Four Charts Every Investor Should Have in Their Toolbox

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. Four Charts Every Investor Should Have in Their Toolbox By Nomi Prins, Editor, Inside Wall Street with Nomi Prins “Don't fight the Fed.” It’s a common phrase. But how accurate is it, really? On [Thursday]( I showed you why it might not be the best strategy if you’re looking to maximize your gains in the markets. I also promised to do a deep dive on four indicators that can help you navigate the market’s ups and downs. And that should be in every investor’s toolbox. So let’s take a look… Recommended Link [America’s “Permanent Recession” Is Here]( [image]( Life in America is not as it seems… And thanks to recent unprecedented decisions by a strange force of unelected officials… Americans may now experience a level of financial insecurity and suffocation of freedoms bigger than the crisis of 2000…2008… and 2020 - COMBINED. Months from now we may look back to – this moment – as the end of the middle class. Stephen Roach, a former chairman at Morgan Stanley, says: [“U.S. living standards are about to be squeezed as never before.”]( Newsweek says: [“[This] Will Be The End of American Freedom.”]( And HuffPost says: [“[This] Is Making The Rich Richer, and Leaving You Behind.”]( But a new “boots on the ground” investigation reveals Americans will be forced to make a drastic decision… Become one of the ‘new poor’ in America… Or the ‘new rich’. While everyone else could end up in “Permanent Recession.” [Click Here To Get The Details.]( -- Four Indicators for Every Investor’s Toolbox One of my favorites is called the Buffett Indicator. It looks at the GDP and compares it against the stock market's total value. You can see it in the chart below. [Chart] As the chart above indicates the historical average is at 121%. And right now, we're sitting at roughly 150%. So, is that good or bad? If we turn to famed investor Warren Buffett himself, he says that anything above 200% and we're playing with fire. We’re way below this mark right now (though simultaneously being above the historical average). To me, the current 155% reading says that the stock market is neither too cheap nor expensive. In other words, it’s fairly valued right now. Recommended Link Market Wizard who predicted all indexes would be negative in 2022 shares shocking new forecast: [“Prepare for Five Years of Famine”]( [image]( [Click here for the name of the one ticker you need to protect yourself.]( -- My second favorite way to tell if the stock market is undervalued or overvalued is something called the cyclically adjusted price to earnings ratio, or CAPE. You might also know it as the Shiller P/E ratio. It’s based on the more common price-to-earnings (P/E) ratio. The P/E ratio is one the most important financial ratios out there. It’s quoted on your brokerage firm’s webpage or on major financial news websites. To get the P/E ratio for a stock, you divide the price of the stock by the company's earnings per share. What is different about CAPE, though, is that it looks at the last 10-year average of those numbers. As you can see in the next chart, the CAPE number sits at around 29 right now. [Chart] Meanwhile, the historical average for the stock market has been roughly 20. So, according to this metric, the stock market is somewhat overvalued. The third way I use to help me decide if the stock market is cheap or expensive is by looking at something called Margin Debt. It basically measures investor greed. The idea behind it is this: The more people take on loans to invest money they don't have… the more expensive (and hence riskier) the stock market is. [Chart] As you can see from the chart above, margin debt is currently sitting at the $664 billion level. It retreated nearly 30% from its October-2021 peak of $936 billion. It’s also down about 4% from $688 billion last month. In other words, people aren't really taking out loans to invest in the stock market right now. [Featured: Do Recession-Proof Stocks Exist???]( Our fourth and final metric is something called the S&P 500 Reversion Model. Now, the name itself makes it sound like it's the most complicated one. It’s really not, though. All it does is show us how far the market is from its historical trend line. The further away it gets from that average (orange line) the more expensive the stock market is. And vice versa. [Chart] The current reading shows that the S&P 500 is 30% above its historical mean. So, the market is still relatively overvalued based on this metric. Recommended Link [Secretive asset class withstanding stock market disaster - get in now]( [Ad Image]( The “era of abundance” is behind us… With stocks down 25%... and more pain on the horizon… Most people are likely to lose money this year. But for another group of investors – it’s a much different story: [A new type of millionaire is springing from the ashes.]( Their rapid rise has nothing to do with stocks… private investing… or real estate. Yet 1 million of these millionaires have been created in a single year. [Click here to discover what they’re buying (and how $50 lets you join them).]( -- What This Means for Your Money So, we got a positive reading on two out of four metrics above. This means that this still isn’t the time to dive in headfirst. What can you do? To start, consider investing smaller amounts over a longer period of time. We recommend investing a fixed amount of money on a regular basis, typically monthly or bi-weekly. This is what we call “legging in,” or “dollar-cost averaging.” You can also buy more when the stock market is cheap and less when it’s expensive. The tools I shared with you above can help you there. Just don’t beat yourself up if you can’t time the tops and bottoms perfectly. No one can. Ultimately, it comes down to another useful mantra: “Time in the markets is more important than timing the markets.” That’s because the longer you stay invested in the market, the more you increase the odds of making money from it. That’s regardless of what the Fed does in the short term. [Featured: Dr. Nomi Prins: “Musk spent $10 billion on these. This is bigger…”]( If you read the [August 9 Inside Wall Street]( you’ll know exactly what I’m talking about. As I showed you in that essay, if you stay invested in the stock market for 20 years or more, you’ll boost your chances of making money to 100%. And you don’t even have to wait that long. As long as you stay in the markets for at least five years, you can already boost your chances of making money to 80%. One way to take advantage of that is with the Vanguard S&P 500 ETF (VOO). This exchange-traded fund (ETF) tracks the S&P 500 Index. It allows investors to gain broad exposure to the U.S. stock market. It’s a straightforward investment you can access in a regular brokerage account. The fund doesn’t try to outperform the index. Instead, it aims to replicate its performance as closely as possible. And if investing in stock indexes isn’t your cup of tea, you may want to check out some long-term investment opportunities along the lines of our five distortion profit themes. Those themes are New Energy, Infrastructure, Transformative Technology, Meta-Reality, and New Money. For a quick recap on those, you can read [my earlier essay]( where I outline my thesis behind each of these. Happy investing, and I’ll be in touch again soon. Regards, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins P.S. At my Distortion Report advisory, I look for the best-in-class companies across our five distortion profit sectors. And right now, I’ve got my eye firmly on the New Energy sector. See, everybody is positioning themselves to profit from the coming revolution in how the world creates, consumes, and stores energy. $755 billion flowed into one particular energy shift this year. And Forbes predicts that number will surge to $130 trillion. You probably won’t hear about it from the mainstream media. Elon Musk is changing Tesla’s entire business model to capitalize on this energy revolution. But you won’t hear about that on the news, either. To find out all about it – and a way you can get in on the action – [just watch this presentation I recorded recently](. --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=Inside Wall Street Feedback). --------------------------------------------------------------- MAILBAG Last week, Nomi covered what’s happening in the crypto world (catch up [here]( and one reader thinks crypto is too volatile to be a replacement for the dollar… I like Nomi Prins’ spin on what's happening in the crypto world. My take on her view is that crypto is still too volatile to be used as an everyday working replacement for the dollar or the new Biden Bucks they are trying to force down our throats. I think the biggest hurdle is to have a trustworthy exchange and a trustworthy person running the company issuing the tokens. I'm also skeptical about the claims that a U.S. digital currency would let the government spy on us to the extent some are claiming. Because they deemed them an asset and demanded you keep track of and report your gains and losses, can you imagine the chaos that would result in the IRS if everyone used them for all their purchases? – William B. Other readers have recently written in support of bringing back the gold standard… There is enough gold in the world now but the “buy back” rate will help calm the market adjustment and it does take 10 years for new gold mines to start producing. – Gordon S. Do you agree with Nomi’s mantra: “Time in the markets is more important than timing the markets”? In markets like these, have you seen success with investing smaller amounts over a longer period of time? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Four Charts Every Investor Should Have in Their Toolbox). IN CASE YOU MISSED IT… [Holy Cow, Only $19!]( “Hi, my name is Jeff Clark. For the past 36 years, I’ve helped people from all walks of life make money in the markets. 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