The bull turns six...

The bull turns six... Why you should still buy the dips... Strong jobs report crushes the market... Things can change fast... Klarman's advice today... Stocks usually rise after a rate hike... Tesla gets slammed on Chinese struggles...
 

 The bull market turns six today.
 

The S&P 500 bottomed on March 9, 2009 at 676.53. Exactly six years later, the index sits at around 2,078... a gain of more than 200%.
 

 According to data from financial-research service Bespoke Investment Group, the current bull market – defined as a rally of at least 20% following a decline of at least 20% – is the fourth-longest bull market in history.
 

The longest bull market in history stretched 12.3 years, going from December 4, 1987 through March 24, 2000. The S&P 500 rose 582% over that time frame.
 

 Stansberry Short Report editor Jeff Clark wrote about the aging bull market today. While this market is no doubt "long in the tooth," we've still got some upside. From Jeff...
 

The bull market that started in March 2009 is now six years old. That's an aging bull market by just about any measure. And when you consider we've gone the past three years without so much as a 10% correction, it's reasonable to expect that each big decline could be the start of the next bear market.   So Friday's big drop – which erased 279 points on the Dow Jones Industrial Average, 29 points on the S&P 500, and 55 points on the Nasdaq – has a lot of folks wondering if the bull market is over. It isn't. Not yet, anyway.   Make no mistake about it. We're close to the end. But this old bull market still has at least one more rally left in it. So the big drop that happened Friday may be our last chance – for a few years – to "buy the dip."

 While we think this bull market still has legs, Friday's move was cautionary...

The U.S. economy added 295,000 jobs in February, beating expectations of 240,000. The unemployment rate fell from 5.7% to 5.5% – the lowest level since May 2008.

This surprising strength in the economy means the Federal Reserve could hike interest rates in June. On Friday, the market plunged on the possibility.

If you wonder what's driving the market today – fundamental economic strength or low interest rates – Friday's move should give you a clue.

The Dow fell nearly 300 points because unemployment is improving.

Yields on the 10-year Treasury exploded on Thursday... jumping from 2.11% to 2.24%. Yields have soared from a January low of 1.67%...
 

 

 The Volatility Index ("VIX"), the market's fear gauge, soared more than 8% on Friday, hitting 15.2.
 

Gold and silver got crushed – falling 2.2% and 1.2%, respectively. Gold stocks, as measured by the Market Vectors Gold Miners Fund (GDX), fell nearly 7.5%.
 

Remember, higher interest rates are bearish for precious metals. Holding an asset that yields nothing – like gold and silver – becomes less attractive as interest rates rise. We remain bullish on the metals, however.
 

 Don't read too much into Friday's move. Markets overreact. We've been expecting a hike in interest rates in 2015... The Fed has given us plenty of warning.
 

Still, it shows that markets are getting jittery. This bull market is closer to the end than it is to the beginning. And you should be cautious going forward. Nobody rings a bell at the top. And the bear can come faster and harder than anyone expects.
 

One of the most successful hedge-fund managers in history, Baupost Group founder Seth Klarman, recently released his 2014 annual letter to investors. Klarman, who is famously risk averse, says you should be cautious right now...
 

Today, stocks and bonds are both in favor; tomorrow, and without notice, this could change. Markets, like hemlines, will rise and fall. The current flavor of the month can turn sour.

 Klarman noted that "bull markets have a way of sucking everyone in at the top." And he said you should pay extra attention to risks when things are going well...
 

That's why it is of paramount importance to do everything humanly possible in a bull market to prepare for the next bear market.

For the individual investor, that means raising some cash, unloading more speculative positions, and watching your stop losses.

But it's not time to rush for the exits just yet. History shows that markets rise after the Fed raises rates. As Steve Sjuggerud wrote in the September 30 DailyWealth...
 

Most investors think the rate hike will kill the stock market boom. Their basic thought is: "Stocks are going up because of the Fed's low interest rates and money printing. Once those end, the fun is over."   Logic says that higher interest rates should hurt stocks. After all, higher rates raise borrowing costs for companies, and they allow you to earn more money on your cash in the bank (which creates competition for stocks). But history tells a different story... Rising rates are actually a good thing for stocks. In the last quarter-century, the Fed has only had three major cycles of rising interest rates. (Those started in 1994, 1999, and 2004.) In each of those cycles, the stock market followed roughly the same pattern... First, the market went up in the months before the interest-rate hike. Next, it had a short-term correction of roughly 7%. Then, stocks started going up again – with a significant rally after the correction.

 So while stocks will likely rise from here, it still makes sense to hedge your portfolio with some short positions. Hopefully you followed the advice of DailyWealth Trader editor Brian Hunt and shorted Tesla.

Tesla shares fell 2% today on news that the electric-car manufacturer would cut jobs in China as the company struggles in the country. Tesla shares are trading at a nine-month low...
 

 

 New 52-week highs (as of 3/6/15): Cempra (CEMP) and PNC Financial Warrants (PNC.WS).
 

 The mailbag was loaded with praise from subscribers who enjoyed the first chapter of Porter's upcoming book, Warren's Mistakes. If you missed it, you can read it right here. And send your thoughts on it to feedback@stansberryresearch.com.
 

 "We had a snow day in these here parts of Pennsylvania as well which gave me a chance to enjoy reading your first chapter rough draft on Warren's Mistakes. I for one am very interested in learning from Warren Buffett. He is so down to earth and very easy to understand. I read his most recent letter to his shareholders and was captivated. I didn't know one could write such a letter that didn't contain a bunch of high falutin' gobbledy-goop. Instead it was clear and precise and I felt like he was talking like my businessman father and that he really cared that you could understand what he was saying and make good investment decisions.

"He's inspirational to me. And I will be first in line to purchase your new book when it's finished. I aspire to be investment savvy like Buffett and even though I've just turned 60, perhaps if I follow his good ways and refrain from his mistakes I will be a multi-millionaire just like him!" – Paid-up subscriber Becky N.
 

 "Porter, if the rest of your new book turns out to be as intriguing as the first chapter, we can only hope for more snowy days in Maryland. After getting a glimpse of Warren's Mistakes, I wonder if value investing, which contributed to market exceeding returns for Warren Buffett and Co. from the post-WWII era of the 1950's to the Internet Bubble top in 2000 were a function of the right investment strategy for the right period. And is it coincidence that the post-Internet bubble/declining interest rate period induced by government printing we find ourselves in now is the stronger market hand that has turned Mr. Buffett's 'luck' against him?

"I wait for the release of your new book in order to hopefully find out. As always, keep up the straight-talk, call-it-as-you-see-it financial publishing that has led to, not one but two triple digit winners in Apple and Becton Dickinson." – Paid-up subscriber T.C. Danciak

Regards,

Sean Goldsmith

March 9, 2015