The Trouble Is Just Getting Started for This $60 Billion Market Darling

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 The concerns continue to mount for one of the market's most beloved companies…
 
We're not fans of electric-car maker Tesla (TSLA) and its "visionary" founder Elon Musk… It isn't that we have a problem with the products. Rather, it is Musk's questionable ethics, and the fact that it is simply a terrible business.
 
Tesla has missed virtually every manufacturing deadline and sales target it has ever set. It loses money on every car it sells, despite forcing taxpayers to subsidize a huge portion of the cost.
 
It has burned through nearly $10 billion since 2012… holds another $10 billion in debt… and has almost never turned a quarterly profit. And yet, somehow, we're supposed to believe the company is worth roughly $60 billion today.
 
Of course, you've likely heard all this before. But if you thought Tesla had problems now, just wait… A virtual tsunami of new competition is coming soon. As Bloomberg reported this week…
 
In North America alone, the number of electric vehicles [EVs] will soar to 47 by the first quarter of 2022 from 24 in the third quarter of this year, according to data from Bloomberg New Energy Finance. China's EV market will go to 80 from 61, and European buyers will have 58 electric choices, up from 31. Globally, there will be 136 EVs on the market by the end of that year, and that doesn't even include the hybrid models or fuel cells.
 
That will make for a very crowded field in a nascent zero-emission car market that most consumers have yet to embrace and where financial losses loom large. In the U.S., electric car sales were less than 1% of the market last year, according to the International Energy Agency. They were 1.4% in China and in the U.K.
 
"Companies are committed to electric cars, but there is little evidence that there is a lot of consumer demand for it," said Kevin Tynan, senior analyst with Bloomberg Intelligence.

 This last point is important…
 
Economics 101 tells us surging supply combined with tepid demand is a recipe for lower prices. This isn't great news for any electric-car maker, but it's especially bad for Tesla.
 
Worse, more competitors – including Audi, Porsche, BMW, and Mercedes-Benz, among others – are now targeting the luxury segment of the market where Tesla largely operates.

If Tesla can't make money with practically no competition today, what hope will it have when the competition really gets going?

 
 In the meantime, Tesla continues to fall short of Musk's lofty goals…
 
When the company launched its new, lower-cost Model 3 sedan in July, Musk promised that production would ramp up quickly.
 
He said Tesla would produce 100 units in August, 1,500 in September, and a huge 20,000 per month by December. From there, Musk said production would really take off… He said the company plans to make 500,000 Model 3s in 2018, and 1 million in 2020.
 
So how is his big plan coming along? More from Bloomberg (emphasis added)…
 
The automaker built only 260 Model 3s during the quarter ended in September, less than a fifth of its 1,500-unit forecast. Output of the sedan that starts at $35,000 – roughly half the cost of the least expensive Model S – was lower than expected because of unspecified "bottlenecks," according to the company.
 
Musk has engendered enthusiasm about the future of electric cars and has automakers including Volkswagen, General Motors, and Daimler lining up to compete.
 
But what Tesla hasn't done is prove itself as a mass manufacturer. The slow start for Model 3, which was designed for easier assembly, reignites concern that the company will struggle to reach the lofty production targets set by its CEO.

 You'd be a fool to believe Tesla will produce 1 million Model 3s per year anytime soon…
 
According to Karl Brauer, executive publisher for Kelley Blue Book and Autotrader, that ramp-up rate is unprecedented among experienced, high-volume automakers. (Tesla is neither.)
 
But Musk couldn't even meet the first of these projections. Worse, Tesla produced just 25,336 total vehicles across all its models last quarter. This is less than it produced in the three months ending in June.
 
In other words, Tesla is actually producing fewer cars just as it has promised to begin making exponentially more.
 
Maybe Musk is on to something… After all, when you're losing money on every vehicle you produce, making fewer cars doesn't sound so bad.
 
 Before we wrap things up today, we need to pass some exciting news along…
 
Earlier this week, TradeStops founder Dr. Richard Smith sat down for an exclusive interview that was broadcast from Stansberry Research headquarters…
 
In it, Richard shared the same compelling research he recently presented to a standing-room-only crowd at our private Stansberry Conference in Las Vegas, including…
 
1.   How you can easily triple the performance of the Stansberry Research recommendations you already own…
 
2.   How to safely position yourself to earn every penny possible from the final "inning" of this long bull market…
 
3.   And how to know without a doubt when it's finally time to head for the exits.
No matter how long you've been investing… and no matter the size of your portfolio… if you're even a little worried about the markets today, you owe it to yourself to review Richard's work. Watch a brand-new video presentation he put together – and learn about a special, limited-time offer – right here.
 
Regards,
 
Justin Brill
 
Editor's note: TradeStops is the only software on the market that can help you squeeze every last penny of profits out of this historic bull market AND help you get out at exactly the right moment. And for an extremely limited time, you can get up to $2,000 in discounts and credits just for signing up. Get all the details here.
 

Source: DailyWealth

What to Do With Money Today… Besides Enjoy It

Steve's note: As regular readers know, I believe this market has plenty of upside ahead as we approach its "climactic third act." But today's essay offers a different perspective. We're sharing another excellent piece from investment-newsletter legend Jim Grant… Originally published on July 28, it's a thorough examination of a "most unusual" bull market. I hope you enjoy it…
 
"Short Sellers Retreat Amid Rally," ran the headline in the Wall Street Journal.
 
Curious readers stopped and stared. It was the premise of the headline that arrested them. Who knew that there was even one bear left to give ground at the 100-month mark of the post-2008 levitation?
 
El toro is the topic at hand. It's a most unusual bull market (we count as one the updrafts in stocks and bonds). An unzestful, low-volume, and low-volatility affair, it seems to belong on a psychiatrist's couch. We write to catalogue its singularities with the purpose of addressing the always pertinent question: What to do with money besides enjoy it?
 
No. 1 is the zest deficit. Since the S&P 500 Index bottomed at an intraday low of 666.79 on March 6, 2009, the blue chips have appreciated by 271%. The country has grown, too, although – famously – the economic expansion leaves much to be desired. Trailing 12-month earnings for the S&P 500 peaked in the third quarter of 2014, and disappointments abound in the data that purport to measure growth in GDP and productivity.
 
Still, you'd expect more joie de vivre. There's little enough on Wall Street, where the price war in money management spells profitless prosperity for the leaders in index funds and exchange-traded funds (ETFs).
 
Not that the remnant of surviving active managers appears any happier than the index administrators. According to Bank of America Merrill Lynch's Global Fund Manager Survey for July, non-indexed investors are the least committed to (the "most underweight") American equities since the start of 2008.
 
A second singularity of the 2009-2017 bull market is the shrunken level of the activity that sustains it. In the year to date, the S&P 500 has traded an average of 565 million shares a day, down from a daily average of 642.2 million last year and 1,290.5 million in 2007.
 
Trading in bonds, currencies, and commodities has similarly dwindled (at least, as recently reported by JPMorgan Chase and Goldman Sachs). "This is the only multiyear bull market in history whereby trade volumes are declining rather than increasing," says Christopher Cole, founder of Artemis Vega Fund.
 
A perhaps related anomaly is the dwindling population of American investor-owned businesses. In 2007, there were 4,783. As of Monday, there were 3,982. Private-equity firms are swallowing listed companies whole.
 
El toro's third unique feature is the undifferentiated nature of the advance. "At the March 2000 peak of the (first) Internet bubble," observes our Deputy Editor Evan Lorenz, "the capitalization-weighted S&P 500 traded at 30.6 times trailing earnings, while the equal-weighted S&P – in which all stocks count for the same, their market cap notwithstanding – traded at 20.7 times.
 
"There is no such dispersion today within the blue-chip index," Lorenz goes on, though there is plenty among the stocks and bonds that are too small to catch the bids of the index buyers. "Apple (AAPL), Facebook (FB), Alphabet (GOOGL), and Amazon.com (AMZN) trade at 17.9, 43.7, 31, and 195.2 times trailing earnings, respectively, and command an aggregate market cap of $2.4 trillion, which represents 11% of the S&P 500's total value. In light of these magnitudes, it isn't so surprising that the cap-weighted index changes hands at a lofty 21.7 times trailing earnings. What is surprising is that the S&P 500 Equal Weighted Index trades at 21.8 times.
 
"Either way, or both ways, according to the cyclically adjusted price/earnings ratio (which compares the price of the index to its average inflation-adjusted earnings over the prior decade), today's S&P is the third most expensive in U.S. history, trailing only 1929 and 1997–2001."
 
Central-bank-sponsored miniature interest rates and the runaway success of indexed investing, we count as singularities Nos. 4 and 5. Ultra-low rates coax income-seeking investors into the stock and bond markets. They invest because cash equivalents and short-dated savings instruments yield them nothing. But the buyer of an S&P 500 index fund is – must be – indifferent to valuation; he or she is buying the market. Even the nominally value-sensitive investor is likely to be ill-informed as to the real worth of the securities that stock his 401(k).
 
Corporate managements and ETF sponsors independently misrepresent valuation; it's a decentralized effort of many minds and hands. Let's call it singularity No. 6, while acknowledging that "profit" is ever a defined term. But today, there are more definitions than ever. "'Adjusted' earnings are the standard nowadays," Lorenz points out. "They exclude restructuring charges, one-time items, and other expenses which management deems to be non-recurring. The longer the bull market lasts, the more inventive do managements become at finding costs that can be designated as such…
 
"Adjusted figures, rather than the ones calculated according to generally accepted accounting principles, are the default setting on Bloomberg," Lorenz goes on. "Check out Kraft Heinz (KHC)… Bloomberg shows KHC trading at a trailing price-to-earnings ratio of 25.9 times. Using audited GAAP numbers, the stock is priced at 31.1 times.
 
"Bloomberg shows the S&P 500's price/earnings multiple as the aforementioned 21.7 times. Using the as-reported earnings data from S&P Dow Jones Indices, the S&P 500 is actually priced at 24.7 times trailing earnings."
 
Low volatility is as much a marker of the post-2008 bull market as is low turnover or high valuations. It's our singularity No. 7. The CBOE Volatility Index (or "VIX"), a measure of implied volatility on one-month options on the S&P 500, today stands at 9.4, below its long-term average of 19.5. In the 27-and-a-half years of its existence, the VIX has closed below 10 only 25 times, and 16 of those somnolent readings have occurred since May.
 
You can explain the plunge in implied volatility by observing the still more precipitous fall in realized volatility. Here the readings are less than seven. There has been no period so financially still since 2006 (and, before that, the years 1995, 1964, and 1952), according to the afore-quoted Christopher Cole.
 
"The problem," Cole continues, "is that by definition [volatility] can never go to zero, but it can – and has – gone to 100. When people short volatility, what they don't realize is they are actually shorting variance [i.e., the spread between numbers in a data set], which has a non-linear return profile. You have a very limited gain shorting volatility from 10 to 5. You have a very large, non-linear loss profile if [volatility] and by-proxy variance move from 10 to 100."
 
It's a comic conundrum that the most volatile commander-in-chief should preside over the least volatile stock market, but Donald J. Trump has so far achieved it. With volatility falling, the price of the Big Board-listed security on which one can wager on a rising VIX – its ticker is VXX – has been sawed in half this year. Volatility bears have sold short 63% of VXX shares outstanding.
 
Our seven singularities describe a low-volume, low-conviction, low-energy stock market (FAANG stocks being the notable exception). In the context of a standard, three-act bull-market drama, the tone perhaps resembles an inconclusive second act more than a climactic third. Maybe the sound and fury and the ultimate upside are yet to come. On the question of how high is up, we yield to the technicians.
 
What to do with money, besides enjoy it? A question with no correct answer, of course. For ourselves, we like neither the stock market nor the bond market and abominate the prevailing monetary arrangements. If we are confident about anything in the future, it's that bargains and tumult will return.
 
Professional investors, being paid to invest, can't just do nothing, as profitable as that course of action might ultimately prove. For the rest of us, we must decide if tomorrow's opportunities might not be more interesting than today's. For those who reply, "Yes, they very well might be," and who have the luxury of time and the gift of patience (and who share our foreboding about modern money), a modified Scrooge McDuck portfolio could be the thing: Heavy in cash and gold, light in inflated stocks and bonds.
 
Regards,
 
Jim Grant
 
Editor's note: Jim's exclusive conference is right around the corner. And Porter Stansberry has arranged a red-carpet, VIP-level invitation for Stansberry Research readers… for about half the regular price. You'll hear from some of the world's most important minds in finance. But be warned – Jim may never offer anything like this again. Get the details right here.

Source: DailyWealth

It's Time to Bet Against the Canadian Dollar

 
The Canadian dollar has soared 8% this year – which is a big move in the currency markets.
 
But based on our research, those big gains are likely to end soon…
 
You see, the Canadian dollar just hit its "most loved" level since 2013. It's now at a sentiment extreme.
 
We love to see sentiment extremes like this… They're great opportunities for profit. Whenever we see an extreme in sentiment, we look to make money by trading in the opposite direction…
 
Right now, investors absolutely love the Canadian dollar based on the Commitment of Traders (COT) report – one of our favorite sentiment measures.
 
The COT report tells us what futures traders are doing with real money. It's a fantastic contrarian tool to figure out what the crowd expects, so we can do the opposite.
 
You may have heard the old Wall Street saying, "Traders are wrong at the extremes, and right in between." We think that saying is exactly right.
 
When futures traders all agree on a trade, they tend to get it wrong. If they're all bearish, a rally is likely. And if they're all bullish, like today, lower prices are usually on the way…
 
Right now, the COT report shows futures traders are as bullish on the Canadian dollar as they've been in four years. Take a look…
 
As I said, the last time futures traders were this bullish was early 2013. That time, the currency went on to fall 9% over the next year.
 
That was no fluke. The Canadian dollar has a history of falling after hitting similar COT levels.
 
The table below shows the full details. It shows what happened every time the COT rose above and then fell below 65,000 contracts (like it recently did) within the last two decades. Take a look…
 
 
1-Year
2-Year
After extreme
-3.4%
-7.6%
All periods
0.6%
1.2%
 
These numbers may look small… But they're big declines for a currency.
 
The Canadian dollar – like most major currencies – doesn't usually make thrilling moves up or down. It has gone up only 13% over the last 20 years.
 
It has had some major swings along the way, though… including major falls after sentiment extremes like the one we're seeing right now.
 
As the table shows, the Canadian dollar has typically fallen 3.4% the year after similar COT levels. And it has fallen 7.6% after two years, based on history.
 
Futures traders love the Canadian dollar right now. To us, that's a bad sign for the Canadian dollar over the next year or so…
 
Good investing,
 
Brett Eversole
 

Source: DailyWealth

How to Do Less… and Make More

 
Would you like to do less and make more?
 
In almost any area of life and business, the answer to that question is a no-brainer.
 
Unfortunately, when it comes to investing, most people seem to want to "do more and make less." That, at least, is what the evidence suggests…
 
Overtrading is one of the cardinal sins of the individual investor. I've known this for a long time now… ever since I read the seminal paper "Boys Will Be Boys" by Brad Barber and Terrance Odean, published in the Quarterly Journal of Economics way back in February 2001.
 
In that important paper, the authors had access to the real brokerage-account history of 78,000 households. That's the kind of data set I love. It's real data on real investors and their real decisions.
 
Here is a representative example from their findings, published in Bloomberg Personal Finance in May 2000:
 
The more actively investors trade, the less they earn. We divided 66,465 households into five groups on the basis of the level of turnover in their common stock portfolios. The 20% of investors who traded most actively earned an average net annual return 5.5% lower than that of the least active investors.
Wow. That's hard evidence… hard data. And it's also hard to swallow for many of us.
 
In his 1991 letter to shareholders, Warren Buffett noted, "Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient."
 
More than 20 years later, that's still true. Investors need more patience… And patience is exactly what my TradeStops service helps to facilitate. It's only through patience and "doing less" that investors can hope to tip the scales of profitability in their favor by putting the weights on the side of their winners rather than on the side of their losers.
 
One of my favorite examples of this is a stock that I personally own – Constellation Brands (STZ)…
 
Our TradeStops system is set up to send a variety of alerts when your stocks hit certain targets – including entry and exit signals. I won't go into the details here. But for the purposes of this example, I'll just say the system last triggered an entry signal for STZ back in July 2012.
 
Since that time, STZ is up around 620%, and still going strong…
 
I'm happy to say that I've owned the stock for the entire run… And even though I'm up 620%, I'm still not selling.
 
Another less dramatic but still compelling example of the benefits of patience is the S&P 500 Index itself.
 
From its TradeStops entry signal in August 2009 to when the system finally stopped out in 2015, it recorded an 85.5% gain. Take a look…
 
After that, early last year, our system signaled a new entry point. The index has delivered a solid 21% gain since then… And it's still going.
 
These kinds of results are easily within reach of individual investors. Fewer trades, better results, less risk. Less anxiety. Less time in front of the computer.
 
There are a lot of stakeholders in the financial markets that love to see us busier than a group of long-tailed cats in a room full of rocking chairs. In particular, I'm referring to brokers, as well as the media. They all make more money when we are more active.
 
They ply their trade primarily by appealing to our overconfidence – appealing to our egos. Don't fall for it…
 
Patience leads to profits. Do less. You're likely to make a lot more…
 
Regards,
 
Richard Smith
 
Editor's note: Richard has found a way to more than triple the returns on your portfolio using the exact same stocks… and squeeze every last penny of profit out of this historic bull market. Tomorrow at 7 p.m. Eastern time, he'll show you how. Reserve your seat right here.

Source: DailyWealth

Bitcoin Investors Are in a Frenzy – Proceed With Caution

 
I'm sure Teeka Tiwari was quizzed at the urinal last week…
 
As I've said before, "When I can't even use the restroom in peace, I know we're at the top of the market." Here's what I mean…
 
I know how "hot" an investing idea is the moment I step off the podium after giving a speech…
 
The craziest time was when the questions continued even as I made my way into the restroom – and even as I stood at the urinal. Then I knew the idea was at a top.

Teeka, editor at the Palm Beach Research Group, held a breakout session on bitcoin and cryptocurrencies at our Stansberry Conference last week. It was standing-room only. (The breakout session, not the urinal…)
 
I never thought I'd see a mania again like I saw in the 1999 dot-com days. But the customers at our conference were in a frenzy for any insights into bitcoin and other cryptocurrencies…
 
Since I'm about to share my opinion on bitcoin, let me back up for a minute and share my credentials…
 
I have no expertise in bitcoin, or cryptocurrencies – at all. (I don't even know what a bitcoin looks like… Ha!)
 
Here's what I do know…
 
•   Bitcoin stood at $400 for most of early 2016.
   
•  
Today – 18 months later – it's up 11-fold, at $4,400.
   
•   Our customers at the conference expect to get rich off it from here.
Maybe our customers will get rich. Maybe they won't. I don't know.
 
What I do know is the bitcoin frenzy I saw at our Stansberry Conference sure feels like the mania in the Nasdaq Composite Index in 1998-1999.
 
Don't get me wrong. I'm not making a judgment on the technology. People I trust on this (like Tama Churchouse at Stansberry Churchouse Research) tell me that the technology is revolutionary… They say, "Basically everything will be blockchain-based in 20 years – if not sooner." I believe them.
 
So again, I'm not making a judgment on the technology. I am making a judgment on how much money you can make speculating at this point… and on whether it's worth the risk.
 
I think the dot-com bubble provides us a great script of what could happen…
 
The Internet really did transform our lives in this century – exactly as we were promised in the late 1990s.
 
The important thing is, most Internet investors still lost a lot of money, as most dot-com companies ended up falling and never recovering.
 
In short:
 
•   The Internet fulfilled its promise to change our lives over the next decade.
   
•   Most Internet investors still got their butts kicked.
Substitute the word "blockchain" today for the word "Internet" back then – and that sums up my general feeling here. The standing-room only crowds were just the tip of the iceberg.
 
People will swear that "it's different this time." My response is, make sure you don't confuse "a likely certain idea" (like dot-com businesses in 1999) with "a likely certain investment" – regardless of how strongly your friends and peers feel about it.
 
On a separate (but somewhat related) note, I found it fascinating that we didn't have any gold or gold-stock recommendations at our conference – and nobody cared.
 
I know that gold has fallen from $1,800 five years ago to $1,250 today… and that gold stocks have struggled… but bitcoin stole all of gold's thunder. More people asked me about bitcoin – by far.
 
Look, I admit it. I don't understand the tech side of cryptocurrency. I don't claim to be any kind of expert.
 
I'm just reporting on what I saw at our conference – which was very little interest in gold, and a shocking amount of interest in bitcoin.
 
I'm afraid that the blockchain frenzy might turn out like the dot-com frenzy.
 
I think the promise of widespread future use of the blockchain is real. But I think that most people will probably lose money investing in it starting today.
 
I could be wrong – of course. I'm out of my area of expertise. Teeka has followed this story closely, and he sees more upside ahead in bitcoin.
 
But to me, it sure feels like 1998-1999 in cryptocurrencies…
 
If you're going to trade in these things, be very careful.
 
Good investing,
 
Steve
 

Source: DailyWealth

Investing Legend: 'Higher Valuations Are Here to Stay'

Steve's note: I believe that before it all ends, the huge run-up in stocks (the "Melt Up") will go on far longer than anyone imagined. But whether you agree or not, I think you'll be interested in this essay. Today, I'm thrilled to be sharing a piece from investment-newsletter legend Jim Grant, in which he asks, "Is this time really different?"…
 
"Grantham says higher valuations here to stay," ran a headline in the June 2 Financial Times. The reference is to Jeremy Grantham, oracle of mean reversion, anatomist of asset-price bubbles, prophet of climate change, and the "G" in the Boston money-management firm GMO, LLC.
 
Grantham has changed his mind. The question before the house is whether we should change ours, too.
 
Many investors, especially members of the value tribe, are wobbling. Rich markets remain highly valued. High profit margins remain elevated. Poor gross domestic product (GDP) growth, worse demographics, and weak productivity seem not to count as they might (or should) on the scales of investment success.
 
Hedge funds shut down, exchange-traded funds prosper, and security analysis disappoints. It seems a waste of time to pore through Securities and Exchange Commission (SEC) filings when investors insist on buying "exposure" rather than individual stocks and bonds. Even when the stock market does take a tumble, it doesn't stay low for long (as it did, for instance, from 1973 to 1987 and, before that, between 1930 and 1956). To Grantham, it looks like a new era. What it does not look like is a bubble.
 
Since 1997, the famous bear noted in his first-quarter letter, profit margins in American companies have averaged 30% higher than in the preceding 70 years. Price-to-earnings ratios, too, have seemingly come to rest on some permanent high plateau. What kind of capitalism is this?
 
"A dedicated value investor like me eats, breathes and dreams mean reversion," the Financial Times article quotes Grantham as saying. "It's very hard to see when the world has changed. But my job description is to think about markets and not to be a member of a cult."
 
Spare us all from cults, even – this is a little close to home – the cult of skepticism. Still, by Grantham's own telling, the world isn't about to change. It's already changed – started changing 20 years ago, in fact.
 
Nor has the shift exactly gone unnoticed. Higher free cash flow, shrunken capital outlays, massive share repurchases, and miniscule interest rates have pushed stock prices to an average that's 64% higher than the average of the past hundred years, he points out. It's no bubble, the renowned bubble-ologist insists, rather, a phase of financial evolution.
 
Before venturing a guess on the staying power of these prices, valuations, and profit margins, a few more words from Grantham are in order. Among the sources of the supposed new era, he has identified these: aging populations, extreme income inequality, slow economic growth, radical monetary policy, and – the crux of the matter – persistently high corporate profits.
 
"I used to call profit margins the most dependably mean-reverting series in finance," Grantham writes. "And they were through 1997. So why did they stop mean reverting around the old trend?"
 
Among the reasons proposed: the rising value of corporate brands, a trend enhanced by more and more globalization; "steadily increasing corporate power"; and lower real interest rates with higher corporate leverage. As to this final item, "Pre-1997 real rates averaged 200 basis points higher than now and leverage was 25% lower. At the old average rate and leverage, profit margins on the S&P 500 would drop back 80% of the way to their previous much lower pre-1997 average, leaving them a mere 6% higher."
 
Yet, Grantham reasons, in a well-tempered enterprise system, above-trend margins could not have persisted. Competition would have flattened them, whatever the cost of borrowing or the level of corporate indebtedness. But margins remain unflattened, "and I believe it was precisely these other factors – increased monopoly, political, and brand power – that had created this new stickiness in profits that allowed these new higher margin levels to be sustained for so long."
 
To repeat, Grantham's observations are historical. He is guessing about the future, just like the rest of us. If you watch his televised interview with James Mackintosh on the Wall Street Journal's website, you'll see that the old bear isn't even bullish (he says that he might do some buying in case of a 20% pullback). Then is this time really different? "This time," said Grantham, "is decently different."
 
Decently different in the technological respect, we would say. Radically different in the monetary dimension. The world has had 200 years of experience with innovation, disruption, and creative destruction, dating back at least to the displacement of English weavers by the bloody, job-killing, wealth-creating, and humanity-enhancing mechanical loom. The world has had no experience with the consequences of unprecedented monetary action. How could it have?
 
And because there's no predicting the outcome of a first-in-5,000-years experiment in negative nominal bond yields, zero-percent funding costs, and multitrillion-dollar credit creation, we are not so quick as our friend from Boston to accept that this unique constellation of deformities will sustain the stock market in the high style to which it's become accustomed.
 
Technological disruption seems a strange accompaniment to an alleged new age of elevated corporate profitability. Established business models are no sturdier on account of digital disruption. They rather seem more vulnerable. Hoteliers, cab companies, money managers, grocery chains, oil companies, newspaper publishers, network TV stations, ad agencies, shopping-mall owners, telecommunications providers, to name a few, can only wish that they lived in a time of permanently elevated margins…
 
Regards,
 
Jim Grant
 
Editor's note: Twice a year, Jim hosts the world's most exclusive financial conference. And Porter has arranged a red-carpet, VIP-level invitation for Stansberry Research readers… for about half the regular price. This is unlike anything Jim has ever offered before… And he may never offer it again. Click here for the details.

Source: DailyWealth