The No. 1 Way to Know When to Sell
Thousands tuned in... Steve, Doc, and Dan give their thoughts on today's market... A crash is coming... The No. 1 way to know when to sell... Two Fed officials in hot water decide to quit... An eerie dot-com-bubble comparison...
Oh, what a night...
Thousands of folks tuned in to our "Bull vs. Bear Summit," and they were treated to a great evening of both entertainment and information – just the way we like it...
Among other things...
Our colleague and Extreme Value editor Dan Ferris kicked things off by dropping an atomic-bomb-magnitude prediction about where he sees the market going next... Those watching got to see the explosion video he shared for emphasis.
True Wealth editor Steve Sjuggerud gave a huge update about his "Melt Up" thesis and how it could unfold over the rest of this year...
Then Retirement Millionaire editor Dr. David "Doc" Eifrig added a warning to the major inflation prediction he issued a few months ago.
Finally – and maybe most important – they talked about something they all agree on: An economic bust of massive proportions is on its way... and you need to be prepared for it.
Unfortunately, most people aren't. Today, I (Corey McLaughlin) will talk a little bit more about how you can prepare, when and why to sell, and generally how to hold on to more of your money when things turn bad.
No matter what your portfolio looks like, most investors struggle with this idea...
How do I know when to sell?
Most people find it easier to "buy" and see upside ahead...
It's when things fall apart that people get worried, scared, or fearful – like today. The ongoing pandemic, geopolitical tensions, and Federal Reserve "taper" talk are just a few things that have a lot of investors on edge.
For many, money that had been in the markets before COVID-19 remains on the sideline entirely today, for fear of another crash...
And less than two years since the sudden 30% drop in the markets last March, we're willing to bet many people who have significant money in stocks are concerned about the same thing happening again.
What will be the trigger for the next "crash"? When will it happen? And how big will it be?
The answers often make sense in hindsight when we talk about the dot-com bubble... the great financial crisis... or the COVID-19 pandemic...
But as Doc said last night, when anyone asks him these sorts of questions, his answer is always the same... "Nobody knows." But that doesn't mean that you can't successfully navigate what does happen.
In other words, Doc, Steve, and Dan all agree that you should – and can – have a plan that will tilt the odds of making more money... and then protecting it... in your favor.
You need an 'exit strategy'...
One of the things any investor should do when they buy something is think about when or why they would sell it.
Frankly, most people with money in the markets have given this idea less thought than what to buy their cousin come the holiday season.
But it may be that you set a predetermined price at which you'll sell a particular stock...
That's a good start. But with so much information and wild volatility in the markets these days, it's often difficult to keep track of your guidelines even if you take the time to make them... or maybe you have to pay someone else to do it for you.
Doc, Steve, and Dan were joined by a special guest who explained how any investor – no matter their risk-tolerance or experience – can navigate this scenario... and know the No. 1 way to know when to sell...
'Knowing when to sell' might be the most valuable piece of investment advice...
We talk a lot about different investment storylines here in the Digest, but there are a few universal principles that everyone should think about no matter what you do with your money.
This is one of them... Knowing when to sell not only protects your money from major risks, but it can also help you make more money by not selling too early. That's the obvious reason.
Then there's the less obvious reason, like what you could do as an alternative with the money gained from selling at the right time. The academics call this "opportunity cost." This is harder to calculate than simple returns on a single stock.
In any case, the ideal scenario to make the most value on your investments is to buy at the "bottom" instead of selling... or sell at the "top" instead of buying. As we've written the last few days, knowing when to do that is probably the most important thing you can get "right."
For much more on this point, be sure to check out our 'Bull vs. Bear Summit'...
You'll hear great insights from Steve, Doc, and Dan about the state of the markets today... their latest thoughts on what might come next... and the tool they recommend every investor use to know precisely the best time to sell.
Just for tuning in, you'll also get the name and ticker symbol of what we're calling "The Most Dangerous Stock in the World." This is one of the most popular stocks in the country today, but it's one that we think could really tank in the coming months. The time to sell it is now.
If you missed the debut of the event last night, good news... You can catch a replay of the "Bull vs. Bear Summit" right here.
Switching gears, to some updates about 'insider' buying and selling...
A few weeks ago, we wrote about members of Congress who have access to information that's not available to the public and how that might influence their investment decisions... You see, when they trade on this information before other investors do, they can reap huge stock returns.
For example, Speaker of the House Nancy Pelosi – who naturally has unique insight on the priorities of Congress – and her husband own around $6.5 million worth of shares of chipmaker Nvidia (NVDA), and much of that includes a hefty gain.
This kind of trading goes on at the Federal Reserve as well... but the threshold of what's acceptable is apparently a lot lower than it is in Congress.
After recent trading disclosures of a pair of soon-to-be-former Fed leaders – as well as that of Fed Chair Jerome Powell – were revealed, questions have been swirling about the central bank's "conflict of interest" policy...
No, we shouldn't own what 'we' are buying...
Last week, Powell acknowledged – or rather, stated the obvious – that Fed governors should not own any of the same assets that the central bank is buying because it would be a big conflict of interest. Powell said...
As a general principle, that makes a lot of sense.
Powell made the comments in response to a question last week in a press conference after the central bank's latest policy meeting.
An analyst asked what Powell thought of the recent trading disclosures of two Fed presidents... and the reports of Powell owning at least one municipal bond fund that the Fed bought a stake in during its COVID-19-panic rescue efforts in March 2020...
Powell started by admitting that he has owned municipal funds in his own portfolio for "many, many years." In his explanation, the Fed chair also said that, under conventional wisdom, he never considered it an issue because he thought the Fed would never dabble in muni funds. The fact that he said this again reminds us of the unprecedented nature of the bank's buying efforts.
He also said that when it occurred to him there might be a conflict when the Fed decided to buy muni funds in March 2020, Fed compliance officers signed off on the move... saying there wasn't anything wrong with him owning the same assets that the central bank is buying.
Recently, two Fed officials came under closer scrutiny...
Of particular note was the personal trading activity of Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, as revealed in their annual portfolio disclosures.
Kaplan's disclosure showed that he bought and sold shares of the iShares Floating Rate Bond Fund (FLOT), an exchange-traded fund ("ETF") that tracks bond prices... which the Fed naturally has enormous influence on.
Bloomberg reported that Kaplan, a former executive at Goldman Sachs, had bought and sold shares worth more than $1 million multiple times over the past year. As we wrote in the September 13 Digest...
We can't think of an ETF that would fall more into "conflict of interest" territory than FLOT.
Rosengren, meanwhile, owned stakes in four different real estate investment trusts – including at least one that holds mortgage-backed securities. The Fed has been buying billions of dollars of mortgage-backed securities every month since June 2020.
This isn't in violation of Fed policy... but it's not a great look to have senior officials dabbling in the markets that they're regulating and investing in (even if they look like Boy Scouts compared to Congress). Both Kaplan and Rosengren said that they'd sell their positions by the end of the month.
And now, they're quitting...
On Monday, Rosengren announced that he's stepping down from his position tomorrow, nine months earlier than planned. He cited health concerns – Rosengren is hoping to receive a kidney transplant – as the reason for his departure.
Hours later, Kaplan announced that he'd also be leaving the Fed, in early October. Unlike Rosengren, he cited the trading-activity controversy, saying that he was concerned it might become a "distraction" for the Fed.
That was quick... They must have agreed with us.
This might sound like inside baseball... but who runs the Fed matters...
Both Rosengren and Kaplan were among the senior Fed officials keener to hike interest rates sooner (in 2022) than official Fed statements are suggesting. Their departure might slightly tip the balance of opinion internally. That might not matter when a rate-hike decision is made... but it could.
And – just as important – the whole trading-activity issue is now less likely to hurt the credibility of Fed Chair Powell, who is up for reappointment early next year to remain what the Washington Post calls "the most powerful economic official on the planet."
Powell was named chairman by former President Donald Trump. His renomination is facing strong opposition from, among others, Democratic Senator Elizabeth Warren, who sits on the powerful banking committee...
Warren recently called Powell a "dangerous man to head up the Fed," highlighting what she views as a weak track record on banking-sector regulation. In part, she wants the Fed to break up Wells Fargo because it has been an "irredeemable repeat offender" of regulations.
Finally today, a history note...
If you've been following along for any length of time this year, you know our Ten Stock Trader editor Greg Diamond has been tracking the similarities between today's market and that of 1998 to 2001... aka dot-com-bubble times.
He has found another piece of evidence that makes for a compelling comparison. As Greg wrote to subscribers this morning, he sees technical signs that the recent sell-off we've seen has been part of a longer "correction" that could resolve higher from here. Here's what he says...
For much of this year, we've looked at the analog of 1998 to 2001 in the Nasdaq 100 and now. I noted last week that I believe we are still following this path. Here's the price action that fits what's happening of late...
Again, the red circle [December 1999 to January 2000] is where I believe we are right now within this analog.... a correction followed by a big rally...
To make the point, Greg searched for old news stories from around this time period – which he does to study history and compare what was going on in the world with the charts he's analyzing. Here is an article he found from January 28, 2000...
U.S. Stocks Drop on Rate Concern; Nasdaq Loses 8.2% for Week
New York, Jan. 28 (Bloomberg) – U.S. stocks tumbled, sending the Nasdaq Composite Index to its biggest weekly loss since August 1998, after reports showing faster inflation fueled concern the Federal Reserve will raise interest rates more than expected in coming months.
Major indexes fell at the open, rebounded, and dropped further still as investors reacted to the last major snapshots of the surging economy Fed officials will see before meeting next week to decide interest-rate policy.
Greg concluded...
Sound familiar? Concern rates will rise more on inflation and Fed hiking – just like now. This was NOT the case as rates continued lower and the Nasdaq rallied into the bubble top. History is repeating, my friends. Anyone who says history doesn't repeat isn't looking hard enough.
As you know, we like to ignore surface-level headlines most of the time...
... Especially the ones that peg with certainty specific stock movements to some event. But here's why this one is important...
When we look back at headlines and see pretty much the exact same language 20 years apart, that tells us something, too.
Greg is of the mind that this means the Nasdaq in particular could head much higher and that interest rates – which we noted have spiked to relative highs recently – "should stabilize."
This would be bullish for stocks, overall, heading into the end of the year.
Hello, Stagflation
"We are in a stagflationary environment," says Peter Boockvar, chief investment officer of Bleakly Advisory Group, noting slowing economic growth in the U.S. And in this exclusive interview with our editor-at-large Daniela Cambone, he explains that the story can "truly be global"...
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
New 52-week highs (as of 9/28/21): Black Stone Minerals (BSM), Cheniere Energy (LNG), Royal Dutch Shell (RDS-B), and Stamps.com (STMP).
In today's mailbag, we received a few messages from folks who couldn't make last night's airing of the "Bull vs. Bear Summit." Good news for you... as we mentioned above, you can catch the replay right here. Besides that, do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
All the best,
Corey McLaughlin and Kim Iskyan
Baltimore and Ashton, Maryland
September 29, 2021