If you needed one more reason to own China, you now have it... A big bullish tailwind for Asian stocks... Everyone expects the market to go higher... 'Mom and Pop' are piling into stocks... Even millennials are buying for the first time... Time is running out for Stansberry Portfolio Solutions...
If you needed one more reason to own China, you now have it...
Regular Digest readers know our colleague Steve Sjuggerud has been incredibly bullish on Chinese stocks for the past couple of years.
As we've discussed, Steve is following several long-term trends that are converging on the country today, including a remarkable technological revolution... and a once-in-a-lifetime shift in the investment markets.
But in his latest True Wealth Systems Review of Market Extremes, Steve shared another big reason to remain bullish not only on
Asia-Pacific stocks – as measured by the MSCI AC Asia Pacific Index – rallied 32% in 2017. That's a stellar return... more than a full 10 percentage points higher than the S&P 500 Index last year.
It makes sense, though. This index is heavily weighted towards Japan and China – two markets that soared last year.
After such a strong year, you'd probably expect these markets to take a breather. You'd expect them to start closing the gap on valuation with U.S. stocks.
Well, that isn't happening. The valuation gap between U.S. stocks and Asian stocks has gotten even wider, based on book value.
In fact, as Steve explained, Asia-Pacific stocks aren't just cheap compared with U.S. stocks...
They're now cheaper than they've been in 15 years. More from the update...
Asia-Pacific stocks are actually the cheapest they've been compared to U.S. stocks since 2002, based on book value.
The chart below shows the S&P 500 price-to-book value (P/B) minus the MSCI AC Asia Pacific Index P/B. Take a look...
A high reading on the chart means Asia-Pacific stocks are cheap compared with U.S. stocks.
The chart shows that this valuation gap has been increasing... and has just hit a new extreme. It hasn't been this extreme in over 15 years.
What does this mean for investors in China and other Asian shares?
It means Asian stocks are both historically cheap and in a strong uptrend, exactly what Steve likes to see in an investment opportunity. Despite their recent rally, further gains are likely...
Asian stocks are dirt-cheap compared to U.S. stocks. Again, they trade at a 50% discount to U.S. stocks based on book value.
That's a good thing for investors. I love buying cheap stocks. And after a nine-year bull market in the U.S., it's fair to say value opportunities in this country are scarce.
But that's not true in Asia-Pacific... Stocks are still dirt-cheap.
The trend is strong as well. China and Japan boomed last year. Prices are moving higher. So if you're looking to invest in cheap markets that are in an uptrend, Asia-Pacific stocks fit the bill.
Today's extreme is another sign of the opportunity in Asia. The uptrend is in place... and today's major discount could be a tailwind to push Asian stocks higher.
At the other end of the spectrum, U.S. stocks aren't just historically expensive today...
They're becoming downright loved by investors again.
This morning, the Conference Board released its latest monthly survey on consumer confidence. As the name suggests, the survey is primarily focused on consumer sentiment and spending expectations.
But it also includes questions on expectations for inflation, interest rates, and stock prices. Specifically, it asks participants if they expect stock prices to increase, decrease, or remain about the same over the next 12 months.
The following chart shows "net" expectations of higher stock prices from this month's survey. This is simply the percentage of folks who expect stock prices to increase, less the percentage who expect stocks to decline. As you can see, more Americans now expect stocks to rise this year than any other time since the last "
But that's not all...
According to the latest data, "mom and pop" are now rushing back into stocks for the first time in years. From an article in the Wall Street Journal...
Discount brokerages TD Ameritrade, E*Trade, and Charles Schwab reported surges in client activity at the end of 2017 that have accelerated in January. The firms attributed much of the activity to retail, or individual, investors who are opening brokerage accounts for the first time... "There's pent-up activity and some element of the fear of missing out," said Devin Ryan, a brokerage analyst and managing director at JMP Securities LLC...
This rise in interest in some of the riskiest new areas highlights investor optimism that is spurring more trading activity across age demographics and markets. And analysts say the strong trading activity from Ameritrade, E*Trade, and Schwab – results reminiscent of their heady days during the tech-stock boom – suggests the market rally is entering a "melt-up" stage that is bringing in once-skeptical investors.
Individual investors put more than $35 billion into stock mutual funds and exchange-traded funds last week alone. This is the most in any week since the dotcom boom, according to data from Bank of America Merrill Lynch.
Perhaps most notable, evidence suggests millennials are now jumping in, too...
Remember, these folks came of age during the financial crisis. Many watched their parents struggle with losses in both the stocks and housing, and have largely avoided the financial markets altogether. But that appears to be changing. More from the Journal...
At Ameritrade... new account openings hit a record at the end of its latest quarter, driven by a 72% rise in new business among millennials. Chief Executive Tim Hockey said in an interview that most of the influx of younger, first-time investors was due to interest in the highly speculative areas of cryptocurrencies, including bitcoin, and cannabis.
"It's all correlated," said Mr. Ryan, as the 35-year-old-and-younger crowd wants to get in on the bull market before it ends and is more versed and interested in cryptocurrencies and "pot" investments than older investors.
This should sound familiar...
It's exactly what Steve has been predicting for years. Time and again, he told readers that the long bull market would not peak until individual investors were "all in" on stocks once again. As he reminded folks in our free DailyWealth e-letter nearly two years ago...
YOU KNOW WHAT A TOP FEELS LIKE. You went through one in the real estate boom in 2006-2008...
At the top in real estate...
- EVERYONE was optimistic about house prices. Nobody was cautious. No one even thought that there was even any downside risk. (People felt that way about dot-com stocks in 1999, too.)
- EVERYONE was "in" – and heck, if you weren't "in," you wanted in!
- EVERYONE was talking about real estate at cocktail parties, sharing their "can't lose" strategies.
Everyone thought they had their own spin on it... They thought they had their own unique way of making money that was somehow special to them.
They didn't realize that, whether they were "flipping" houses or "developing" houses, all the strategies were essentially the same – in that they all relied on higher and higher asset prices to succeed.
THAT is what a top looks like. THAT is what a top feels like.
Make no mistake, these signals are a reason for caution...
But they are not a reason to panic.
The evidence suggests we're in the final "inning" of this long bull market. And we're long overdue for a correction.
But as Steve has explained, the biggest gains often occur at the very end... And we still don't see the over-the-top euphoria that often accompanies the peak of
For now, our advice remains the same: Stay long, but stay smart. Make sure your portfolio is properly diversified, and keep a close eye on your stops, just in case.
Again, if you aren't sure what that means – or you would like more guidance in setting up a "bulletproof" portfolio that's prepared for whatever comes next – we urge you to take a closer look at our Stansberry Portfolio Solutions product.
But if you're interested, don't delay... Porter, Steve, and Dr. David Eifrig are set to release our brand-new 2018 portfolios this Thursday, February 1. Click here to learn more.
New 52-week highs (as of 1/29/18): Amazon (AMZN), CBRE Group (CBG), Cisco (CSCO), iShares Nasdaq Biotechnology Fund (IBB), iShares U.S. Aerospace and Defense Fund (ITA), VanEck Vectors Coal Fund (KOL), Lockheed Martin (LMT), Midas Gold (MAX.TO), Mobile TeleSystems (MBT), MercadoLibre (MELI), Match Group (MTCH), New York Times (NYT), PNC Financial Warrants (PNC-WT), ALPS Medical Breakthroughs Fund (SBIO), ProShares Ultra Semiconductors Fund (USD), VF Corporation (VFC), and Wal-Mart (WMT).
In today's mailbag, a subscriber is confused about Stansberry Portfolio Solutions. As always, send your questions, comments, and concerns to feedback@stansberryresearch.com. We can't provide individual investment advice, but we read every e-mail.
"Dear Porter et al., I watched the replay of your presentation. Thank you for making it available after the fact. My schedule usually does not allow for free evenings. (Is there such a thing?) You presented charts showing that the positions are derived from varying newsletter services. For example, The Income Portfolio includes Income Intelligence and Stansberry Credit Opportunities [among others]. You also state that you're getting out of the newsletter business.
"My apologies for adding yet another question regarding this, but I do not remember hearing whether the analysts will still be writing articles covering the companies being recommended and if so, at what times/frequency. I understand that the monthly publishing schedule was based on the direct mail model, but I didn't hear with what that model would be replaced. I recall that the current means of communication is almost instantaneous given today's technology, but I'm left wondering what to expect beyond the annual portfolio recommendations and necessary updates.
"If the portfolios are going to be updated at times that are not predictable, would I expect a write-up equivalent to a newsletter to be released if a position stops out and is replaced with another position?
"As a Stansberry Flex member, I enjoy the [monthly issues] written
"I am not very skilled at shrinking my questions down to publishable size. If you feel this question is had by others, feel free to phrase however you deem necessary. Thank you for your time." – Paid-up subscriber Craig R.
Porter comment: You've just misunderstood what we are trying to do. Nothing will change about how we write or what we write about... or the titles ... or the publishing schedule.
What will change is how we sell our products and the way we fulfill them.
When we say we want to get out of the "newsletter business," it means we don't want to be in the business of selling a single publication for a single year. It doesn't do us or the reader any good.
Instead, we want to serve all our customers like we serve you – in a comprehensive way, for the long term. That's how both our business prospers and how investors can benefit the most.
If you join Stansberry Portfolio Solutions, you will simply have access to more of our work, and you will have more support from us in the form of allocation advice and real-time news and alerts.
Regards,
Justin Brill
Baltimore, Maryland
January 30, 2018