The 'Melt Up' Is Accelerating
The 'Melt Up' is accelerating... Tech stocks take the lead... Jeremy Grantham warns of a blow-off top... Is the 'bubble spotter' reading True Wealth?... LAST CALL: How to 'unlock' your portfolio for the biggest (and safest) gains this year...
We're beginning to feel like a 'broken record'...
Once again, it appears our colleague Steve Sjuggerud was exactly right.
Despite the big run up in stocks over the past year... and in spite of market valuations near all-time extremes... more and more evidence suggests the real "Melt Up" has barely begun.
The market continues to set new high after new high. The Dow Jones Industrial Average broke above 25,000 for the first time ever today, just 23 trading days after hitting 24,000. This is the fastest 1,000-point move for the Dow in history...
Investors are finally getting excited about the markets again (as Steve has long predicted).
And it now appears tech stocks are starting to lead the market higher. As the Wall Street Journal reported yesterday...
The Nasdaq Composite closed above 7,000 for the first time Tuesday after racing to a fresh 1,000-point milestone in just over eight months – a pace not seen since the heights of the technology boom.
The Nasdaq has risen faster than other major U.S. indexes over the past year as investors, frustrated with low interest rates and tepid global growth, bet on the prospects of large technology companies such as Apple, Google parent Alphabet, and Microsoft, all of which are heavily weighted in the index.
Such bets helped the Nasdaq jump 28% in 2017, beating the Dow Jones Industrial Average's 25% gain and S&P 500's 19% rise.
This is a significant change from just a few months ago...
For most of last year, tech stocks were actually lagging stodgy blue chips. As Steve explained in the September 26 edition of our free DailyWealth e-letter...
In the last year, Alphabet (GOOGL) – the parent company of Google – is up nearly 16%. Facebook (FB) is up around 33%. Those are good returns, for sure. But they don't tell the full story...
The surprising truth is that over the last year, the boring, old-school companies of the Dow Jones Industrial Average have beaten the "hip" tech names in the Nasdaq Composite Index...
Ninety-nine out of 100 investors would have guessed the tech-heavy Nasdaq would have beaten the old-school names in the Dow Industrials over the last year. But they would have guessed wrong... You can see it in this chart:
Now, this could be changing.
Why is that important?
Because it's exactly what happened as the last Melt Up accelerated in 1999. More from Steve...
For almost half of the last year of the tech boom, the tech names and the old-school names tracked each other. But then things changed dramatically... Take a look:
By the end of the last 12 months of the dot-com boom, the Nasdaq was up more than 100% – meanwhile, the Dow delivered ZERO return.
Again, it's great that tech names have done well in the last year – but it's not surprising. Stocks are in a bull market. What's more amazing to me is that the old-school names in the Dow have outperformed the tech names in the Nasdaq...
This tells me you haven't missed the Melt Up yet – the final months when the more speculative names start to blast off. I believe that it hasn't even started yet... But it will...
If the last few months are any indication, the "real" Melt Up could be about to begin.
But we're not alone in this thinking...
As regular Digest readers know, several notable investors have recently echoed Steve's Melt Up prediction. And just yesterday, one of the world's best-known value investors joined the chorus.
Last spring, we noted that Jeremy Grantham – founder and chief strategist of top money-management firm GMO – had a radical change of heart. The man known as the "bubble spotter" wasn't just bullish... He was tossing around phrases like, "This time seems very, very different," and suggested market valuations could stay elevated indefinitely.
Now, it seems Grantham has regained his senses...
While he remains bullish, he now sees signs of a massive bubble. He believes the market could soon enter a melt-up phase that pushes stocks dramatically higher, before eventually crashing in a Melt Down. As he wrote in his latest note to investors on Wednesday...
I find myself in an interesting position for an investor from the value school. I recognize on one hand that this is one of the highest-priced markets in US history. On the other hand, as a historian of the great equity bubbles, I also recognize that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market.
This should sound familiar to Steve's subscribers. In fact, if we didn't know any better, we'd say Grantham has been reading True Wealth.
Like Steve, Grantham believes U.S. markets are extremely expensive, but notes that valuation alone won't kill a bull market.
Like Steve, Grantham notes that reliable indicators that have warned of prior tops (such as the advance/decline line) continue to give the "all clear" today.
And like Steve, Grantham says we'll likely be able to "feel" when the top is near. More from the letter...
Anyone around in 1999 and early 2000 has had a classic primer in these signs. We know we're not there yet, but we can perhaps see some early movement: increasing vindictiveness to the bears for costing investors money; the crazy Bitcoins of the world; and Amazon and the other handful of current heroes – here and globally – taking over more of the press coverage and a growing percentage of total market gains.
The increasingly optimistic tone of press and TV coverage is also important. A mere six months ago, new market highs were hardly mentioned and learned bears were featured everywhere. Now, the newspaper and TV coverage is considerably more interested in market events...
Keep an eye on what the TVs at lunchtime eateries are showing. When most have talking heads yammering about Amazon, Tencent, and Bitcoin and not Patriot replays – just as late 1999 featured the latest in Pets.com – we are probably down to the last few months. Good luck. We'll all need some.
Again, if you're looking to safely profit from the Melt Up...
Or simply protect your hard-earned savings from the Melt Down that's sure to follow, we urge you to join us for tonight's special event.
Our friend Dr. Richard Smith will be sharing proprietary research that can help you make much more money... and take far less risk... in the same stocks and investments you already own.
As we mentioned yesterday, his easy-to-follow system could have helped you make more than four times more money in Steve's True Wealth recommendations... more than three times more money in Porter's Investment Advisory recommendations... and earn even more money while taking less risk in Dr. David Eifrig's Retirement Millionaire recommendations. He has the data to prove it... And he'll show it all to you tonight.
Everyone who attends tonight will also hear from Steve himself, who will share his outlook for 2018 and the latest update on the Melt Up.
This event is free to attend, and there is absolutely no obligation to purchase. Simply click here a little before 8 p.m. Eastern time. We hope to see you there.
New 52-week highs (as of 1/3/18): AbbVie (ABBV), AMETEK (AME), Amazon (AMZN), iShares MSCI BRIC Fund (BKF), Berkshire Hathaway (BRK-B), Global X China Consumer Fund (CHIQ), Global X China Financials Fund (CHIX), First Trust Nasdaq Cybersecurity Fund (CIBR), Cisco (CSCO), WisdomTree Emerging Markets High Dividend Fund (DEM), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI Japan Fund (EWJ), Facebook (FB), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS), Corning (GLW), Alphabet (GOOGL), ETFMG Prime Mobile Payments Fund (IPAY), iShares U.S. Home Construction Fund (ITB), iShares Transportation Average Fund (IYT), JPMorgan Chase (JPM), KraneShares E China Commercial Paper Fund (KCNY), KraneShares CSI China Internet Fund (KWEB), Naspers (NPSNY), Nutrien (NTR), NVR (NVR), iShares MSCI Global Metals & Mining Producers Fund (PICK), ProShares Ultra Technology Fund (ROM), ProShares Ultra Health Care Fund (RXL), ALPS Medical Breakthroughs Fund (SBIO), Sabine Royalty Trust (SBR), iShares MSCI India Small-Cap Fund (SMIN), ProShares Ultra S&P 500 Fund (SSO), Steel Dynamics (STLD), ProShares Ultra FTSE China 50 Fund (XPP), and Direxion Daily FTSE China Bull 3X Fund (YINN).
In today's mailbag, several subscribers share their results with our research last year. How did you do? Let us know at feedback@stansberryresearch.com.
"My primary portfolio was up 31.35% in 2017. My best year in a long time. And that was with very conservative cash and precious metals positions held for much of the year. Traded more frequently than usual, taking shorter term gains more often, and need to look more closely at the guidance from TradeStops as to letting the winners run, rather than jumping off at any sign of weakness. Also have learned to spread the risk with position sizing and trade stops in place. Now approaching 66 years old and seeing the end of income puts a different spin on how much risk I can accept given I cannot replace anything lost very easily. I'm in Doc Eifrig's Retirement advisories as well as some of your other offerings but perhaps Steve and Porter can also provide more advice focused on the older investing crowd?" – Paid-up "very satisfied" subscriber Rich Richer
"Thanks Stansberry Research for the 700K!! That's right... you read that correctly. Primarily because of the Stansberry Research team's recommendations, I made over $700K in my retirement fund account investments just in 2017. I did it primarily by following Dr. Steve Sjuggerud's 'Melt Up' thesis and investing in his fantastic China recommendations. WOW! Steve's China recommendations have produced over the top returns for me. Thank you, Steve, and thank you, Stansberry Research." – Paid-up subscriber Michael Y.
"Steve and Porter, I know you are both surfers and I know Steve is still in the water. I am a lifelong surfer – in the water since I was 5. I started with you guys a little over 2 years ago with only one goal: MAKE MONEY FOR SURF TRIPS!
"I set up a 'fund' and only invest in what is in your portfolios. Only the profits can be used for surf trips. Here is 2017 in a nutshell: Surfed Nicaragua 4 weeks... Surfed South America 3 weeks... Surfed islands off South America 10 days... Surfed Baja 2 weeks... And I work one day a week less so I can get more waves here at home, too. All on my 'Stansberry Dime.' So stoked you don't even know, brah.
"Hit me up if you guys are ever in Huntington Beach, no dramas I got plenty of boards and rubber, and keep up the insane work you do." – Paid-up subscriber Austin Hewlett
"Can't be happier with Steve's China recommendations, and even though I got into the Melt-UP portfolio late (thanks for re-opening to loyal subscribers), I'm very happy with the results. Despite having a significant exposure to gold/silver and quality royalty companies, I still achieved a more than 25% increase in my portfolio." – Paid-up Stansberry Alliance member Rick R.
"Someone once said it's hard not to pick a good stock in a bull market, so with that in mind... I am only 2 years into active investment of my assets. Last year (2017) my gains were almost 6% greater than the S&P. My [portfolio's volatility] is just a shy higher than the S&P, I own 25 stocks, my average hold time is 11 months, and my portfolio is bullish with two both feet investing in China (thanks to Sjug's research). I read Stansberry's Investment Advisory, Retirement Millionaire, True Wealth, and DailyWealth Trader, and I choose my positions with some added... Needless to say, for someone who does this part time, it was a rockstar year. Thank you for your hard work, great writing and analysis. I've tried reading other investment newsletters, but they just don't match what I get from ya'll. Here's to a smart, disciplined, profitable 2018." – Paid-up subscriber Bryan D.
Regards,
Justin Brill
Baltimore, Maryland
January 4, 2018