Danny the Goof

In today's Masters Series, adapted from the October 28, 2022 Digest, Dan compares the current bear market with past financial crises... details how several important asset classes have been struggling over the past few years... and reveals how investors can preserve their wealth as this bear market drags on... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Master Series] Editor's note: Don't avoid the reality of today's bear market... Investors fled stocks en masse in 2022 as sky-high inflation and global supply-chain issues weighed on the economy. But some desperate folks have reentered the markets this year in hopes of uncovering hidden gems that could explode higher once the downtrend reverses – putting their portfolios at risk amid today's rampant uncertainty... That's why Extreme Value editor Dan Ferris believes it's critical for investors to understand the full scope of the chaos we're experiencing right now in order to navigate this ongoing market turmoil. In today's Masters Series, adapted from the October 28, 2022 Digest, Dan compares the current bear market with past financial crises... details how several important asset classes have been struggling over the past few years... and reveals how investors can preserve their wealth as this bear market drags on... --------------------------------------------------------------- Danny the Goof By Dan Ferris, editor, Extreme Value Apparently, I am not a very good communicator... I've always thought that I state my views clearly. And a team of very smart people look at all my published reports and Digests before they go out to our subscribers. So if something isn't clear, they fix it (or make me fix it). That's a big reason why we've developed a reputation here at Stansberry Research as a valuable source of financial insights. And more importantly, we're recognized as a company that communicates those insights without bogging you down with Wall Street jargon. Maybe I've been wrong all this time... You see, last October, a subscriber wrote in and showed me that it's not only possible to misunderstand me... but to get everything I've said backward. Here's what he wrote... I have Steve Sjuggerud's services for the past 5 years. Not one time was Danny Boy Ferris ever bullish in the 5 years I have been a subscriber. You have this erroneous thinking at the publication that all investors are mindless herds and need to be shepherded by your experts like Dan. If I listened to Dan Ferris for the past 5 years, I would be losing money instead of being far ahead of the game in 2022, and still with lots of cash on hand. No, I never expect Dan to be bullish ever, especially at the stock market bottom. Isn't the name of the game, buy low, sell high. But for Dan it's always sell stocks and short the market. Perhaps I'm being a little sensitive. But I think this guy is kind of being a jerk. He even titled his e-mail, "Danny the goof." That nickname makes me chuckle. I might start signing my Digests that way. My only real problem with this e-mail is that it's so false that I had to do a double take. At first, I didn't think the subscriber could possibly be referring to me – even though he used my name five times (six if you count the e-mail's subject line). Then, I figured we could use this as a teaching moment... --------------------------------------------------------------- Recommended Link: [CRASH ALERT: 60 Days (Take This One Step to Prepare)]( Nobody believed Dan Ferris in 2008 when he said to short Lehman Brothers... or in November 2021 when he called the Nasdaq top... or in February 2022 when he warned that inflation would continue ravaging the economy. Now, while many investors are piling into cash today, Dan says this is the wrong move! [Here's his No. 1 recommendation to protect your wealth and sleep easy at night](. --------------------------------------------------------------- After all, if he has read my writings for five years and still got things this wrong, I'm afraid that maybe other readers have done so, too. So let's set the record straight right now... If you want to know the truth, just invert everything in the e-mail. The subscriber said I've never been bullish in the past five years... Not. One. Time. And yet, I was bullish from April 2020 through early December 2020. That was just after the darkest days of the COVID-19 pandemic. The headline of the April 2020 issue of Extreme Value bore an unmistakably bullish title... And if that wasn't clear enough, the first two sentences clarified my view further... Yes, this is really Dan Ferris. And yes, I'm that bullish. I could reprint the whole first page of that newsletter, but I won't waste your time. It would show you that we were prepared to hold through further volatility... that we weren't "calling a bottom"... and that we were simply turning bullish because the market had lopped off six years of valuation increases in one month and had started coughing up great bargains. That's what value investors do. If something you want falls in price, you buy more. It's as simple as that. Of course, as I said, I turned bearish again in December 2020... That was just one to three months before bubbles in various types of garbage stocks started collapsing. And three years later, I'm still bearish on the overall stock market today. You could argue that I was early again by flipping back to bearish in December 2020. But given that several equity bubbles peaked in 2021 and totally fell apart last year, I wouldn't say I was early at all. Rather, I would say that... I nailed one of the biggest calls anybody in our business has ever made. Someday, of course, I'll turn bullish on stocks again. It's silly to suggest otherwise. In fact, it appears that the greatest financial mega-bubble in all recorded history has formed a massive top. It took somewhere between 22 and 29 months (so far) to get there. I've never put it quite this way before, but the top happened in two big pieces – bonds and stocks. Bonds peaked in 2020. And so far, stocks have peaked in 2021 and 2022. Two events define the bond market top... First, on March 9, 2020, during the chaos of COVID-19 and the Federal Reserve's massive reduction in interest rates, the 10-year U.S. Treasury note's yield sunk to its all-time low. It yielded as little as 0.398% during the day. And it closed at 0.499%. The second event that defined the bond market top was on December 11, 2020, when the amount of negative-yielding sovereign debt in the world (mostly Japanese and European) reached its all-time high of nearly $18.4 trillion. It's down to around $254 billion today. These extremes represent 5,000-year lows in bond yields. And since yields and prices are inverses, it also means 5,000-year highs in bond prices. That's the current situation with bonds. Now, let's look at stocks... Stocks started topping in the first quarter of 2021... By that March, equity-market bubbles in clean energy, cannabis, special purpose acquisition companies, and unprofitable technology companies had all topped out. As we've discussed many times in the Digest, Cathie Wood's ARK Innovation Fund (ARKK) best represents the latter bubble. The exchange-traded fund hit its all-time high of $156.58 per share on February 12, 2021 – the day after I first warned you about it in the Digest. The topping party picked up in the fall of 2021... Bitcoin hit its all-time high of roughly $69,000 in October 2021. Small-cap stocks topped out on November 8, when the Russell 2000 Index peaked. And then, the tech-heavy Nasdaq Composite Index peaked at a little more than 16,000 on November 19. You may recall our November 19, 2021 Digest. In it, I encouraged you to... Invest accordingly. Reduce your speculative bets. Make sure you have plenty of cash ready to go when the bust happens. And consider shorting vulnerable stocks if you're comfortable. This is a dangerous time for investors. Be careful. And don't say I didn't warn you. I think that qualifies me to take credit for calling the top in the Nasdaq to the day. (Again, keyboard cowboys, your quibbles about that will likely be ignored. But feel free to write in.) Then, the S&P 500 Index hit its all-time high on January 3, 2022. Perhaps fittingly, it was the first trading day of this crazy year in the markets. The top of the biggest financial mega-bubble of all time was in – at least, as it stands so far. You know what happened next... In 2022, U.S. stocks endured their worst first half of a year since 1970. At the same time, the U.S. Treasury market had its worst six months since 1788. Mortgage rates have more than doubled. Inflation hit 40-year highs. The double-barrel hit to financial assets and the housing market generated Americans' biggest-ever quarterly decline in household net worth in the second quarter of 2022. And don't forget... The Fed is raising interest rates at an unprecedented pace. The central bank remains steadfast in its effort to bring the year-over-year changes in the monthly Consumer Price Index from the current level of around 6% back down to its target level of 2%. Meanwhile, everyone from talking heads to fund managers and Wall Street status-quo keepers has tried "calling the bottom" along the way. And yet, none of them were bearish enough on stocks or bonds. So what happens next? The only credible answer to that question is... "I don't know." Instead, I encourage you to ask a different question. You should ask something like, "How can I use history as a guide here?" Don't make the mistake of thinking this bear market is an average one. If I'm right and we've just watched the biggest financial mega-bubble of all time form a massive top, then what follows will not be a run-of-the-mill bear market... It will more likely be a horrendous bear market that takes the S&P 500 and other big stock indexes down 70% or more. Even worse... an up-and-down, ratcheting-sideways market will then follow that. And it might not make a new high for 10, 15, 25... or even 30 years. Don't just take my word on that. Learn from history... It happened after mega-bubbles topped out in U.S. stocks in 1929 and 2000 (after which the Nasdaq went sideways for 15 years). And it happened in Japan in 1989. The Japanese stock market still hasn't made a new high after going sideways for the past 33 years. You, me, and every investor who fears this type of calamity wants to know... What the heck can we do about it? I've urged you many times to "prepare, don't predict." I've also said many times that it's foolish to try to make market predictions. You see, most times, a prediction is something you say about the future. Then, you wait to see if it comes true. The whole thing is often just an intellectual game. And for the most part, it doesn't affect your life in a big way at all. But as an investor, it's much different... A prediction isn't what you say. A prediction is what you do with real money. And I've consistently recommended that you take the same four actions... - Hold the stocks of great businesses. - Sell unprofitable, cash-burning tech stocks and other trashy speculations. - Hold plenty of cash. - Hold gold and silver. These four investments form the core of a truly diversified portfolio. But again, as we learned with the one subscriber's e-mail at the start of today's essay, I can't say this stuff enough. So now, let's remember why we do these things... First, let's talk about the stocks of great businesses... We keep holding stocks partially because nobody knows the true timing of market tops and bottoms until they're far enough in the past for us to see them clearly. But mainly, we do it because we can't afford to not be invested in the endless process of real wealth creation... Every day, through every kind of economic environment we can name, armies of people wake up and make the world a little wealthier than it was the day before. Over the long term, that process can make us a lot of money as investors. Constantly participating in that process is essential if you hope to build long-term wealth. It's the easiest way to get rich in the U.S. – and maybe the entire world. Again, that's why I say you should... never, ever sell all your stocks and go to 100% cash. You should sell garbage stocks because they're only fun and profitable during bull markets... In bear markets, they get absolutely crushed. And many of them go out of business. They don't earn cash. They burn it. The only way these types of companies can survive is by raising cash through new equity and debt issuance. And when their stock falls 70% or 80% – as many already have – it becomes impossible to do that. So many of the burning matches become nothing but ashes. It was fun while it lasted. But now, it's over... Get out of garbage speculations. They're not coming back. A bear market's job is to bring investors back to reality... If we don't learn what assets and businesses are worth, we'll eventually come to regret it. Perhaps worst of all... not appreciating what things are worth can ruin your retirement if you encounter a big bear market late enough in your investing career. Value investing generated big returns in the Japanese sideways market. And I expect this investing style will do the same thing in the U.S. sideways market that will likely begin within the next two to three years and last a decade or more. We've hit on yet another reason why I keep repeating myself... Most of our subscribers are older folks like me. (I'm almost 61 years old.) They can't afford another dot-com bust or financial crisis. They need to preserve the value of the wealth they have right now... and they want to continue growing it into their retirement years. Fortunately, I can help with both of those things... Good investing, Dan Ferris --------------------------------------------------------------- Editor's note: Dan says a rare market event is about to take place... one that could impact every asset you own and make or break your wealth for years to come. That's why he recently teamed up with an investing legend to reveal how folks can prepare for what's coming. You can't afford to miss out on this presentation, especially if you have cash in the bank. [Click here to watch the full replay](... --------------------------------------------------------------- Recommended Link: [The No. 1 Gold Play for 2023]( Some of the richest men in the world are jumping into gold right now... because evidence suggests we could see MUCH HIGHER prices in the coming weeks. But if you're not taking advantage of a little-known way to invest for around $5 today, you're missing out. 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