'Stocks Won't Sink Forever'... The market isn't even done topping... People are still behaving like it's a bull market... Full monty doom and gloom... Turning Japanese?... Decade-plus sideways markets... It's not too late to prepare...
 Everybody is talking about finding the bottom...
The weekly financial publication Barron's recently said, "Stocks Won't Sink Forever," and published a list of eight homebuilders and steel producers it considers cheap... I'll tell you later in this Digest why the homebuilder recommendation left me struggling to hold my lunch down. And while Barron's is technically right, it's anecdotally wrong. I promise you, when this massive bursting bubble finally bottoms, it absolutely will feel like it took forever. The Financial Times recently reported on research into market bottoms by French bank Société Générale... Asking whether the bottom is now in sight, Société Générale examined 56 "crisis" periods for US stock market corrections over the past 150 years — pertaining to sell-offs that have fueled drawdowns greater than 10 per cent for the S&P 500. Identifying 30 bear markets since 1870, the French bank said that history suggests the S&P should bottom out over the next six months at about 34 per cent to 40 per cent below its peak reached at the start of 2022. That 34% to 40% range is effectively a long-term average... which means it's completely worthless. 'Average' never happens in the present-day market... Averages are calculated long after the dizzying highs have lured the great herd of investors in and the gut-wrenching lows have made them cry, "Uncle!" and wiped them out. It's hard to imagine anything dumber and more useless than long-term average performance statistics. A Forbes columnist said simply, "Here Comes The Bottom," predicting the benchmark S&P 500 Index will bottom around 3,500, a scant 5% below its June 16 close of 3,666.77. That's the sort of thing you say when you don't know the difference between an ordinary bear market and the bursting of a once-an-eon bubble. If this columnist said the S&P 500 will bottom at around 1,200 two years from now, I might be nodding. That's not a prediction. It's just a recognition of what would be normal after the bursting of one of the three biggest equity bubbles of the last century. The Forbes guy is making the same mistake as everybody else... He doesn't understand that, as we said last week, this is the end of the world as we have known it... and to understand where we're headed, you must take everything you learned in the last 20 to 40 years and invert it. As I'll show Extreme Value readers in blistering detail in the upcoming July issue, this is no mere bear market. It's a massive bubble that has only just begun to burst. We're not only nowhere near the bottom... The market still isn't done topping out... We've told you many times a market bottom is an event, but a market top is a process. It takes a long time for investors to get used to the idea that the good times are over. It's not hard to see how giddy markets still are right now. I've covered this before, but it bears repeating until it's no longer true. The easiest way to see that the bubble hasn't burst yet is by the cyclically adjusted price-earnings ratio ("CAPE"), also called the Shiller P/E. Named for the Yale economist professor who invented it, the Shiller P/E is based on the average inflation-adjusted earnings of the S&P 500 companies from the previous 10 years. This is an indicator that shows how cheap or expensive stocks are relative to their fundamentals, and the data goes back to before 1890. Since then, this ratio has rarely been higher than it is today... The S&P 500 price-to-sales ratio – a similar indicator – peaked at its all-time high of 3.17 in late December. Now it's 2.4 – the level of its second-highest all-time peak at the top of the dot-com bubble in March 2000. The reason I'm saying the bubble isn't done topping out is simple... Remember, this is "the everything bubble." It encompasses all the major financial asset classes. Stocks get most of the headlines and attention, but there is plenty more to talk about... Bond yields continue to scrape 5,000-year lows. According to data compiled by Bloomberg, there's still nearly $2 trillion of negative-yielding bonds trading globally. Near-record-low high-yield credit spreads have widened. The benchmark ICE Bank of America U.S. High Yield Index Option-Adjusted Spread hit 5.6% recently, up substantially from its June 2021 low of 3.04%. High-yield spreads are the difference between risk-free Treasury yields and risky junk-bond yields. When the spread widens – specifically when junk-bond yields move higher, faster than Treasury yields are behaving – this tells us that more fear is showing up in the bond market. Think of junk bonds as high-yielding stocks that investors have now soured on. These are typically the first bonds investors will unload if they are getting nervous about their future value. But this spread – the difference in yields between high-yield bonds and U.S. Treasuries – still has to rise another three percentage points to match inflation... which is eating away at the value of bonds today. In short, the spread won't get into bubble-bursting territory until it reaches double-digits. Does this chart showing the 30-year Treasury yield look like the bursting of a massive bubble? Falling bond yields equate to rising bond prices. So this chart doesn't even look like the end of a 40-year bond bull market yet. Given the current 8.6% Consumer Price Index ("CPI") inflation reading for May, the 30-year yield still has 5.3% of rise before it stops generating a negative real return, accounting for inflation. A decent positive real return lies higher still. In other words, bond yields have reason to go much higher – meaning prices have room to go lower. Another sign we are closer to the top of a massive bubble than a bottom is this... Lots of folks are behaving more like it's a top than a bottom... When the going gets rough, you can count on pension plan investors not to notice until it's way too late. And right on cue, they're ramping up risk in search of higher returns. Last year, more than 100 government pensions borrowed money to invest – twice the previous highest number. They borrowed nearly $13 billion last year – more than in the previous five years combined. But they're not done yet. The biggest public employee pension fund in the country is the California Public Employees' Retirement System ("CalPERS"). It'll add leverage to its portfolio next month for the first time in its 90-year history. It's only one fund, but it has $440 billion (down $37 billion from six months ago) and invests on behalf of 1.5 million employees. In addition to pension funds adding leverage with their usual miserable timing, some investors' appetite for low-quality technology speculations is somehow not dead yet. Starting the day before it peaked on February 12, 2021, we have warned you many times against buying the risky, highly speculative ARK Innovation Fund (ARKK). This exchange-traded fund ("ETF") recently hit a new low close of $36.58 – 77% below its all-time high of $156.58. We still wouldn't touch it with a 10-foot pole, but folks with several hundred million to light on fire disagree... In a recent eight-day period, the fund saw net inflows every day, totaling $639 million – roughly 7% of its recent net asset value, according to Grant's Interest Rate Observer. It's the longest such streak since March 2021, just after it started falling from its all-time high. Maybe a few investors buying ARKK and one pension fund – albeit the largest – putting on leverage for the first time ever doesn't feel meaningful to you. As I've noted before, I'm not worried about the statistical significance of these events. I'm just looking for anecdotes that support what the long-term valuation measures like CAPE and Price-to-Sales show... Stocks are still expensive, and the bottom is likely well below current levels. While stocks and bonds are clearly in what I'm suggesting are the early stages of a longer downtrend, another asset class in particular has barely begun to peak (if indeed it has at all). In fact, one indicator suggests the animal spirits are just starting to hit it... The housing market is starting to look like a casino again... Remember back in the early 2000s, when you couldn't turn on a TV without having to switch off a reality show focused on home improvement, interior design... or house flipping? Remember a hit reality TV show of that era, called Flipping Out? Well, get your TV remote ready, because folks are flipping out again. Researchers at ATTOM Data Solutions – a property-data provider – reported that house flipping in the first quarter of 2022 accounted for 9.6% of all housing transactions. That's higher than the housing bubble peak in the third quarter of 2005 of just below 9%. In an ominous juxtaposition, they also reported that flipping profit margins declined to their lowest level since 2009. The Mortgage Bankers Association ("MBA") piled on with its recent report that mortgage applications for home purchases were down 24% last week compared with one year ago. Refinance applications were down 80%. So house flipping is hitting levels it hasn't seen since at least 2000, the profit margins on flipping have fallen to 13-year lows... and higher interest rates have reduced interest in buying and refinancing homes. Case-Shiller U.S. National Home Price Index data is two months behind, with April 2022 data published on June 28. The index hit 300.58, a new all-time high, up 20.4% over April 2021. That's second only to the 20.6% increase logged in March. By that measure... Housing prices are on fire as never before in history... But the much more recent MBA report also implied price deterioration of roughly 10%, with the average purchase loan amount falling from a record $460,000 in March to $413,500 last week. This could be an important top in housing, given the trend in interest rates and the growing likelihood of a recession. And don't forget, the last housing bubble was followed by a nearly six-year-long bear market in home prices. That was worse for homeowners than it was for stock market investors. Fortunately, homebuilder stocks bottomed in 2009 with the rest of the market, so the opportunity to profit from these stocks led the actual rise in home prices by three years. I recognize that a crash in home prices is not likely, or at least historically rare. And we already reported to you how would-be homebuyers are bidding up rents because they can no longer afford to buy homes due to sharply higher prices for both homes and mortgages. We also suggested that the wild cards of inflation and a larger influence by corporate homebuyers could keep prices high. I still have to ask... is it such a stretch to believe the same problems scaring individual buyers away will eventually plague the corporate buyers? And is it so crazy to suggest that flipping activity is simply the meme stock trading activity of the housing market, with sellers turning quick profits as long as the market holds out? And it never, ever holds out forever. When anybody in any market is making easy money, you know it's only a matter of time before that market sees a correction. I hate to go full monty doom and gloom, but... The six-year bear market in home prices that I mentioned lasted from 2006 to early 2012... It's probably a mistake to believe that can't happen in the stock market. After all, it can and has happened in the bond market. Interest rates on longer dated Treasurys took 35 years – from 1946 to 1981 – to rise from 2.15% to 15%. And they fell steadily for 40 years. The past two years might be a bounce and they might be a new bond bear market. The historical tendency for U.S. equity bear markets to be relatively short feels like a high-water mark to me. It feels like it's highly unlikely to be exceeded... but the opposite is true, and at some point, it's virtually guaranteed to be exceeded. This has left many stock market participants, including all those pension fund beneficiaries, vulnerable to the potential devastation of a lollapalooza bear market in stocks. If you've studied equity bear markets, you might already have guessed which one I'm about to discuss... While it's true that all the big U.S. stock market bubbles have been followed by bear markets of roughly one to three years, it might be good to keep another example in the back of your mind... The Japanese stock market peaked in 1989 in a massive blow-off bubble top... and didn't bottom out until 2012... 22 and a half years and down 75% later... Worse still, 10 years after the bottom, the Tokyo Stock Price Index ("TOPIX") is nowhere near eclipsing its 1989 high. So far, it's a 33-year sideways market, and still counting. I'm not saying this will happen in the U.S. this time... Since it has only happened once, it seems reasonable to believe it's unlikely to happen a second time. I'm just pointing out that there's a nasty precedent that proves bear markets can take your historical insights and turn them into useless high-water marks. Things could be a lot worse for a lot longer. It also shows that it's possible for a central bank to pursue an easy monetary policy for two decades, as Japan did, without leading to the result that U.S. investors have come to rely upon. And while there's no precedent in the U.S. for a 22-and-a-half-year bear market... We had three long sideways markets last century... You could debate the usefulness of the following data and I probably wouldn't put up a fight. I freely admit that most comparisons to old stock market data leave me wondering if it's at all relevant to modern investors. But here it is... No matter what objections you might make, I contend it's worth contemplating the possibility of a wrenching, sideways market that fails to make a new high for a decade or two... or longer. Most of the time, it's unnecessary to worry about things like short-term equity-market direction, Fed policy, and rising inflation. It's also unnecessary to worry about 22-and-a-half-year bear markets or decade-plus sideways markets most of the time. Then one day sooner than you ever dreamed, all you care about is where the market is headed next... how long the bear will grind on... and if you can stomach any more downside without selling in a panic. I bet a lot of folks are feeling that way now. The good news I have for you today is that it's nowhere near too late to take action and protect yourself as this massive bubble continues to burst. My "prepare, don't predict," mantra is still at the core of all the advice I give to our Extreme Value readers. Rather than merely frightening you... I'm hoping today's Digest will inspire you to make sure your portfolio is as robust and ready for a variety of outcomes as you can possibly make it. In last month's issue of Extreme Value, I described in greater detail how we're in a bear market – and how to navigate it. As I wrote in a section of the issue subheaded "What to Do About It"... If you want to pretend it doesn't matter that we're in a bear market, you should go ahead and skip reading this section. However, I recommend against that. I've fooled myself into thinking that exact same thing in the past. And let me tell you... it doesn't end well. Existing subscribers and Stansberry Alliance members can find last month's issue here. But, as is the theme today, that issue is just the start... As I mentioned earlier, in this month's issue of Extreme Value – which we'll publish for subscribers next Friday – I will get into even more detail about why this bubble has only started to burst... and what I recommend you do to protect and grow your wealth through our strategy. If you don't yet subscribe to Extreme Value and want to join, today you're in luck... This morning, I told our team what I was writing about and they decided to come up with a special discount offer just for folks who might be interested in subscribing to the newsletter... So today, you can access Extreme Value for a full year – which includes all of the monthly issues, research, stock recommendations, special reports, and our back issues – for $500 off our regular subscription price. Even better, you can try the newsletter for the next 30 days and if you don't think it's right for you, you can give our customer service team a call and we'll give you a full credit refund to any other Stansberry Research product. Plus, you can keep all of the research you've received. Frankly, this is an absurd deal. But it's the right time for it. You can get started right here with just a couple of clicks. I suggest you do. As I think I've shown today, the time to prepare for a long bear market is now.
| Recommended Links: | |  NEW: Severe Stock Warning for July 2022 Ninety days ago, Wall Street legend Marc Chaikin issued a dire warning for U.S. stocks that quickly came true. Today, his systems just detected the next massive shift headed straight for U.S. stocks. And just like before, you have a very narrow window of time to prepare. In fact, history shows it could arrive by the end of July. Click here for the full details. | |
 'Interest-Rate Hikes Will NOT Save You!' It didn't work in the '70s and it won't work now. In fact, if history serves as a guide, then nearly two DECADES of runaway inflation could be on the horizon. The good news is there's a straightforward, one-step plan to protect yourself. Just do NOT delay... because when the next inflation report releases, you might be kicking yourself for not paying attention sooner. Click here for your inflation protection plan. | | |
New 52-week highs (as of 6/30/22): Booz Allen Hamilton (BAH), SPDR Bloomberg Barclays 1-3 Month T-Bill Fund (BIL), and General Mills (GIS). Before we get to the mail, a quick housekeeping note... Our offices and the U.S. markets are closed on Monday in observance of Independence Day. Following this weekend's Masters Series essays, we'll pick back up with our regular fare on Tuesday. Now, in today's mailbag, feedback on yesterday's Digest by Stansberry's Credit Opportunities editor Mike DiBiase... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I remember the 70s. I got married in 1972. I remember the gas lines to fill a tank. Thanks to the teachers' unions, our salaries rose every year. We also played the game of 'more education.' "We lived frugally and bought a house at 12% interest. A few years later we adjusted the rate to 6% and paid it off in 10 more years. Now I'm a widow, eking out my pension that used to be generous but hasn't risen much in 30+ years. "Thanks to Stansberry Research, I understand what the analysts are saying. I used all the free money during COVID to start investing. I have great perspective on the matter." – Paid-up subscriber Polly R. "Terrific article. The series of charts and your quotes from the great Mr. Friedman were made more clear by your perception, explanation and thoughtful consideration of what it means for us now and in the near future. Thank you." – Paid-up subscriber Ron F. Good investing, Dan Ferris
Eagle Point, Oregon
July 1, 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 | 917.9% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 788.4% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data | 10/09/08 | 746.0% | Extreme Value | Ferris | HSY
Hershey | 12/07/07 | 508.9% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/12/12 | 435.8% | Stansberry's Investment Advisory | Porter | ETH/USD
Ethereum | 02/21/20 | 407.4% | Stansberry Innovations Report | Wade | BRK.B
Berkshire Hathaway | 04/01/09 | 384.1% | Retirement Millionaire | Doc | FSMEX
Fidelity Sel Med | 09/03/08 | 283.6% | Retirement Millionaire | Doc | NTLA
Intellia Therapeutics | 12/19/19 | 269.4% | Stansberry Innovations Report | Engel | ALS-T
Altius Minerals | 02/16/09 | 247.0% | Extreme Value | Ferris | 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 | | 3 | Stansberry's Investment Advisory | Porter | | 2 | Extreme Value | Ferris | | 2 | Stansberry Innovations Report | Engel/Wade |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Stock | Buy Date | Return | Publication | Analyst | ONE-USD
Harmony | 12/16/19 | 1,141.7% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,056.8% | Crypto Capital | Wade | ETH/USD
Ethereum | 12/07/18 | 1,012.8% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 748.7% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 429.8% | 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 | | Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | | 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 | ^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. | 
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