This Could Be the 'Mother of All Melt Ups'

In today's Masters Series, adapted from the February 11, 2021 Digest, Dan explains how the chaos we're seeing in the stock market right now could lead to a sizable rebound once the downtrend reverses... compares today's volatility with past financial crises... and details how investors can survive this bear market as it drags on... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Master Series] Editor's note: More volatility is coming, but you still have time to prepare... Investors fled stocks in droves in 2022 as sky-high inflation and geopolitical conflict caused uncertainty to cloud the markets. But as the effects of the Federal Reserve's interest-rate hikes settle in, many desperate investors could be tempted to reenter the market this year – which means it's critical to have a sound investment plan before folks flood back into stocks... That's why Extreme Value editor Dan Ferris says it's crucial for investors to remain patient and start preparing their portfolios now so they can uncover buying opportunities once the stock market turnaround begins. In today's Masters Series, adapted from the February 11, 2021 Digest, Dan explains how the chaos we're seeing in the stock market right now could lead to a sizable rebound once the downtrend reverses... compares today's volatility with past financial crises... and details how investors can survive this bear market as it drags on... --------------------------------------------------------------- This Could Be the 'Mother of All Melt Ups' By Dan Ferris, editor, Extreme Value The "MAMU" is coming... And you should beware of its awesome power... What am I talking about exactly? The name for another pandemic? A new WWE wrestler? The latest trendy fast-food franchise? Nope, none of the above. It's an acronym for the "Mother of All Melt Ups." Yale-educated economist Ed Yardeni coined the term a few years ago in a blog post called "Party Like There's No Tomorrow." Here's what Yardeni wrote in his post... Now, as in 1999, there are mounting signs of irrational exuberance in the stock market. This time, there are also more signs of ultra-stimulative fiscal and monetary policies than there were back then. The combination could be fueling MAMU – the Mother of All Meltups. Now, I want to be clear... The MAMU isn't here yet... When I sent the link to the Yardeni blog post to some of my Stansberry colleagues in early 2021, analyst Alan Gula promptly sent back a chart of the Nasdaq Composite Index. The chart showed that the dot-com peak in March 2000 was a three-plus standard deviation move above the long-term trend (based on a regression of the Nasdaq Composite since its inception in 1971). Meanwhile, the current level of the Nasdaq is not even two standard deviations above the long-term trend. By that measure, the dot-com bubble still holds the MAMU title... To me, this indicates the MAMU lies ahead. I agree with investor Jeremy Grantham, who previously said he expects the next market peak and aftermath to resemble those of 1929 and 2000. The current moment is certainly loaded with examples of speculative froth... I hardly know where to begin... --------------------------------------------------------------- Recommended Link: [March 2: 'Get Ready for a U.S. Dollar Collapse!']( That's the newest warning from a 20-year market veteran who nailed the 2008 Lehman collapse and 2021 Nasdaq crash. He says a once-in-a-lifetime financial event is about to impact nearly every asset you own. Your cash, stocks, bonds... even your real estate is now in jeopardy. And the decisions you make on March 2 could impact your wealth for the rest of your life. [Click here for full details](. --------------------------------------------------------------- Struggling video-game retailer GameStop (GME) is the craziest example to date. The stock rose as retail investors posting in Reddit's WallStreetBets thread drove the share price up, causing large hedge funds like Melvin Capital to buy the stock to exit short positions. Melvin reported a 53% loss in January 2021 as a result. While some counted the episode as a victory for the little guy, I never saw it that way. I knew they'd mostly get crushed, like they always do in speculative manias. When a stock price goes straight up like a rocket ship, it's practically guaranteed to turn right around and fall straight down – very soon. This is what bubbles look like... The more stock charts you see that look like ballistic missiles, the more 90% crashes you'll see shortly afterward. Sooner or later, the big indexes will look the same way. Another classic bubble-era development is the 'star fund manager syndrome'... For example, during the "go go" 1960s market mania, Gerald Tsai was that manager. I can barely do justice to John Brooks' telling of the details about Tsai in the must-read classic, The Go-Go Years, but I'll give you the highlights... Tsai was born in China and moved to the U.S. in 1947 after graduating college in Shanghai. His father worked for Ford Motor (F), and his mother was a stockbroker (an interesting story itself). Tsai went to work for Fidelity in 1952. Brooks describes him as, "brisk, practical, ambitious, energetic, logical, aggressive – almost the very model of a modern Yankee trader." According to Brooks... He showed himself to be a shrewd and decisive picker of stocks for short-term appreciation, and so swift and nimble in getting into and out of specific stocks that his relations with them, far from resembling a marriage or even a companionate marriage, were often more like those of a roué with a chorus line. Tsai was famous enough to drive stock prices up if it was learned he was buying, just like the famed Jesse Livermore in the 1920s. In 1957, Fidelity put Tsai in charge of the Fidelity Capital Fund, the firm's first speculative public growth fund offering. He took large positions in then-speculative names like Polaroid, Xerox, and Litton Industries. He badgered brokers to assemble large blocks of stock and warned them not to move the price in doing so, or he would give someone else the trade. The fund's turnover exceeded 100%, meaning it sold every share it bought before the year was over. The high turnover and concentration in relatively few speculative names were unheard of at the time. With Tsai at the helm, the fund returned 285% over its first seven years. Tsai owned 20% of Fidelity by the time he sold his company stock for $2.2 million and left in 1965 to set up his own shop in New York. He set out to raise $25 million from investors and raised nearly 10 times that amount – $247 million. Coincidentally, Tsai started his new project, called the Manhattan Fund, a few weeks after the Dow Jones Industrial Average peaked, ending the 1960s bull market. His name was still gold, though, and he'd attracted $500 million in assets by mid-1968. Tsai made a very respectable 39% in the first year, but seven years after it began, it was down 70% – the worst mutual fund in existence at the time. And Tsai saw the writing on the wall as his fund began to falter. In August 1968, he sold the fund to CNA Financial for $30 million. And he was off. Tsai went on to greater successes, eventually becoming a billionaire as well as the first Chinese-American CEO of a Dow Jones Industrial company: American Can Company. Cathie Wood is the Gerald Tsai of today... And Wood's firm, ARK Investment Management, is the new Manhattan Fund. Wood has been profiled in the mainstream financial press over the last few years or so, given her fund's eye-popping returns and the sectors that it invests in. Wood founded ARK in 2014 to invest in "disruptive innovation." By 2018, it had $1.2 billion under management. By the beginning of 2020, ARK had $3.1 billion under management. The world went nuts for its products in 2020, and today, it manages around $12 billion. Just look at the names of the exchange-traded funds ("ETFs") it offers, and you'll understand why investors fearful of missing out are shoving money at it as fast as they can... - ARK Innovation Fund (ARKK) - ARK Next Generation Internet Fund (ARKW) - ARK Genomic Revolution Fund (ARKG) - ARK Autonomous Technology & Robotics Fund (ARKQ) - ARK Fintech Innovation Fund (ARKF) - 3D Printing Fund (PRNT) - ARK Israel Innovative Technology Fund (IZRL) Go look up every ETF listed above. Every single one has that same ballistic trajectory... Every. Single. One. Here's a chart of all of them together (which frankly mutes the uniform ballistic-ness of a couple of the individual charts, but you get the picture). The 3D Printing Fund is the second-worst performer. The ARK Innovation Fund went up 150% in 2020. The ARK Genomic Revolution Fund rose 180%. Ballistic. By looking at the charts of the ARK funds above, you have to conclude that Wood is either the greatest investment genius in the world or that she and her firm are the Mother of All Signs of an Impending Top ("MASIT"). Wood is perhaps best known as a vocal Tesla (TSLA) bull... And it's no surprise that Tesla is the largest holding of three ARK funds: ARK Innovation Fund, ARK Next Generation Internet Fund, and ARK Autonomous Technology & Robotics Fund. A popular stock, a star fund manager, and her firm. It's so perfect. It's often said that history doesn't repeat, it rhymes. Clearly, sometimes history repeats so perfectly, you can just keep the same script and change the characters' names. It's like Wood read a book on asset bubbles and set out to get a starring role in the next one. I admit that founding her company based on disruptive-technology investing in 2014 was a stroke of genius. But I am 100% certain the ballistic trajectories of her ETFs and ARK's assets under management absolutely, positively will reverse course in the not-very-far future. And like I said before, ballistic trajectories don't level off and go sideways. They turn around and fall back to Earth. To anyone who knows even a little market history, it looks like Wood and her team went back to the great financial crisis, tried to figure out how the bankers almost broke the system while making themselves piles of money, have chosen today to ignore the "broke the system" part of the outcome, and are doing it all over again. During the financial crisis, it wasn't housing and mortgages that crashed the system. It was mortgages sliced, diced, and leveraged into structured finance vehicles called CDOs, or collateralized debt obligations (among other toxic ingredients, including highly levered bank balance sheets and sinister lending practices, to name just two). We'll skip the details of what happened with CDOs during the financial crisis. Just know a lot of it wasn't good... and that Wood and ARK are doing the same thing today, except the underlying asset isn't the trusty U.S. 30-year mortgage. It's ARK's ballistic, bubbly looking, sexy-named mutual funds. I keep telling myself I have to stop writing all this bearish stuff... It wouldn't surprise me one bit if the market ripped for another year or so before crashing horrendously. If I'm too bearish, it might make me look like an idiot. That's not how I want hundreds of thousands of loyal Stansberry subscribers to see me. But the signs are everywhere and ignoring them won't make them go away... That's why I say prepare, don't predict. If you prepare your investments the right way... if you spend less than you make... and if you allocate your assets across a truly diversified portfolio of stocks and bonds, plenty of cash, and stores of value like gold, silver, and bitcoin, or put options on the big equity indexes... In other words, if you understand that the party will end... you can still find ways to profit in today's turbulent market. Your portfolio will survive the bear market and be around for another day... and the one after that. Good investing, Dan Ferris --------------------------------------------------------------- Editor's note: Dan says this ongoing chaos isn't the only thing investors should prepare for right now. He believes a rare market event is about to happen... one that could impact every asset you own and make or break your wealth for years to come. That's why he's hosting an online presentation on Thursday, March 2 to reveal how folks can prepare for what's coming. You can't afford to miss out on this event, especially if you have cash in the bank. [Click here to learn more](... --------------------------------------------------------------- Recommended Link: [Pentagon Consultant: Here's How Biden Wins Landslide Reelection]( The forensic accountant who consults for the U.S. Pentagon, FBI, and Marines says a surprising July 25 "twist" could make many Americans vastly wealthier... but also hand Joe Biden a landslide reelection win. Full story, including four steps you can take to protect your money, [detailed here](. --------------------------------------------------------------- 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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