What Follows the S&P 500's 49-Year Rally

The S&P 60-bagger... Top dogs drag you down... Your retirement account is a speculation... The April 8 blastoff... MSTR's big gamble... The farce of 'bitcoin yield'... Value and price, price and value... The antidote to speculative fever...

If you don't invest, you will fall behind...

In a recent post on the social platform X, analyst Charlie Bilello showed a chart plotting the purchasing power of the U.S. dollar against the return of the S&P 500 Index over the past 30 years. The contrast is stark:

The dollar's value has been cut in half, and the S&P 500 is nearly a 10-bagger.

As I discuss in today's new issue of The Ferris Report, the S&P 500 has been incredible for decades. It's a 60-bagger since August 31, 1976 – the day the first S&P 500 index fund started trading. And it's nearly a 15-bagger since January 22, 1993 – the day the first S&P 500 index exchange-traded fund started trading under the ticker symbol SPY.

You didn't need to be Warren Buffett to make these returns. You needed to just buy and do nothing. But maybe that's more Buffett-like than I'm letting on. As he quipped in his 1990 annual shareholder letter:

Lethargy bordering on sloth remains the cornerstone of our investment style.

Somebody should rewrite Ben Graham's 1949 classic, The Intelligent Investor, and call the new edition The Slothful Investor.

Given such a history of performance, as of the end of last year, investors had about $13 trillion in S&P 500 funds... and another $7 trillion or so in funds benchmarked to the index. That includes much of the $2.5 trillion in new money that Americans fed into their retirement accounts last year.

It's a clear-cut case of "if it ain't broke, don't fix it."

But as I show my Ferris Report subscribers this month, the S&P 500 looks like it's in serious need of repair...

The benchmark index is supposed to be a large, diversified portfolio, but 38% of it is in just 10 stocks. And the more folks keep buying it, the more concentrated it will tend to become.

One day, if this keeps up without an intervening bear market, American retirees will wind up with more than half their savings in just 10 megacap stocks.

To be fair, these include some of the greatest businesses that have ever existed... But as I've pointed out before, the ranks of the "top dogs" have historically changed so often that owning too much of them is a bad idea.

Unknowingly speculating on richly valued megacaps when you think you're intelligently investing is not a good way to prepare for retirement... But that's what just about everybody with a 401(k) is doing today.

I've heard a lot of analyses about why the market is healthier than I'm presenting it. But in the big picture, it all sounds like the title of a 2009 book by economists Carmen Reinhart and Ken Rogoff: This Time Is Different. (The subtitle: Eight Centuries of Financial Folly.)

For 800 years, "this time" has never turned out to be different. Sure, maybe now it is... as some very smart people I know have thoughtfully argued. But more likely, counting on stocks to rise to the moon after they've already grown to the sky is once again a losing strategy.

(Alliance members and other subscribers to The Ferris Report can read today's full issue to find out how S&P 500 concentration can devastate portfolios, and how to profit and preserve capital no matter what kind of market we get.)

The president seems to have goosed the current speculative fever into existence...

In early April, it looked like President Donald Trump's tariffs might finally bring the bull market down, as the S&P 500 closed on April 8 nearly 19% off its previous all-time high.

But Trump didn't like how the bond market was taking his new policies and backed off, extending deadlines for higher tariffs against China.

The stock market skyrocketed and everything soared... from the stalwart S&P 500 to the money-losing tech speculations in Cathie Wood's ARK Innovation Fund (ARKK).

The S&P 500 is up nearly 28% off the April 8 bottom, as of yesterday's close. ARKK is up 81%. Asset manager GMO recently made note of big gains in speculative stocks through July 31, from unprofitable tech (up 57%) to "bitcoin sensitive" stocks (up 112%).

This trend may be losing steam, though...

You can see this in the mother of all bitcoin-sensitive stocks, Strategy (MSTR). You can see it in the relative performances of bitcoin and MSTR, which now owns nearly 629,000 bitcoins worth more than $70 billion.

Investors went nuts for MSTR after April 8, pushing it up as much as 91.6% by mid-July, compared with a peak rise of about 60% for bitcoin. But MSTR has recently begun to underperform bitcoin, with the cryptocurrency trading roughly 46% off the April 8 bottom and MSTR up less than 42%.

Maybe the world is finally realizing that Strategy's plan to issue stock and debt to fund bitcoin purchases is doomed to disappoint.

In the meantime, Strategy co-founder and chief bitcoin zealot Michael Saylor is still bragging about MSTR's bitcoin yield – the made-up nonsense metric that suggests buying bitcoin with leverage is something other than gambling with borrowed money.

Saylor recently claimed on X that Strategy has a 25% "yield" from buying bitcoin on margin at one price and watching the crypto's price rise from there. But while he uses language that sounds like he's talking about a dividend payment, no cash is hitting shareholders' pockets. It can't... since Strategy's scheme generates zero cash flow.

Like many speculations, it works just fine when prices are going up... and courts disaster when they're falling.

MSTR's recent market cap is around $96 billion, roughly 35% higher than the value of its bitcoin (about $71 billion). Presumably, the market is assigning a premium to the stock because it thinks the price of bitcoin will continue to rise, increasing MSTR's asset value.

But what if the bitcoin price falls substantially from here? And what if investors realize MSTR is a leveraged play on bitcoin and nothing else... Then, fearing additional losses, what if they sell off the stock until it trades at a discount to its bitcoin cache, instead of the current premium?

MSTR is up more than 800% since August 10, 2020, when it announced its first bitcoin purchase. There is no way that would have happened if it had never bought bitcoin. Its software business isn't worth more than a couple billion dollars. Its revenues have shrunk every year since 2021.

It's already trading nearly 30% off its November 2024 high as of yesterday's close (though it bounced back a bit today). Would it be so crazy for a leveraged bitcoin scheme to lose 80% of its value in a bitcoin bear market? Bitcoin is super volatile. Investors who own MSTR and don't think it could tank are delusional.

An 800% run followed by an 80% drop should surprise no one. But I bet it would surprise everyone... perhaps MSTR's chief bitcoin hoarder most of all. Volatility goes both ways, but it's easy to forget that when everything is still rosy.

MSTR isn't alone...

It's by far the biggest bitcoin buyer among public companies. But as we've pointed out before, there are dozens and dozens of others. The top 100 of them own nearly 1 million bitcoins, which would be worth about $115 billion today.

A substantial decline in bitcoin would obliterate tens of billions of dollars in market value and probably bankrupt at least some of those companies. As Buffett once put it, we'll all find out who is swimming naked when the tide goes out.

To be quite clear, speculation isn't inherently wrong. Feel free to make big bets. But as I spell out in great detail in today's issue of The Ferris Report, the trouble is speculating when you think you're investing – failing to understand that you're sitting on a lot more risk than you wanted to take.

And given that Saylor has recommended taking every penny you own – including whatever you can borrow – and putting it into bitcoin, I'd say he definitely qualifies as one of the most shameless of the "hype men" we covered last Friday.

Such folks tend to get their comeuppance, but only after taking down a bunch of poor sad fools with them.

I wish more investors would listen to someone like Howard Marks...

The author/debt investor's most recent note, titled "The Calculus of Value," is a tour de force... It thoroughly explains the relationship between the value and the price of investments, then brings investors up to speed on the state of things right now. (Spoiler: Marks agrees with me that the markets are optimistic and expensive.)

The note provides a brilliant antidote to the totally unrealistic expectations and speculative fever you see almost everywhere you look in the stock market today. If the great mass of investors read it right now and took it to heart, the S&P 500 would probably lose half its value in a week. (Don't worry. That'll never happen.)

In a nutshell, Marks says that investments have an intrinsic value, which is based on their earnings power. He learned in college that assets are worth the present value of cash flows, discounted at an appropriate rate.

If that's too technical, think of it this way: A company is worth roughly its annual earnings power times a suitable multiple reflecting its future cash flows.

While value is subjective and theoretical, Marks realizes that an asset's price is concrete and complex in practice...

But in the real world, price is set by a different discounting process, which consists mostly of people applying their subjective opinions and attitudes about what the asset and its earning power are worth.

He ultimately concludes that an asset's price is investors' consensus view of its underlying value. Marks provides several ideas for how investors ought to think about the relationship of asset prices to their value, including this gem...

When the majority of investors are optimistic, they cause price to rise and potentially exceed value. And when the pessimists reign, they cause price to decline and potentially fall short of value.

He then points out that too much pessimism or optimism can create bargains or overpricings that wouldn't exist if all investors were informed and behaved rationally at all times.

It's all great, and it's exactly what investors need to hear right now, but there is one wrinkle...

Trillions of dollars have been invested in the S&P 500 based on no such value or price assessments whatsoever.

As we said earlier, it's folly to believe this time is different and that value and price have become permanently unhinged.

But that sure is how it feels, and it aptly describes what has been happening for years. Investors mindlessly put money into their retirement accounts, not for any reason but that they just got paid and they elected to move the money automatically years ago.

Marks says the market is expensive because investors have a more optimistic outlook than he does. But I don't think that's true. I think it's because they don't have any outlook. They're on autopilot no matter what people like him say about the value-price proposition on offer in the stock market.

That's why I focused all my energy on explaining the S&P 500's current popularity to Ferris Report subscribers this month...

If there is one thing in global finance that nobody seems to get right now, it's that the S&P 500 is not the safe asset everybody seems to think it is.

That alone is cause for serious concern.

As for exactly what to do, you could read almost any Stansberry newsletter and see the answer...

Focus on high-quality businesses.

Don't overpay.

Build a truly diversified portfolio of uncorrelated asset types... including stocks, bonds, precious metals, Treasury bills, mortgage-backed securities, managed futures, and bitcoin.

My colleagues and I have published easy, one-click ways to invest in all of those.

If you've ridden the S&P 500's 49-year, 60-bagger run, congrats. But this is no time to get complacent.

Learn about value.

Learn about price.

Learn about the interaction that likely determines a substantial chunk of your net worth.

It's far more important to think about such things right now than it is to worry about what to buy next.

Be careful out there.

New 52-week highs (as of 8/21/25): Agnico Eagle Mines (AEM), Barrick Mining (B), Alpha Architect 1-3 Month Box Fund (BOXX), British American Tobacco (BTI), Franco-Nevada (FNV), Cambria Foreign Shareholder Yield Fund (FYLD), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), Kinross Gold (KGC), Grand Canyon Education (LOPE), Altria (MO), Newmont (NEM), New Gold (NGD), Pan American Silver (PAAS), Sandstorm Gold (SAND), and SSR Mining (SSRM).

In today's mailbag, feedback on yesterday's edition, which previewed today's speech from Federal Reserve Chair Jerome Powell and discussed the impacts of tariffs on the economy... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Corey and the team! You guys need to mix it up a little. So tired [of] reading about the Fed! I think there's more of a story. The game is rigged, and your team should be digging deeper." – Subscriber Thomas V.

Corey McLaughlin comment: Noted. Send your ideas or tips about what you'd like to see us cover.

"What downside if any is there to Powell being fired [today]? I do not think we can wait until next year." – Subscriber Tom P.

"The Federal Reserve Bank should have NEVER been created anyhow!..." – Subscriber David B.

"One aspect of tariffs: Current spot rate for a 40' container (= 2 TEU's [Twenty-Foot Equivalent Units]) is less than $2,000 from China to U.S. West Coast." – Subscriber Larry B.

"Mainstream America is downsizing their shopping to stores like Walmart and the Dollar Tree. The inflation numbers combined with lack of wage growth do not accurately paint a picture of what is happening to normal citizens' pocketbooks. The Dollar Tree recently upped prices on a lot of their merchandise to $1.75! That's a 75% increase over the last couple of years. A far cry from 3%. This will end badly." – Subscriber Ted B.

Good investing,

Dan Ferris
Medford, Oregon
August 22, 2025