You Guys Need to Get on the Same Page
Clearing up some confusion… 'You guys need to get on the same page'… Exactly what we recommend today… The next downturn will be one for the record books… When this historic bull market will finally end… P.J. O'Rourke is ankle-deep in the chicken coop...
How can we be any clearer?
Stocks aren't cheap today. And as we noted yesterday, history suggests traditional "buy and hold" investors are likely to earn poor returns over the next several years.
But regular readers also know we remain cautiously bullish… We don't recommend selling all your stocks and moving entirely to cash. And we certainly don't recommend heavily shorting the market today.
As we've mentioned many times in recent months, inflated valuations alone are not a reason to sell. Stocks could continue higher – potentially much higher – before the bull market finally ends.
So we've continued to recommend staying long stocks, while taking some simple steps to protect your portfolio.
Yet we continue to receive e-mails from folks like paid-up subscriber Peter D., who writes:
You guys need to get on the same message page as Steve Sjuggerud. He says market "melt up" could take DJIA to 50,000 in next few years. So what is the story here – buy, hold or sell?
So we'll try again...
Despite Peter D.'s assertion, our analysts are generally in agreement today.
Yes, Porter and Extreme Value editor Dan Ferris are more cautious, while Steve Sjuggerud and Dr. David "Doc" Eifrig lean more bullish. But their advice is more similar than you may realize…
For example, as we explained yesterday, both Porter and Dan have urged readers to stay the course despite the warning signs. They recognize stocks are likely to continue higher before the bull market ends.
And despite his bullish "Melt Up" thesis, Steve Sjuggerud agrees that long-term, buy-and-hold investors are unlikely to do well over the next few years. As we shared on Monday (from the May issue of True Wealth)...
In the previous tech-stock Melt Up, the Nasdaq-100 Index went from a value of 1,500 to nearly 5,000 – and back down again – in three years. It was crazy.
Importantly, if you hung in there the whole time, you didn't make any money – you broke even.
Most people did much worse... They bought late in 1999, during the frenzy, and then sold close to the ultimate bottom in 2003.
We intend to do much better. We will do our best to catch most of the upside and avoid most of the downside.
We can't know just how high stocks will go during the Melt Up. But we would like to capture as much of that gain as possible. At the same time, we'd like to give back as little as possible when the fun is over.
How you choose to position your portfolio is a personal matter...
We're prohibited from giving individual investment advice. And even if we could, we simply don't know enough about any of our subscriber's personal circumstances to do so.
But our general advice is simple…
First, assuming you're using proper asset allocation and position sizing, don't get too bearish today. Stay long the stocks you already own, and don't be afraid to put new money to work in high-conviction or defined-risk opportunities.
On the other hand, if you already have too much money in any individual position or in stocks in general, consider lightening up now.
Next, think about "hedging" your portfolio with small positions in short sales and gold stocks. If you're not comfortable with those, simply hold more cash.
Finally, as always, if you have any money in the market, we urge you to use trailing stop losses. And if you're buying expensive stocks today or hoping to profit from Steve's Melt Up, you should consider them mandatory.
Now, you may be wondering...
If we don't recommend selling stocks today, why do we spend so much time warning about the risks in the market? It's simple…
If you know what to expect, you're less likely to make a serious mistake.
Again, while we can't know when the bull market will end, we can know for certain that it will. And history proves that the more overvalued a market becomes, the bigger the resulting damage will be when a recession or bear market finally arrives.
Today's historic extremes almost guarantee the next downturn will be one for the record books… And folks who don't see it coming could be wiped out.
Likewise, if you know the market is expensive today – and any potential Melt Up is unsustainable – you may be less likely to repeat the mistakes of those poor investors who held on too long in the early 2000s.
Does that clear things up? Let us know at feedback@stansberryresearch.com.
And don't forget to join us tonight at 8 p.m. Eastern time… Porter, Steve, and TradeStops founder Dr. Richard Smith are hosting a live event called "The Day the Bull Market Will End," where they'll help you prepare for whatever comes next.
Again, this event is absolutely free for Stansberry Research subscribers. Click here to sign up.
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A busy day in the mailbag, including more feedback on Porter's Friday Digest… some advice for subscriber Scott T… a question about trailing stops... and a celebrity sighting. Send your notes to feedback@stansberryresearch.com. And be sure to read on for the latest from Digest contributing editor P.J. O'Rourke.
"Dear Porter, until I read your Digest on Friday, I didn't know Wednesday's market was all that much to worry about. Sure, I lost more money than usual but, I was out there beating the bushes looking for buying opportunities, not looking for a reason to sell. Unfortunately, I couldn't find any stocks that I liked that had corrected enough to buy. But, I did hold on and as of today (Tuesday) everything has made its way back to where it was week ago and then some. I really can't believe that there is that much panic out there. If you have so little faith in yourself and what you are doing then you really need to get out of stocks and get into something a lot safer.
"I'm really grateful for your service, the service has more than paid for itself. While I don't take full advantage of every single newsletter and service. I read a lot of it. It gives me a good overview of what's going on in the world of finance. People who religiously follow everything that they read that you publish without doing some of their own due diligence are probably the people who are the least successful. I find I have the least success when I substitute your judgement for my own. However, when I take a position after doing my own due diligence… I look at the position and ask myself does that make sense? Can I tolerate that much risk? Does it fit with my investment strategy? What I've found is that there is no shortcut to investment success…
"Damn the torpedoes and keep up the good work. Just know you have subscribers like me who quietly use your service (and TradeStops) and are having great success." – Paid-up Stansberry Alliance member Steve Fox
"You were right, there is nothing like a one-day downturn to bring out the fun e-mails. It certainly brightened my Sunday morning and kept me from doing things I wanted to avoid anyway, if only for a few minutes.
"I loved your remarks about red/green/yellow lights and driving. Plus, your comments about a bolt hole in rural PA struck home, as I married into a family with deep rural PA roots, and we are soon to be getting our own place there, with a similar purpose." – Paid-up subscriber Eric W.
"I was up over $144 on a less than $50 K portfolio [last Wednesday]. I know that you have recommended 10% gold, etc. for hedging. I'm closer to 20%, which has reduced my upside a little but I'm still beating the market significantly." – Paid-up Stansberry Flex member Bob H.
"Justin, tell Scott T. that simply because it's legal in some places, doesn't mean you HAVE to smoke it every day." – Paid-up subscriber Rick V.
"I love reading your articles, especially on stop losses. I have a question. My trading page for my bank does not have a trailing stop option. It has stop losses and limits. How should I use them to achieve the same (if possible) results as a stop loss?" – Paid-up subscriber Susan E.
Brill comment: Susan, we're glad to hear you're taking our advice on trailing stops. But to be clear, we never recommend placing them with your broker, even electronically. Instead, we recommend tracking your stops yourself, either manually or via a service like TradeStops. Again, if you'd like to learn more about how we use trailing stops, be sure to join us tonight for our free educational event. Simply click here before 8 p.m. Eastern time.
"Is that Randy Travis of country music fame? Regardless, you have a great group of followers and for good reason!" – Paid-up subscriber S.W.
Brill comment: What do you say, Randy?
Regards,
Justin Brill
Baltimore, Maryland
May 24, 2017
Thoughts While Cleaning the Chicken Coop
Last weekend, I was shoveling s*** in hell.
It was a hot day, and I was performing my least favorite farm chore – the twice-a-year chicken coop cleanout.
This set me thinking while I shoveled... First, I thought about the phrase "I'd rather be shoveling s*** in hell." I often use it in conversation.
Friend: "How'd you like to have Sean Spicer's job?"
Me: "I'd rather be shoveling s*** in hell."
The expression is a cliché. But... I thought... clichés only become clichés because they express a truth. And the truth is, I'd rather clean out the chicken coop than...
- Try to sell Puerto Rican municipal bonds.
- Balance the state budget of Illinois.
- Negotiate the Brexit.
- Attempt to forge a just and lasting peace in the Middle East.
- Be in the same room as Elizabeth Warren.
A cliché may be overused and trite. ("Nobody loves you like your mother.") But it represents an idea we all agree on – and there aren't enough ideas we all agree on in America these days.
Maybe America should be more clichéd. Maybe we should have a society, a business world, and a political system based on clichés. I can think of some good ones...
All men are created equal.
They are endowed by their creator with certain unalienable rights.
Among these are life, liberty, and the pursuit of happiness.
Cleaning the chicken coop might seem to be an odd way of pursuing happiness. But I can tell you, from a certain amount of personal experience, it's a better path to lasting joy than drink, drugs, and adultery.
The chicken coop won't need to be cleaned out again for six months. With drink, drugs, and adultery, you can find yourself cleaned out the next morning.
Cleaning the chicken coop is also honest work, and when I'm done I've accomplished something (at least for the chickens).
This gives me more dignity than I have in most of the rest of my life – making fun of people for a living, being a second-string parent, failing to train my bird dogs, and taking eight strokes on a par 3 at the golf course (and that's after I've fudged my scorecard).
No one on Earth has the right to look down on anybody who does honest work and accomplishes something. Even if what they accomplish is a pile of chicken s***.
I may be filthy, sweaty, and stinking, but I rank higher in the aristocracy of life than people who do no work and accomplish nothing, and much higher than the parasites who do dishonest work and suck the blood out of the accomplishments of others. This means that compared with about 95% of America's elected officials, I am an imperial majesty – as long as I stick to cleaning my chicken coop.
Also, cleaning the chicken coop gives me an opportunity to do that kind of thinking. Mindless labor is thought provoking.
Not to compare my thinking with Einstein's, but I'll bet Einstein was doing something like cleaning a chicken coop when "E=mc2" popped into his head.
(Actually, he was working in the Swiss Patent Office. Which really does sound like shoveling s*** in hell... Imagine spending day after day immersed in Germanically precise and detailed official documents concerning cuckoo-clock intellectual property.)
My thoughts ran to more prosaic subjects. Such as, "Where did all this s*** come from?"
I only have eight chickens. They live in a large coop, about eight feet by 12 feet. The coop opens into an even larger pen, at least 12 feet by 20 feet. And every bit of the coop and the pen was covered in chicken s***.
Using a gravel rake and a garden spade I filled my tractor bucket three times. That's enough to load a full-sized pickup truck's bed to the brim.
As I delved and heaved, I began calculating the number of bags of layer hen feed I buy, the frequency of my wife giving the chickens vegetable trimmings, wilted lettuce, leftover Brussels sprouts, etc., and how long it had been since I last cleaned the coop.
The chickens are pooping more than they eat!
If the chickens were a business I was considering investing in, I'd smell something rotten. (Of course, in this case, I was smelling something rotten anyway.) When a corporation says it bought a ton of steel from which it manufactured two tons of steel widgets, I want to see the corporation's books.
My chickens don't keep books (so far as I know). But they're up to something.
Are they sneaking out of the coop at night and going to McDonald's? Maybe they're taking my car, with one chicken pecking the accelerator and another pecking the brake pedal while a third perches on the steering wheel. I should roll up the windows and quit leaving the keys in the ignition and my spare change in the cup holder.
I kept shoveling and had yet another thought. The chickens are a business. And I did invest in it. In fact, I invested quite a bit. There was the capital expense of building the coop and the pen, the cost of the chickens themselves, plus the cost of the chicken feed (the price of which is not, by the way, "chicken feed"). Then there's what I paid for the heated poultry waterer, the infrared lamp to keep the coop warm on freezing New-England nights, the laying boxes, the feed trays, the feed scoop, and the mouse-proof feed bin. Not to mention what my feeding, water replenishment, egg collection, and coop-cleanout time is worth, even figured at minimum-wage rates.
The return I get is one egg per day per hen (if she feels like it). Pricing that out, I figure each sunny-side-up I have for breakfast sets me back about $1.50.
So shoveling s*** in hell turns out to be a good thing... in the following ways:
I got some exercise.
I did some deep thinking.
And I learned four important lessons about business and investing...
1. Because people say the same thing over and over again doesn't mean it isn't true. There's no value in being contrarian just to be contrary.
2. Never undervalue honest work that accomplishes something, no matter how humble that something seems to be. This goes for employees and employers alike, as well as husbands, wives, friends, associates, chairmen of Fortune 500 companies, and the people emptying those companies' wastepaper baskets.
3. Be alert to mismatches between input and output. Take the Snapchat social-media company as an example. Snapchat's output is supposed to be millions and millions in revenue. But Snapchat's input is just a bunch of social media or, as I would call it, "a pile of chicken s***."
4. Don't keep chickens.
Regards,
P.J. O'Rourke