'There's a Huge Problem With Your Portfolio'
'There's a huge problem with your portfolio'... More on last week's stock market 'panic'... What Steve Sjuggerud is thinking now... Why the 'Melt Up' is still in play... What you must do before the bull market ends...
Did last week's declines worry you?...
On Friday, Digest readers heard Porter's thoughts about last week's market "panic"...
In short, if Wednesday's relatively small declines bothered you at all, Porter warned there's likely a huge problem with your portfolio. As he explained...
Think honestly. When you first saw how the market was going to open (way down) on Wednesday, what was your first reaction? Or, if you didn't see the open, what happened on Wednesday night when you first saw the news? Or during the day when stocks just kept going down, lower and lower?
Be honest with yourself. If there was even a twinge of fear, you've got a big problem. Let me explain why...
Wednesday saw about three weeks' worth of market gains wiped out, temporarily. It was a tiny, 2% move lower. It wasn't a bump in the road. It was barely a ripple on the calmest lake the equity markets have ever seen.
Since 2015, stocks have been ripping higher, propelled by "rocket fuel" – central banks, sovereign wealth funds, corporate buybacks, and value-ignoring index-fund investors. There's hardly been a down day in nearly two years. This incredible rally has created record levels of investor complacency – aka, investor stupidity.
It has also, almost surely, lulled many of our subscribers into portfolio allocation decisions that are far too aggressive.
If you missed it, be sure to catch up here. And if you're one of those folks who was worried last week, we urge you to join us this Wednesday night at 8:00 p.m. for a special live event with Porter, Steve Sjuggerud, and TradeStops founder Dr. Richard Smith.
As we noted last week, you will walk away from this event knowing when this historic bull market will finally end... how to safely get back into stocks today if you've been afraid to do so... how to know exactly when to sell some of our best-performing recommendations like Hershey, Microsoft, and McDonald's... the one thing you must do whether you side with Porter or Steve... and much more.
Best of all, this event is absolutely free for all Stansberry Research subscribers. Click here to reserve your spot now.
Today, we're sharing some of Steve's latest thoughts...
In the latest issue of True Wealth, just published Friday, Steve explained why he believes last week's mini-panic was actually great news for stocks. From the issue...
In technical terms, the move was "two standard deviations beyond normal." In plain English, it was a panic.
The move wasn't that big on paper... a 370-point fall was less than a 2% loss. But it shocked folks... Trading had been so sleepy lately that investors panicked at the fall. You can see it in their trading activity...
My good friend Jason Goepfert at SentimenTrader reported that, on that day, "there was a monster spike in [panic-based exchange-traded fund ("ETF")] volume, accounting for nearly 8% of NYSE volume, by far the largest ever." Jason defines a "panic-based ETF" as one of two types of funds: 1. an inverse ETF, or 2. a volatility-based ETF.
In short, when investors fear big downside risk or big volatility ahead, they trade these funds. And trade they did... They traded panic-based ETFs in record amounts.
As Steve noted, this is a sign that despite the long rally, most investors still don't "trust" this bull market. More from the issue...
Think about this... What do you think of when you think of the top of a market? I think of it as a moment of unbridled optimism. It's a moment when investors are no longer scared.
As an example, think about the real estate boom a decade ago... How many people were scared at the peak? Nobody was scared. Everyone believed that prices could never go down. Everyone believed that house prices could go up 10% or more a year – even when population growth was less than one percent per year.
At the peak, everyone who wanted to buy a house had bought. There was no one left to buy. And so there was nowhere left for prices to go – but down. That's what a peak in a market feels like. Is that what it feels like to you now?
As we saw on Wednesday, investors are fearful and twitchy. We don't have that feeling of euphoria in the stock market at all. Wednesday taught us that investors are ready to sell at the first sign of trouble.
The 'Melt Up' is still in play…
In other words, last week showed that U.S. stocks still have plenty of upside potential...
Steve says it confirms that his Melt Up script is still on track... And stocks could absolutely soar over the next 12 to 18 months as the final "innings" of the long bull market play out.
Steve says the stodgy, blue-chip Dow Jones Industrial Average could more than double to as much as 50,000 before it's all over... And many individual stocks could do far better.
Of course, profiting from a Melt Up is just half the battle...
Successful investors must also get out before the "Melt Down" that is sure to follow. As Steve explained...
In the previous tech-stock Melt Up, the Nasdaq-100 Index went from a value of 1,500 to nearly 5,000 – and back down again – in three years. It was crazy.
Importantly, if you hung in there the whole time, you didn't make any money – you broke even.
Most people did much worse... They bought late in 1999, during the frenzy, and then sold close to the ultimate bottom in 2003.
We intend to do much better. We will do our best to catch most of the upside and avoid most of the downside.
We can't know just how high stocks will go during the Melt Up. But we would like to capture as much of that gain as possible. At the same time, we'd like to give back as little as possible when the fun is over.
In the issue, Steve laid out a detailed plan to help his True Wealth subscribers lock in the biggest gains possible over the next couple years. But because he believes this is so important, he has agreed to share this information with all Stansberry Research subscribers at this Wednesday's live event.
Again, whether you think Steve is correct – and stocks will absolutely soar before the bull market ends – or you agree with Porter's more cautious stance, you can't afford to miss this free event. Click here to sign up now.
New 52-week highs (as of 5/19/17): iShares MSCI Italy Capped Fund (EWI), iShares MSCI Japan Fund (EWJ), iShares MSCI South Korea Capped Fund (EWY), iShares U.S. Home Construction Fund (ITB), JD.com (JD), KraneShares CSI China Internet Fund (KWEB), McDonald's (MCD), Naspers (NPSNY), Paysafe (PAYS.L), PowerShares S&P 500 BuyWrite Fund (PBP), Tencent Holdings (TCEHY), and Weight Watchers (WTW).
In today's mailbag, several subscribers weigh in on Porter's must-read Friday Digest. How did you hold up during last week's "panic"? Let us know at feedback@stansberryresearch.com.
"How was my Wednesday in the market? I'm mostly done with funding 40% of our investible net worth into the Stansberry Total Portfolio. 50% remains in cash, and 10% is in physical bullion. I used Wednesday to wrap up most of my remaining purchases while some recommendations were on sale.
"I didn't panic, because we've seen several of these little market panics in the past year, because of our cash and metals allocations outside the Portfolio, and because of the diversification and hedging in The Total Portfolio. At the end of Wednesday, with benefits from [the] rise in metals prices, and gains in the gold stocks and short positions, we were down... $74. On a 377-point drop in the Dow. And the next day, when the Dow bounced back by 50-something, we were up over $3,000 (net, same rules) on that same portfolio. Today (Friday), we're up another $2,500 or so, net, even though metals and the short positions are losing a little.
"That's the power of diversification, with a healthy allocation to cash and metals. Sleep well at night, smile during the day." – Paid-up subscriber Joe R.
"Porter, I am truly sorry, and I must apologize profusely. Last Wednesday came and went and I didn't feel a thing. I must be living in LaLa land, (OK, well, rural OK) and upon checking our IRAs at the end of the day, the numbers were a bit red, but I didn't have a meltdown, didn't call a therapist, didn't drink more wine than Doc Eifrig suggests, didn't break out in a sweat, thus, I am so sorry I forgot to panic, and even worse, due to following the principles of position sizing, shorting likely losers, holding cash, owning metals, etc, I just felt OK, just another irrational moment in a rather rational life, nothing unusual. Please forgive me for being such an insensitive diversified disciplined disciple.
"There was once a fellow carrying on a conversation with a friend who would start banging his head against a wall, then quit for a while, then bang his head against the wall, then quit, you get the idea. The friend asked the head banger if it hurt when he banged his head against the wall. Guy said it hurt like heck, but then said, it felt sooooooo good when he quit... If, as an investor, you felt like heck Wednesday, and felt sooooooo good the next day, you might be a head banger. Once again, a horse-and-water thing." – Paid-up Stansberry Alliance member Randy W.
"Thanks for the laughs tonight. Your last comment 'that's just mean' got me laughing out loud." – Paid-up subscriber Evan W.
"Yep, I had a belly laugh! Thanks." – Paid-up subscriber Allen W.
"Not to brag, but my overall portfolio actually went up Wednesday. Within my portfolio I hold a basket of high-quality mining stocks as well as physical gold and silver. Additionally I hold a basket of high-quality Chinese stocks based upon the True Wealth China Opportunities. I have some hedges... (learned from Stansberry). I also have some covered calls that worked in my favor as well.
"By the way my average drives at Altitude go about 275 to 280, even though I sometimes hit 300. I always anticipate my average. Same with my portfolio. Stansberry has taught me to be patient, hedge my portfolio with puts and covered calls along with gold and silver. I have learned a lot, but keep learning from my mistakes. Keep up the great work!" – Paid-up subscriber Rick R.
"If one has learned to control their portfolio with asset allocation, position sizing, stops and thus a hedged portfolio you can look at these sell offs as future buying opportunities instead of a tale of woe." – Paid-up subscriber R. Miller
"Porter, Thanks for another great Friday Digest. Our portfolio performed very well on Wednesday; it was up over 4% for the day. I started out as an amateur and now consider myself a pro-in-training thanks in large part to your willingness to share your knowledge.
"I didn't panic and I wasn't afraid because I didn't even realize what was going on! We just happened to be on our way home from London and once we got home, I checked my e-mail and trading account and was pleasantly surprised.
"My first reaction was 'It's about damn time!... We get a little vindication for the portion of our portfolio dedicated to gold stocks and shorts/puts!' Lol! I was starting to feel like I was crying in the wilderness until Wednesday.
"Count me as one of your subscribers that is not an accredited investor and therefore cannot handle the risks. Thank you once again for all you do, Porter! We just booked our flight; see you in September for the Alliance meeting!" – Paid-up Stansberry Alliance member Jesse Haro
"WHAT I DID DURING THE MELT DOWN... The first thing I did when I found out about the market's falling was think: 'Let's see what the dunderheads on TV are saying.' As usual – nothing that made any sense. The second thing I did was think: 'I wonder what will happen by day's end and will I be stopped out of any of my stocks.' The third thing I did was think: 'I wonder if there will be anything I want to buy.'
"I keep a spreadsheet of all your recommendations with color coding for the ones that I own that includes TradeStops' VQ% and status (by color)! If I find something that I like then I can:
1) Buy it
2) Sell a Stink Bid Put on it
3) Set up an Alpha trade on it
4) Check its bonds and see if they are getting shoved down, too
5) Check the Dirty Thirty and see if TradeStops has changed its status
"TOO MANY OPTIONS! MY HEAD HURTS! By the time I get thru with all this the market is closed & I can't do anything till tomorrow, so I go have a glass of wine to calm my nerves! WHO HAS THE TIME TO PANIC? LOL" – Paid-up subscriber Bob J.
Porter comment: That's a great to-do list.
Regards,
Justin Brill
Baltimore, Maryland
May 22, 2017