You Know What Really 'Grinds My Gears'?

The best place to find a good laugh... You know what really 'grinds my gears?'... In a world short on 'common sense'... Independence is a beautiful thing... An opportunity in shipping?...

If you need a good laugh, just go to CNBC's website at any point during the trading day...

There's a good chance you'll find something amusing.

Take yesterday afternoon, for example... I (Corey McLaughlin) had just finished some editing work, so I opened my web browser to catch up on what the mainstream financial media was saying about the markets.

I usually don't pay attention to these types of stories much, and this brief relapse quickly reminded me why. The top headline on CNBC's website really "grinded my gears," to borrow a phrase from popular cartoon Family Guy...

... Especially since just two weeks earlier, CNBC's lead article was...

Regular Digest readers know this is nothing new...

It seems the popular financial-news network can't make up its mind... or is apt to change it very quickly on an emotional level that we wouldn't recommend to any investor.

I don't know these articles' authors, nor do I intend any personal malice to either of them. Writers and editors are human, too... and they write and publish these stories every day because someone is paying them.

My colleague Dan Ferris wrote about some of the absurdities in the mainstream media in the November 22 Digest. This just happened to be the "Absurdity of the Week" example.

These headlines said nothing with conviction – and certainly nothing worthwhile...

Always be wary of anyone who tells you exactly which way the broader market is headed based off a few trading days. No one really knows for sure what the market will do from here.

Take the CNBC article yesterday, for example...

An astute consumer would quickly see that it's based off new data from investment-research firm Ned Davis Research. It also includes different investment managers' perspectives.

The article noted that between mid-August and late November, the Dow Jones Industrial Average was up 10.5% in 74 days. And according to Ned Davis Research, the Dow has posted a median gain of 13.4% and rally length of 61 days before "blow-off tops" dating to 1901.

That's great... It's all Journalism 101 – supporting facts, hard data, and expert insight.

But in the article, Ned Davis himself doesn't say what the headline says.

He's only quoted as saying, "I am aware that many bull markets have ended with a rally similar to what we have seen since August."

But why let the truth get in the way of a click-bait headline, which is all most people see?

There's also a thing called 'common sense'...

News writers of any kind are often prohibited from using it.

Whether they know it or not, they're at the behest of advertisers, corporate ownership, and the need to fill a 24-hour news cycle that the industry created in pursuit of revenue.

Thankfully, we're independent around these parts...

Our Stansberry Research editors and analysts don't have to sugarcoat their opinions, nor do we have to find flashy headlines where there's no story to fill space.

We answer to you, the readers and subscribers. That's what makes the whole operation work.

And as far as "Melt Up" and "blow-off top" analysis goes, we'll listen to our colleague Steve Sjuggerud and his research team...

In Monday's edition of his free DailyWealth e-letter, Steve posed the question directly in the headline: "Where's My Melt Up?" The short answer, of course, is that he believes there's a lot of room for this bull market to run. He laid out the data in the essay...

Since 1950, stocks have hit new all-time highs more than 500 times (and that's just using weekly data).

What happened six months after those highs? What happened a year later?

It turns out, stocks were up – a lot.

If you were simply a "buy and hold" investor, you would have made 7.7% a year on stocks during that time (not including dividends).

However, for the 52 weeks after a new high, stocks outperformed their typical return – delivering an 8.5% compound annual gain.

Of course, this should all sound familiar for regular readers. As far back as the February 24, 2018 Digest, Steve wrote...

Long story short, we still have time. The ultimate market peak might not arrive until 2020. No kidding.

Steve's analyst, Chris Igou, wrote in today's DailyWealth that he still sees positive signs in the market for the next year or so... and "much higher stock prices before the ultimate peak in U.S. stocks"... but also not to "expect a one-way ride" higher.

In the short term, Chris is wary that the most recent Commitment of Traders ("COT") report shows that futures traders are betting "easy money will continue"...

If you're not familiar, the COT report comes out every Friday and indicates where futures traders are putting their money. Right now, they're betting on continued low levels in the Chicago Board Options Exchange's Volatility Index ("VIX") that gauges market "fear."

But as Chris wrote earlier today, the COT report is typically a great contrarian indicator...

You see, when these traders are all betting in one direction, the opposite is likely to occur. And right now, futures traders are "all in" on lower volatility. Take a look...

Record bets on low volatility have flashed short-term warning signs in the past...

We saw a similar occurrence back in 2017. The S&P 500 was coming off of a 30%-plus rally that started in 2016. By late 2017, volatility was at extreme lows... And traders were all betting that the steady rally was the new normal.

Stocks peaked a few months later, and we saw our first correction in roughly two years.

Chris also pointed out that while we could be in for a correction, a pullback wouldn't make for a long-term signal. For instance, in the late 1990s, the Melt Up saw five corrections before the peak of the dot-com boom in 2000.

In other words, this isn't a time to go "all in" or "all out" on U.S. stocks.

As always, be smart about your position sizes and allocations, hold some cash and gold, and maybe consider taking a few short positions to hedge your portfolio. If you do that, you can rest easy for now. And if you want to speculate, know the risks and do your research.

Or let us do it for you...

Take this 'left for dead' sector, for example...

Shipping oil isn't sexy. But it's something we need in our everyday lives...

Without the massive tankers hauling hundreds of thousands of barrels of oil from place to place around the globe, we wouldn't have access to one of the most basic necessities.

So when something like new emissions rules for shipping come up, you can be sure it will not only affect the companies involved in the industry... it could also impact you.

On January 1 – less than four weeks from now – the International Maritime Organization ("IMO"), the United Nations' shipping regulator, is set to enforce new environmental regulations.

In short, the IMO will require 60,000 vessels or tankers to cut sulfur emissions by more than 80%, according to the Wall Street Journal. As the newspaper reported yesterday...

The IMO's move, which has been 10 years in the making and is already international law, will saddle the industry with some $50 billion in extra fuel costs over the next four years, according to shipping executives. Cleaner fuels aren't being widely traded, but prices are expected to be up to 40% higher than the heavy oil now in use.

Sulfur is blamed for causing respiratory and lung diseases in humans, as well as causing acid rains that harm crops and marine life. By restricting the amount of sulfur used in fuel, the IMO hopes to substantially cut down on ship emissions and improve overall air quality.

That sounds like a worthwhile long-term initiative. But as with anything when regulations are changed, there's a short-term economic impact, too.

And Commodity Supercycles editor Bill Shaw wrote about that angle in this month's issue, just published yesterday...

Shippers can either fit their existing tankers with "scrubbers" that will remove sulfur from their exhaust... or use more environmentally friendly fuel sources. Not everyone is ready for that, though... Greece, among other countries, has tried to delay the upcoming deadline.

In any case, Bill believes many shipping companies will pass the buck of higher costs onto their customers. In the short term, that could lead to bigger profits for the best-positioned and most well-run companies.

In yesterday's issue, Bill identified one company in particular that stands to benefit more than its competition. He explained that its conservative management team has a long history of not overleveraging... and rewarding its shareholders with dividends.

In fairness to Bill's subscribers, we can't say too much more here today. But if you'd like to learn more – and want to get in before this key environmental mandate kicks in – we encourage you to click here to learn how you can subscribe to Commodity Supercycles.

New 52-week highs (as of 12/4/19): Bausch Health (BHC), Bristol-Myers Squibb (BMY), Hologic (HOLX), JPMorgan Chase (JPM), ALPS Medical Breakthroughs Fund (SBIO), and Sysco (SYY).

In today's mailbag, we share some feedback about Bill McGilton's Digest yesterday on why your favorite restaurant could be doomed and the city of San Francisco, in particular... plus a reply to a paid-up subscriber's take yesterday on who caused the Great Depression.

"My heart bleeds for [the people in San Francisco]... BLEEDS I TELL YOU!!!!! Move somewhere else or live on the streets. Sorry, no sympathy! If they want to live there, pay the price." – Paid-up subscriber Sheldon S.

"Hi, I live on the peninsula, near San Francisco, and the greedy housing/apartment owners are trying to take as much as they can from residents. Raising rents every year. They think if no one is moving out rents are too low. I'm not kidding. Companies all around here have a hard time with these low-paying jobs and being able to afford rent and other necessities. The housing prices are way out of step with wages. Governor Newsom's rent control seemed like a nice gesture, but at 9% a year that is still way too much of a rent increase for the average person. Sad the greed hadn't come back to haunt the housing owners yet. OK, I said my peace." – Paid-up subscriber Ben T.

"Your analysis of the labor shortage troubles facing the restaurant industry was a real eye-opener. The asset price bubble is starting to have an inflationary impact on consumer prices. There is one simple solution that could relieve the shortage of low skilled workers in the U.S. Start letting in more immigrants. Mr. Trump, tear down that wall!" – Paid-up subscriber David D.

"Enjoyed your sobering article on the failure of restaurants. Let's not forget that Trump has deported hundreds of workers who used to do many of those jobs which are now going vacant. As someone who has lived in Arizona the vast majority of my life, I know that in the past there was a wink and a nod to employers using illegals to fill low paying jobs...

"What this country needs is a LEGAL way for immigrants to have worker visas without all of the foolishness that has taken place over the last few years. Even in areas where rent prices are still affordable such as in Phoenix and Tucson, the void left by immigrant deportations is leaving many jobs unfilled." – Paid-up subscriber Karen T.

"Sorry, [Chuck B.'s comment yesterday] is not correct. The cause of the Great Depression was the U.S. becoming the world's biggest creditor and, through lending, subsidizing foreign economic syndicates that were dumping product in the U.S. and causing domestic firms to go out of business. This dynamic is why there was so much political support for the tariffs that Hoover eventually passed." – Paid-up subscriber Mark P.

Regards,

Corey McLaughlin
Baltimore, Maryland
December 5, 2019