasury bonds pay around 1.5% interest today. Once you account for inflation, those bonds will almost certainly lose money.

So that’s the main competition for stocks right now… government bonds that are sure to lose money.

It’s no competition at all, my friend. This is a big reason why I’ve continued to pound the table on buying stocks. And it’s why I’m incredibly bullish right now.

Tomorrow, I’ll dig deeper into this indicator and how it works. I think you’ll see that there’s no question about it… You really want to own stocks now.

It’s Time to Get OUT of Naspers and Into This Company

By Steve Sjuggerud

This is the biggest news that no one’s paying attention to right now…

The backdoor way into one of my favorite investments will soon be even better. It’s the last chance to buy one of the world’s best businesses at a major discount.

Importantly, thanks to what’s happening right now, that discount could soon disappear… which means time is running out to seize this incredible value.

I first outlined what was going on in March. A lot has happened since then. Today, I’ll give you the latest update, including why this big news keeps getting better…

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If you’ve been reading DailyWealth for long, you’re probably familiar with Tencent (TCEHY). The company owns China’s mega-app WeChat, and a lot more.

I’ve predicted it could become the world’s most valuable company. But the funny thing is that a little-known company in South Africa has been a major shareholder of this business for years…

That company is Naspers. And it owns a 31% stake in Tencent.

Naspers acquired a $32 million stake in Tencent in 2001, making what might be the most successful investment of this century.

Tencent has performed remarkably well since then, growing to become one of the world’s 10 largest companies. Naspers’ small $32 million investment has turned into more than $130 billion as a result.

The catch was, it also caused Naspers to outgrow the South African stock exchange. And that brings us to the recent news…

Naspers is in the process of spinning out its Tencent shares (and a lot more) into a new company that will trade in Amsterdam.

This is huge news because Naspers has traded at a discount to the value of its Tencent stake in recent years. It was never able to catch up, because institutional investors in South Africa didn’t want to own too much of Naspers and throw their portfolios out of balance.

Now, this spinoff company can grow freely – and investors have a chance to make huge profits as the discount disappears.

The story gets even better, though. That’s because Naspers doesn’t just own Tencent…

The company has created or invested in dozens of other exciting technology, e-commerce, and payment companies throughout the world. It does this by finding huge, untapped markets, and then applying business models that are already successful in other parts of the world.

Legendary investor Matt McCall just revealed over half a dozen little-known stocks that he believes will DOUBLE your money in a matter of months. He used this same 10X strategy to hand Deb F. $30,000 in two days, Gene T. $162,799 in 4 months, and Gene P. $150,000 in 5 months.

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For example, it has invested in Russia’s largest social media network, VK. It also built a network of platforms for classified ads throughout several emerging markets. And it’s building a similar network for food-delivery services.

These kinds of “new economy” businesses have the potential for explosive growth… especially in emerging markets, where American tech giants don’t generally go.

This is what makes the spinoff company – named Prosus – so exciting. Naspers isn’t just moving its Tencent stake into Prosus… It’s also moving its most exciting and high-growth businesses to Prosus as well.

In short, all the good stuff is moving to the new listing in Amsterdam. The stuff staying with Naspers in South Africa is its “boring” local businesses. Perfect!

We want to own the new listing. This spinoff is huge news for anyone looking to make money on this anomaly…

By moving the Tencent stake – and the rest of the good stuff – to Amsterdam, the company can finally escape the limitations of the South African stock market. A more international group of investors will be able to own Prosus. And that means we should see the discount to Tencent start to close… boosting investor profits.

I’ve recommended Naspers shares for years as a way to own Tencent at a discount. But once Prosus shares hit the open market – which should be in September – the better bet is to move money into Prosus to capitalize on the situation.

Again, trading hasn’t begun just yet. But keep an eye out… You’ll want to own Prosus shares once they’re available. And that could be as soon as next month.

The Fed Just Created a Major Tailwind for Gold

By Steve Sjuggerud

Gold just hit a six-year high.

Is it time to sell? In short, no…

Thanks to the Federal Reserve, gold has a huge tailwind at its back, starting now.

The Fed just cut interest rates for the first time in eight years. And contrary to recent hints from the head of the central bank, I believe more rate cuts are likely.

I know what you’re thinking… Sure, a rate cut is great for stocks, at least in the short term. But why would it mean good things for gold?

Let me explain, starting with some of the background on this crazy situation…

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Until recently, the Fed had been raising interest rates. Its reasons were sound…

Unemployment has been at record lows. And the economy is in good shape. So the Fed spent 2017 and 2018 pushing rates higher.

The thing is, higher interest rates mean that other assets that don’t pay interest – like gold – face more competition. Investors know they can earn higher yields elsewhere.

So, based on history, rising interest rates are about the worst thing that can happen to gold. Just take a look at the chart below to see what I mean…

This chart shows the yield on two-year Treasury bonds. These aren’t the same rates that the Fed controls directly… But they’re close. They’re partly market-driven and partly driven by the Fed.

From 2007 to 2011, interest rates fell dramatically… and gold soared. Then interest rates leveled off in 2011, the same year gold peaked. The interest rate on the two-year Treasury bond started a steady rise from 2012 to 2018. And gold continued lower.

But that all changed this year…

Recently, two-year rates have been falling again. Sure enough, gold has been rising. And that trend should continue… because last week, the Fed completely changed course.

Despite a strong economy and low unemployment, the Fed cut rates by 0.25%. That’s a huge positive for gold. Prices jumped 2% on Thursday after the Fed’s big announcement.

Again, gold pays no interest… So the opportunity cost of owning gold gets worse as rates rise. And when rates fall, the opposite is true.

That’s exactly what we’ve been seeing lately. More folks want to own the metal. They know they’re not giving up much in interest by putting their money in gold.

This is huge news. It helps to explain why the metal has been soaring. And it tells us the rally should continue for a deeply ingrained, fundamental reason.

In short, gold’s recent breakout isn’t overblown. There’s still plenty of upside left, thanks to the Fed’s decision… And gold could rally much higher from here.

Your Bias Against These Stocks Is Costing You Money

By Brian Tycangco, analyst, True Wealth Opportunities: China

China and President Trump have something in common…

It seems like 99% of their news coverage in the U.S. is bad.

The problem for China is that unlike Trump, it doesn’t have a Twitter account with 62 million followers.

That’s partly China’s fault… because it bans the use of Twitter. It can’t redirect the narrative being strewn on the mainstream media.

And it can’t effectively counter Trump’s China-bashing tweets, including his most recent…

China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal with the U.S., and wishes it had not broken the original deal in the first place…

Look, I’m no preacher for all things China. But you can see why it’s easy to develop a bias against the world’s second-largest economy.

The problem is, bias against China could be costing you a lot of money.

Let me explain…

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With the S&P 500 Index up 20.4% for the year, the U.S. stock market is the envy of the world right now.

Most folks haven’t realized it, but Chinese stocks have nearly kept pace with that stellar return. China’s Shanghai Composite Index is up 19.9%.

There’s a similar story taking place in these two countries’ biggest and most important tech companies… where China’s best are nearly keeping pace with the U.S., too.

I’m talking about four of the largest technology-driven Chinese companies – three of which trade publicly in New York.

This includes Alibaba (BABA), Tencent (TCEHY), JD.com (JD), and iQIYI (IQ). They have a combined market capitalization of nearly $1 trillion. And after a rough 2018, they’re soaring this year…

In 2018, the trade war slammed anything and everything that had to do with China. But so far this year, these stocks have performed exceedingly well.

The average year-to-date return for these Chinese tech stocks is 29%. And that nearly matches the returns from the U.S.’ most famous tech giants…

That group includes Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL). They’re collectively known as the “FAANG” stocks.

Combined, they nearly have a $3.5 trillion market cap. That’s about the size of the entire Shenzhen Stock Exchange – the smaller of China’s two stock markets.

But while the FAANG stocks wiped the floor with those top Chinese companies last year, 2019 is turning out to be a different story. Look at how the U.S.’s tech leaders have done…

On average, these U.S. tech stocks are up 32.3%. That’s impressive. And it just barely beats China’s hottest tech companies today.

I don’t expect this will last forever, though. Indeed, last week I showed DailyWealth readers how China’s stock market has severely underperformed its own booming economy. Chinese stocks need to soar an eye-popping 1,100% from present-day levels just to catch up with China’s economy.

That’s why I expect a huge catch-up rally over the coming years. And China’s big tech names will be an important part of it.

The point is… the U.S. is performing fantastically this year. But if you’re only thinking about the U.S., you’re missing out.

You wouldn’t have known this listening to the news. That’s anti-China bias in action. Don’t let it fool you into missing out on the big opportunities happening in China right now.