Why Inflation REALLY Matters to Investors

 
Once in the last 20 years, inflation poked its head above 5%.
 
That happened in 2008 – the worst year in the stock market since the Great Depression. Stocks fell 37%.
 
But was it a coincidence that inflation soared at the same time the stock market crashed?
 
To find out, let's look a little further back in history…
 
Besides 2008, some of the worst years in the stock market were 1973 and 1974. What happened with inflation back then?
 
Just like in 2008, inflation rose above 5%. And those turned out to be the second- and fourth-worst years for stocks after the Great Depression.
 
Inflation poked its head above 5% two other times in the 1970s. And stocks tanked then, too. Take a look…
 
The message from history is simple. The stock market hates rising inflation.
 
It's a serious warning sign for stocks if the year-over-year inflation rate rises above 5%.
 
This brings us to today…
 
The stock market went down this week, the experts say, because of rising inflation expectations. The Consumer Price Index came out yesterday, stating that inflation rose over the last 12 months.
 
But the new inflation number was just 2.1%.
 
Excuse my technical language here… but "big whoop."
 
Really? 2.1%? That's cause for concern?
 
I don't think so. I think a better explanation is that traders and investors have become nervous over the last few weeks, looking for a reason to sell. Inflation was simply this week's excuse.
 
Rising inflation has historically been terrible for stocks. It's a clear danger sign when the year-over-year inflation rate rises above 5%.
 
But right now, we are nowhere near that number. And – while I could be wrong, of course – I don't expect we will see 5% anytime soon.
 
Any number of things could derail this great bull market in stocks. I don't expect that the rate of inflation will be THE thing that derails this particular boom…
 
Don't let this week's "inflation scare" spook you. Stay on board with the "Melt Up."
 
Good investing,
 
Steve
 

Source: DailyWealth

Why the Crypto Correction Is a Good Thing

Steve's note: I don't write much about cryptocurrencies like bitcoin… But if you're interested in these assets, my colleague Tama Churchouse is the guy I trust to give you the full story. In today's essay, he says the "crypto boom" is alive and well – and if you make the right moves, the recent correction could be a great buying opportunity…
 
Forest fires, while potentially lethal and devastating to people and property in their path, are a crucial part of the natural cycle of forest ecosystems.
 
Fires remove dead vegetation and alien plants that compete with native species, stimulate new growth, trigger certain plants to release seeds, and actually improve wildlife habitats in the long run. They also remove diseased, decaying trees, making new for new younger ones.
 
In the world of crypto assets, a fire is raging right now. The crypto market has shed more than $400 billion of market value since last month (that's nearly 50%). Every crypto has pulled back.
 
The spark was a long-overdue regulatory hammer blow, reverberating from both South Korea and China…
 
China is now intensifying its crackdown on crypto trading, specifically on exchange-like service providers. Chinese exchanges themselves have long been closed, since the previous regulatory onslaught last August and September.
 
South Korea, on the other hand, is focused on more regulation and oversight – an end to anonymous crypto exchange accounts for example, and proper taxation – rather than shutting the market down.
 
I've been warning my Crypto Capital subscribers about an impending correction for a while now.
 
In December, I wrote…
 
There's a degree of frenzy, and of blind speculative mania, that has taken hold. I've seen projects that I know with certainty have no long-term future whatsoever see their market values double, triple, or more, moving into the billion-dollar plus category.
 
These are projects that I'm certain will fail…
 
The big shakeout is going to come. Don't be even vaguely mistaken about that.

No doubt plenty of folks out there are panicking. Maybe you own a little bitcoin yourself, and are feeling nervous… and you've lost some money.
 
Of course, that's not good. But through the smoke and flames, it's worth remembering that these fires do serve a greater purpose…
 
Firstly, they force people to start truly assessing what it is they own… or think they own. In a raging bull market when everything's going up, it's easy to throw some darts at the crypto wall with no research at all, bag some returns, and think you're a genius. As the cliché goes, a rising tide lifts all boats.
 
But let's say a cryptocurrency you own is down 30%, 50%, even 70%, and it happens in an instant. Chances are good that if you don't have that foundation of conviction, research, and understanding to fall back on, then you'll sell, bag a loss, go home, and lick your wounds.
 
Corrections force discipline on an otherwise broadly unsophisticated market. And that's only a good thing in the long run.
 
The second benefit is that these fires clear out the dead wood… that is, the garbage of the crypto world. And there's no greater decaying oak than a crypto called Bitconnect.
 
Back in November, one of my Crypto Capital subscribers wrote to me asking about it. He noticed it had been doing extremely well and upon further digging came across an article online claiming that Bitconnect was some kind of "sustainable 2.0 Ponzi scheme."
 
I wrote at the time…
 
I think Bitconnect's days are probably going to be numbered…
 
I have warned people about it. People say, "Well, the price keeps going up." Well, that's kind of what happens in a Ponzi scheme until it doesn't and the rug comes out from under your feet.
 
It's interesting to see the regulators coming down and actually sending cease and desist to a specific crypto. We warned about this crypto in the past, so I hope you don't own any.

As of early January, Bitconnect traded for more than $430. A little more than a month later, it was trading for about $3 – a collapse of more than 99%.
 
The sad part of this is that thousands of individuals, if not tens of thousands, have been wiped out. There was certainly no smart money in Bitconnect tokens. This was the preserve of the unsophisticated – who I suspect could least afford its demise.
 
Two billion dollars of "wealth" vanished into thin air.
 
Its very existence, however, was a black mark on the whole crypto sector in general.
 
The company behind it received multiple cease and desist orders. No one knows who is actually behind the platform. Its GitHub repository, where all open source blockchain code resides, is noticeable only for its inactivity. And if you're looking for a white paper to learn at least something about the inner workings of this coin, good luck finding one.
 
Oh, and according to its website, Bitconnect is "an interest-bearing asset with 120% return."
 
When all's said and done, these corrections will help this still-nascent asset class.
 
There's still a lot of dead wood to clear out. It's a painful process. But the market will be the better for it.
 
Good investing,
 
Tama Churchouse
 
Editor's note: Is this the end for cryptocurrencies? Or is it the perfect opportunity to get on board? Tomorrow at 8 p.m. Eastern time, Tama is hosting a live emergency briefing to answer all your questions. In it, he'll discuss the latest developments in cryptocurrencies… reveal a shocking prediction… and show you how to make a lot of money as the market recovers. Reserve your seat here.

Source: DailyWealth

100% Chance of New Highs in the Next Six Months

 
OK, so the headline is a little strong. I can't know the future, of course. However…
 
100% of the time – over the past 90 years – stocks have been higher after going through what they just went through.
 
Can you name another indicator that has called the market correctly – 100% of the time – over the past 90 years?
 
So while I can't predict the future, looking at the past provides a clear picture after situations like what we just went through in the markets…
 
First, I'll show you the track record. Then I'll explain it.
 
Signals
(1928-2018)
Return
1 Mo. Later
Return
3 Mo. Later
Return
6 Mo. Later
Average Gain
4.7%
7.3%
13.1%
% Positive
100%
100%
100%
Source: SentimenTrader.com
What we just went through was pretty extreme…
 
The market had its worst week in more than a year – after hitting a 52-week high.
 
My friend Jason Goepfert of SentimenTrader.com looked back at every time this had happened before in history.
 
He was looking for one specific condition: the worst week in a year, occurring immediately one week after a 52-week high.
 
As you might guess, this hasn't happened a lot – only 10 times, to be exact (not counting this latest occurrence).
 
Jason is conservative in his "play calling." So it was interesting to read his enthusiasm after these results. Here's what he said…
 
All 10 signals led to a rebound over one to six months, and the risk versus reward was ridiculously skewed to the upside.
 
There was almost no downside risk on a closing basis, while the rebounds tended to be very strong.
 
This is one of the most skewed risk/reward ratios we've seen in any study in recent years.
I can't be 100% certain that stocks will be higher six months from today. But based on Jason's homework, history paints a pretty compelling picture. (I highly recommend you check out Jason's excellent work at SentimenTrader.com.)
 
Sure, it would be great if we had more than just 10 occurrences over the past 90 years to hang our hats on. But this indicator is 10 for 10 so far. And as Jason said, the reward versus risk was "ridiculously skewed to the upside."
 
Today is more of a "buy" than a "sell" based on indicators like this. Follow your trailing stops, of course. But don't get spooked out of the market. I believe there's still plenty of upside ahead…
 
Good investing,
 
Steve
 

Source: DailyWealth

Most Investors Now Expect Higher Stock Prices

 
Stocks have spent nearly a decade climbing the "Wall of Worry."
 
Fear has kept folks out of stocks. Despite solid returns, they kept expecting prices to fall. That's changing now, for the first time in this bull market.
 
Investors are getting bullish on stocks for the first time in years. They're getting on board the "Melt Up." In fact, one measure says more folks than ever are expecting stocks to go higher.
 
That could mean a slowdown in the Melt Up – but it won't kill this bull market.
 
Let me explain…
 
Do you expect stock prices to increase?
 
It's a simple question. And recently, more folks than ever are answering "yes."
 
The Conference Board is an independent research company that gathers business and economic data. It's famous for its Consumer Confidence Index, which tracks how folks feel about the economy.
 
But that's not the only thing The Conference Board does…
 
It also runs a monthly poll asking folks the simple question above. More specifically, it asks if folks expect stocks to rise, fall, or stay the same.
 
The answer to that question tells us a lot about market sentiment. And as of the latest survey in January, more than half of the responders expect higher stock prices.
 
That's the highest reading ever. And it's the first time that more than half of folks polled said they expect higher prices. Take a look…
 
For most of this bull market, fewer than 40% of responders expected higher stock prices. That's changed in the last year. Now, more folks than ever expect stock prices to rise.
 
That much positive sentiment is not a good thing. But it's not the end of the world, either.
 
History shows that while it won't kill this bull market, it will likely mean a slowdown for stocks.
 
Specifically, after readings of more than 45%, stocks have a history of falling slightly over the next few months. Take a look…
 
 
1-Month
3-Month
6-Month
After extreme
0.5%
-3.7%
1.0%
All periods
0.6%
1.8%
3.7%
We've seen these kinds of readings only 5% of the time since 1987. Those have led to minimal gains a month later and 3.7% losses over three months.
 
Six months later, stocks were up 1%.
 
But if we look further out, stocks were typically up 10% two years after these extreme readings. And we saw positive returns 69% of the time two years later.
 
That tells me that this positive sentiment will slow down the market's climb… But it likely won't cause the next bear market.
 
Stocks have been falling for the past few weeks. And that'll likely shake the confidence of most folks. Don't let it affect you, though.
 
Folks finally expect higher stock prices. That could be part of the cause for the recent decline. But it won't end this bull market.
 
Watch your stops and stay long.
 
Good investing,
 
Brett Eversole
 

Source: DailyWealth

Six Things to Keep in Mind Before You Buy Your Next Crypto

Editor's note: When it comes to investing in cryptocurrencies, our friend and colleague Tama Churchouse is the first person we listen to. Tama has an extensive background in the industry, both as an investor and as a shareholder for a popular blockchain company. Whether you already own cryptos or you're simply interested in learning more about this major technological trend, today's essay is a must-read…
 
Cryptocurrencies are often viewed as the "Wild West" for investors…
 
As you know, equity markets are highly regulated.
 
The buying and selling of securities is controlled… And laws require companies to share detailed information about their operations with investors and potential investors.
 
Companies must give regular updates… like annual reports and quarterly earnings reports. Plus, they have annual shareholders' meetings, boards of directors, and more.
 
And tens of thousands of high-paid equity analysts and institutional investors cover stocks and quiz management teams about what's going on. The media constantly ask questions.
 
But practically none of this exists in the cryptocurrency space…
 
Not only is the mainstream media coverage of cryptos poor – I've seen Wall Street Journal articles with basic factual errors, for example – but the crypto media is also not great.
 
People who write about cryptos often have their own agendas… They could own tokens in a crypto that competes against the one that they're writing an article about, for example. As a result, their coverage could be extremely negative. Or the opposite could be true, where they give extremely positive coverage for a low-quality crypto that they have a stake in.
 
You'll find a huge number of trolls, pumpers and dumpers, and liars and cheats in the space. So if you're going to invest in cryptos, make sure you're investing in the right ones.
 
Here are a few key attributes to look for…
 
      1.  Problem solving
 
The first thing to ask yourself is: What is the problem that this project is solving? Is this technology leveraging blockchain to solve a difficult problem that can't be solved without blockchain?
 
I'm dismissive of companies that are just jumping on the crypto bandwagon by trying to transfer an existing business to the blockchain. I'm looking for something that truly benefits from decentralization… a crypto asset that solves a problem that can't be solved without blockchain.
 
      2.  The addressable market should be global
 
At this early stage in the development of the blockchain ecosystem, everything is a land grab. We want to maximize our bang for our buck. We want a company that has the capacity to go global. We want a crypto asset that can potentially be used by everyone on Earth, not just a narrow market.
 
      3.  Launch horizon proximity
 
The way a lot of initial coin offerings (ICOs) work is: The company produces a "white paper" that outlines the technology it plans to build. Then, the company funds it by issuing some tokens in return for capital (in the form of bitcoin and/or other cryptos).
 
The key phrase here is "plans to build." There's an ocean of difference between putting an idea down on a white paper and building and executing a successful launch. This is one of the main reasons I rarely advocate participating in ICOs.
 
      4.  The team
 
I want to see a team comprised of developers who have a track record of building and deploying blockchain technology.
 
Now, they don't necessarily need to have been successful in prior ventures. After all, Microsoft (MSFT) CEO Bill Gates and late Apple (AAPL) CEO Steve Jobs failed in some of their early ventures.
 
A CEO doesn't need to be a computer scientist, but the team needs to have a strong understanding of how its project will address the points I just mentioned.
 
      5.  The community
 
You have to ask, "Does this project have a large community of followers and early adopters who will actually use whatever is being built?" A crypto asset is no good if nobody is using it and the token isn't widely distributed.
 
Blockchain protocols like Ethereum are valuable because a huge number of users are behind them. If nobody is building on them or using the application, they don't have much value.
 
      6.  The token economics
 
Crypto tokens all have varying characteristics, but scarcity is an important one. Would you buy into a token that had 1 billion tokens currently issued if you knew that in three months, it would issue another 2 billion? Probably not.
 
All cryptos have completely different token economics underpinning them. Bitcoin, for example, has around 16.5 million in circulation at the moment. New bitcoins are mined every day, but the total supply will only ever be about 21 million.
 
Other tokens are created in a single launch with a permanent fixed supply. And some specify an annual "inflation" to be distributed every year based on a predefined mechanism. Token supply has infinite permutations, so you need to analyze them accordingly.
 
These are just a handful of high-level things I look for before I recommend cryptos. Keep them in mind as you consider buying.
 
Good investing,
 
Tama Churchouse
 
Editor's note: Bitcoin prices have been on a wild ride over the past few months, doing a round trip from $6,000 to almost $20,000 and back. The volatility has some worried that the "crypto boom" is dead.

That's why on Thursday, February 15, at 8 p.m. Eastern time, Tama will host an emergency bitcoin briefing where he'll share his latest thoughts on the space… reveal a shocking prediction… and explain what you should be doing with your money right now. Save your seat for the free event here.

Source: DailyWealth

Two Lessons From My First 'Melt Up'

 
Twenty-five years ago, I experienced my first "Melt Up" as an investment professional…
 
It. Was. Awesome.
 
And then…
 
It. Was. Awful.
 
There's nothing like actually putting your hand on that hot stove to really feel the fire. And I was right in the middle of the fire…
 
In late 1993, I was a young stockbroker in the U.S., specializing in international stocks.
 
I didn't know it yet… but man, oh man, I was in the right place at the right time.
 
It might sound hard to believe, but the big story in 1993 was China… Investors absolutely had to get in.
 
As a young stockbroker, I quickly learned that you almost never get incoming calls from strangers looking to open an account with you.
 
Never, that is, except when it's late 1993 and you can buy "China plays" in Hong Kong for your customers. Then you're Mr. Popular! The phone is ringing for you – multiple times a day.
 
We had "new leads" – potential customers – calling us like you can't imagine.
 
We had no idea – but we were in the middle of a "Melt Up" in Hong Kong stocks.
 
Our group of young brokers was giddy coming to work every day. We were making more money than any people in their twenties probably should.
 
For us, in the middle of it, it felt a bit like bitcoin probably felt late last year. Everybody wanted to buy this market. And we were the ones who could get you in…
 
In early 1993, the Hang Seng Index – Hong Kong's main stock index – was in the 6,000s. By December, it was approaching 12,000.
 
In November, and particularly December, it felt like the market was going up every single day.
 
Then January arrived… And the market started going down! Take a look…
 
The market lost about 10% of its value in a month. All the talk was of a correction… "Is it over?" I wondered.
 
Heck no! The phones kept ringing. People who missed the December run-up scrambled to buy in January.
 
And then… by February, the market started going down again. The phones were still ringing. But it started to feel like the opposite of November and December…
 
February was awful. It felt like the market went down… on every day of the month.
 
It wasn't easy to track your Hong Kong holdings back then. We didn't have the Internet. So customers would call… every day. And I'd have to give them the bad news… every day.
 
Customers wanted to "double down" to "lower their average cost." They were certain China would run back up. But they were wrong.
 
The grim reality set in. The late-1993 China Melt Up turned into the 1994 China "Melt Down."
 
I wanted to hide under my desk. My monthly income – which was all based on commission – fell roughly 90%. And it stayed there for about nine months. It was awful.
 
I went from the top of the world to, well, nearly broke.
 
I learned two emotionally scarring lessons from that experience:
 
1.   A Melt Up is a fantastic ride on the way up. And it is downright awful on the way down.
   
2.   I want to be on board for the good times of a Melt Up. And I want to have a plan to avoid the Melt Down.
Since then, I have lived and traded through several Melt Ups. If you are willing to buy any asset class, in any country – like I am – then you will see the pattern repeat itself. You will recognize the signs.
 
Despite weakness in recent days, I still believe that for the first time since 1999, we are in a Melt Up in U.S. stocks.
 
Sure, you should sell if you hit your stops. But I believe the recent fall is just one of many corrections on the road to much higher prices.
 
It might not feel like it right now – but the Melt Up is still in place. Watch your stops… But stay long.
 
This bull market isn't over yet!
 
Good investing,
 
Steve
 

Source: DailyWealth

Did Monday's Market Action Make You Panic?

Steve's note: On Monday, the benchmark S&P 500 Index fell about 4.1%. It was the worst one-day fall it had since 2011. Did it scare you?
 
As I've said lately, corrections happen – even in the "Melt Up." This is a time to stay calm. Stick to your stops. And if you're worried about the recent declines, it's also time to come back to an important lesson…
 
That's why today, we're republishing (and updating) a classic essay from my friend and colleague Porter Stansberry. In it, he explains the best way to control your fear… and how to avoid being a victim when the next bear market arrives.
 
Did you panic? Were you afraid?
 
Stocks got beat up on Monday. They fell 4.1% – their worst one-day fall since August 10, 2011.
 
Anytime investors are reminded that stocks can go down as well as up in value, our mailbag "lights up." Subscribers suddenly want to have constant contact with us. They need reassurance.
 
Friends… If that market action bothered you in any way, there's a huge problem with your portfolio.
 
Think honestly. When you first saw how the market was going to open (way down), what was your first reaction? Or, if you didn't see the open, what happened when you first saw the news? Or during the day when stocks just kept going down, lower and lower?
 
Be honest with yourself. If you felt even a twinge of fear, you've got a big problem. Let me explain why…
 
Monday was a 4.1% move lower. It wasn't a bump in the road. It was barely a ripple on the calmest lake the equity markets have ever seen.
 
Since 2015, stocks have been ripping higher, propelled by "rocket fuel" – central banks, sovereign wealth funds, corporate buybacks, and value-ignoring index-fund investors. There's hardly been a down day in nearly two years. This incredible rally has created record levels of investor complacency (aka investor stupidity).
 
It has also, almost surely, lulled many of our subscribers into portfolio allocation decisions that are far too aggressive.
 
On the golf course, virtually every amateur player overestimates how far he can hit the golf ball, usually by 20% or more.
 
Why? Because our best-ever shot becomes our expected outcome.
 
As we're sitting there on the tee box, we're thinking, "I crushed the ball the last time I played this hole. I'm sure I can do it again." Instead of making a conservative swing on the ball – a swing we can hit well nine out of 10 times – we end up taking the big cut… the move that almost never works.
 
Pro golfers don't make this mistake. They study the distance of every club in the bag, based on their most repeatable swing. They know their distances down to the precise yard. And they don't try to make swings they can't repeat virtually every single time.
 
Amateur investors make the same kind of mistake as amateur golfers.
 
They vastly overestimate the expected outcome of their investments. Think about this the next time you buy a stock. Write down what you're expecting to make (annualized) from the investment. Now go and look at what your actual annualized returns have been from similar investments.
 
The odds are you're overestimating your expected returns by at least 100% – meaning, you're expecting to make twice as much as history suggests you will.
 
You're probably doing the same thing right now in your portfolio: You're holding positions because you're sure they're going to soar.
 
Meanwhile, it's unlikely stocks will produce the sort of returns you're expecting…
 
With stocks trading at near-record valuations, with consumer debt crashing, and with extremely low interest rates, it's unlikely stocks will produce double-digit annualized returns in the time frame you're planning for. Very unlikely. Virtually impossible.
 
But every time you buy a stock, I'm sure you expect to make more than 20% over the next year. Or maybe even in the next quarter.
 
That's because, like an amateur golfer, you're thinking of that great "shot" you hit back in 2015 – that stock you bought two years ago that has soared with the market.
 
But that's not what's going to happen every time.
 
That 4.1% fall on Monday was a warning from the stock market "volcano."
 
It was just a minor rumble. A tiny taste of what will happen when there's another bear market, a decline that's five times worse. (A bear market is a decline of more than 20% on the major indexes.)
 
If you were worried about this minor dip, you'll be crushed – wiped out – by a bear market.
 
I know… you say you will just hold on "no matter what." But almost everyone who sets out to be a "buy and hold" investor ends up becoming a "buy and fold" investor. Just as you overestimate your expected returns, you're also overestimating your risk tolerance.
 
If you'd asked investors back in 2009 about their risk tolerance, they all would have said "none." They would have told you, "I'm tired of stocks. I only want safe investments. Just give me something that's safe…"
 
Today, you hear exactly the opposite. At conferences, I'm constantly seeing subscribers telling people, "I'm an accredited investor. I can handle the risks."
 
But they can't. Not really. Almost no one can.
 
Here's the best way to think about the risks you're taking…
 
If you're 100% invested (long stocks) it's only a matter of time before you suffer a 50% drawdown – at a minimum. Warren Buffett, the world's best long-only investor, has seen the value of his equity holdings drop by 50% three times in his career. And it has happened twice since 1999.
 
You probably aren't as good of an investor as Warren Buffett. It's likely that your results won't be as good as his have been… which means that if you are a long-only investor, you will (not might) suffer more than a 50% decline in the value of your equity portfolio.
 
If you're using trailing stops, you can greatly limit this volatility. In fact, if you merely use a trailing stop loss and reasonable position sizes, I can almost guarantee that your investment results will become dramatically better.
 
And there's another, even better way to limit the volatility of your portfolio.
 
Consider "hedging" your portfolio by adding small positions in investments that are designed to go up when the stock market goes down – like short sells and gold stocks. You should also consider a big allocation to short-term corporate bonds and mortgages. Or if you don't understand these kinds of investments, then simply hold cash.
 
In Stansberry Portfolio Solutions – a service I put together with my colleagues Steve and Doc Eifrig – we've used this general strategy with The Total Portfolio, a diversified and hedged portfolio.
 
Right now, we have about 7.5% of the portfolio in corporate bonds. This is allocated to fixed income via high-quality insurance stocks – which are really just big piles of bonds plus underwriting profits. (Last year, we allocated 10% of our portfolio directly in carefully selected high-yield corporate bonds.)
 
This is the kind of firm foundation we want in our portfolio. And to further reduce volatility, we've put another 20% of the portfolio in super-safe mortgages and cash.
 
Thus, nearly 30% of our portfolio is in cash and fixed income. It's like driving with a parachute tied to our car. It probably limits our top speed… But it keeps us from crashing. That doesn't mean we can't still produce good results, though. The Total Portfolio reported an 18% return last year.
 
But the real magic in what we're doing comes from the two things that you probably won't do. Ever.
 
When stocks fell on Monday, we had 3% of the portfolio allocated to short-sell positions and 3.5% allocated to precious metals stocks. This strategy doesn't reduce volatility, as these positions are enormously volatile. But they're also negatively correlated. So, when stocks go down, this part of the portfolio tends to go straight up.
 
On Monday, when the S&P 500 dropped 4.1%, our shorts went up 3%. And our precious metals stocks held their ground.
 
Since February 1, the S&P 500 is down 4.6%. But our Total Portfolio is only down about 3.2%.
 
That probably doesn't seem like a big difference to you. But proportionally, it's a huge difference. Our portfolio's decline was nearly a third less than the S&P 500's. What if the market's move down had been three times worse, like a correction or even a real bear market?
 
I'm certain you'd feel a lot better looking at a 10% portfolio decline than a 14% portfolio decline. And if you can reduce your risk without a corresponding decline in performance, why wouldn't you hedge your portfolio?
 
Again, if you look carefully at our Total Portfolio, you'll find a very conservative allocation mix, with almost 30% of the portfolio in very stable investments like mortgages, corporate bonds, or short-term credit facilities, and with an additional 6.5% of the portfolio completely hedged (short positions, gold stocks). This allocation allowed us to reduce our downside by more than 30%.
 
If Monday made you nervous… change your allocation. Act like a pro. Go for the "shot" you know you can hit. Stick with an allocation that lets you sleep at night and that fills you with confidence on bad days in the market.
 
Regards,
 
Porter Stansberry
 
Editor's note: Asset allocation is the best way to control your fear and survive the next panic in the markets. Even better, our Stansberry Portfolio Solutions service does all the hard work for you – with three hedged, diversified model portfolios to choose from, including The Total Portfolio.
 
But if you're ready to manage your market risk like the pros, you need to act fast… This offer expires TOMORROW at midnight. Click here to get the details while you can.

Source: DailyWealth

Will You Outlive Your Money?

 
In 1928, U.S. life expectancy was about 57 years.
 
Today, according to the Social Security Administration, folks turning 65 this year have an average life expectancy of 84.3 (men) or 86.6 (women). What's more, folks are living longer than ever. One in four 65-year-olds today will live past 90, and one in 10 will live past 95.
 
Most retirement plans assume you'll retire sometime around 65 and live for another 20 years.
 
But consider this…
 
Someone who is 65 years old today is expected to live 20 additional years… to the age of 85. But when this 65-year-old was born, scientists expected him to only live to the age of 68. So right now, this typical retiree is already 17 years "ahead of the curve."
 
And as medical advancements continue, that number could grow even more… even faster.
 
What does this mean for you?
 
Outliving one's retirement savings is the greatest fear of most people nearing retirement age. According to the Employee Benefit Research Institute, 61% of those aged 44 to 75 say running out of money in retirement is their biggest fear…
 
There's reason for that concern, too. More than half of Americans have less than $10,000 saved for retirement, according to GoBankingRates. And in an article in the New York Times, an economics professor estimated that nearly half of middle-class workers will be "poor or near poor" in retirement, living on a food budget of about $5 per day…
 
So imagine trying to milk those already sparse savings over 30 or 40 years.
 
This is why it's so crucial to estimate your lifespan and make sure you don't run out of money. Consider Social Security strategies, along with products like annuities and solid income-producing investments to provide a full, secure retirement.
 
But the first step to take is to develop a plan…
 
The retirement landscape has undergone vast changes over the past couple of decades…
 
As we already mentioned, people are living longer. And previously reliable sources of retirement income – like pension plans – are dying out.
 
That's where retirement planning comes in. There are three phases of retirement planning:
 
1Accumulation.
The accumulation phase is the time when you focus on growing your wealth and getting a general idea of how much money you'll need in retirement. You can do this through saving money, investing in the market, buying real estate, etc. It's never too early to start accumulating wealth. As we've said before, compounding is one of the most powerful tools you have to grow your wealth, especially when you've got time on your side.
 
2Consolidation.
During the consolidation phase, you should zero in on what you'll need to survive retirement… including bills you'll have to pay, income you expect to receive, etc. This is also the point when you switch to more conservative investments in order to preserve your capital. This phase is for people who are within several years of retiring.
 
3Distribution.
In the final phase, you get to enjoy your hard work in retirement. This is when you begin taking distributions from income sources like Social Security, a pension (if you have one), dividend payments, etc.
 
Arguably the most important thing to do is to start accumulating wealth. Lots of Americans are relying on Social Security to get them through retirement. But the average monthly Social Security check in 2017 was only about $1,360.
 
And what will happen if Social Security goes bankrupt?
 
That's why you need to have a strategy to start building your nest egg. And the sooner you can start, the better.
 
One of the easiest ways to get started is buying shares of strong businesses that can keep up with future price changes and pass some of that growth back to investors. That's why for years, I've recommended people invest in what I call Sleep Well at Night ("SWAN") stocks.
 
These are investments that can pay you regular income – like dividend stocks, master limited partnerships (MLPs), real estate investment trusts (REITs), utilities, preferred shares, corporate bonds, and municipal bonds. If you're looking to make additional money in the market during retirement, these types of investments will not only provide you income now, but also set you up for income in the future.
 
Here's to our health, wealth, and a great retirement,
 
Dr. David Eifrig
 
Editor's note: Every month, Doc tells his Retirement Millionaire subscribers about safe ways to grow their income… debunks popular health myths… and shows them how to live a "millionaire lifestyle" for less. Get started with a risk-free trial subscription to Retirement Millionaire right here.

Source: DailyWealth

One of the Few Cheap Investments in the World Today

Steve's note: Is the first correction of the "Melt Up" here? After yesterday's big drop in the markets, you might think it is. But I'd like to urge you not to panic. As I explained yesterday morning, this is normal.
 
Corrections happen, even in the Melt Up. The Nasdaq Composite Index fell by roughly 10% five times during the last Melt Up. And corrections are likely this time around as well.
 
Stocks are down about 8% since peaking on January 26. So the first correction of this Melt Up is happening right now. Don't panic. Sit tight. Nothing that's happening makes me believe this is the "Melt Down."
 
We're smack in the middle of the stock market "Melt Up" – and years into a global bull market.
 
That makes it darn difficult to find cheap investments.
 
The U.S. market hasn't been cheap in years. Valuations have roughly doubled since 2011. But that's not true everywhere in the world.
 
In fact, a certain part of the world hasn't offered today's value in more than 15 years. And it's in a strong uptrend as well…
 
Cheap and in an uptrend? That's the kind of investment I love to see. And it's available right now.
 
Let me explain…
 
Asia-Pacific stocks are offering incredible value today.
 
Simply put, they're one of the few cheap investments in the world right now…
 
This group – which includes Asian markets as well as Australia and New Zealand – is roughly half as expensive as U.S. stocks, based on one measure. That's one of the largest discounts in history for Asia-Pacific stocks.
 
To see this, we only have to compare the book value of this group of stocks versus the U.S.
 
Based on book value, Asia-Pacific stocks are actually the cheapest they've been since 2002, relative to U.S. stocks.
 
The chart below shows the price-to-book value (P/BV) ratio of the benchmark S&P 500 Index minus the MSCI AC Asia Pacific Index's P/BV ratio. A high reading on the chart means Asia-Pacific stocks are cheap compared with U.S. stocks. Take a look…
 
The chart shows that this valuation gap has been increasing… And even better, it has just hit a new multiyear high.
 
What does this mean for investors?
 
It means that Asia-Pacific stocks are dirt-cheap. Again, they trade at a 50% discount to U.S. stocks based on book value. These markets haven't been this cheap, relative to the U.S., in more than 15 years.
 
That's a good thing. I love buying cheap stocks. And after a nine-year bull market in the U.S., value opportunities in this country are scarce.
 
But that's not true in this corner of the globe… These markets are still cheap.
 
And the trend is strong, as well…
 
Asia-Pacific stocks rallied 32% in 2017. That's a stellar return… a full 10 percentage points higher than the S&P 500 last year.
 
It makes sense, though. Asia-Pacific stocks include Japan and China – two markets that boomed last year.
 
As longtime readers know, we love to buy these kinds of uptrends. When prices move higher, it usually leads to more gains. And because these markets are so cheap, they have more room to run – which makes this opportunity even better.
 
The uptrend is in place… And today's huge discount could be a tailwind to push these markets higher.
 
So if you're looking to invest in cheap markets that are in an uptrend, Asia-Pacific stocks – places like China, Japan, Korea, and Australia – fit the bill.
 
Good investing,
 
Brett Eversole
 

Source: DailyWealth

Not One, or Two, But FIVE Corrections of 10% Are Possible

 
"This market is way overbought – a correction is coming!"
 
We've heard that for weeks. I'm tired of it!
 
It's not because it's wrong… but because, my friend, OF COURSE a correction is coming!
 
That is not a bold prediction. It is a simple fact…
 
The simple truth is that stock markets have corrections. (Corrections are typically defined as a fall of 10% from new highs.) If you can't handle that, then don't invest.
 
The big question now is, could we see a correction during the current stock market "Melt Up"?
 
Of course!
 
But if we see a 10% correction during this Melt Up, would that mean the Melt Up is over?
 
NO!
 
I say this so emphatically because of this fact:
 
During the last great Melt Up in stocks – the dot-com boom of the late 1990s – the Nasdaq Composite Index actually saw five roughly 10% declines during its final push higher.
 
Take a look…
 
These falls were quick. They all happened in a month or less.
 
But don't think they weren't painful… A 10% fall in the broad index definitely meant larger declines in the more volatile stocks. During the worst of those corrections, you had to question if staying on board was the right move.
 
These days, folks are used to a one-way market… They will certainly panic in a correction.
 
My message today is DON'T PANIC. Corrections are normal – even in the Melt Up phase of a stock market boom.
 
So please, don't be surprised if the market falls 10% this year. Based on history, it could even happen more than once.
 
The next correction will be painful. It will feel terrible. But don't panic. A correction (or two, or more) does not signal the end of the Melt Up.
 
Good investing,
 
Steve
 

Source: DailyWealth