The State of the 'Melt Up'

A bigger, better, and more dangerous 'Melt Up'... The state of the 'Melt Up'... 'Davey Day Trader' greed and less Wall Street fear is a recipe for euphoria... How to make money and get ahead of the 'Melt Down'... Last call for Steve's free 'Melt Up' event tonight...

We've turned the Digest over to our colleague Dr. Steve Sjuggerud and his team a lot recently...

And for good reason...

They have something important to say about the "Melt Up" thesis that Steve has become so widely known for over the years... and what the COVID-19 pandemic and ensuing government shutdowns did to change its course earlier this year.

As longtime Digest readers know, Steve popularized the term "Melt Up" to describe what was happening with the stock market over the past decade or so – how stocks just kept reaching new highs no matter what drama was happening in the world.

Steve first coined the phrase in Las Vegas at our annual Stansberry Conference in 2015, but the heart of the idea goes back years earlier... to the government's response to the previous financial crisis.

As Vic Lederman, one of Steve's analysts, wrote in last Thursday's Digest... a lot of folks fail to realize that the Melt Up is built on an economic philosophy.

It's not an approach that we would suggest anyone use to manage their own nest egg (or is even possible, lending to yourself at near-zero interest rates), but it's one that the Federal Reserve and governments around the world have used for years... and most notably since the financial crisis of 2008 and 2009.

In short, we're talking about larger amounts of 'easy money'...

And as Vic described so well last week, the initial idea behind Steve's thesis was simple...

1. The world had just been through a major economic crisis.
2. The Federal Reserve and the U.S. government were taking massive action to end the crisis.
3. That meant interest rates would stay at rock-bottom levels for longer than anyone could possibly imagine.
4. And the net result would be an asset boom... one that could be larger than any of us would ever see again in our lifetimes.

Those four components are the core of Steve's Melt Up thesis. And the philosophy behind them is simply that policymakers will push markets to ridiculous extremes just to keep things rolling in the "right" direction.

If you run down the list of Steve's four main points that define a Melt Up, it doesn't take a market wizard to realize the same thing is playing out today – only with different circumstances.

This time... instead of a mortgage crisis and housing bubble, followed by a market crash and a Fed-fueled record bull market... it has been a pandemic and government shutdowns, a simultaneous market crash, and a Fed-fueled end to the shortest bear market in history.

And today, stocks continue to go higher...

So, if you ask us, "Did COVID-19 kill the Melt Up?"... we'd say, "Hardly." The idea actually might be stronger than it has ever been.

For one, more 'fake money' has fallen from the sky than ever before...

The fuel for a Melt Up has arrived on a greater scale than ever before (and more might be on the way). Steve wrote about this idea in our Masters Series over the weekend.

He pointed out that the $6 trillion-plus of stimulus that the Fed, led by Chair Jerome Powell, has pumped into the economy this year makes the fuel for the record bull market we saw over the past decade "look like child's play."

As Steve pointed out, it took Ben Bernanke – the former Fed chair who introduced quantitative easing ("QE") to us all – seven years to rack up half the amount of stimulus that Powell created in one month alone this year. And as Steve said...

Powell's measures are dramatically beyond the scope of anything Bernanke ever put into motion.

As I (Corey McLaughlin) wrote back in the July 27 Digest, the numbers are even more startling the further back in history you go...

In 10 days in March, the Fed created trillions of dollars of free "fake money"... more than it had created in the previous 30 years before the financial crisis of 2008 and 2009.

At its most basic level, this means there's way more money in the financial system and available in different ways today than anyone thought imaginable at the start of 2020... and we're seeing the consequences play out.

Here's just one example...

Take the growing popularity in investing circles of figures like Barstool Sports founder Dave Portnoy, also known as "Davey Day Trader," as Steve wrote in Monday's Digest. I'll add self-professed TikTok financial experts to this group, too.

Portnoy likes to say "stocks only go up," which is, of course, not true. But if you're the type of new investor like him who has only followed stocks since the end of March, you largely don't know anything different.

We sense a bit of sarcasm in Portnoy's public comments and think he's not as freewheeling as he leads on, but we know not everyone is so keen.

More commonly, newcomers to the market have been making money over the past six months (unless they traded only in September) but are largely blind to what experienced investors know...

1. They are actually part of the Melt Up with each share or bullish call option they buy, and

2. Maybe more important, they're largely unprepared for the other side of a great asset boom, be it a Fed-fueled rise of stocks today, "tulipmania" in 17th-century Holland, or bitcoin in 2017.

On that last point, you've heard our founder Porter Stansberry and Steve say this over the years...

For every Melt Up, there is a 'Melt Down'...

Don't get us wrong... You can make a ton of money on the way up, if you know what you're doing. And we know that's a big reason why Steve traveled to Baltimore to film tonight's presentation – to show everyday investors precisely how do that.

But as Steve wrote in yesterday's Digest, folks must be prepared for the inevitable downside of a massive government-fueled asset bubble, too. The bigger the bubble, the messier the pop...

So here's the most important thing we can tell you today...

To make the most money you can without losing a fortune, you want to be on the right side of both the Melt Up and the Melt Down. You don't have to time it exactly right to the hour or day... but you want to get at least get as close as you can.

And you definitely need to know the best investments to take advantage of and prepare your portfolio for both sides of the Melt Up and Melt Down.

With all that in mind, Steve is giving his latest update on his Melt Up thesis tonight...

Tens of thousands of folks have already signed up for this free event... And we're excited for it, too.

This "State of the 'Melt Up'" presentation is set to go live in less than two hours. If you haven't already signed up, consider this a last call... You can do that right here. (And to Stansberry Alliance members and Steve's True Wealth Systems subscribers, be sure to check your inbox for the details that are already available to you.)

We don't want to spoil too much... But based on what Vic wrote to you last week, we do know that Steve plans to get into more nuances of what the Melt Up really means. And that's two things, really...

It's an economic philosophy, for one, as we described above. But there is also the critical "end of the Melt Up" stage that we also mentioned, where it feels like almost everyone you know is downright giddy about the stock market.

We're not experiencing full-blown euphoria yet, but Steve and his team say we're on the way...

What was once a strange blend of euphoria and fear from traders or Wall Street investors, as we wrote about in late August and early September, is now moving more toward a cocktail of the same amount of euphoria and less fear.

Brett Eversole, the lead analyst for Steve's True Wealth franchise, joined our colleague Jessica Stone and Stansberry NewsWire editor C. Scott Garliss for an interview recently to talk about those details...

Today, Brett points out that we will definitely continue to see and hear plenty of stories from the Davey Day Traders of the world...

To that point, I recently talked to a former NFL player here in Maryland who is now spending his days trading. He said he gets the "same adrenaline rush" as he did playing... And this is a guy who played in the Super Bowl.

This former NFL player also said he was amazed that the stock market could return the sort of money it did this spring and summer in just a few names he was involved with – like Amazon (AMZN) and Apple (AAPL).

The second point that Brett pointed out to Jessica and Scott in the video is just as important...

Institutional investors, who have been more scared of risk as the markets have churned higher over the past few months, are getting "less scared" of the market today, too.

According to the most recent survey of hundreds of money managers and investors around the world by Bank of America, "cash levels" held by these folks in the past six months has dropped at the fastest rate since 2003.

This is important... because A LOT of cash has been sitting on the sidelines in things like barely-any-yield money market accounts since March. The amount of cash held by institutional investors reached $3.3 trillion in May.

As you can see in the chart below, the amount of cash that Wall Street managers have held has been declining steadily since May, but they still have about $700 billion more on hand than before the COVID-19 pandemic and subsequent government shutdowns...

If you're a believer that this cash will continue to come off the sidelines, that means this roughly $700 billion must go somewhere...

With rock-bottom interest rates in place today and the same expected from the Fed for the next few years, Brett says, "We're in a situation where there's nowhere else to make money" other than stocks, if you're a mainstream investor. As Brett told Jessica and Scott...

So we have a situation where retail investors are starting to get excited for the first time and money managers are starting to get excited for the first time and they're becoming less and less worried about the tech bubble.

And that's really what has to happen. For a tech bubble to exist and to take place, people can't be worried about it. Because if they're worried about it, it can't really take hold.

We're not all the way there yet, but it's coming... And these shifts in sentiment are also happening quicker than they did after the financial crisis a decade ago...

Said another way, even if we don't like what's happening – and Steve acknowledges that the long-term consequences of this money-printing won't all be good – this is the world we must work with today.

And the good news is... he has a plan for it.

We're excited for tonight's Melt Up event...

As we said, it's less than two hours away – and thousands of people have signed up. It might end up being our most-watched event of the year, for good reason.

Being on the right side of a Melt Up can deliver life-changing returns.

We've given you an outline today and over the past week in the Digest, but there are important fine details about Steve's ideas that he wants all investors to understand before they do anything else with their money.

In particular, Steve says what you do in the next week can influence how your investments turn out in the next 10 years. That's why he recently traveled on short notice to our headquarters and is bringing his presentation to viewers tonight.

Again, you can click here right now to grab your free ticket so you don't miss any of the details. And remember, if you're already an Alliance member or True Wealth Systems subscriber, you'll soon hear from Steve about how you can access all of this research if you haven't already.

New 52-week highs (as of 10/20/20): Alibaba (BABA), Curaleaf (CURLF), Calibre Mining (CXB.TO), New Oriental Education & Technology (EDU), Green Thumb Industries (GTBIF), MarketAxess (MKTX), Southern Copper (SCCO), and Zebra Technologies (ZBRA).

In today's mailbag, more discussion on Dan Ferris' Friday Digest and responses this week. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I just joined Extreme Value as a Lifetime Member. After reading Dan's responses to the letters he received, I am even more happy than I was before in signing up for this man's service. Well done, Dan." – Paid-up subscriber Jay D.

"Dan, Just read your Digest and I can't begin to thank you. When I was a freshman, the school had Malcolm X come to our campus to speak to all who cared to listen. The hall was jammed with curious liberals (all students were liberals). I believe the year was 1960. He came to the podium dressed in a three-piece suit, white shirt and rep tie with our school colors! We were stupefied.

"He started his talk by saying, 'You probably expected a screaming n****r telling all you chalk sticks that you should burn in hell! Sorry to disappoint.' The student body stood, applauded wildly and listened to an impassioned speaker. That was a long time ago, but no protestors, no violence, no nuthin'. When Ann Coulter was 'not allowed to speak' at Berkeley I wanted to puke. Our country is going to hell in a handbasket and there is nothing we can do about it. What a shame. Glad I'm old." – Paid-up subscriber Kenny G.

Dan Ferris comment: Perhaps our country is "going to hell in a handbasket," but fear not... It's hopeless, but not serious.

What you can do about it might seem like nothing, but I promise you it's something...

Speak up and speak out. Don't remain silent when you hear someone spouting something that's destructive of a truly open society.

Use your voice to help bring order to the chaos, as God intended. It might not seem like much, but like I said in Friday's Digest, it is nothing less than the primary weapon in the fight to protect civilization.

"Dan, absolutely great response to David D. One of the best articulations in defense of free speech I have read and I read a lot of bright, educated, and purposeful writers." – Paid-up subscriber Curtis S.

"In response to Tim L's and Dan's comments from [Monday's] Digest: The concept of individual rights has been completely warped in the past century (accelerating its demise in the past 50 years). This country was founded (as evidenced in the Declaration of Independence) on the recognition of inalienable rights (rights that cannot be taken away). This was a profound and monumental occasion. This was the first time in history that a government document referred to the concept of individual rights. Although this country wasn't fully formed at that moment, that document is the precursor to its official formation by the Constitution. That is why it should be taught in conjunction with the Constitution. The Declaration identifies that man has rights with which he is born. By the very nature of man's existence (as an independent being, unattached to others by mind or body), he is therefore free to use his faculty of reason for himself. Because of this existential fact, man has a right to his own life, liberty, and the pursuit of happiness.

"The concept of individual rights is antithetical to other 'rights' being pushed by today's government. The present-day rights are entitlement rights. These rights are bequeathed by government and can be taken away just as easily. Furthermore, in order to enforce entitlement rights, it requires the government to impede upon one's inalienable rights; think taxes and regulations. An easy check to the concept of individual right versus entitlement right is to ask yourself the following question: does the fulfillment of this 'right' require an action by anyone else? If it does, then your right is by default someone else's duty.

"Dan, thank you for bringing up such an important topic." – Paid-up subscriber Bret R.

Ferris comment: I borrow Ayn Rand's test... When someone says they have a right to something, I ask, "Provided by whom?"

"Don't usually respond to anything you write but, I really like your thoughts on this subject. When they take the guns, we're done." – Paid-up subscriber Homer B.

All the best,

Corey McLaughlin
Baltimore, Maryland
October 21, 2020