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Negative Interest Rates Are Here!

By Dr. Steve Sjuggerud
Friday, June 6, 2014

"Negative Interest Rates Are Coming." That was the headline to my April 1 DailyWealth.
No, it wasn't an April Fools' Day joke... I was serious. I was right...
Just yesterday, Mario Draghi – the head of the European Central Bank – cut short-term interest rates to below zero in Europe.
I said this was likely to happen. And I told you what you should do about it. Here's what I wrote:
Much of Europe could see negative interest rates – soon.
What will happen then? You already know... Savers will get clobbered. People will borrow money. And asset prices will go up.
So what should you do?
Own assets. Own stocks and real estate, both in Europe and in the U.S.
Know that you will sell those assets someday. You know that the rise in asset prices will be built on ultra-low (and potentially negative) interest rates around the globe. And you know that those ultra-low interest rates will have to end someday. You don't want to go down with the ship.

That was exactly the right advice...
As I write, European stocks are breaking out to new 5-year highs (based on shares of the SPDR Euro Stoxx Fund (FEZ), the main European stock fund). And U.S. stocks are hitting all-time highs.
That advice still stands today...
We saw what happened in the U.S. when Ben Bernanke pulled out all the stops to stimulate the U.S. economy... He created what I call the Bernanke Asset Bubble. U.S. stock prices soared.
Now, Mario Draghi is following Bernanke's playbook... He's pulling out all the stops, and he has cut interest rates to below zero. Call it the Draghi Asset Bubble if you'd like... it is definitely the sequel to the Bernanke Asset Bubble.
So what should you do? Follow the blueprint that Draghi is following...
You could make a heck of a lot of money if you do...
You don't need to make it complicated... simply buy a basket of European stocks – something like America's Dow Jones Index, only in Europe. Shares of FEZ (an exchange-traded fund, or "ETF") are just that – the fund holds 50 leading European companies.
Negative interest rates are here. They will push European money out of savings accounts and into stocks and property, creating the Draghi Asset Bubble. Get your money there before everyone else... There's still plenty of upside from here...
Good investing,

Further Reading:

"If you haven't taken my advice to buy Europe," Steve says, "don't wait much longer. European stocks are really starting to move... and they have major upside potential." Find out which country Steve thinks you should invest in now – and a simple way to do it – right here: If You Missed Out on U.S. Stocks, Buy This.
With all its problems, the idea of investing anywhere in Europe might seem crazy. But Brett Eversole says it isn't. "In short, despite Europe's long-term problems, European stocks could absolutely soar from here," he writes. Get all the details here.

Market Notes


More evidence that the U.S. economy is doing better than the pessimists would have you believe...
Shares of Disney (DIS) are soaring.
Over the past few years, we've profiled the big bull markets in retailers, hotel operators, home improvers, and transporters. We figure that if these sectors are enjoying rising profits and soaring stock prices, the economy can't be doing all that bad.
Another big piece of evidence is the recent business and share-price performance of Disney. Disney is one of America's largest media and entertainment companies. When folks have enough money to spend on cable TV, movies, and vacations, Disney prospers. It is THE iconic brand in American entertainment. Thus, its share price is a solid gauge of what's going on with the economy.
Today's chart shows things are going well. Our chart tracks the performance of Disney shares over the past three years. As you can see, Disney shares have skyrocketed to an all-time high. And what's good for Disney is good for America.

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