Sjug: These Stocks Are 'Dirt Cheap' Today

Sjug: These stocks are 'dirt cheap' today... The first time we've seen this since 2003... Porter reluctantly agrees with Steve's 'Melt Up' thesis... Don't forget to sign up for the first bitcoin event in Stansberry Research history...

Regular Digest readers know U.S. stocks have been on a tear this year...

The benchmark S&P 500 Index is up nearly 16% year to date. That's good for the third-best annual return since the financial crisis, and we still have nearly two months to go in the calendar year.

But many U.S. investors may not realize that European stocks have been doing even better this year. The STOXX Europe 600 Index is up a staggering 24% year to date.

Yet despite this outperformance, European stocks remain incredibly cheap compared with those in the U.S. In fact, as our colleague Steve Sjuggerud wrote in his latest True Wealth Systems Review of Market Extremes – published last night after market close – they're cheaper than they've been in more than a decade. As he explained...

U.S. stocks are roughly 65% more expensive than European stocks today.

Yes, 65% more expensive!

Don't get me wrong, I am extremely bullish on U.S. stocks... But valuations have soared in this bull market. European stocks are now dirt-cheap compared with their U.S. counterparts. And they should outperform from here...

The chart below shows the premium/discount ratio – it's based on the price-to-book value of U.S. stocks compared with European stocks.

Take a look at the extreme...

As Steve noted, the last time we had a similar setup was back in 2003...

And history shows that turned out to be a great time to own both the U.S. and Europe. More from the update...

U.S. stocks chugged higher from 2003 to 2007... And European stocks outperformed each year in that time frame. Take a look...

This could be the beginning of a multiyear run for European stocks, if history is any indication. Even more, we could be seeing this already...

We can't know for sure what the future holds, but European stocks are dirt-cheap compared with the U.S. And that means European stocks could be starting a multiyear run of outperformance.

Again, Steve remains extremely bullish on U.S. stocks as the 'Melt Up' rolls on...

But he believes European stocks are likely to continue to outperform from here.

As regular Digest readers know, Steve originally recommended buying European stocks back in January. And True Wealth Systems subscribers who took his advice are up 46% so far... nearly double the return of the broad European market over that time.

But if you missed this opportunity back then, Steve says it isn't too late to profit. History suggests the gains are just getting started.

True Wealth Systems subscribers can find all the details on Steve's preferred way to profit from this situation in the January issue right here. If you not already reading True Wealth Systems, click here to learn more about a subscription.

Speaking of the Melt Up, regular readers also know Porter has been cautious...

While he and his analysts have continued to recommend owning U.S. stocks, they've also recommended "hedging" your portfolio.

In The Total Portfolio – our highest-level Stansberry Portfolio Solutions product, where Porter, Steve, and Dr. David "Doc" Eifrig take all the guesswork out of building a balanced, diversified portfolio – this has meant holding plenty of cash and nearly 10% of the portfolio in short positions.

But now, Porter is beginning to reassess that view. As he explained in this month's Stansberry Portfolio Solutions Monthly Briefing...

Porter, when the ducks are quacking, you'd better feed 'em...

A mentor, who happens to be one of the world's foremost art collectors, gave me this advice a long time ago. It has served me well. And I believe it will serve us well in the days to come...

Today, the ducks are quacking... as loudly as I've ever heard them in my career.

After largely ignoring the stock market for years (and piling into bonds and gold), investors have been rushing into stocks since 2015, pushing them higher and higher... to truly absurd valuations. By most measures, stocks are now more expensive relative to earnings than they've ever been, except for the market peaks in 1929 and 2000.

Investors have decided to ignore one of the largest hurricanes in history... a massive flood in Texas... and a crazed dictator – "Rocket Man" – lobbing missiles over Japan.

As Porter noted, the one thing they haven't been ignoring are stocks...

Last month saw new all-time highs in virtually every important measure of the equity markets: the Dow Jones Industrial Average (DJIA), the Dow Jones Transports, the Nasdaq Composite Index, and the Russell 2000 Index (small-cap stocks). (See chart above.)

The most important foreign markets (Japan, Germany) also set new highs – an all-time high for Germany (DAX Index) and a new trend high for Japan (Nikkei 225). (See chart above.)

Quack. Quack. Quack.

If you've been a believer in Steve Sjuggerud's "Melt Up" thesis – that our profligate central banks would light a raging fire in the world's equity markets – then the stage is now set.

In short, Porter remains cautious today, but he now reluctantly agrees that a Melt Up has become much more probable...

As a result, we're moving tactically to get more of our assets back into the markets. We do so reluctantly... but firmly. Risk isn't one-sided. While the risk of capital loss is real and paramount, the risk of massive underperformance is also real.

Currently our Total Portfolio is up 17.7% on an annualized basis, trailing the S&P 500 Index by only 0.4%. By dropping most of our short positions and reducing our cash reserve, I'm confident we can keep pace with this bull market. And with most of our assets still conservatively positioned (and with about 14% still in cash), I'm comfortable that we will have ample opportunity to escape the market before its ultimate top.

If you, like me, are worried and risk-averse... don't forget the advice of my mentor. The ducks are quacking. With new highs around the world, stocks are likely to move higher for the next several quarters. There's a top out there somewhere... But it's not here yet.

Since we launched Stansberry Portfolio Solutions in January, it has quickly become one of our most popular products. And for good reason... Porter, Steve, and Doc not only share their favorite recommendations from across the Stansberry Research universe, they also show members exactly when to buy... how much money to allocate to each position... and when to sell. There's no better way to take all of the guesswork out of investing like a professional.

If you're interested in becoming a Stansberry Portfolio Solutions member, stay tuned. We'll be briefly opening all three portfolios to new members early next year.

As we noted yesterday, this isn't the only 'change of heart' Porter has had...

He's also become less bearish about bitcoin and other cryptocurrencies in recent months. But he isn't alone... Several of our analysts are now taking a second look at these markets.

Why? In short, it appears we're approaching a "tipping point," where significant money could begin to flow into these assets over the next several years. While we aren't quite ready to make an official recommendation today, we do believe you owe it to yourself to become educated about this burgeoning asset class.

To be clear... This is not an endorsement to load up on cryptocurrencies. Even the best of the bunch are incredibly speculative and volatile, and these markets are undeniably bubbly today.

Worse, similar to the 1990s Internet bubble – when huge numbers of questionable companies added ".com" to their names to cash in – our research suggests the vast majority of the nearly 1,200 "cryptos" available today are worthless.

If you're going to speculate in these markets, you must manage your risk... and you must know exactly what you're buying.

This is why we're hosting our first-ever live cryptocurrency event, next Wednesday, October 18, at 8 p.m. Eastern time. Porter will be joined by two of the most successful cryptocurrency experts in the world to explain everything you need to know about Bitcoin and cryptocurrencies, and answer all your questions.

Click here to learn more and reserve your spot now.

New 52-week highs (as of 10/11/17): AbbVie (ABBV), American Express (AXP), Allianz (AZSEY), Alibaba (BABA), Biogen (BIIB), Bristol-Myers Squibb (BMY), CBRE Group (CBG), WisdomTree U.S. SmallCap Dividend Fund (DES), iShares Select Dividend Fund (DVY), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), Euronet Worldwide (EEFT), iShares MSCI Japan Fund (EWJ), Alphabet (GOOGL), ETFMG Prime Mobile Payments Fund (IPAY), McDonald's (MCD), Microsoft (MSFT), Nvidia (NVDA), ProShares Ultra Technology Fund (ROM), Seabridge Gold (SA), and Wal-Mart (WMT).

In today's mailbag: a longtime Stansberry Alliance member responds to Porter's Friday Digest... a question about gold and the dollar... kudos for Steve Sjuggerud... and more signs the Melt Up is catching on. What are you seeing or hearing? Let us know at feedback@stansberryresearch.com.

"I discovered Porter and Steve's newsletters when I became a lifetime subscriber to another service in 2002 that included their letters. When that service broke apart I followed you two to this newsletter and became an Alliance member because I thought so highly of both of your letters. I've since acquired a good deal of knowledge from your letters and from your other writers. One of the best ideas I have picked up is the idea of being a contrarian investor/trader. I just wish I went along with more of the contrarian ideas you have published." – Paid-up Stansberry Alliance member Dan S.

"In recent articles you have both gold and the dollar positioning for a potential breakout. Can both be true at this point?" – Paid-up subscriber Tim W.

Brill comment: In short, yes, they could... One of the biggest misconceptions among novice investors is that market correlations are consistent and rational. But reality is rarely so simple.

For example, it's true that gold and the U.S. dollar tend to move inversely over the long term. But that isn't always the case. Over shorter periods of time, this relationship is constantly changing. It waxes and wanes, and even reverses – meaning gold and the dollar move in the same direction – from time to time.

So while we would generally expect a rising dollar to be a headwind for gold, we can point to plenty of times when gold and the dollar rallied together for a time.

"I have been following Dr. Steve's advice for longer than I care to remember. While most of the Stansberry newsletters are definitely worth the read, never do I skip Steve's advice: Still have my first Saints from early 2000's, and have steadily purchased more gold coins over the years. I believe gold was in the low $300 range when first coins purchased. Kept a position in Seabridge Gold... Invested in almost all of the 'Melt Up' thesis. Held my nose and held on to virtually all of my positions. Trailing stops have saved me from myself a few times. Have positions in all of the China recommendations. In short, his recommendations have kept me more than solvent in early retirement and beyond. Thankful, appreciative, and still humbled." – Paid-up subscriber Don G.

"This morning I took my car into the local dealership to have some service work done. They gave me a ride to work so they could have the car for the day. On the way, I struck up a conversation with the retired gentleman who drove the shuttle. We talked about many things, it was a 20 minute ride, but we landed on personal investing. He told me, unsolicited, mind you, that he and his wife had some cash they've been sitting on for years and were looking for ways to invest it. He referred to the current market condition as 'the Melt Up.' Here it comes, a tsunami of currently sidelined cash, about to inflate this market to monumental proportions. With [TradeStops volatility-adjusted] trailing stops firmly in place, it's going to be an awesome ride!" – Paid-up subscriber Terry G.

Regards,

Justin Brill
Baltimore, Maryland
October 12, 2017