Going bottom seeking... All the Nasdaq's 2021 gains are gone... You don't always get what you want... History suggests 50% more downside is 'normal'... More stocks are going down than up... How to make money if stocks keep falling... Where's the 'bottom'? The question – how much farther do stocks have to fall? – is on a lot of minds today... or at least, it should be for those who have been paying attention... Following Friday's major sell-off – the second in a row to end a trading week – the major U.S. indexes are trading at levels not seen in roughly a year or more... It's like the stock market has suddenly gone back in time... The benchmark S&P 500 Index closed today at almost the same price as May 21, 2021... The Dow Jones Industrial Average traded today near numbers of March 19, 2021, meaning you've made basically no money owning the index for the past 14 months... And the laggard is the tech-heavy Nasdaq Composite Index... All of its gains from 2021 have now been erased... It's down 21% from previous highs, meaning tech stocks are in the conventional 20%-plus decline definition of a bear market. You might think it won't or can't get worse... or perhaps that we deserve better times ahead. But as Clint Eastwood's character, William Munny, says in the classic Western movie Unforgiven before killing Little Bill, who says he doesn't deserve to die... Deserve's got nothing to do with it. Personally, I (Corey McLaughlin) want better times ahead, but if you're interested in practically protecting and growing your money, we also need to be realistic... Mr. Market doesn't owe anyone anything, especially after two stimulus-fueled years of stock gains... near record high "official" inflation numbers... and, as we've been describing, a Federal Reserve that will keep slowing economic growth in the year ahead with its policy decisions... We don't have a crystal ball, but... We do know what we see... and we also like to follow what smart, independent-thinking people are saying, doing, and recommending today. And today, as we go "bottom seeking" in search of where this sell-off might end, I'll share a few telling reports from our research team to paint the picture... But we begin today with another insightful take, from someone who might be familiar to longtime subscribers... Over the weekend, Meb Faber, the co-founder of Cambria Investment Management and a frequent speaker at our annual Stansberry Research Conference, shared some findings that caught the attention of financial geeks on Twitter... Stay with me as I explain the context... In response to a thread that went somewhat viral from venture-capitalist Bill Gurley, thanks to a reply from Amazon (AMZN) founder Jeff Bezos, Meb shared his thoughts on today's market and said stocks falling 50% from here would be "normal/not a big deal"... As you can see, Meb's analysis centers on historic valuations of "CAPE" – or the cyclically adjusted price-to-earnings ("P/E") ratio of the S&P 500. This is an inflation-adjusted number, and Meb shared average 10-year CAPE readings during different ranges of "official" inflation in the economy... Today, even after the sell-off to start 2022, the CAPE ratio of the S&P 500 is still around 33 times earnings... That's down from its early 2021 peak, but it remains higher than any other time outside of the dot-com bubble, including the peak before the Great Depression. We wrote about this valuation metric, also known as the Shiller P/E ratio, named for the Yale economics professor Robert Shiller who invented it, in March 2021 when it first entered rare territory... That was before inflation spiked and stocks were due for a correction... It's the same story today. As Meb notes, in a "normal" world, meaning the type of low "official" inflation around 2% we've seen in the past decade, U.S. stocks would still be due for a pullback anyway... Then consider a world of 4% to 7% inflation, as Meb does – again, based on official numbers. This scenario is entirely likely in the year ahead, even if inflation peaks in the first half of the year... By Meb's math, the only thing Mr. Market deserves is a roughly 50% cut in valuations from today. Then we'll see a market bottom... And we get his point at the end of the message, but if that happens, it will be a "big deal" to most people. At the same time, more stocks are going down than up... A wise man once told me that it's impossible for the "stock market" to go up if there are more individual stocks going down than up. And vice versa... The "market" won't go down if more stocks are going up than down... It's a potentially mind-numbing and almost offensive concept to tell an experienced investor, but it's true and might not be obvious to newbies... Thousands of stocks trade on the New York Stock Exchange alone. They don't all go in the same direction every day, but we can look at the trends from each day – how many are going up versus down – and get a good gauge on market sentiment... This indicator is called the "advance-decline line." If more stocks rise than fall in a day, then the line rises with them, or vice versa. It's a simple, yet powerful tool when used correctly. As our colleague Chris Igou explained in the April 21 issue of DailyWealth Trader... Importantly, this is a cumulative indicator. So if, say, 100 more stocks rose today than fell, you'd add 100 points to the advance-decline line's rolling total. This lets us track the market's changing strength over time. Today, the advance-decline line is telling us a lot... In a healthy bull market, the market advances broadly. A large number of stocks in various sectors all rise together. This is shown by steady upward moves in the advance-decline line. But when the market is weak, it may be propped up by only a few strong performers. In this case, the advance-decline line will taper off or even drop. When the advance-decline line falls, it's a major sign to proceed with caution. It means that a bull market cycle may be nearing its end. That's exactly what we're seeing today, Chris says... The broad rally in U.S. stocks has lost steam and the advance-decline line is trending downward for the first time in years. Take a look... As Chris notes, there's a sustained fall in the advance-decline line for the first time since 2007. And this is only the third such move in the history of the index. If you go back to early 2021 in the above chart, you'll see that the line stopped advancing then – and traded sideways through the start of 2022... before dropping this year. As Chris writes... The action means that more stocks are losing than winning... and that's a different market environment than we've seen for many years. In other words, if you use history as a guide, the trend for U.S. stocks is down, and they could head lower for longer before the broad trend reverses. But this doesn't mean it's time to panic... If you've followed us for any length of time, you perhaps have heeded our advice and own a "truly diversified" portfolio, including high-quality stocks, hard assets like gold, and as we wrote recently, commodities. We hope that you've raised cash, too. But if not, it's not too late. Even if stocks have an additional 20%... or 50%... to fall from here, as Faber suggests, there likely will be "relief rallies" along the way that can mark good exit points, if you believe stocks ultimately haven't hit a "bottom" yet. It's probably not going to be a one-way street down... Indeed, today certain indicators suggest a rally in the indexes could happen soon, as in over the next week or so. For instance, the results of a weekly survey of individual traders by the American Association of Individual Investors ("AAII") tends to be a good contrarian indicator for what actually happens in the market... Meaning the opposite of the findings tends to happen next. According to the most recent survey, "bearishness" hasn't been this high since 2009. That means there's a good chance we soon see the opposite outcome ‒ a rally ‒ in the very short term. That would make sense, given precedent... Veteran trader John Roque of 22V Research recently shared interesting, related data on the dot-com bust bear market, when the Nasdaq dropped roughly 80% from March 2000 to October 2002. In the 649 trading days that are covered, which in retrospect was a clear bear market, the Nasdaq finished the trading day up nearly half the time (47%)... and there were 15 rallies of 10% or more and eight rallies of 20% or more. As Roque pointed out, today the Nasdaq could rally 16% and still be below its 200-day moving average, a good technical measure of a long-term trend... This is to say, stocks could rally by a significant amount and still be in a long-term downtrend. In fact, our Ten Stock Trader editor Greg Diamond has been tracking this precise trend over the last several months, and has showed subscribers how to make money amid the volatility. How to make money if stocks keep falling... Greg and our colleague Jeff Havenstein also just shared two other ways to hedge your portfolio against a broader market sell-off... in the fourth module of our new Stansberry's Financial Survival Program, which published on Friday. Stansberry Alliance members have access to these ideas and research at no additional cost. And for anyone who wants to gain access to our new seven-part Financial Survival Program, click here for more details about it. The lesson fits in perfectly with our discussion today... and is a more detailed extension of it. Greg and Jeff detail the four proven "phases" of a bear market and share their take on where we might be today, including comparisons to the Great Depression, dot-com bubble, and financial crisis eras... Without giving too much away, here's a preview... The price action is following the exact same path of the three previous big bear markets... The crash is happening right now as you read this. Greg and Jeff share a specific marker that could tell them if they're wrong... but they also say it won't stop them from suggesting you prepare your portfolio for lower prices... and showing you how to do it. In Module 4 of our seven-part Financial Survival Program, they offer two strategies that will make you money should stocks continue to fall... and step-by-step instructions on how to employ them in the months ahead. Given what we're seeing today, allocating even a small part of your portfolio could make all the difference between surviving whatever comes next... and you wondering if you could have done more to save it. | | | | We Are in a Hyperinflationary Depression Lynette Zang, chief market analyst at ITM Trading, tells our editor-at-large Daniela Cambone that the U.S. is heading into a recession... and then worse. "There's no doubt in my mind that we've begun a hyperinflationary depression," she says... 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. | | | | | Recommended Links: | | Considering NFTs? Watch This First! Just $100 in bitcoin back in 2010 would have made you more than $40 million today. Now, a similar rally is happening with non-fungible tokens, with new millionaires being minted at a shocking rate. Sure, there's hype. But if you know where to look, this could be an extraordinary 10X opportunity. But don't do anything until you see what this crypto insider says first. |  | $3,000 GOLD Coming Soon? Gold could be on the verge of the biggest bull run in half a century. (It gained 1,700% during the high-inflation 1970s.) And legendary analyst Dan Ferris believes you MUST own shares of one extraordinary gold stock. He says it's likely better than any miner, explorer, or exchange-traded fund on Earth. It's the crown jewel of his complete plan for this dangerous market, with 1,500% potential. Details here. |  | | New 52-week highs (as of 4/29/22): None. In today's mailbag, feedback on Dan Ferris' latest Friday Digest and Kim Iskyan's essay from last Wednesday about the U.S. dollar... Do you have a comment, question, or suggestion? As always, e-mail us at feedback@stansberryresearch.com. "Just finished reading the 'Levered Visionaries, Hucksters, and Elon Musk' email. Great article!... The research is pretty outstanding. Thanks again, I'm excited for what you've got this coming week!" – Paid-up subscriber Daniel K. "Kim, I couldn't agree more with your article in the Digest. I wish for every American to see the reality in this insight you provide. If that was true, we wouldn't be in the position politicians have put us in with excess credit creation and devaluation of the dollar. I have to hand it to them that they have seen a way to steal from the American people to buy votes and increase their campaign funds (which are unknown to society). "As Keynes said, 'Not one person in a thousand understands inflation.' Politicians are constantly saving us from 'collapse.' I find the most amazing thing about this is that a large part of society actually believes it. "The one point I would disagree with you on was that the start of this problem with was 2008 where banks were 'too big to fail.' I think it was in 2000 when banks and other portions of Wall Street and banking were too big to fail and then again in 2008. This was nothing more than the government bailing out their favorite campaign donators under the guise of 'too big to fail.' "A collapse of the economy would have been a beautiful deleveraging. Look at how the income differential has grown absurdly since these bailouts. Look at the polarization of society has continued to divide the U.S. Look at who controls the wealth now versus then. Just imagine that banks and Wall Street would have collapsed. Wouldn't the final result be much better than what we face now, i.e., $150 trillion in government debt and unfunded promises for a $22 trillion economy. Deflation would have been a wonderful gift to the middle class and the poor as deflation is great for the middle class and the poor, making the dollars go further... "Excellent article Kim. I think you guys at Stansberry are giving your clients exactly what they would want to know if you were in their shoes, albeit difficult to accept." – Paid-up subscriber Al M. All the best, Corey McLaughlin Baltimore, Maryland May 2, 2022 Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock | Buy Date | Return | Publication | Analyst | MSFT Microsoft | 11/11/10 | 992.4% | Retirement Millionaire | Doc | ETH/USD Ethereum | 02/21/20 | 933.7% | Stansberry Innovations Report | Wade | MSFT Microsoft | 02/10/12 | 853.7% | Stansberry's Investment Advisory | Porter | ADP Automatic Data | 10/09/08 | 769.3% | Extreme Value | Ferris | HSY Hershey | 12/07/07 | 532.8% | Stansberry's Investment Advisory | Porter | BRK.B Berkshire Hathaway | 04/01/09 | 472.4% | Retirement Millionaire | Doc | AFG American Financial | 10/12/12 | 413.9% | Stansberry's Investment Advisory | Porter | BTC/USD Bitcoin | 01/16/20 | 339.7% | Stansberry Innovations Report | Wade | BTC/USD Bitcoin | 05/05/20 | 334.4% | DailyWealth Trader | Morris | FSMEX Fidelity Sel Med | 09/03/08 | 309.3% | Retirement Millionaire | Doc | Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. Top 10 Totals | 3 | Retirement Millionaire | Doc | 2 | Stansberry Innovations Report | Wade | 3 | Stansberry's Investment Advisory | Porter | 1 | Extreme Value | Ferris | 1 | DailyWealth Trader | Morris | Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock | Buy Date | Return | Publication | Analyst | ETH/USD Ethereum | 12/07/18 | 1,978.5% | Crypto Capital | Wade | ONE-USD Harmony | 12/16/19 | 1,978.1% | Crypto Capital | Wade | POLY/USD Polymath | 05/19/20 | 1,145.6% | Crypto Capital | Wade | MATIC/USD Polygon | 02/25/21 | 931.1% | Crypto Capital | Wade | BTC/USD Bitcoin | 11/27/18 | 930.9% | Crypto Capital | Wade | Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment | Symbol | Duration | Gain | Publication | Analyst | Band Protocol crypto | | 0.32 years | 1,169% | Crypto Capital | Wade | Terra crypto | | 0.41 years | 1,164% | Crypto Capital | Wade | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | Frontier crypto | | 0.08 years | 978% | Crypto Capital | Wade | Binance Coin crypto | | 1.78 years | 963% | Crypto Capital | Wade | Nvidia^ | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | PNC Warrants | PNC-WS | 6.16 years | 709% | True Wealth Sys. | Sjuggerud | ^ These gains occurred with a partial position in the respective stocks. |
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