Officials in the European currency union (or "eurozone") reportedly approved Greece's reform plans… and the country is back on track for its four-month bailout extension. Regular Digest readers know we aren't concerned with the situation in Greece. It's in everybody's best interest for the eurozone and Greece to cooperate. And we're sure they'll eventually reach a deal.
Also, Federal Reserve Chair Janet Yellen testified to Congress this week. She took a "dovish" tone, hinting that interest rates could remain low for longer than previously expected. (The market had previously expected a rate increase in June.) From her speech…
The Federal Open Market Committee's (FOMC) assessment that it can be patient in beginning to normalize policy means that the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.
Yellen also said she would give the markets plenty of notice before hiking rates…
If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance.
A quick glance at the stocks hitting new 52-week highs this week shows the U.S. consumer is alive and well.
First, home-improvement retailer Home Depot announced a 36% increase in fourth-quarter earnings to $1.4 billion. Revenue rose 8.3% to $19.2 billion. Home Depot also said it was buying back $18 billion of shares.
Fellow home-improvement chain Lowe's and homebuilders Lennar and D.R. Horton also hit new highs.
Restaurants Darden Restaurants (which owns Olive Garden, Longhorn Steakhouse, and Capital Grille), Domino's, Restaurant Brands International (Burger King and Tim Horton's), Papa John's, Popeyes, Jack in the Box, Sonic, Starbucks, and Texas Roadhouse all hit new highs, too.
Booze giant Anheuser-Busch InBev and cigarette companies Altria, Lorillard, and Reynolds American hit new highs. "Middle American" retailers AutoZone, Dillard's, Dollar General, and Ross Stores hit new highs.
I borrowed the line "it's a bull market, you know" from one of the greatest books ever written on trading – Reminiscences of a Stock Operator, by Edwin Lefevre. The quote comes from a trader in the book nicknamed "Old Turkey." And Old Turkey's advice is as good today as it was when the book was published in the 1920s. When the market is rising, it pays to be along for the ride.
We excerpted a bit about Old Turkey in a classic DailyWealth essay from 2007. It's a great, short read. Click here to read it.
Elsewhere in the market, the currency wars are still raging. And that's super-bullish for gold.
The precious metal is stealing headlines as global central banks race to destroy their currencies. Record-low interest rates around the world make gold a wonderful alternative currency. Gold pays no interest… so it's more attractive when government paper has zero (or negative) yields.
Gold is advancing in lockstep with the U.S. dollar. The markets view gold as the "anti-dollar," so seeing the two assets rise together is unusual.
Still, the dollar is one of the most popular trades in the world.
When that money leaves the dollar, where is it going to go? Remember, almost every central bank is cutting rates to weaken its currency. The dollar was the last bastion of safety. As you can see from the chart below, the dollar has skyrocketed…
In a recent note to clients, wealth-management firm Gluskin Sheff's David Rosenberg echoed our beliefs of an overbought dollar…
There are certainly plenty of reasons why the greenback should be the world's currency darling, but at some point all the news is in the price – we may well be there in terms of the U.S. dollar story, which looks long in the tooth even if not totally over.
Rosenberg also asked what happens if some of these speculators simply take profits. True Wealth Systems editor Steve Sjuggerud says the dollar has peaked.
And when money does start to leave the dollar, we think a lot of that capital will flow into gold. Again, gold is more attractive than parking money in negative-interest-rate German and Swiss government bonds.
Steve believes gold rising against most major currencies is a major bullish signal for the precious metal. In the latest issue ofTrue Wealth Systems, he noted that gold was the best-performing currency of the past three months… It rose 8% versus just 7.5% for the U.S. dollar index. He wrote…
This is important. We want to own gold when it's in a global bull market. Gold rising in U.S. dollar terms alone doesn't show us we have a real gold bull market. That could just mean the U.S. dollar is in a bear market.
But gold rising against all four of the world's major currencies – the U.S. dollar, euro, yen, and pound – shows we're in a major gold bull market. And based on history, this is the best time to own gold.
Steve also pointed out another major bullish indicator was flashing "buy" for gold. Historically, when these two indicators both say buy, it's a "super signal" that returns 47% annualized gains in Steve's favorite gold asset.
Of course, gold is just one of the assets Steve tracks in True Wealth Systems.
True Wealth Systems is an advisory service Steve and research analyst Brett Eversole developed based on sophisticated computational models. Steve worked with Brett and a PhD in mathematics and spent years and nearly $1 million building custom analysis software, a historical back-testing program, and a chart-making software. Steve has constructed safe, successful trading systems using these incredible tools. The result is a high-end trading service based on decades of Steve's financial knowledge.
The computers follow virtually every market in the world and alert Steve and Brett when there is a tradable "setup." These signals reflect strategies that Steve has traded personally over many years as a broker, mutual-fund manager, hedge-fund manager, and newsletter editor. The computers have back-tested these strategies rigorously, and Steve recommends action when the statistics line up.
Steve also recently put together a presentation explaining the strategies he uses in True Wealth Systems… and why he focuses his trading on exchange-traded funds (ETFs). For one, you save a fortune on management fees when you buy ETFs instead of other actively managed funds.
It's a great educational piece. And should you decide to try True Wealth Systems, you'll gain immediate access to Steve's top gold trade. You can watch his presentation right here.