Wall Street Echoes Steve
Sjug's 'Melt Up' thesis continues to catch on... Wall Street echoes Steve... The 'euphoria' stage has begun... No sign of a bear market yet...
Sjug's 'Melt Up' thesis continues to catch on...
Last week, renowned "bubble spotter" Jeremy Grantham became the latest notable name to endorse the forecast Steve Sjuggerud has been sharing with his readers for months.
Now, two major Wall Street firms have joined in...
In a note over the weekend, strategists from investment bank Morgan Stanley said we've now reached the "euphoria" stage of the bull market. This is the potentially explosive final leg of a rally where investors finally go "all in" on stocks again.
The firm noted that no cyclical bull market in history has ended without this phase... And it often signals the "beginning of the end" of the long bull market.
Hmm, where have we heard that before?
Meanwhile, a recent note from Citibank predicts this rally has further to run...
Despite elevated valuations and extreme sentiment today, Citi said it sees no risk of a cyclical bear market this year. In fact, of the 18 indicators on the firm's "bear market checklist" - which include measures of valuation, sentiment, corporate behavior and profitability, and credit market health - only 3.5 say "sell" today.
By comparison, 13 of the 18 indicators were flashing red at the market's pre-financial crisis peak in October 2007. And 17.5 out of 18 were warning of a bear market at the peak of the dot-com boom in March 2000.
In other words, just like Steve, Citi says its long-term market indicators are still giving the "all clear" today.
Of course, this doesn't mean we can't see a significant correction in the meantime...
We've seen several double-digit declines in stocks over the nine-year-old bull market in stocks so far. And we could see others before the "Melt Up" ends. These indicators simply tell us that any decline is likely to be temporary, rather than the start of a serious bear market. As Citi noted...
It is not a market-timing model. It will not tell us that another short-term correction in global equities is imminent, but it will tell us what to do when that correction occurs... Right now, it is telling us to buy the next dip.
And the risk of that dip continues to grow...
Yesterday, we noted 'mom and pop' investors are getting back into stocks for the first time in years...
The latest report from the American Association of Individual Investors ("AAII") showed individual investors were holding 72% of their portfolios in stocks last month. That's the highest allocation since the last Melt Up in the late 1990s.
Investors are also piling back into risky debt. As Bloomberg reported yesterday (emphasis added)...
As the traditional January rally gathers steam, investors in exchange-traded funds put fresh money to work in the hottest fixed-income trades of 2017: high-yield and emerging-market credit.
Three ETFs tracking risky debt products attracted a combined $2.3 billion in the week to January 5, with inflows that ranked among the four largest for U.S.-listed fixed-income ETFs...
Investors poured $868 million into the benchmark iShares JPMorgan USD Emerging Markets Bond Fund, the most on record. [The] SPDR Bloomberg Barclays High Yield Bond Fund garnered a $1.07 billion allocation, the largest since October 2015.
But they're not the only folks getting excited about the market again...
The latest data show Wall Street analysts are getting downright giddy, too.
According to data from research firm Bespoke Investment Group, analysts are raising their forecasts for U.S. corporate profits at the fastest pace in more than a decade. The last time analysts were anywhere near as bullish was in spring 2010... which coincided with a 16% correction in the S&P 500 that summer.
Now you could argue analysts are simply responding to expectations of further economic growth or the new tax plan. But it's another clear sign of "froth" in the market today.
What should you do with this information?
As is often the case in investing (and in life), the answer is, "it depends."
As Porter has explained in detail, a serious crisis is approaching. If you're a conservative investor – or simply cannot afford to lose money – speculating on the Melt Up likely isn't worth the risk or the headache.
On the other hand, if you can afford to speculate correctly, all signs say the Melt Up will continue for now. The weight of the evidence suggests this bull market isn't over yet... And any near-term correction will be another buying opportunity, rather than a reason to sell.
New 52-week highs (as of 1/8/18): AllianceBernstein (AB), AMETEK (AME), Amazon (AMZN), Boeing (BA), iShares MSCI BRIC Fund (BKF), Berkshire Hathaway (BRK-B), Morgan Stanley China A Share Fund (CAF), CBRE Group (CBG), Global X China Financials Fund (CHIX), First Trust Nasdaq Cybersecurity Fund (CIBR), Cisco (CSCO), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), Emerging Markets Internet & Ecommerce Fund (EMQQ), iShares MSCI Japan Fund (EWJ), Facebook (FB), First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS), iShares China Large-Cap Fund (FXI), Corning (GLW), Alphabet (GOOGL), iShares Core S&P Small-Cap Fund (IJR), ETFMG Prime Mobile Payments Fund (IPAY), iShares U.S. Aerospace and Defense Fund (ITA), iShares U.S. Home Construction Fund (ITB), iShares Transportation Average Fund (IYT), KraneShares E China Commercial Paper Fund (KCNY), VanEck Vectors Coal Fund (KOL), KraneShares CSI China Internet Fund (KWEB), iShares MSCI China Index Fund (MCHI), Microsoft (MSFT), AllianzGI Equity & Convertible Income Fund (NIE), NVR (NVR), Overstock (OSTK), PowerShares High Yield Equity Dividend Achievers Portfolio Fund (PEY), iShares MSCI Global Metals & Mining Producers Fund (PICK), Ralph Lauren (RL), ProShares Ultra Technology Fund (ROM), Sabine Royalty Trust (SBR), VanEck Vectors Steel Fund (SLX), ProShares Ultra S&P 500 Fund (SSO), Steel Dynamics (STLD), Stanley Black & Decker (SWK), Guggenheim China Real Estate Fund (TAO), Tencent (TCEHY), ProShares Ultra Financials Fund (UYG), VF Corporation (VFC), Wal-Mart (WMT), ProShares Ultra FTSE China 50 Fund (XPP), and Direxion Daily FTSE China Bull 3X Fund (YINN).
In today's mailbag, two more subscribers share their experiences with TradeStops... and another is cashing out. What's on your mind? Let us know at feedback@stansberryresearch.com.
"I got an early lifetime subscription to TradeStops on the basis of your recommendation. Utilizing it multiplies my confidence in my portfolio. Your comment in response to David S. is going to be very helpful to me (thank you, David) in getting the most out of my Stansberry/TradeStops subscriptions. Since I trust my memory a little less each year, I'll print it and put it on my wall. Thanks for the improved perspective." – Paid-up subscriber Carl O.
"TradeStops has enabled me to break the daily tradition of looking at me 40 plus stocks and trying to figure out when to cash out poor performing stocks, additionally I do not have to reallocate capital because the churning (buy and sell all the time) has stopped. I am confident the system will warn me of marginal and questionable stock investments when I run them through the 'stock analysis' portion of TradeStops. I believe this yearly fee (I have the premium software) is cheap for the degree and level of 'risk management' I receive on a daily basis..." – Paid-up subscriber John K.
"My take and my decision on [the 'Melt Up']... I'm a working guy. I've got a job. A regular job. Not one where I can sit around all day watching what's going on in the stock market. I'm a lifetime subscriber to TradeStops, Stansberry EVERYTHING...
"But I'm getting out [of the market, today,] 01/09/2018. Go ahead – laugh at me you. Use me as a bad example to your readers of what a 'good investor' shouldn't do, and shouldn't be.
"But I know me. I know my life. There's NO WAY I'm going to be available and ready mentally and emotionally to instantly react to the sirens and red flashing lights when you guys finally set them off. I'm getting out!! NOW. Thank you very much." – Paid-up subscriber Jeff Martin
Brill comment: On the contrary, Jeff... From the beginning, Steve has been crystal clear that speculating on the Melt Up isn't necessarily the right choice for everyone. And we've urged you to stay fully invested only if you're certain you have the discipline to follow his exact recommendations and sell when he finally says the "party" is over.
Unfortunately, history suggests many folks don't, and will hold on far too long. We applaud your self-awareness and honesty about your own limitations. That alone may not make you a "good investor," but it's a great start.
Regards,
Justin Brill Baltimore, Maryland January 9, 2018