Bernanke Guarantees These Investments Are Winners
Your Christmas Gift
Ben Bernanke just gave you an early Christmas gift.
He torpedoed your savings account for at least another two years.
I say "gift" because for investors of REITs, MLPs, income trusts, gold and silver, and high-paying dividend stocks, the party will last for at least another two to three years — at least!
The yields on many of these instruments are between 5% and 14%, so you can enjoy fat dividend payments hitting your mailbox for months to come.
Here's why I'm so sure about it...
Responding to last week's unemployment report, Ben Bernanke said the Fed would keep rates near zero until the unemployment rate reached 6.5%. And he said quite unequivocally that he doesn't expect the unemployment rate to reach 6.5% until sometime in 2015.
Trust me, dear reader... when Ben says "sometime in 2015," he's being irrationally optimistic.
Ben even hedged his bet: He said he would be willing to keep rates ultra-low even if the unemployment rate hit 6.5%.
So for the next two to three years, the money you have in savings accounts, CDs, and U.S. Treasuries is collecting dust... and will continue to do so for the foreseeable future.
You see, currently the unemployment rate stands at 7.7%.
To get it down a full percentage point in a hurry is impossible.
Last week the jobs report came out with jobless claims at 343,000, down from 372,000 a week prior. A month earlier, jobless claims were running 451,000 per week on average.
No matter how you slice or spin it, employment growth in the U.S. is abysmal.
That's because the "official" government unemployment rate report doesn't reflect, well, true unemployment in America: It doesn't take into account people who have stopped looking for work, or those working part-time because they can't find full-time employment.
According to the excellent site Shadow Government Statistics, the true unemployment rate in the U.S. might be triple what the government is reporting. Check out Shadow Government Statistics' chart on unemployment:
The accuracy of the above chart isn't lost on Bernanke. Like I said, he stated he is willing to keep rates at ultra-low levels, even when unemployment hits 6.5%.
I think getting the U.S. back to 6.5% unemployment is going to be a slow process, mainly because of the uncertainty in the economy and government regulations.
In other words, we have no clue how businesses will react once the real fangs of ObamaCare take effect.
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It contains full details on why dividends are an amazing tool for growing your wealth.
It was just revealed that every worker will have to pay a "fee" of $63 starting in 2014 to cover people with pre-existing conditions.
Those who support the law argue this is chump change (though they might be trying to mask their surprise with sarcasm, because I've never known government costs in any program to go down over the long term).
So, is this $63 fee the tip of the iceberg to more money coming out of our pockets?
We'll see. But one thing is certain: Nobody has a clue what's coming down the pike.
Remember Nancy Pelosi's famous dictum about the Affordable Health Care Act: "We have to pass our bill so we can find out what's in it."
Forbes recently ran an article titled, "The Five Biggest Issues Facing Small Business in 2013." It's no surprise the #1 issue facing small business today is how to manage ObamaCare:
Managing Obamacare. Under the PPAHCA, small businesses with 50 or more employees are mandated to buy health insurance for their employees or pay a fine, or tax according to Justice Roberts. In addition, many small businesses will be eligible for tax credits under the PPAHCA, as well as taking under consideration managing full-time and part-time staff to meet or beat the 50 employee threshold. Will small business owners hire advisers and consultants to get them through this knothole? Will they try to read and understand the 2000+ page piece of legislation themselves? Healthcare expenditures are approaching 20% of GDP, thus spiraling healthcare costs is a significant concern for small business owners.
ObamaCare could be a wet blanket on hiring. And that means the Fed chairman will keep rates low for a very long time to stimulate the economy.
But there is a silver lining to this...
If anything, this will continue to add fuel to a recovering housing market, as homeowners take advantage of record-low mortgage rates.
Refinancings are through the roof.
I just refi'ed my vacation home last Friday. We started the refi process back in August... It took four months from start to finish to complete a rather simple and straightforward refi. That's how backed-up banks are doing mortgage refinancings.
I know people who have done three and four refinancings on the same house — and they have promised me that if rates keep dropping, they'll keep refinancing.
Here are my Top Ten Investments for 2013 in this low-rate environment:
- Housing – and everything associated with it, like timber
- MLPs – especially oil and gas pipelines
- Gold and silver – the Fed is doubling its bond buying, which should dilute the dollar, further raising the risk of inflation again
- Mining stocks – both large and junior miners have been beaten into the dirt with the Venture Exchange down 50% in two years... this group is hated, which makes it attractive as a contrarian investment
- Utilities – borrowing costs are low, so utilities will continue to enjoy a large spread
- Gun stocks – for obvious reasons
- Biotechs – the aging of America is a boon for this industry
- High dividend-paying stocks – like Pfizer, Verizon, and AT&T
You can also use leverage to your advantage. A lot of companies can take that "nearly free" money as a result of near-zero rates and invest it in higher-yielding instruments — getting a return 2x, 3x, even 4x their borrowing costs.
Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.