Hate the Banks, Love Bank Stocks

Posted On Feb 6, 2017 By Dave Gonigam

  • The $100 billion pile banks can’t wait to hand investors like you…
  • A decade after the “big short”, one of the major players can’t get enough financial stocks
  • Soda’s out, “functional beverages” are in
  • Foodmaker looks to shrink package sizes because it’s good for your health!
  • Shopkeepers throw in towel in the war on cash
  • “Trump policy worries” as a media crutch… a different spin on outsourcing… Friday gold story inspires a “buttload” of bad puns… and more!

Usually, it takes a few weeks or months, sometimes years, before the mainstream picks up on our forecasts. Not the next business day.

But there it is on the front page of today’s Wall Street Journal: “The six biggest U.S. banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulation.”

And there you have the case for bank stocks as laid out on Friday by our income specialist Zach Scheidt: “Banks will likely be able to better invest their own capital to generate profits. And more importantly, banks will be able to pay more of their capital to investors through dividends and buybacks.”

You and I might think it prudent for the banks to have a big pile of cash — “excess capital,” to use the technical term — set aside for the next crisis. You know, just in case of another 2008. But if you’re a banker, that’s dead money.

Congress appears to be on board with Trump’s plans, announced Friday, to dial back the Dodd-Frank Act of 2010. That’s unlike most of the Trump agenda.

If you’ve been reading regularly, you know we’re skeptical about the likelihood Congress will put the Trump agenda into legislation that has a prayer of passage, even with a GOP majority. The $1 trillion infrastructure plan, corporate tax reform, individual income tax cuts, Obamacare repeal… One way or another, it all has to do with taxing and spending. And anything that has to do with taxing and spending will run up against the debt ceiling, which comes back into force on March 15.

It’s all one big Jenga game. Repeal an Obamacare tax and the revenue will have to be found elsewhere, maybe in some godawful complicated change to the corporate tax code.

But rolling back Dodd-Frank? Easy-peasy, by comparison. Rep. Jeb Hensarling, the chairman of the House Financial Services Committee, will likely take the wraps off his “Financial Choice Act 2.0” this week.

We reiterate: It’s party time for bank stocks.

But don’t take our word about financial stocks. Take Steve Eisman’s.

Eisman hates the big Wall Street firms as much as we do. During the housing bubble a decade ago, he bet those firms would go down and go down hard. He was one of the people spotlighted in The Big Short — both the book and the movie.

“It was Eisman’s contempt for Wall Street that led him to uncover the disaster that lay waiting in the form of toxic mortgages sitting on the balance sheets of Wall Street banks,” says Zach Scheidt — back with us today to pound the table for bank stocks.

“Eisman found it repulsive that the Wall Street Banks were selling garbage to their customers, and he took no small amount of pleasure profiting from their eventual demise.”

But that was then and this is now: A few weeks ago, Eisman went on CNBC and said he’s “as long as I could be” on financial stocks. “This will be a golden age of investing in financial stocks.”

“Trump’s deregulation is going to make this up cycle in the finance sector one for the ages,” Zach agrees.

There’s precedent here: “Check out what happened to shares of Wells Fargo after the savings and loan crisis of the late ’80s/early ’90s,” Zach exhorts us.

“Investors who did not want to own one of the country’s strongest banks missed out on a 10-bagger over the following decade.”

Don’t miss out this time. Zach has recommended a basket of three financial stocks in his entry-level newsletter, Lifetime Income Report. Snag a trial subscription today and we’ll ship you Zach Scheidt’s Big Book of Income. Among the income-generating tips you’ll find…

  • A single word you can effectively put on your Social Security application to increase your benefits by as much as $570 per month (Page 149)
  • How to get a 2.0% “contribution match” through your BROKER on your 401(k). (Page 105)
  • How to earn a royalty with the help of nearly every major financial transaction in the world (Page 23).

The book is an Agora Financial exclusive. All we ask is $4.95 for shipping. Click here and claim your copy.

To the markets, where the dollar is up… but gold is up more.

The dollar index has recovered the 100 level as we write. And while that would ordinarily but a dent in the Midas metal, the bid is instead up nearly three-quarters of a percent at $1,228 — a level last seen in early November.

The major U.S. stock indexes are flat to slightly down. There are no major earnings reports or economic numbers today, so the financial media are falling back on “Trump policy worries” to explain why the market isn’t rising. That’s going to get mighty old, real quick…

“We’re entering an important crossroads in the soft drink business,” says Greg Guenthner, on the hunt for microcaps — those stocks that are smallest of the small.

“You won’t see kids ripping into potato chips or guzzling cans of soda these days. Even giving your kid juice is a felony in some yuppie neighborhoods. It’s full of SUGAR, for God’s sake! We’re all getting a little more uptight about what we put in our bodies. And most folks aren’t interested in drinking empty calories anymore. It’s a trend that’s percolated for years — and it’s finally reaching a tipping point.”

Indeed, Fortune says sales of carbonated drinks in the United States have fallen for each of the last 11 years. Evidence mounts that even diet sodas are no better than the regular variety — just the sweetness increases cravings for real sugar and other carbohydrates.

Enter the quest for “functional beverages” — like kombucha.

“Kombucha is a fermented tea drink that originated in Asia centuries ago,” Greg explains.
“It’s bubbly, a little sour and usually flavored with fruit. The tea is prized for its health and healing capabilities. According to legend, kombucha was called ‘the tea of immortality,’ first brewed for Emperor Shi Huang Ti, the earliest ruler of China.

“To be fair, some folks are turned off by the vinegar aftertaste. I’ve been sipping on various brands of kombucha since December for research purposes, and I’ve found some brands to be more sour than others. But there’s one brand that’s more friendly to the average palate.” Its maker is already up nearly 20% since Greg recommended it in our Microcap Millionaires service only a month ago.

It’s been a while since we’ve opened access to this unique advisory. Watch this space for updates.

Speaking of sugar and stuff that’s not good for you… here’s the most disingenuous explanation you’ll ever see for the shrinking size of food packages.

As you might know, shrinking the package is one of the oldest tricks in the book to mask the effects of inflation — the 12-ounce box of cereal becomes 10 ounces for the same price, for example.

But now, Nestlé is telling Britons it’s for their own good: “Public Health England (PHE), which is working to cut childhood obesity in England, is looking to set targets to reduce total calories in a wider range of products,” according to a story from the Press Association news agency.

Thus, Nestlé is considering shrinking all those Kit Kat and Aero bars Britons love so much: “Nestlé is in the process of looking at all options and we are keeping in close contact with PHE while they establish their sugar reduction program,” says a company statement.

Seriously? The value of the pound has tumbled nearly 16% since the “Brexit” referendum last June… but Nestle wants us to believe shrinking the package size is all about health?

Pull the other one…

OK, so this is becoming a thing in the war on cash — small businesses in big cities going cashless for safety reasons.

A reader alerted us to the phenomenon last month — a barber in Seattle alarmed by recent burglaries in the neighborhood.

Now it’s happening a few blocks northwest of Agora Financial headquarters in Baltimore. “We’re not going to accept cash anymore,” says David Hart, owner of Park Cafe & Coffee Bar.

Can’t blame the guy — the joint’s been robbed five times since October. Hart tells the local CBS station his customers are behind him: “I would say virtually 90% of them have said, ‘Listen, you needed to do what you needed to do to protect yourself and protect your staff. We will continue to support you.’”

Indeed, he says he’s seen no drop-off in business… even though cash used to account for 22% of revenue.

“As follow-up to the many letters regarding the H1B discussion,” begins a new week’s mailbag, “low-cost foreign workers taking local jobs is not exclusive to the U.S.

“For instance, in Penang, Malaysia, large tech companies moved there in the ’80s for low-cost labor. They now import lower-cost workers from Tibet.

“These workers live in squalid conditions so they can send virtually 100% of their paychecks back home.

“When they return at the end of the two-year maximum guest worker stay (replaced by another wave of willing workers), their families have invested in local business enterprises and housing, greatly enhancing the standard of living for the returning worker.

“Love The 5!

“I grew up in ‘Silicon Valley’ before it was so-named,” recalls another. “Back then, it grew strawberries, walnuts, almonds, plums and families with small children in new houses built over former orchards.

“My dad, an engineer for Lockheed, often complained that when he came up with major improvements in testing equipment for the defense contractor, management wouldn’t use it, because it saved too much money on labor (never mind it also increased safety). They seemed to think that ever-expanding budgets were the main objective.

“Rational management gets corrupted by government monopolies and manipulations; that much doesn’t change.”

“I haven’t heard that word used for at least 60 years,” a reader writes after we said ‘What a coinkydink!’ on Friday.

“Sixty years ago, our personal lives were ours to control (freedom). Sixty years ago, the government’s control over our personal lives, our free market system and our economy were not roadblocks to the success of our country and our way of life. Is it a ‘coinkydink’ that all those things are the complete opposite today, or is it because the people of this country have been led to believe that we can still have what we had 60 years ago ‘and far more’ if we only turn all those things over to ‘the good hands people’ (the federal government)?”

The 5: Hate to tell you, but 60 years ago was 1957. Think you need to go a little further back to identify when things started going off the rails…

“This is The 5 — not the (smelly) Onion!” a reader upbraids us after our account of a guy who smuggled gold out of the Royal Canadian Mint via his rectum.

“As a newer reader, I expected more than a commode(ious) attempt at lavatory levity. You, sir, are to be pooh-poohed for your effort. I was so impacted (wink! wink!) by this scandal that when you said an amount of C$190,000 would have to be restituted, I was unsure as to whether ‘C’ stood for Canadian or crappy with a capital.

“What’s next? How about a funky fable called Loonie in the Loo (last I checked, the Canadian dollar was pegged at 77 cents to the USD and trending downward). After reading this story, I not only need a shower, but perhaps a suppository as well. Just hope that I don’t give new meaning to ‘one’s bowl hath runneth over.’ Pfft…”

The 5: We promise we’ll do better next time…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. If you don’t want to believe us, how about the president?

Asked by Bill O’Reilly during a pre-Super Bowl interview last night about an Obamacare replacement this year, Trump said…

“Yes, in the process, and maybe it’ll take till sometime into next year, but we’re certainly going to be in the process… You have to remember Obamacare doesn’t work, so we are putting in a wonderful plan.

“It statutorily takes a while to get. We’re going to be putting it in fairly soon. I think that yes, I would like, say, by the end of the year at least the rudiments, but we should have something within the year and the following year.”

Gee, only last month, we were told the administration would put out a replacement plan as soon as the new Health and Human Services secretary was confirmed.

We’ll say it again: Don’t wait for the administration and Congress to relieve you of Obamacare’s burdens. That’s up to you.

Fortunately, there are legal solutions that can slash your costs and still give you total freedom of choice when it comes to doctors and hospitals. Take a look right here.


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