The Latest on the Porter Versus Steve 'Debate'

This is not normal... The bubble in everything rolls on... The latest on the Porter versus Steve 'debate'... Your last chance to try our 'Golden Triangle' strategy for yourself...

If it wasn't already clear, there should be no doubt anymore...

What is happening in the financial markets today is not normal.

Just consider a few of the remarkable events we've witnessed this year alone, in no particular order (hat tip to Michael Lewitt, publisher of The Credit Strategist):

• Global debt soared to $225 trillion (representing a record 324% of global GDP), while global stock market capitalization soared to more than $85 trillion (a record 113% of global GDP)...

• The central banks of Europe and Japan purchased more than $2 trillion of assets...

• European high-yield (or "junk") bonds traded at yields below 2%, and yielded less than U.S. Treasury debt for the first time on record...

• Argentina – which has defaulted on its debt no less than eight times – sold 100-year bonds yielding less than 8%, and investors couldn't get enough...

• U.S. corporations sold a record $1.75 trillion in bonds...

• Electric carmaker Tesla – which burned through $4 billion-plus in cash and still has never earned a profit – sold $1.8 billion of the junkiest junk bonds yielding just 5%...

• Volatility on the benchmark S&P 500 Index plunged to the lowest levels on record...

• The market caps of the super-popular "FANG" stocks – Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) – grew by more than $1 trillion and counting...

• And just last month, a painting by Leonardo da Vinci sold for a whopping $450.3 million, setting a new all-time record for any work of art several times over.

And of course, we can't forget about cryptocurrencies...

Bitcoin surged from less than $1,000 on January 1 to around $17,000 as we go to press. That's good for a mind-boggling gain of more than 1,600% year-to-date... And there are still nearly three weeks left to go in 2017.

Meanwhile, the broad "crypto" market – which has grown to include more than 1,300 different digital assets – has surged from a total valuation of less than $20 billion a year ago to nearly $450 billion today... a gain of more than 2,100%.

In short, central-bank manipulation has created a bubble in everything...

Stocks, bonds, and most other financial assets have gone straight up for the past few years. With few exceptions, they're now trading at or near their most expensive valuations in history.

Sooner or later, this bubble will pop. They always do. And when it does, today's "Melt Up" will be followed by a "Melt Down" of historic proportions.

Despite accusations to the contrary, both Porter and our colleague Steve Sjuggerud agree about this...

They differ only on their expected timing.

Porter believes the peak could arrive as soon as early next year, while Steve believes the boom could extend another two or three years.

As is often the case, we fall somewhere in between.

We're natural contrarians. It's hard for us to remain bullish when most metrics show stocks are extremely expensive, and investor sentiment is as "frothy" as it has been in years.

On the other hand, we acknowledge that central banks around the world have unleashed a flood of stimulus unlike anything ever seen in history. It would not surprise us to see markets set absurd new records before this boom finally ends.

Fortunately, both Porter and Steve believe we'll receive early notice before it does...

Both are watching one indicator in particular that has never failed to warn of a major market peak and an impending recession. As Steve explained last month in the November 21 Digest...

So when does it end? Porter and I [recently] published the exact same chart... We both said it's a major "get out" warning for us...

The chart shows us that when we get an inverted yield curve, stocks peak and a recession is around the corner. That is "inevitable if the Fed continues to raise rates," as Porter said. We both agree on that.

Porter says it could turn negative by early next year. I think that day happens in 2019 or even 2020. Only time will tell... But whenever it does happen, don't take it lightly. Bear markets happen a lot faster than bull markets. And great bear markets tend to follow great bull markets.

We'll be monitoring this closely...

But for now, the yield curve continues to support Steve's stance. As you can see in this updated chart, the "spread" continues to fall...

But you can also see how today's level compares with those of the last two market cycles.

Despite the rather steep decline this year, we're still at the same levels first seen in February 1997 and April 2005. In both cases, the boom still had years to run before stocks peaked and recession began.

Of course, this time could be different. But even if spreads drop faster than in either of the previous cycles, history suggests the boom will continue for many more months, at least.

What should you do with this information?

As Sjug has explained, the biggest gains often come near the end of a Melt Up. More important, today's extreme valuations suggest that stock market returns are likely to be downright dismal for years (or possibly even decades) down the road.

In other words, stay long (but keep a close eye on your trailing stops). This could be your last great chance to build substantial wealth in stocks for years.

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New 52-week highs (as of 12/8/17): Boeing (BA), iShares Select Dividend Fund (DVY), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares Transportation Average Fund (IYT), Nuveen Preferred Securities Income Fund (JPS), ALPS Medical Breakthroughs Fund (SBIO), ProShares Ultra S&P 500 Fund (SSO), Steel Dynamics (STLD), Sysco (SYY), U.S. Concrete (USCR), ProShares Ultra Financials Fund (UYG), and short position in Sprint (S).

In today's mailbag, on-the-ground "confirmation" of Steve Sjuggerud's bullish China thesis... and several more subscribers weigh in on Porter's loss. Send your notes to feedback@stansberryresearch.com.

"It had been 5 years since I was in China until [last] week. Sitting with local colleagues for dinner, I explained the concept of more money will start flowing into China stocks soon and asked them about some companies that they thought were good Chinese companies that were worth investing in.

"Immediately, Tencent was named first. They said they all used WeChat for almost everything and that even the older people and kids use it. They pulled it up on their phones and explained the ease of using it for payments and not having to carry cash or credit cards. They also use it for setting up rides (instead of using taxis), and using the shared bike (Mobike, etc) services and it auto pays through the app... They explained they use [both] WeChat and Alipay for payments because of certain perks you get with each.

"I asked about Alibaba and they said 'you mean this?' and pulled it up on their phones. Asked about JD.com and they said 'you mean this?' and pulled it up on their phones. I told them that some people are projecting Tencent will be the world's biggest company soon, and they readily agreed.

"So, I am convinced now that China is much further advanced on using these types of digital technologies than the US at this point and confirm Steve's take on what is happening in China, in at least the big cities, and will continue to invest in these opportunities following the Stansberry team's advice. Thanks for all you do to educate us." – Paid-up subscriber Troy J.

"Porter, I have been reading the Friday Digests for as long as I can remember and this one was special. We all want to make money and build our wealth, but this was about life.

"I gotta tell you, I have never been a big pet person and not much of a dog guy. I have four kids, a wife and a demanding profession. I barely have time to think, let alone take care of something else. One summer evening many years ago, I came home from work and was ambushed at the dinner table by my better half and four kids. They had decided we were getting a dog. I didn't say a word through the whole meal. All I could think of was how exhausted I would be having to help take care of the dog, walking it, feeding it, cleaning up after it, etc. I was not happy about it.

"Of course, we got one – a black puli named Hobbs. It looks like a black mop given its cords (they look like dreadlocks). At first, it was a nightmare. But, you know what, I have grown to love that dog. He is so loyal, loving and is completely part of our family. He adores my wife and loves all the kids and they all love him right back. I can't imagine the day when I come home from work and he is not there so I feel for you and your family. It hurts to lose someone who is part of the family.

"I am sorry about Ringo. I hope the great memories of him far outweigh the current pain and that you are all on the road to recovery. Best of luck." – Paid-up subscriber Rob Neirynck

"Dear Porter, My heartfelt condolences to you and your family on your loss of Ringo. Pets, dogs in particular, are truly significant and as each is a unique individual, an irreplaceable family member. Thank you for tastefully sharing such a beautiful snapshot of your life and your family. I was deeply moved and touched, as always, by you great integrity and high sense of moral character. Truly who you are as a person and the high caliber of those with whom you associate and aid you in producing the world class quality of investment research and teaching is what inspired me to become an Alliance member. A decision I will never regret. My association with Stansberry Research has richly blessed me, far beyond anything purely financial. In a very real sense you all have provided a roadmap for the future. Thank you for working tirelessly to 'tell us what you would want to know if our roles were reversed,' and for having the vision to allow Stansberry Research to grow into the fount of wisdom, insight, and extreme value that it has. Again, my heartfelt sympathy at your loss." – Paid-up Stansberry Alliance member Sean B.

"For Porter – Thanks for sharing Ringo's story with us. You reinforce my trust in you as a person. It takes character to experience life as you do, and it takes immense character to understand the experience, to relate it so eloquently, and to open up to this family of yours out here. A tough one, though it's part of growth for the boys. I sincerely hope you'll all have a merry Christmas." – Paid-up subscriber George Miller

"Wow. That was the best column you have ever written. We have a rescue we love at least as much as you loved Ringo. I always say – there are only two kinds of people in the world. Those who are dog people. And those who should be. I only wish you had ended your column with the story of Ringo, and forgotten about financial advice. Sometimes we don't need to think about dollars and cents. Just family. Thank you for bringing a smile to my face, and I admit, a small tear to my eye." – Paid-up subscriber Stan Wilson

"Thank you Porter... You have made me think. Inspired me to save and learn. Showed me the way it all works together and inspired me to be a better man. Your experience and knowledge have opened my eyes many times through the years. But you finally did it. You brought me to tears with your story of Ringo. Mourning here for you and your family over your loss. Brilliant tribute to a great family member and a first class black lab who was always there for your wife and kids. Many blessings for you and your gang, Porter. With gratitude always." – Paid-up subscriber Chris K.

"Good morning – I have been an Alliance member for a year and half now, and have been meaning to write in to thank you for all the research you share and providing an amazing product(s). I'll keep it brief, even though the events to get me here are long.

"I started reading Stansberry Research after my divorce in 2011, which devastated me and while this was going on 2 very dear family members were diagnosed with cancer, in the same few months. I was basically broke, depressed and not feeling good about life. I came across a marketing piece Stansberry was pushing and was intrigued. I enjoy reading, and felt I needed to 'rebuild' my life. I started with one of the $99/year subscriptions and was hooked. I couldn't wait each month for the next issue. I then increased the number of subscriptions, moved to Flex Alliance and then ultimately the Alliance membership once the business (I was minority owner) I was working for was sold to a bigger competitor. I also own a OneBlade and love it, and getting them for my sons for Christmas, as they are now 17 and 14.

"I read a few comments about readers who were not happy with Porter for missing Wednesday's call, and was appalled. I don't have pets, but reading Friday's Digest made me cry like it was my own dog.

"Porter- I will say this. Thank you. Thank you for being the businessman you are, giving great products, information and also for being an inspiration to be a better human being than we all are. I value your integrity (honesty and truthfulness) and love reading about your success stories (Whether it's a good call on a recommendation or adventures on Two Suns.) You make it about more than just 'investing' or finance. There is so much more that I can say, but don't want to take too much of the space for feedback. I wanted to let you know that you made a big impact in my life 6 years ago, when I first started reading your work. You made another big impact on Friday, but having the courage to share a terrible tragedy that occurred to your family, and helping us ALL realize that there is so much more to life than just 'stock picks.' Thanks again, and Merry Christmas. (I hope the memories of Ringo bring you joy through this holiday season)" – Paid-up Stansberry Alliance member Lenny Servedio

Regards,

Justin Brill
Baltimore, Maryland
December 11, 2017