The Best Time to Buy in a Generation
Editor's note: He knew it was time to buy.
After a colossal wipeout of the U.S. stock market, Steve Sjuggerud told True Wealth subscribers about the incredible opportunities in the market.
Today's Masters Series is adapted from the June 2011 issue of True Wealth. In it, Steve explains why stocks, gold, and housing were the best values he had ever seen. Of course, anyone who took his advice is now sitting on massive gains today in all three asset classes...
The Best Time to Buy in a Generation
Nobody will believe me... But I'll make the case today, anyway.
Right now is the best time to buy in a generation.
With the exception of the March 2009 bottom in some cases, the values I'm seeing today in U.S. stocks, housing, and precious metals trades are the best I've seen in my entire career.
You would have to go back more than a generation to find values this good.
I never imagined we'd see all these things come together at the same time in my investing lifetime. Right now, we have:
- Major stocks trading at record-low valuations, while we have near-zero interest rates.
- House prices more affordable than ever, with record-low mortgage rates.
- Gold investments that are record-cheap, during a bull market in gold.
We also have a fearful public, which is good because it means the peak is not here yet. And we have a sputtering economy, which is good because we have a government that is committed to keeping interest rates near zero for a long time.
It's a "perfect storm" of opportunity.
To spare you the suspense, opportunities abound. Let's get started...
You Are Your Own Worst Enemy
I strongly believe you can make a lot of money if you're willing to step up and buy now.
But I can guarantee most people won't. They're too afraid.
I saw it firsthand a week ago. I was face to face with hundreds of subscribers at an investment conference in San Diego. The worries I heard were endless!
Just about every question from investors boiled down to the same concern:
"I'm too worried about [fill in the blank] to invest."
You can "fill in the blank" with whatever you want: the national debt, the U.S. dollar, energy prices, a potential recession, the jobs situation, politicians... whatever.
But the reality is, all these things are just excuses...
They're just excuses for you to hide... for you to NOT put your money to work.
"But these things are real, Steve." Yes, I know... The thing is, you could have used these identical excuses at just about any time over the last 20 years.
In True Wealth, we haven't hidden. We have put our money to work...
In March 2009 (the month the market bottomed), I became incredibly bullish on stocks. True Wealth readers have been buyers of stocks and all kinds of investments since then. We bought U.S. stocks, Hong Kong stocks, Russian stocks, Japanese stocks, Argentinean farmland, biotechs, homebuilders, real estate trusts, gold miners, and more.
We've been invested for most of this fantastic run in stock prices over the last two years. And it's not over... not by a long shot.
But you are certainly welcome to pick your own "fill in the blank" and sit on the sidelines...
Nobody will fault you. I'm sure you have a good story about your own "fill in the blank" worry... a good reason why you're sitting on your hands. You can tell it to people at cocktail parties. They'll nod in agreement when you tell them what you're doing, mostly because you just gave them another "fill in the blank" excuse they can use, too.
Meanwhile, you won't make any money. In fact, you'll lose money by sitting on the sidelines...
Don't forget these two things: The bank is paying you zero-percent interest. And yet inflation is around 3% a year. So while your bank-account balance may look the same, you're losing 3% of your wealth a year (at least!) due to inflation by sitting in cash.
I'm thankful I faced a "wall of worry" at the investment conference because there's an old saying in the markets...
Bull Markets Climb a Wall of Worry... Bear Markets Sail Down a River of Hope
The Wall of Worry tells me there's a lot more upside potential here in stocks. Once the Wall of Worry is gone, the peak in prices is here. And once the River of Hope is gone, the bottom is here.
The easiest way to visualize this is with the real estate bubble...
We climbed off the Wall of Worry in real estate around 2005... That was when everyone talked about real estate and how real estate prices have never gone down in America. People thought house prices could continue to go up 10% or more a year... defying the basic laws of population growth, economic growth, gravity, and everything else.
But once people thought house prices couldn't fall, that was it... The Wall of Worry was gone. And at that moment, the bull market in house prices peaked.
Since 2006, we've sailed down a River of Hope in housing...
At first, people hoped prices would bounce back so they could sell at the peak price. Then, they hoped prices would bounce enough so they wouldn't sell the house for less than they paid for it. Next, they hoped the bank wouldn't take it away.
Now, hope is gone in real estate. House prices are down by one-third. And people have given up. Based on one of the oldest rules of the market, since the River of Hope has run its course, the bottom should be near. And that bring us to our first idea this month...
U.S. Residential Real Estate: Now the Best Deal in Recorded History
Now is literally the best time in recorded history to buy a house in America...
Right now – today – U.S. real estate is the most affordable it's ever been. Ever.
When I say "affordable," I'm looking at three things: house prices, mortgage rates, and incomes.
With the Housing Affordability Index near 200, the median family has 200% of the income necessary to buy the median home (or more specifically, to qualify for a conventional loan on the median home). It's easy to see where we are now...
Right now, as you know, house prices are sitting near new lows for this cycle, down by roughly one-third (depending on who's counting). And right now, mortgage rates – after ticking above 5% earlier this year – are all the way down to 4.5% again, near all-time lows.
So it's simple: With the worst house-price crash in American history, combined with the lowest mortgage rates in history, you can now afford more home than ever.
Meanwhile, hope is gone. Everyone thinks housing is hopeless. The River of Hope has reached its end. That is when a bear market ends and a new bull market begins.
At the conference, some speakers spoke woefully of the large supply of houses for sale. That will take care of itself in time. Others bemoaned the certainty of higher interest rates in the future, which would hurt housing. But they shouldn't be so certain...
Twenty years ago, Japan faced a housing bust similar to ours. Japan's government has cut interest rates to near zero and printed money. And long-term interest rates in Japan currently sit around 1%.
Even rising interest rates won't kill housing... In the 1970s, interest rates were rising, and house prices outperformed stock prices.
The story is simple. House prices have fallen more than ever. And mortgage rates are lower than ever. If you can buy a house now (and want one), do it. Now is the best time in American history to do it.
Good investing,
Steve Sjuggerud
Editor's note: Steve has been working on a secret project over the last few weeks. He's calling it the "Melt Up Millionaire" Project. And on Wednesday night, he's finally pulling back the curtain and sharing the details. He'll update viewers on the latest developments in his Melt Up thesis... reveal the details behind this top-secret project... and explain how to double the value of your portfolio over the next 12 months. Sign up for this free event here.