The Best Strategy for the Next Several Years

The force that affects everything... 'The economy is about to have a heart attack'... What the world's best investors will do in a crisis... An endorsement from our own Mike DiBiase... Seeking double-digit yields and triple-digit capital gains...

Our friend Joel Litman got right to the point last night...

A few minutes into his brand-new, free video presentation, Joel – the founder of our corporate affiliate Altimetry – cut right to the chase about his view of stocks today and what he sees next for the market...

I see a stock market that's hallucinating, much like it did in late 2007. The gains, the valuations, the bullish sentiment – it's all completely out of whack with what's really under the surface.

So let me be very clear. I want to get this out there before anyone potentially leaves: This is the most dangerous environment for stocks that I've seen since 2007, just before the financial crisis. I'm extremely, extremely worried.

I'm not saying what happens next will be quite as severe. However, it will be very, very bad, and there's no telling for certain how bad.

As Joel went on to explain, he's extremely bullish on U.S. stocks in the long run, but over the next two or three years, he's concerned. He's not saying "sell everything," but he is looking at alternatives to stocks for buying opportunities. Here's why...

The 'force that affects everything'...

Joel's focus today is on the credit market, or what some people may call the debt market.

As he explained, don't get confused by the terminology... or turned off if it sounds boring or intimidating to you. The credit market is what truly savvy investors pay attention to as much as (if not more than) the stock market or anything else to build long-term wealth.

It's what many of Joel's institutional clients are interested in and why they buy his research. In short, the credit market is all the borrowed money that "makes America go." As Joel explained...

Mortgages... credit cards... personal loans... and staggering heaps of corporate debt. Bonds are a part of that, too – both Treasury bonds and the bonds issued by companies.

There are lots of moving parts. But we collectively call all that lending and borrowing the "credit market." And it's far more important than almost anyone realizes.

In fact, this lending and borrowing is the "force that affects everything" in the economy and markets. And if you understand this $10 trillion market and whether it's healthy or weak, it can telegraph what's coming next, not only for the debt market but also for other assets like stocks.

The thing is, almost no one understands the credit market...

Despite its size and influence, relatively few individual investors even know to look at the credit market, much less see what signals it's sending about its health. Even fewer know how best to profit from investments in it – which can be safer than buying stocks. And fewer still can explain how to navigate the credit market to others.

Important money managers listen to Joel because he's one of those few...

Why you should pay attention to the credit market...

Last night, in front of thousands of viewers who tuned in, Joel first explained the concerning signs that the "force" is showing today... and why they have him as worried as he has been about the stock market since 2007 before the financial crisis.

I urge you to check out the presentation for yourself to get all the important details. But broadly speaking, Joel said that several indicators of credit-market health are behaving much like they did before other major turning points for the economy...

Trouble in the credit market forecasts pain for the stock market. Same with individual companies. Credit is at least half the picture when it comes to understanding a company's health and where it's headed, but almost no one looks at it.

Think of it this way: The credit market is the economy's most important vital sign... just like your pulse and your blood pressure and your bloodwork at the doctor. The credit market is the same thing for the economy.

And right now, this vital sign is telling us the economy is about to have a heart attack.

Joel brought up the inverted yield curve, saying...

The economic jargon is designed to confuse you. But here's what it means, very simply: It means banks don't make money lending in these conditions. So they stop.

Then he shared a chart showing the relationship between credit standards (how stingy lenders are) and the trend with recessions in the benchmark S&P 500 Index. As you'll see, credit standards are at their tightest since the early days of the pandemic, in 2008 during the financial crisis, and in 2001 during the dot-com bust...

Of this, he said...

It means the banks just don't want to lend. And the key thing is every time that red line spikes, we see a market crash. It couldn't be clearer. It's doing the exact same thing it did in 2001... 2008... and 2020... the last three big crashes.

Does that not alarm anyone? The red line goes up and we have a world historical disaster in the stock market, every time. And it's happening now.

Some of you will have seen this information in the Digest before. We've shared the fact of tightening credit standards here over the past year and our concerns about it. Subscribers to our Stansberry's Credit Opportunities publication certainly know this as well.

Yet Joel shared a variety of more evidence and has his own take on what all this means – and what to do with the information, which we'll get to momentarily. As he put it...

Without this flow of credit, companies can't grow. They can't add products... hire workers... build factories.

A storm is brewing...

As I wrote in yesterday's edition, rising interest rates have made money a lot more expensive, and a lot of debt will be coming due over the next several years. This could leave many companies looking to refinance in a difficult, costly position.

The same goes for individual Americans... They're staring down interest rates on credit cards, mortgages, and car loans that many of us have never seen before... just those who lived through the 1970s and early '80s. As Joel explained last night, "That's not an accident." It's by design by the Federal Reserve to throttle the economy...

And what people don't realize is it's set up a massive storm in the debt markets. And the storm hasn't even hit yet.

That's the bad news – and why everyone with money should be aware of what's going on in the credit market at any given time.

The better news is that now you know this, which is more than 99% of people can say today. And, importantly, there is a way to prepare for the next crisis ahead – and make potentially a lot of money – if you have the right tools and guidance.

What the world's best investors will do in a crisis...

Some of the world's biggest investors are actually licking their chops for this moment to arrive. Billionaire Barry Sternlicht said he was "foaming at the mouth" about this same opportunity today.

Folks like Warren Buffett or Howard Marks – who is raising $18 billion for a fund to take advantage of this setup – are interested, too. Like Joel, they know the importance of the credit market... and how to generate huge returns from it. Back in the early 2000s, Buffett put $8 billion to work this way.

Joel says the inevitable bust ahead, when the credit market grinds to a halt, will actually unlock lopsided opportunity in the credit market – at the same time the stock market will likely be gripped by panic.

Contrary to most of the advice you'll hear elsewhere or what your gut might be telling you, this will be the precise moment to pounce on buying opportunities – in the credit market.

Without giving too much away, I can tell you that by using the proprietary research that he also uses to recommend stocks, Joel is looking at the bonds of good companies that he and his team know can cover their debts.

These investments will pay juicy yields but trade at prices well below their true value. They'll sell off as fear grips the market broadly and investors mistakenly believe these companies will default on their obligations... and then rebound when the market wakes up to the reality that these companies aren't going anywhere.

This is a proven way to make money – and arguably the way to make returns in a time of crisis – yet you probably won't hear much about it from most sources.

To learn much more, be sure to check out Joel's free presentation...

As Joel explains, he's talking about the potential of double-digit yields and triple-digit capital gains... in investments that can be considered safer than stocks... and while it seems like the rest of the financial world is falling apart...

Many companies will default and go bankrupt. And it's going to happen nearly all at once, setting off a 2008-like panic – mark my words. That panic is going to create a fire sale in bonds.

Big institutions will be selling off their bond holdings indiscriminately. They often have to sell because of automatic triggers when bonds hit a certain level... or to meet a sudden flood of redemption demand from panicked investors pulling their money out.

Both cause a chain reaction, leading to even more selling [of] good companies and bad. And what happens is suddenly there's a window where you can buy a bond that's worth $1,000 for $700 or $600 or $500. Sometimes less.

Again, this may sound very much like our Credit Opportunities approach, but the way Joel goes about making recommendations is slightly different. As he put it, "We are fishing in a very different pond." Still, our Credit Opportunities editor Mike DiBiase joined last night's event to give his full endorsement of Joel's outlook and strategy.

All in all, Joel made a compelling case for what he calls "hands-down the best strategy in the world for the next several years." And his business partner and Altimetry Director of Research Rob Spivey also joined him to add more insight.

If you do nothing else with all this information, just know that understanding the credit market is worth your time. It can help you anticipate what might happen next with the economy and "market" overall... and open up a world beyond stocks.

Beyond that, Joel is offering a straightforward way to put this knowledge into action in pursuit of big profits. If you're interested in learning more about this strategy and how to access Joel's work over at Altimetry, you can check out a replay of his presentation now.

Click here to watch at your convenience.

New 52-week highs (as of 9/27/23): Liberty Energy (LBRT), Ryder System (R), Sprouts Farmers Market (SFM), and ExxonMobil (XOM).

Our inbox is overflowing with your takes and firsthand accounts of theft around the country, which reinforces to us that the trend is real. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Corey, Little surprise here that the People's Republic of Portland tied for the most store closures by Target due to safety and organized shoplifting. Target [is] not alone. It is joining Walmart, REI, Nike, and others who have shuttered locations in Portland. A survey of downtown businesses found that 87% of those businesses have lost customers, 77% have repaired windows, doors and other parts of buildings due to vandalism, 50% had employees quit because they didn't feel safe, and 85% were negatively impacted by individuals who are homeless and living on the sidewalks of downtown Portland.

"I know firsthand about this alarming issue. I followed a girl out of a store who was 'helping herself' to at least 6 pairs of shoes. She stood in front of the door waiting for her ride, so I followed her out, took a picture of the car license plate as she scrambled to get in, and gave the info to store security along with my name and contact info. I told them I would gladly testify, but never heard a word from them. If they won't prosecute they invite more theft. Oh yes, that store disappeared from the mall the next time I was there." – Subscriber Kathy D.

"A few weeks ago at the Sierra Trading Post in Reno, I witnessed a 'gentleman' load up a golf club bag hard case for airline travel with all sorts of items from the store, and just wheel it out to his car. No one at the store lifted a finger to stop him." – Subscriber David F.

"I turned 68 today and as [a registered nurse] of 35 years and working towards retirement, I don't want to become a couch potato, so have also worked in retail part-time for as many years. I presently work [at a retail store] when I winter in Florida, and for the last three years, I don't have the adjectives to describe the rampant theft.

"Every morning, we encounter empty shoe boxes in the restrooms. Occasionally, they gift us their old pair. Women bring empty strollers in, full strollers out. They take their babies into the restrooms and load them up with merchandise.

"Empty backpacks in, full backpacks out. They use their children to wear the backpacks. I've watched people load up shopping bags and walk out the door, and have been told by those customers as I watch 'You can't do a thing about it.' Wow, just wow. It's so disheartening that people think it is OK to steal. And yes, the theft rings are mind-boggling... Our security will have groups on tape that will hit up 35 [stores] in a day, yet can do nothing?

"And yes, surprisingly, men's underwear are a huge hit. [We're] always finding empty packaging, and it's nothing to find 10 empty hangers stuffed in with the towels, several empty perfume security cases...

"... and we just watch... Thanks for the vent!" – Subscriber Cheryl B.

"One solution for inventory shrink: Ex-military guards with tranquilizer weapons, then haul the perps off to jail. Might give the next ones second thoughts." – Subscriber Vernon L.

"Let the police do their job. Force prosecutors and judges to enforce laws. Mandatory sentences that judges can't bypass." – Subscriber Dan S.

"The real problem is the relaxed laws allowing people to steal without prosecution. 30 years working in Manhattan I have never seen anything like this. It is stupid for anyone to pay in a store when politicians are saying it's OK to steal up to $1,000 worth of items. Places are closing like crazy. This is not the economy, this is political madness. Don't blame this on the economy being bad. The fox is in charge of the hen house." – Subscriber John S.

"I live in a relatively small town in BC, Canada, and retail theft is definitely on the rise. My wife and kids have observed multiple thefts at Lululemon, for example, with employees not batting an eye (or lifting a finger) when thieves grab multiple items and just walk out of the store. I know Lulu stuff is pricey, but there seems to be zero disincentive to stealing it. Given the moral decline in society as a whole, several formerly law-abiding citizens are likely to join in on the thefts as there is little reason not to (the police don't care and neither do the shop owners it seems). We will all pay for the theft through higher prices.

"A sad state of affairs. Keep up the good work!" – Subscriber Kevin M.

All the best,

Corey McLaughlin
Baltimore, Maryland
September 28, 2023