My First Short Recommendation Since 2020

Violating the laws of physics... Wisdom from Jackson Browne... How manic markets always end... My first short recommendation since 2020... The power of 'creative destruction'... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Violating the laws of physics... Wisdom from Jackson Browne... How manic markets always end... My first short recommendation since 2020... The power of 'creative destruction'... --------------------------------------------------------------- Say you have one wish... We've all heard and seen versions of this thought exercise before. You might have seen one on social media depicting buttons next to options like great wealth, a long life, property, a happy marriage, and so on, along with the question: "Which button would you press if you could only press one?" Most of the time, this question is thrown out lightly. But I (Dan Ferris) also see a serious lesson to be learned from this exercise, which applies directly to investing (among other aspects of life). Quizzes about wishes and magic buttons seem to be metaphors for only having one life to live... But the effortlessness of wishing and pushing buttons makes the metaphors fail. When you only have one life, you don't contemplate what you'd want without effort. You contemplate what you'll quite literally give up your entire life to achieve. You can't do everything, and you will die one day, so you'd better use your time well. So the right answer is that I wouldn't wish for anything... I don't want free stuff, because nothing in this universe is free, not even the air you breathe. Any of the many trained medical professionals reading this can tell you exactly how your body pays for every breath it takes. Nothing is free... Everything comes from somewhere. "Free" violates the laws of physics. The magic button can't create wealth or happiness out of nothing... just like how Congress can't give Americans "free" money without getting it from somewhere. The real question then is, since there are no wishes or magic buttons, what is worth all the blood, sweat, and tears you'll spill over the rest of your life? Rather than the "one wish" game, there's a more challenging philosophical question that better reflects reality. Ever heard the one where two of your loved ones are drowning, and you can only save one? Most of our realities are less brutal, but this exercise acknowledges that the life you want will probably cost you more than you think. Whatever you want, you'll give up a lot of life to get it, so choose your path wisely. There's a great old song by Jackson Browne called "The Fuse." It says: Whatever it is you might think you have, you have nothing to lose. For every dead and living thing, time runs like a fuse. And the fuse is burning. And the Earth is turning. That's how the world works. Time is burning like a fuse, and one day, the fire will go out. How will you spend the interim? Each day is one little life... That's how my friend, the investor and author Vitaliy Katsenelson, expresses it. This approach can help you live every day to the fullest. You're born when you wake up, die when you go to sleep, and one complete little life happens in between. Living a whole life each day must include the lifelong pursuit of building wealth through saving and investing. That doesn't happen by making a wish or pressing a button. It requires discipline and focus. You can't afford to waste a minute of your life, and you can't afford to waste a dollar of your accumulated savings and investments. Losses are inevitable for investors. The only way to avoid them is to stay out of investing altogether, and as I've explained before, that's a losing game as well. But failing to build sufficient wealth over time is intolerable. You can't work forever. If you want a high standard of living beyond your working years, you must invest successfully. Warren Buffett's famous quote about the only rules of investing is your long-term blueprint: The first rule is don't lose money, and the second rule is to follow the first rule. The one point where I might depart from the wisdom of Jackson Browne is that, as an investor, whatever wealth you have, you really do have something to lose. You can't afford big, catastrophic losses. We talked [last week]( about how to avoid them with strategies like stop losses and value investing. I'm telling you this now because the current moment seems like it's begging you to prepare for a tough time in the stock market... For example, consider the recent curious mix of hyper-bullish comments on the social platform X, combined with concerning technical action and egregious overvaluation. The folks at the Kobeissi Letter reported... The S&P 500 just posted its best weekly streak in 35 years. The index has increased in 23 of the last 30 weeks, a joint record since 1989, according to Deutsche Bank. Should the S&P 500 close up this week, it would mark the 24th weekly gain out of 31 previous weeks, a performance last seen in 1963. During this period, the index has rallied by 25% and added ~$12 trillion in market cap. This is one of the strongest markets of all time. Tolou Capital Management founder Spencer Hakimian said... When the S&P 500 is up +10% in the first 100 trading days of the year, it has never ended the year in the red. On average, the rally from day 101 to year end has been another +9%. There was only 1 occasion, 1987, where the rest of the year after day 100 had a negative return. If history is any guide, strong equity gains may be in store for the rest of 2024. How could anyone possibly expect anything but more gains? The rearview mirror is filled with them. An X account called Global Markets Investor commented... The S&P 500 has hit 24 all-time highs this year, the most since 2021. Since March 23, 2020, the index is up by a MASSIVE 130%. The simple fact that the S&P 500 is within 1.5% of a new high tells me how most folks feel about stocks. And it's an election year, which most folks will tell you is bullish. The Federal Reserve is (bizarrely) talking about cutting interest rates, which most folks think is bullish (even though history clearly indicates it's more often bearish). Nobody thinks the market will drop. And yet some analysts are finding the market's action and valuation to be quite concerning right now... Analyst Dean Christians reported on Wednesday... For the first time in history, more than five NYSE issues declined for every one that advanced in 2 out of 4 sessions, with the S&P 500 less than 1.5% below a multi-year high. That same day, economist David Rosenberg pointed out how expensive U.S. stocks are right now (I'll explain his technical phrasing in a moment)... A 3-point multiple expansion from Oct-May is a near-2 SD event and at ~21x on the fwd. P/E, this is the top decile overvalued equity markets of all time. What Rosenberg means is that S&P 500 earnings per share rose 6% over the past 12 months while the index rose 26%, which increased the index's earnings multiple by 3 percentage points in just a few months. A "near-2 SD event" means stocks have rarely gotten so much more expensive this quickly. "Top decile" means that in the history of the benchmark stock index, based on its forward price-to-earnings ratio, it has only been more expensive 10% of the time or less. Finally, our friend Jason Geopfert at SentimenTrader.com recently reported... The cumulative number of technical warnings on the Nasdaq is stacking up. It has now reached a level exceeded only 3 other times since 1986: * The peak in 1990 * The peak in 2000 * The peak in 2007 I can understand if all these facts and figures leave you wondering if you're supposed to be super excited that stocks are roaring upward... or worried that stocks are egregiously overvalued and that the trend might be weakening. Which one is it? Or is it both...? Who doesn't like to watch their 401(k) hitting new highs? And who, especially among older folks, doesn't worry about their nest egg daily no matter what kind of market we're in? The strong market heralds and the worrywarts are saying the same thing... Today's investors have the bit of speculation firmly in their teeth, and they're galloping for the finish line with everything they've got. It's normal for it to go on longer than anybody expects. But don't forget that manic markets always end poorly. We have no reason to suspect this one will let us off the hook. At this point maybe you want to ask, "Dan, if stocks are so expensive and the market is weakening, then why don't we just sell it all now and wait for the crash?" My answer is another question: "Who said anything about a crash?" I only said manias tend to end poorly. I have no idea if it'll be a crash, a long bear market, a long sideways market, some combination of all of the above, or something else I can't fathom right now. But OK, yes, I've frequently pointed out that U.S. stocks have performed poorly at times over the past century after trading at current valuations... and I always follow that up with, "Prepare, don't predict." You can't base your investments on predictions because you can't know the future. We humans cling to our knowledge and our ability to know things with certainty like we cling to life itself. We should learn to accept that we live in a world we don't understand and that we don't know anything about the future. The best you can do is to understand that when valuations are this high, risk is higher. Higher risk means a wider range of likely outcomes. In other words, you need to be better prepared for inflation, recession, stagflation, war, political upheaval (in the U.S. and globally), and other troubling scenarios than at any time in the past few decades. My friend Chris Mayer, an investor and author, says "right now" is always the hardest time to invest. That's wise, but I can't help feeling like "right now" is harder than the period from 2009 to 2022. The long decline in interest rates is over. The next four decades are unlikely to resemble the past four. I can't avoid considering the macro factors like I listed a moment ago, at least until the market has undergone a substantial correction in valuations. Whether that happens by earnings rising unexpectedly rapidly or by prices falling steeply is not up to me. I'm just saying that macro factors tend to matter more when the market is teetering at nosebleed valuations. I actually don't like having to pay so much attention to such things. Just like life is poorly represented by wishes and magic buttons, investing isn't supposed to be about the macro picture. It's supposed to be a bottom-up quest to find great businesses you can hold for the long term. It's supposed to be about being frugal and prudent enough to save and invest for the future. But I only live in the world. I'm not God. I didn't create it and I can't make it do what I want. My usual strategy is struggling right now... I've spent most of my nearly 24 years with Stansberry Research looking for great businesses to buy and hold for the long term, but that task has become much harder than normal... Mike Barrett and I have issued six stop-out alerts since March in our Extreme Value newsletter. That means we're now holding fewer names and have fewer current recommendations. Clearly, we haven't recommended any of the handful of popular mega-cap names keeping the market propped up. Though it looks like a mistake right now, I'm confident that'll invert and look a lot smarter in the months ahead. Every month, Mike and I search for great businesses selling for less than we believe they're worth, which means the market pricing is too pessimistic. And with the current market mania, they're getting much harder to find. But for our upcoming June issue (publishing next Friday), we're not buying. For the first time since September 2020, we're shorting. We've found a few stocks that we believe are "dead companies walking," to use investor/author Scott Fearon's phrase (and the title of his excellent 2015 book on short selling). We're still finalizing our research, but we expect to add at least one of these stocks to our model portfolio next Friday. The companies we've found are deteriorating financially. Investors are jumping ship. And we see little chance of a turnaround for any of them. (Like Warren Buffett once said, "Most turnarounds don't.") Mike and I don't really like to short stocks. Unlike buying and holding great businesses, timing is far more important for short sellers. And while you can make many times your money going long, the most you can make going short is 100%, and that's only if the company goes bankrupt. We'd much rather spend our time looking for great businesses with tons of free cash flow, consistent margins, great balance sheets, dividends and/or buybacks, and high returns on capital. But we've scoured our universe of about 3,000 stocks, and the ones we haven't already recommended are too expensive. So we're turning to the short side. This will hedge our exposure to an overvalued market... But more important, it will exploit the power of what economist Joseph Schumpeter famously labeled "creative destruction." That's the process of constant innovation and business development that overturns the previous order and replaces it with newer, better products and services. It's the old leaving the market, making way for the new. Given the enormous speculative binge in the U.S. stock market that has been roaring for most of the time since 2017, we figure there's quite a bit of misallocated capital... a lot of old ways (or even new ones) that just didn't make it in the marketplace. In the aftermath of mega bubbles, they get wiped out and eventually replaced with new businesses. So we're looking for the weakest businesses... the ones we believe are more likely to go under or at least need a massive new capital injection in the coming year or so. As difficult as the timing and selection of good short-sale candidates may be, we believe right now is a better-than-average time to start looking on the short side. We're intent on making the most of an opportune moment while it lasts. I recommend you do the same. --------------------------------------------------------------- Recommended Links: [Doc Eifrig: 'I'm Staking My ENTIRE Reputation on This']( Dr. David "Doc" Eifrig has successfully navigated every crisis you can imagine in 40 years as a financial pro: the 1987 "Black Monday" crash... the dot-com bust... the great financial crisis... and the COVID-19 panic. But he says THIS coming event will top them all. And he's sharing the most important new work of his life. For a short time only, [get the full story here along with a special gift from Doc](. --------------------------------------------------------------- [Last Chance Before June 1 (Tomorrow)]( The most powerful group on Wall Street has spoken. Now you have just days to move your money before this group triggers a wave of dramatic price shocks. Five individual stocks have been flagged for massive potential gains, while dozens of others have been doomed for extraordinary 50% to 90% losses. To understand the difference – and exactly what's coming to the U.S. stock market this summer – [see this before midnight tonight](. --------------------------------------------------------------- New 52-week highs (as of 5/30/24): ABB (ABBNY), Arhaus (ARHS), Cameco (CCJ), Costco Wholesale (COST), Crocs (CROX), Enstar (ESGR), and Eli Lilly (LLY). In today's mailbag, your feedback on Digest editor Corey McLaughlin's inaugural quote of the week from [yesterday's edition](... What do you think? Have a question or comment? As always, e-mail us at feedback@stansberryresearch.com. "Love the quote of the week idea." – Subscriber Jay R. "I do like the concept, if the [Morgan] Housel quote was any indication of the significance." – Subscriber Bill B. "I read Housel's book, The Psychology of Money, and found it well worth the time. The advice that is thrown at us (the intended audience and intended customer of advice services) does not connect to our timelines, except by chance. (An exception being your services as you indicate recommendations come with a kind of goal/timeline.) Even more importantly the advice given does not connect to our values. What do we want our money/investment to do for us? That is a question that only we can answer. "The author lays out specific questions. These I am answering after reflection. (The more specific, the better.) Also, we need to allow for changes as our values tend to change over the human lifetime. It's a truly useful book... Emotionally freeing. (Mistakes are human, some are actually good long term). Glad to see you reference it. I highly recommend it." – Subscriber Doris H. Corey McLaughlin comment: Thanks for the feedback. I'll look to keep the quotes coming. Good investing, Dan Ferris Eagle Point, Oregon May 31, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,362.9% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,319.6% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 876.1% Extreme Value Ferris WRB W.R. Berkley 03/16/12 724.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 624.5% Retirement Millionaire Doc HSY Hershey 12/07/07 477.4% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 446.5% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 419.3% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 379.9% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 364.7% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,719.2% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,245.8% Crypto Capital Wade MATIC/USD Polygon 02/25/21 807.8% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 424.3% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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