January 2016

The Six Things You Need to

Know to Make Money in 2016
Plus four investing opportunities outside of

U.S. stocks with triple-digit-upside potential

Dear reader, Inside This Issue

Chances are, you're scared right now... Triple-digit opportunities
in:
You're afraid the markets are going to fall.

1. U.S. residential real
You think the recent fall in stocks and bonds estate.
(particularly in high-yield bonds) is just the
2. Commodities and
beginning... and that all of the bad things lurking commodity-related
out there are finally about to surface. stocks.

3. Gold and gold-related
I get it. stocks.

4. Chinese stocks.
We have some scary things happening right now in
the financial markets. We hit our stop on the
Central Fund of Canada.
But you need to understand one thing: Fear is
good... By: Dr. Steve Sjuggerud

You know the old saying... "Be fearful when others

are greedy, and be greedy when others are fearful." (Warren Buffett said that...
and Buffett is the greatest investor of all time.)

Markets peak when investors are greedy when nobody thinks you can lose money
(like in real estate in 2006). And markets bottom out when fear rules when everyone
is scared.

So my question to you today is simple: Is everyone greedy right now, or is everyone

fearful?

The answer is obvious to me... Investors are more fearful than greedy today.

We have NOT reached the peak in greed yet. For example, it does NOT feel like it felt in
real estate back in 2006, during the last peak in greed.

So investors are more fearful than greedy today. Therefore, we have likely not reached
the peak yet.

This means we have a great moment right now. It is almost the perfect setup for big
gains in many investments in 2016.

You might think I'm crazy. But please, hear me out. This month, I'll share with you six
simple things you need to know to make money in 2016.

While you might think some of these things are controversial, they're not. They're
simple facts.

When you consider all six of these things together, the conclusion should be as clear as
it gets in the financial markets...

Let's get started...

 The Six Things You Need to Know
Let me list the six things first, so you can get the bird's-eye view. Then we'll quickly go
over each one...

1. With interest rates so low, there is no alternative to the stock market for
investors.

2. Interest rates likely won't go above 1% in 2016. It would be absolutely foolish

for the Federal Reserve to raise interest rates above 1% in 2016, with the rest of the
world and the U.S. high-yield bond market struggling.

3. Even when the Fed starts to raise rates... stocks, house prices, and gold
perform surprisingly well, based on history.

4. Stocks are NOT overpriced yet. We are nowhere near the extremes we hit during
the last major stock-market peak in 2000.

5. Sentiment is not at an extreme yet. Once again, we are nowhere near the levels
we hit during the last major stock-market peak in 2000.

6. It's a "Goldilocks Moment." This is the perfect time as an investor things are
not too hot, and not too cold... but just right.

We will cover each of these six things this month. By the end of this issue, I'm sure
you'll agree with me on each of these points. And if you agree with me, then you
should be a buyer of U.S. stocks.

But will you be bold enough to buy? If you do, you'll be following the advice of the
world's greatest investor... "Be greedy when others are fearful."

We won't just stop at these six things this month... U.S. stocks aren't our only
opportunity in 2016...

The opportunities for the biggest gains in 2016 are actually outside of the U.S.
stock market.

Beyond U.S. stocks, we have four investing opportunities with triple-digit-upside

potential...

Triple-digit-upside opportunity No. 1: U.S. residential real estate (with a

moderate mortgage).

Triple-digit-upside opportunity No. 2: Commodities and commodity-related

stocks (down 90% since 2011 in some cases).

Triple-digit-upside opportunity No. 3: Gold and gold-related stocks (again, down

90% in some cases since 2011).

Triple-digit-upside opportunity No. 4: Chinese stocks ($1 trillion is about to flow

in).

These ideas range from conservative to risky. But all four offer legitimate triple-digit-
profit opportunities over the next three years.

I urge you to read what I have to say, think about it, and take advantage of the
opportunities that fit for you.

Before we get to the details of these triple-digit opportunities, let's go back to the six
simple things you need to know to make money in 2016...

No. 1: With Interest Rates So Low,

There Is No Alternative to the Stock Market for Investors
They can't live on zero percent.

That's all you need to know. It's simple. But it's brutal...
Mom and Pop America have no other alternative... they CANNOT leave their money in
the bank earning nearly zero percent interest.

As of this week, the Federal Reserve has raised interest rates from zero to, well, a bit
above zero. So now you're earning crumbs on your savings. That's still not going to cut
it.

This is what it all comes down to:

No matter how much money you have in the bank, zero percent of that amount
is still zero. And you can't live on zero. So you have to do something else with
your money.

Mom and Pop are trying to figure out what to do with their money... So far, they
haven't solved their problem. So far, hoping for better days (and higher interest on
their money in the bank) hasn't worked.

Their savings have shrunk. They're spending more money than they're earning in
interest. This is not a long-term plan. And the problem is finally getting critical.

The choices are not pretty.

Mom and Pop don't want to buy bonds... Earning 2% interest on a 10-year bond isn't
going to cut it in retirement. They have to earn more than that.

In the hunt for higher yields, many folks have bought high-yield bond funds.
Unfortunately, those folks got clobbered over the past month. Once burned, twice shy
they won't be coming back to high-yield bonds again.

Mom and Pop are learning that they have to move beyond money in the bank to get a
higher return. So I believe they'll start buying more stocks and real estate in 2016.

The main reason stocks and real estate have soared since 2009 is that interest rates
have been the lowest in history.

Years ago, I said the Federal Reserve's policy of ultra-low interest rates would create
what I called the "Bernanke Asset Bubble" where stock prices and real estate prices
would soar to unimaginable heights.

I was right. Stocks and real estate have gone up a lot over the last six years.

But the story isn't over...

Stocks and real estate haven't hit unimaginable heights yet. And interest rates haven't
gone back to "normal" yet. So the Bernanke Asset Bubble isn't over.

The Bernanke Asset Bubble has been in place since 2009... and it will stay in place
through 2016. The Fed will raise interest rates (to roughly 1% by year-end), but
interest rates will still be well below "normal." So stocks and real estate will keep going
up.

With interest rates so low, investors have few alternatives for their money other than
stocks and real estate.

No. 2: Interest Rates Likely Won't Go Above 1% in 2016

It would be absolutely foolish for the Fed to raise interest rates much in 2016, with the
rest of the world and the U.S. high-yield bond market struggling today.

The Fed says it will raise interest rates to 1.375% by the end of 2016. But I don't
believe it. Why?

You can just feel the fear out there...

The most recent bout of fear in high-yield bonds (also known as "junk" bonds) was a
strong one.

I think of the junk-bond market as the "canary in the coal mine" for the stock market
and the economy...
Visualize it with me... A group of old-time miners carries a caged canary into a mine
tunnel with them. If lethal gases are present in the mine, then the canary will die... the
miners will realize there's danger there they can't see... and the miners will get the
heck out of there!

Junk bonds are just like the canary... When the junk-bond market starts to die, the
Federal Reserve needs to pay attention... There's danger ahead.

The junk-bond market has been a great "canary" over the past quarter-century...
forecasting trouble and Federal Reserve rate CUTS.

You see, when interest rates on junk bonds start to rise (or more specifically, when the
spread of the junk-bond interest rate over the risk-free interest rate starts to rise), it's
a signal that trouble is ahead. It's a signal that the Fed should CUT interest rates. Take
a look:

The message from the chart is simple: Junk bonds tell the Fed what to do. When the
junk-bond-rate "spread" starts to rise quickly, the Federal Reserve starts to cut
interest rates. The Fed doesn't stop cutting interest rates until the bleeding has
stopped in junk bonds.

The message from junk bonds today is that times are still dangerous out there... that
conditions are unsafe... and that it's time to hustle out of the mine. In normal times,
the Federal Reserve would lower interest rates to ease the stress. Instead, the Fed is
RAISING interest rates.

So why are the folks at the Fed raising rates? In short, because they said they would...
The Fed might have lost credibility if it didn't raise interest rates. It has been crying
wolf about raising rates for years.

The Fed accomplished its one goal this week it showed us it's not crying wolf
anymore. But with all the trouble in the world and in junk bonds, the Fed really
shouldn't dramatically raise interest rates in 2016. It should use a cautious approach.

So even though the Fed says it will raise interest rates to about 1.375% by the end of
2016, I seriously doubt it will raise them that much...

Right now, the Fed doesn't have a lot of room to raise interest rates without causing too
much trouble. It will ultimately err on the side of caution.

My guess is that the Fed will finish out 2016 with its interest rate at 1% or less. This
means the Fed's interest-rate hikes in 2016 will not be a factor... Interest rates will still
be near record lows, and asset prices can go up.

That brings us to the next thing you need to know to make money in 2016...
 No. 3: Even When the Fed Starts to Raise Rates...

Stocks, House Prices, and Gold Perform Surprisingly Well
Stock prices, house prices, and gold prices actually do extremely well when the Fed
STARTS raising interest rates...

I know you probably don't believe me. I realize this shouldn't be true. But it is.

Let me show you what happens with all three asset classes, starting with stocks...

You would think that rising rates should be a "negative" for stocks, as corporate
borrowing costs go up and corporate profit margins go down. But it turns out, these
things don't hurt stock prices when the Fed starts raising rates... Based on history,
stocks go up.

Since 1950, stocks have performed incredibly well when the Fed STARTS raising
interest rates (called "tightening"). And stocks have actually underperformed when the
Fed STARTS cutting interest rates (called "easing"). Take a look:

Average Return 3 Months 6 Months 1 Year

Start of easing 1.7% 3.4% 8.0%
Start of tightening 6.3% 8.8% 9.2%

The story is the same with U.S. house prices...

It's easy to make the case that house prices SHOULD go down when the Fed starts to
raise interest rates, as mortgage rates should go up, too. But history tells a different
story about house prices...

Going back to the late 1960s, house prices perform incredibly well when the Fed starts
raising interest rates. Take a look:

Average Return 6 Months 1 Year 2 Years

Start of easing 1.8% 4.7% 8.9%
Start of tightening 3.7% 6.7% 13.3%

The story is even better for gold...

Rising interest rates SHOULD be a negative for gold, as gold pays no interest... so
higher interest rates should attract more money out of gold and into higher-paying
bank accounts.

But gold actually performs extremely well right at the start of a rising-rate
environment, based on 40-plus years of history. Take a look:

Average Return 3 Months 1 Year

Start of easing 0.4% -0.7%
Start of tightening 7.1% 10.4%

You can worry that rising interest rates should hurt companies. I get it. It makes
sense... It just doesn't make you money. Owning stocks when the Fed STARTS raising
rates makes you money.

You can also worry that rising interest rates should hurt house prices and gold prices. I
get that too. Once again, it makes sense, but it doesn't make you money.

Owning real estate and gold when the Fed STARTS raising rates makes you money, just
like owning stocks.

Let everyone else worry... You know the facts. You can be confident... and buy.

No. 4: Stocks Are NOT Overpriced Yet

Stocks aren't expensive yet.
People want to tell you differently people want you to believe that stocks are
expensive. They aren't.

The standard measure of value is the price-to-earnings (P/E) ratio. This is currently
around 16 or 17 for U.S. stocks, based on 2016 earnings estimates. This is not out of
line at all, based on history.

But looking at the P/E ratio by itself misses a lot of the facts...

The important fact is that interest rates are near record lows right now. When interest
rates are 10%, people can skip out on the stock market. But when interest rates are
near zero, people need to put their money to work. Stocks are more attractive when
interest rates are zero than when they are 10%.

When you take interest rates into account, stocks are not expensive at all today. Our
True Wealth value indicator combines the P/E ratio with interest rates. And our current
reading says stocks are not expensive. In fact, stocks are at a level that says double-
digit gains over the next year are possible, based on history. (You can learn more about
our value indicator here.)

In short, stocks aren't expensive yet. Also, value, by itself, never kills a stock-market
boom. I expect stocks will get much more expensive before this boom is over.

No. 5: Sentiment Is Not at an Extreme Yet

The last two major stock-market peaks were in 2000 and 1968. Consumer sentiment
peaked in those two years.

Consumer sentiment bottomed five times. Each of those bottoms were in recessions.
Take a look:
You might think I talk too much about sentiment in True Wealth... that sentiment
doesn't matter that much. This chart shows you that sentiment is important and that
consumer sentiment bottoms out in recessions and peaks at stock-market tops.

The message from this chart is clear to me... We are definitely not in a recession today.
And we are definitely not at a major stock market peak.

Yes, consumer sentiment is getting up there... But we are not at a peak yet. It is not
time to start worrying.

No. 6: It's a 'Goldilocks Moment'

Right now is the perfect time as an investor things are not too hot and not too cold...
but just right.

It's simple: When times are good, you've already missed it. The gains are over.

The thing is, times are ALMOST good now... So the gains are ALMOST over... But not
yet!

The sentiment chart above is a good example... Take a look at it again. You can see
that times are good but they're not too good, yet!

The unemployment situation in the U.S. is also a good example...

It looks pretty good... The unemployment rate is around 5%, which is not far from
where the Fed would have started raising interest rates in the past.
The thing is, the "underemployment rate" today is closer to 10%. (That's the upper line
on the graph.) When that rate gets closer to 7.5% or 8%, the Fed will likely feel it's
time to really start putting the screws to the economy to slow it down... That's when
the REAL "tightening" begins. But we are not there yet.

We are still in the "Goldilocks" stage, where unemployment isn't too cool, but it's not
too hot yet, either it's just right.

When times are just right, you want to stay in stocks.

But Steve, What if You're Wrong?

Don't Worry, I've Got You Covered...
While the setup conditions based on these things look really good, sometimes they
don't work out...

As we saw in gold this year, for example, even with a great setup, we can still get it
wrong. That's okay.

The beautiful thing today is, our downside is so incredibly limited if we're
wrong... and our upside is so incredibly large if we're right... that we are
exactly where we want to be in many different investments.

I can't stress this enough to you... Keep your losers small. Allow your winners to be big.
And you will make a lot of money. It's simple math.

Most people do exactly the opposite of this... They take profits as soon as they have
them (which is the wrong thing to do), and they hold on to their losers, allowing them
to get bigger (which is also the wrong thing to do).

Plenty of things can go wrong in my thesis here...

The simplest signal that I am wrong will be if the U.S. stock market hits new lows.

Specifically, if the S&P 500 closes below 1,860, then I will have been wrong about U.S.
stocks for now. It will be time to cut our losses. We will sell our shares of the
ProShares Ultra S&P 500 Fund (NYSE: SSO), and we will consider selling our other
U.S. stock trades if we haven't already hit our stops. I suggest you do the same if the
time comes.
I believe our upside in U.S. stocks could be dramatic from here. I have always expected
that the Bernanke Asset Bubble would end in a "dot-com"-like boom a greed-driven
frenzy. I think the biggest gains will happen during that boom. We haven't seen that
yet.

Our upside is dramatic. And our downside is limited. Our "line in the sand" that we're
wrong is at 1,860 on the S&P 500.

Beyond U.S. stocks, we have four investing opportunities for 2016-2018 with triple-
digit-upside potential:

Triple-Digit Opportunity No. 1:

U.S. Residential Real Estate (With a Mortgage)
When my parents were in their prime earning years in the early 1980s, they paid
upwards of 20% interest on their 30-year mortgage.

So far in the month of December, the 30-year mortgage rate has hovered below 4%.

The cost of money is cheap today! So is the cost of a home... The housing bust that
bottomed in 2011 was the worst in generations.

So we're in the perfect spot... We have ultra-low mortgage rates and inexpensive home
prices. My friend, this might be the best moment of your life to buy a house.

The U.S. housing market is in a perfect spot to buy... It's in its lowest-risk, highest-
return moment. It's a "Goldilocks" moment... It's not too hot and not too cold... it's just
right.

House prices are in a solid uptrend today... They are nowhere near their old highs, or
old lows. They're just right. You can see the national home-price trend here:
So how can you participate? There's the obvious way buy a house and the less
obvious way through the stock market, where you can buy one stock that owns
thousands of rental houses nationwide.

If you do it yourself, you could bring home a triple-digit return based on the cash you
put in but it would be a lot of work, and you'd be on the hook for a big mortgage.

Doing it through the stock market is actually the better deal today... because through
one stock, you can buy a portfolio of thousands of homes for 70 cents on the dollar.

Shares of our recommended Silver Bay Realty Trust (NYSE: SBY) trade are at about
a 30% discount to their liquidation value. Yes, that means what you think it means if
Silver Bay simply sold all the houses in its portfolio today and paid out the proceeds to
shareholders, then you'd get a massive windfall.

Silver Bay takes all the hassle out of owning a portfolio of homes. It collects rents, pays
expenses, and then (by law) pays out all the rent (after expenses) to you in a
dividend. The dividend is currently more than 3%.

Silver Bay's debt is less than 50% of the value of the homes it owns so it has way
less leverage than the typical homeowner.

Silver Bay's net asset value is around $22 per share. Over the next few years, I expect
we will see home-price appreciation, and we will get dividends. These two things could
push our total return toward $30 a share.

Meanwhile, you can buy into Silver Bay for less than $16 as I write. It's a bit of a
stretch to say we could get a double here in the next three years... but it's not
impossible to imagine. And it is a much safer way for you to participate in the U.S.
housing market.

However you do it, make sure you have a good chunk of your investments allocated to
U.S. housing. I've been saying this for years, and it has been exactly right. There's still
plenty more upside ahead.

Triple-Digit Opportunity No. 2:

Commodities and Commodity-Related Stocks
Gas at the pump is less than $2 per gallon... Can you believe it?

Not long ago, gas at the pump was twice that amount.

What's going on? Commodities prices have been obliterated. The price of oil has fallen
from more than $100 per barrel to less than $40 per barrel. It's not just oil... Most
commodities are down more than 50% since 2011.
The bust has gone from bad to worse... In the past two years, the "Masters of the
Universe" the major commodities producers have been obliterated:

Master of the Universe Fall From Two-Year Highs

Rio Tinto (NYSE: RIO) -54%
Vale (NYSE: VALE) -79%
Freeport-McMoRan (NYSE: FCX) -84%

When the Masters of the Universe get going again, massive gains are likely. I expect we
will make hundreds-of-percent gains in these stocks sometime in 2016 through 2018.

Unfortunately, the time isn't right to buy yet. These guys are still in a downtrend.

Also, sentiment hasn't bottomed yet... Investors keep chasing commodity plays lower.

Investors keep adding to their losing positions. Here's proof... The shares outstanding
of the most popular energy-stock fund, the Energy Select Sector SPDR Fund (NYSE:
XLE), keep going up! More shares are being created to satisfy a growing demand for
this fund.

So investors are chasing energy stocks lower. The bottom isn't here yet in commodities
and energy.

I'm hoping it gets here soon. Hundreds-of-percent gains are possible. But we're not
there yet.

We are much closer to a bottom in gold...

Triple-Digit Opportunity No. 3:

Gold and Gold-Related Stocks
Gold is down 44% since its 2011 highs. Silver is down much more 72%.

I think we're much closer to a bottom in gold than in the more "industrial" commodities
like copper and oil.

Unfortunately, I've been early in this thinking... We hit our stop on the Central Fund
of Canada (NYSE: CEF) in the past month as gold and silver both dipped to new
lows.

Investors have given up completely on gold. I could list a million reasons why. But the
trend is not up yet. I was early (which is a nice way of saying I was wrong).

Gold mining stocks are bouncing along near lows not seen since 2002 (yes, more than a
dozen years ago).

We still own the Market Vectors Junior Gold Miners Fund (NYSE: GDXJ), but it has
been flirting with its stop price for a while now. The stop price is at $18.31.

I expect that we will make hundreds-of-percent returns on GDXJ... But we still must
honor our stop price if we hit it... This way, we keep our losses small, and we have
cash to buy when the time is finally right.

Gold and gold stocks should be good for triple-digit profits for us extremely soon. But
with gold not far from new lows, the timing isn't perfect yet.

Triple-Digit Opportunity No. 4:

Chinese Stocks
This, my friend, is one of the greatest opportunities I have ever seen...

I never imagined I would see a day where NOBODY was invested in the world's second-
largest economy and second-largest stock market. But that's where we are today.

NOBODY owns locally traded Chinese stocks. Nobody, that is, except us...

$1 trillion or more should flow into Chinese stocks and bonds in the next five years.

You see, fund managers are being forced to "rebalance" their portfolios to include more
Chinese positions. It's a long story, but a powerful one, and the end result is a lot more
money in China. You can find the whole story in the December issue.

We simply need to get there first. And we are already there... We own the Morgan
Stanley China A Share Fund (NYSE: CAF). CAF is the most direct investment we
own on this upcoming trend in Chinese stocks. Own this fund if you don't already.

We also own the iShares China Large-Cap Fund (NYSE: FXI). This is a no-brainer
for a large number of reasons. The stocks in this fund are incredibly cheap (trading at
a single-digit P/E ratio and trading for book value). They are the largest Chinese
companies (for the most part). And they trade in Hong Kong at a massive discount to
the identical shares trading in China.

In short, nobody is paying attention to emerging market stocks right now including
Chinese stocks.

Emerging-market stocks have been crushed in the past four years. The main Brazil
fund, the iShares MSCI Brazil Capped Fund (NYSE: EWZ) is down 72% in price from its
2011 high. The main Russia fund, the Market Vectors Russia Fund (NYSE: RSX), is
down 64% from its 2011 high.

From 2016 to 2018, emerging markets could see triple-digit gains. And China will lead
the pack.

Wrapping Up
Yes, the Federal Reserve is raising interest rates. No, it's not a bad thing.

Stocks, house prices, and gold actually do very well at the start of a rising-rate
environment, based on history. Most people don't know this, and will be afraid to take
advantage of it. We know better.

Now could turn out to be a great moment... Our downside risk is low (if you follow your
stops), and our upside potential is huge. Triple-digit profits are possible in many of the
ideas laid out in this issue.

I expect this great boom will end when we see much more greed than fear... And we
are not there yet. The biggest gains typically happen in the final innings of a boom...
And that's where we are today. Don't miss out on those big gains.

Thank you, as always, for your subscription. You allow me to have the greatest job in
the world.
Here's to a happy, healthy, and profitable 2016...

Steve Sjuggerud

December 18, 2015

Saving My Life Update: New Year's Resolution Time...

I hope you've been following my weight-loss (mis)adventures in DailyWealth...

I was inspired to "get on it" by comedian Penn Jillette, who lost 100 pounds in four
months.

I asked him his secret... and he told me, "We ALL know WHAT to do... but nobody
DOES it!"

So I went home, inspired to DO IT. My mantra is simple: "Eat less, move more."

I started strong... I stayed strong for more than a month... Then Thanksgiving
arrived, and the wheels came off.

I need to get back on it. I suggest you join me.

The best thing I did to stay on track was to report my "specs" to you every week
in DailyWealth.

I don't want to let you down. I don't want to fail in front of you. So here I am, in all
my glory...

Here are my most recently reported specs:

Height: 6'4"

Weight: 250 pounds

Body fat: 34.6% (it's the change in this number that counts)

Waist (at belly button): 44.75 inches (yeesh!)

I am not going to win any beauty contests with these numbers. But just imagine
these numbers are a significant improvement over where I was two months ago.

It is a marathon, not a sprint. But it's doable. Like Penn Jillette said, everyone knows
what to do but nobody does it.

Are you in with me? Our first goal is to be good until Valentine's Day. It's close
enough to be achievable, but far enough that it will be challenging. Let's do it!

We appreciate your feedback. Please send your notes here. We can't respond to
individual questions... But we do read every e-mail we receive. If you have any
questions about True Wealth, there is a 99.9% chance someone has asked your
question before. You can find the answers on our Frequently Asked Questions page.


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