The 'Wall of Worry' Continues
A big reason to stay bullish today... The 'wall of worry' continues... Another sign says the 'Melt Up' isn't over yet... New highs for this hated sector... In the mailbag: Readers respond to the 'Melt Up Millionaire' project...
As the old Wall Street adage goes, bull markets 'climb a wall of worry'...
This refers to the contrarian nature of the financial markets...
As longtime readers know, big bull markets are born not on optimism, but pessimism... when investors have all but given up. And it's not until the last worry has been tossed aside – and investors are falling over themselves to buy – that a new bear market becomes likely.
That has certainly held true over the past eight years... U.S. stocks have soared hundreds of percent from their financial-crisis lows in 2009. Yet investors have been anything but optimistic along the way.
Time and time again, they've turned downright bearish at the first sign of trouble... And each time, stocks have quickly rebounded and moved to new highs.
Despite the big gains in stocks so far this year, that still appears to be the case today. As news service Reuters reported this morning, investors are rushing for the exits once again...
U.S. equity funds have suffered their longest outflows streak since 2004, Bank of America Merrill Lynch (BAML) data showed on Friday...
The data, which tracks fund flows from Wednesday to Wednesday, showed investors pulled $2.6 billion from U.S. stocks over the last week, with tech stock funds losing $600 million, their biggest outflows in almost a year.
The S&P 500 is down over 1% so far this month, having rallied almost 9% year-to-date, whilst U.S. tech stocks have surged over 22% so far this year.
As always, nothing is 100% certain in the markets. Perhaps this time is different... and this will be the first major bull market to end on widespread pessimism.
But we wouldn't bet on it.
Of course, that's not the only reason to believe the bull market will continue...
Steve Sjuggerud has shared several bullish indicators with Digest readers in recent months. This morning, in our free DailyWealth e-letter, he shared one more indicator that suggests the "Melt Up" isn't over yet. Here's Steve...
Today's indicator is the S&P 500 Equal Weight Index. You see, the regular S&P 500 is "market-cap weighted." That means the largest companies get a larger weighting.
Consumer-electronics titan Apple (AAPL), for example, has a nearly 4% weighting in the S&P 500, even though the index typically holds 500 companies.
Those kinds of outsized weightings mean that, at times, the overall market can rise while most stocks in the S&P 500 are falling.
So in addition to monitoring the regular index, we can confirm the overall market's movements with this equal-weight index. Every stock is equally weighted, regardless of size. This equal-weight index should mirror the S&P 500 when we're in a healthy bull market.
As Steve explained, similar to the other market "vital signs" he's been following, this indicator gave clear warning signs well in advance of the last two major market peaks...
The S&P 500 Equal Weight Index was hitting "lower highs" when the overall market peaked in 2000. It was 6% below its 1999 high as the overall market hit new highs.
That was a major warning sign for the market. And the same thing happened in 2007...
The index hit a lower high as stocks peaked. The majority of stocks had stopped moving higher. And the final Melt Up gains all happened in what was overall a weak market.
But again, just like those other indicators, this one is also giving the "all clear" for now. More from Steve...
The chart shows that the S&P 500 and the S&P 500 Equal Weight Index are moving together today. They're both coming off all-time highs.
It will be a warning sign if the overall market hits a new high and the S&P 500 Equal Weight Index doesn't. But that's not happening today.
Stocks are still broadly moving higher. The bull market remains healthy.
The Melt Up is still intact... So my advice is simple: Stay long.
If you missed Steve's big event on Wednesday night, it's not too late to take advantage of his brand-new "Melt Up Millionaire" project. Steve is so confident that subscribers will double their money or better in the next 12 months, he's including a guarantee unlike anything we've ever offered before. Click here for all the details.
Earlier this week, we highlighted Steve's 'bad to less bad' trade in miners...
But he isn't the only Stansberry analyst who is bullish on the resource sector today.
Our colleague Ben Morris also believes a new commodities "upcycle" could be underway. And he's especially bullish on one metal in particular: copper. As he explained to his DailyWealth Trader subscribers late last month...
Last year, gold and silver were on the tips of everyone's tongues...
But this year, many of the experts are equally – if not more – excited about the prospects for another metal.
Supplies are declining while demand is increasing. And prices are far too low for new production to be economic. This situation means it could be one of the leading performers in the emerging bull market in commodities.
The metal I'm referring to is copper.
At the time, Ben had just returned from the Sprott Natural Resource Symposium in Vancouver, Canada.
If you're not familiar, it's an annual meeting of many of the world's top commodities experts and insiders, hosted by legendary resource investor Rick Rule. And as Ben explained, this year, many of those insiders were particularly bullish on copper...
Like many other commodities, copper dropped hard starting in 2011. It fell from more than $4.50 per pound down to less than $2 in early 2016... a 58% decline. (For comparison, gold fell 45% from its 2011 peak to its 2015 low.)
As Wojtek Wodzicki of NGEx Resources (NGQ on the Toronto Stock Exchange) explained, "Low prices over the last five or six years have met very little exploration and limited investment. Very few large deposits have been found over the past 10 years."
In other words, many of the world's copper mines are aging. And as you might imagine, producers mined the highest-grade rock – the rock with the highest percentages of copper – first...
As Robert Friedland of Ivanhoe Mines (IVN on the Toronto Stock Exchange) pointed out, Escondida in Chile is the world's biggest and best copper mine. It was discovered 40 years ago. As recently as 20 years ago, the average grade of the mine was 1.7% copper. Now, the average grade of its reserves is 0.52% copper.
This means folks have to mine larger and larger volumes of rock – at higher costs – to produce the same amount of copper.
Friedland agreed with Bernstein Research's estimate that in order to stimulate a new generation of mines, copper needs to double in price from today's levels.
But new mines aren't coming online tomorrow. And in the meantime, it appears that copper demand is likely to increase from here. Wodzicki continued...
On the demand side, there's also a bullish picture. Just average growth is going to result in a supply shortage. But copper also stands to be the main beneficiary of the growth in green energy in transportation. For example, a Tesla uses about five times as much copper as a conventional car.
China's got a serious problem with air pollution. And it's investing very heavily in green energy. Green energy is copper intensive.
And as Friedland explained, wind and solar power use about eight times more copper per unit of electricity than coal-powered electricity does.
Of course, as Ben noted, you could say these folks were simply 'talking their books'...
But price action doesn't lie. And as you can see in the following chart, copper is breaking out. It's now pennies away from touching a new multiyear high...
That's a bullish sign for copper prices moving forward. After years of low copper prices, Ben says the bear market appears to be over. And he believes double-digit gains are likely from here...
On the upside, if copper rises back up to $3.50 per pound – where it bounced around for most of 2012 – you'll make about 16% from here. If the bull market gets going and copper hits $4.50 per pound – just below its old peak – you could make 49% on the position.
If Friedland and some of the other natural resource experts here are right, though, copper will likely break out to new all-time highs. Gains of 80% or more are possible.
We may be in the early stages of a big bull market in commodities. Copper was crushed in the recent bear market... Production is slowing... And demand is increasing. Now, it's time for the price of copper to climb.
You can learn more about Ben's favorite copper trade with a 100% risk-free trial to DailyWealth Trader. Click here to check it out.
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New 52-week highs (as of 8/24/17): iShares MSCI BRIC Fund (BKF), National Beverage (FIZZ), iShares China Large-Cap Fund (FXI), iPath Bloomberg Copper Subindex Total Return Fund (JJC), iShares MSCI Global Metals & Mining Producers Fund (PICK), Shopify (SHOP), ProShares Ultra FTSE China 50 Fund (XPP), Direxion Daily FTSE China Bull 3X Fund (YINN), and short position in Brinker International (EAT).
In today's mailbag, several subscribers share their thoughts on Wednesday night's big event. We'd love to hear from you at feedback@stansberryresearch.com. And if you weren't able to join us, you can still get all the details on Steve's new "Melt Up Millionaire" project right here.
"What can I say... I'm a big believer in Steve's recommendations. I've been doing great with the stocks I've purchased following Steve's advice. I only wish I knew of him sooner. I'm a Stansberry subscriber for 3 years, but didn't follow Steve until late 2016... I'm all in with both Porter and Steve. I hope to attend a live seminar one day soon. I would have loved Vegas, but it wasn't in the cards. PS. I also believe in Dr. Eifrig and the entire Stansberry crew. Thank you." – Paid-up subscriber Marc Destefano
"Feedback on Steve's webinar... IT CHANGED MY MIND! It was a very good presentation." – Paid-up subscriber John T.
"I am a lifetime subscriber and the presentation just reinforced my feelings about the melt up. I have already purchased all of the recommendations in the portfolio." – Paid-up subscriber Ray Fairbanks
"No, he didn't change my mind. But he helped push me along a little sooner." – Paid-up subscriber Marvin Lipschultz
"[Wednesday] night's presentation was very convincing, but I was already sold on it from reading True Wealth..." – Paid-up subscriber Jan W.
"I loved the [Melt Up Millionaire] guarantee. I don't see how a person could go wrong... I am rooting for a 100% gain for Steve." – Paid-up subscriber Tim K.
"I hadn't ever listened to Steve in a presentation, as I usually just read his material so I was very charmed by this man's open and candid approach to selling his melt up newsletter and recommendations. Here was an analyst who made sure buyers into his portfolio understood that it might or might not work. I haven't heard that before from anyone in the financial industry. Well done Steve! I don't think anyone will go into this one without understanding the risks involved... Congratulations; you have a fabulous collection of information that I bought for a pittance a long time ago!" – Paid-up subscriber C.A.
"I've been a Stansberry subscriber for almost three years now. I started with True Wealth Systems then on to the old Flex Membership and now with the lifetime Total Portfolio, as well as a Lifetime membership with TradeStops. I can't thank you enough for all of the insight you have provided.
"It used to be that I felt like I was being blown around the by wind. I've made most, if not all, of the classic blunders along the way. I tried a number of subscriptions over the years with other publishers and my experience never seemed to live up to the sales hype. Always seemed like there was either a red number in the results or that small hyphen in front of the number. Aggravating to say the least.
"That has changed! With what I have learned from all the editors at Stansberry I have expanded my horizons through some of the Big Trade recommendations, gold positions, bought my first bonds, as well as purchased some recommendations on the Hong Kong and London exchanges. Primarily, though, I have followed Steve's work in True Wealth Systems, True Wealth, [True Wealth] China Opportunities and now the Melt Up. Since becoming a Stansberry subscriber I have seen WAAAAAAAY more green in my positions than there used to be.
"So, today I was arranging my portfolio around so that I could make room for Steve's Melt Up recommendations from [Wednesday] night. In the process I needed to go to TradeStops and update my open and closed positions. Then I saw something that made me very happy. I went back and counted my closed positions that Steve has recommended over the past several years. I have 14 winners and 5 losses for a 74% win rate. Not bad! Then I counted my current open positions and found that I have 17 green positions and 1 red position for a 94% winning rate. Taken together, open and closed positions over the past 2 – 3 years, I have experienced an overall 84% winning percentage with Steve's work! I'm in my mid-50's and that kind of win rate has never happened for me before.
"So, from my heart – Thank you! Seriously! Stansberry Research's work, along with TradeStops, has helped me manage both the money and the emotions like never before. From the long term perspective I am also grateful that I can, with the lifetime subscriptions, share your research with my kids so they can get far better results than what I used to get pre-Stansberry.
"I also want to thank Porter for his willingness to allow for differences of opinion among the editors. I found those difference of viewpoints to be one of the things that attracted me to Stansberry in the first place, and still does. I think it's impressive that you don't muzzle the other editors or demand unanimity of opinion even though that would probably make your life a little easier. I look forward to great results going forward with however big the melt up will be and then seeing great results on the back side when things go south." – Paid-up subscriber Tim A.
Steve comment: Wow! I love it when I see that folks are actually learning lessons from us... instead of just taking a stock pick here or there. Congrats on your success so far... but even more important, congrats on gaining so much knowledge.
The next important lesson is NOT to concentrate so much on your "winning percentage." Instead, concentrate on doing the right thing at the right time.
The market doesn't care if you are up or down on a position. If it's time to sell, it's time to sell. Once you can make this mental shift, you'll be even more successful in the markets.
Don't get hung up on maintaining your winning percentage at the risk of doing the wrong thing. The better measure is the bottom line of your portfolio statement. If you do the right thing (and sell when it's the right time, for example), your winning percentage might end up going down, but your bottom line will go up – a lot.
Congratulations again... It's great to hear how far you've come and how well you're doing.
Regards,
Justin Brill
Baltimore, Maryland
August 25, 2017