A guest essay from Whitney Tilson... Staying 'constructive'... The two risks I don't dismiss... Why I've gone from bearish to neutral on bonds... A few charts that explain everything... The 1999 trade that's about to reopen...
Editor's note: Today, we have another guest essay from our colleague Whitney Tilson...
Whitney has written in the Digest for the past two weeks... here and here. As you've heard, he sees a lot of 1999 in today's market. The AI-driven bull market is pushing higher, and a handful of select names are riding hot sentiment to wild gains. It reminds Whitney of the dot-com bubble he navigated as a hedge-fund manager.
But Whitney isn't telling folks to head for the exits just yet, either.
As he explains below – in an essay compiled from the September 9 and September 10 issues of his free Whitney Tilson's Daily e-letter – Whitney remains "constructive" on stocks and is also now "neutral" on bonds...
And he's outright bullish on one overlooked corner of the stock market.
It's the same corner where he made his name in 1999, when his hedge fund nearly tripled his investors' money through the dot-com crash and beat the market in nearly every year of the decade that followed.
Here's Whitney with more...
This has been my (Whitney Tilson's) best call over the years...
It's the best advice I've given since I joined the publishing universe of Stansberry Research's parent company MarketWise more than seven years ago...
Remain "constructive" – and many times, outright bullish – on stocks overall.
No, I didn't predict the COVID-19 crash, the 2022 downturn, or the mini-crashes triggered by the tariffs and the Iran war. But in each case, at the bottom, I pounded the table to buy – and stocks quickly recovered.
These calls have paid off...
Since the April 2019 inaugural issue of my old newsletter, Empire Investment Report, the S&P 500 Index is up a whopping 164% (as of September 8).
And the four core stocks I recommended in that issue – from which I also haven't wavered – have done far better. They've risen by an average of 252%:
I'm writing this because I've noticed the "boobirds" are out again. They're warning of a market downturn because of high valuations, rising interest rates, our national debt soaring past $40 trillion (doubling in less than a decade), political turmoil, unsustainable AI spending juicing corporate profits, and unresolved wars in Ukraine and Iran.
Yet stocks have been resilient. The S&P 500 – even the equal-weighted version of the index – is within a smidge of its all-time high. A September 8 New York Times article explains why:
Roughly 88 percent of the companies in the S&P 500 that had reported results for their most recent quarter by Aug. 31 beat expectations on their earnings per share, according to Scott Rubner, a Citadel Securities analyst. And those that missed expectations didn't miss by much...
What explains this broad strength? Some sectors, like energy, have been boosted by high oil prices, helping them rake in bigger profits.
There's also a tariff-related tailwind. Since the U.S. Supreme Court struck down a slew of tariffs on imported goods in February, the Trump administration has had to refund tens of billions of dollars collected from American companies.
The refunds provided a huge boost to some companies in the second quarter...
And then there were earnings that were lifted by A.I.
Two risks I don't dismiss...
The same article does identify two main risks to stocks. The first is rising interest rates:
Rates on government bonds have been ticking higher. And if they keep rising, they could cast a cloud over the stock market.
Higher-yielding bonds offer investors a strong return but with fewer risks than stocks. That's one reason rising bond rates often push down stock values, as investors rethink the risk-reward of stocks versus bonds.
"When the yields are high, stocks look relatively unattractive all of a sudden, especially stocks where most of the earnings are in the future," said Thierry Wizman, a fixed-income and rates strategist for Macquarie Group.
As rates on government bonds go up, they also increase borrowing costs for companies that use debt to keep growing.
The second is the popping of the AI bubble:
Investors have also become more touchy about anything's going awry in the A.I. story. That means becoming more perceptive to how much companies are spending on A.I. projects and whether those investments will translate into profits. When Google released a solid earnings report in July, for example, its stock dipped after a higher-than-expected spending forecast.
I don't dismiss these risks. In particular, I've repeatedly warned in recent weeks that the AI sector reminds me of the late stages of the dot-com bubble. As I'll explain in a bit, it also provides a setup for the best opportunity I see right now.
Nevertheless, I remain constructive on stocks overall.
Over nearly three decades in the markets, I've learned – too often the hard way – that one should tune out the boobirds 90% to 95% of the time. They predict calamity every year.
But in reality, it only makes sense to get fully defensive once every decade or so. I don't think now is one of those times.
So my broad advice remains the same...
Have modest expectations – for example, I'd guess that the S&P 500 will compound at 5% annually for the next five years. But if you own well-diversified index funds like the State Street SPDR S&P 500 Fund (SPY) and/or modestly valued stocks of quality companies, then stay the course.
Meanwhile, still be on the lookout for special situations to take advantage of... more on that shortly.
As for bonds, I've been telling readers to stay away from them for years...
Bonds have been a terrible investment since the depths of the COVID-19 crisis in early 2020, when interest rates hit a generational low.
Rates have risen sharply since then, which has crushed bonds' value – especially long-term bonds.
In fact, U.S. bonds have given negative returns over the past 10 years – even before factoring in inflation. It's only the second time this has happened in the past 233 years, as this chart from Bianco Research shows:
I'm not an interest-rate prognosticator, but I can still identify stupidly, unsustainably low interest rates... So I've warned my readers to stay away from bonds many times.
Most notably, in my October 12, 2021 e-mail entitled "Financial advice to retired readers," I suggested that a hypothetical couple should put 60% of their long-term nest egg in stocks and keep the rest in cash:
As for the remainder, I'd leave it in cash or cash equivalents – perhaps [one-fourth of the remainder] in a checking account (even though it earns almost no interest these days) and the balance in a super-safe short-term bond fund with a one- or two-year duration that might earn a little interest. That's what I did with some of my excess cash at Citibank – most banks and mutual fund companies will have offerings.
And as for bonds, I wrote:
I suspect many financial advisors would advise this couple to put a significant amount of their savings in higher-yielding bonds – either longer-dated and/or riskier ones – but I'm worried about rising interest rates (which would crush long-term bonds) and the paltry yields relative to risk with corporate and municipal bonds. To use a phrase coined long ago by Jim Grant, bonds in general these days in my opinion offer "return-free risk" (as opposed to what they're supposed to offer: risk-free return).
Sure enough, interest rates have risen substantially since then...
Here's a five-year chart of the yield on 10-year Treasurys, which has risen from 1.4% to around 5% today:
And here's a five-year chart for the 30-year Treasury yield, which has gone from 1.9% to around 5.3% today:
In light of these big shifts, I've moved from bearish to neutral on bonds.
They're now paying a respectable interest rate – but still far below levels reached during the inflationary 1980s, as you can see in these long-term charts:
What about cash and cash equivalents like short-term Treasurys?...
In general, I've long agreed with what Warren Buffett wrote in his seminal New York Times op-ed: "Buy American. I Am." He published it on October 16, 2008, during the depths of the global financial crisis, writing:
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.
That said, there are two good reasons to hold cash today...
First, retirees who are financially secure (such as my parents and the hypothetical couple in my 2021 e-mail) can dial back the risk in their portfolio by holding some cash, so they have a failsafe no matter what the stock market does.
Just make sure you at least earn a market interest rate on the vast majority of your cash. Don't let cash pile up in your bank account, which pays zero (in checking accounts) or close to zero (in bank savings accounts). And make sure your brokerage is paying you fairly.
This brings me to the second reason to hold cash...
If you're a stock picker, you always want to keep some "dry powder" to take advantage of great opportunities when they present themselves.
And one such opportunity is about to reopen.
As I've written lately and expanded on in my new presentation that went live last week, it's the same trade I made in 1999, at the peak of the dot-com bubble. It helped me build my $200 million hedge fund, which went on to crush the market.
As I've said many times, today looks similar to back then... Big tech stocks have been driving the market. But like in 1999, it's time to prepare for a new group of unknown names to take the lead.
I just went on camera to reveal the details of this huge opportunity and the strategy behind it...
Today, the AI bull market is still on and showing the trademarks of a bubble. And I see another "window of opportunity" opening for the same group of stocks I made my name on in 1999. It has to do with one particular stock screen that links them together.
In a near-decadelong back test, I found stocks that passed this test would have turned $100,000 into $1.1 million since 2017. In the past 12 months alone, they could have doubled your money or more on 46 separate occasions.
Most investors are still overlooking these stocks... But as I explained in my presentation, they could deliver 500% or 1,000% gains in the next few years.
If you missed my presentation or have been waiting to watch it, you can catch a replay here... Just for tuning in, I also named my top stock to buy right now and one to dump immediately, free of charge. You can still hear those, too.
But don't wait any longer, because the presentation won't be online forever.
New 52-week highs (as of 9/17/26): Altius Minerals (ALS.TO), Alpha Architect 1-3 Month Box Fund (BOXX), Quest Diagnostics (DGX), Illumina (ILMN), Marathon Petroleum (MPC), Cloudflare (NET), Twist Bioscience (TWST), Valero Energy (VLO), and Waters (WAT).
In today's mailbag, more thoughts on the Federal Reserve's decision to raise interest rates and a prediction about what might happen to inflation next... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Inflation is always and everywhere a monetary phenomenon, right Mr. Friedman? So raising rates should not alleviate high(er) energy prices, which has primarily driven the recent ascent of high(er) inflation. But inflation will be low(er) once the war is over, but not because of high(er) rates.
"Don't worry fellow Digesters, only six more months until base effects kick in and we'll really see that low(er) inflation" – Subscriber Jeff A.
Regards,
Whitney Tilson
New York, New York
September 18, 2026
