From Mega-Bubble to Hypercycle

We're still living in the meme-stock bizarro world... 'Danger Will Robinson! Raise Equity Now!'... Leaving the casino without being totally wiped out... From mega-bubble to hypercycle... Why a bullish trend in this commodity is inevitable... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] We're still living in the meme-stock bizarro world... 'Danger Will Robinson! Raise Equity Now!'... Leaving the casino without being totally wiped out... From mega-bubble to hypercycle... Why a bullish trend in this commodity is inevitable... --------------------------------------------------------------- I (Dan Ferris) have gotten one thing horribly wrong over the past year or so... I've underestimated the financial staying power of stubborn, uninformed investors who are laser-focused on the worst garbage stocks in the market. Today, I really want to say one more time that they'll all be gone in another year or two. But I don't want to make the same mistake again. Consider AMC Entertainment (AMC)... The debt-loaded, "meme stock" movie-theater chain has sold its unwitting (and perhaps completely witless) shareholders millions of shares worth of garbage securities with zero intrinsic value. It has doomed them to a permanent loss of capital if they keep holding. These shareholders are a lot like the folks who chased Bed Bath & Beyond (BBBYQ) all the way to bankruptcy in April. I called that group the "world's dumbest investors" [in February](. (I'd be nicer to AMC shareholders. But they're real jerks on social media, especially to anyone who points out the obvious – AMC is a zero.) AMC's unwitting shareholders always want more of the company's stock, no matter what. They buy every dip. So the stock surges after a development that should make it collapse. On Monday, AMC shareholders reminded everyone that we're still living in the meme-stock bizarro world... The company's stock soared as much as 42% that day. But the thing is... the surge happened after AMC shared another bad development. In short, on Sunday, AMC CEO Adam Aron wrote an "open letter to shareholders" on Twitter. Aron told shareholders very clearly that the company needed to raise equity to avoid failing. In the opening sentences of his letter, he framed self-congratulations with three dire warnings that the company must raise capital to survive. As Aron wrote... Raising fresh equity in the near term is critical to our company... In leading AMC through this once-in-a-century pandemic and its aftermath, I have been driven by this over-arching goal: Do not let AMC fall into financial ruin, ensure that AMC survives, put AMC on a path to eventually thrive. Along the way, I have done my utmost to be transparent with AMC shareholders, and am doing so again right now. AMC must be in a position to raise equity capital. I repeat, to protect AMC's shareholder value over the long term, we MUST be able to raise equity capital. The repetition about needing equity capital reminds me of the iconic line from the robot in the old Lost in Space TV series. I can just picture Aron shouting to the shareholders... 'Danger Will Robinson! Danger! Raise Equity Now! Raise Equity Now!'... Talk about awkward. Aron is essentially saying... I've done everything right. Just look at everything I've done. So as MC Hammer would say, "Can't touch this." But we need to dilute your interest a whole lot more than we already have. Otherwise, this poor, sad, and worthless company will finally go bankrupt. Let's get something clear so we're all on the same page... Investors should do one thing in these situations. If you're holding a stock that has already been diluted roughly 10-fold (from 52 million shares outstanding at the start of 2020 to 519 million outstanding today)... and the CEO tells you the company must raise more equity or it will go bankrupt... and the business is hemorrhaging cash and very likely always will... You don't buy more of the stock. You accept your mistake, sell every share you own, and move on. But AMC shareholders – self-proclaimed 'apes' – don't understand that... Instead, they seem to think Aron's dire warning was the best possible news. How else would you explain an intraday share-price rise of as much as 42% on Monday? And yes, I'm aware that the stock was up as much as 70% before the markets opened this week due to a Delaware court ruling on Friday. The court stopped a plan that would convert AMC's APE shares – [the company's preferred equity units]( – into regular common shares (since that's what they've been all along). It doesn't matter why you think the stock rallied. It only matters that it rallied significantly on the same day the CEO told the whole world that the company would go bankrupt if it didn't raise equity capital very soon. That's a tell-tale sign in the meme-stock bizarro world. Today, AMC's common stock trades at about the same price as last Friday (and before Monday's surge). That's ludicrous after the bankruptcy warning in plain English on Sunday. Aron's declaration should've sent the value of AMC's shares well below $1. Instead, its shares are still in the mid-$4 range. Adding in the value of AMC's preferred shares, its total market cap is more than $7 billion today. That's a lot more than zero! So you can try to tell me the stock rallied because of the court ruling and not the letter. But court ruling or not, you can't tell me it makes the tiniest bit of sense that AMC's shares didn't plummet when the CEO said the company will go bankrupt without "fresh equity." Once again, those poor, sad, and ignorant meme-stock fools saved the company's bacon for a little while longer. They breathed a few days more of life into its worthless stock. It's like I said at the start of today's Digest... These stubborn, uninformed investors' ability to stick with a stock that's highly likely to lose all their money is astonishing. Their confidence in their ability to push the stock around enough to keep the company afloat is breathtaking – but of course, ultimately misplaced. The apes just don't understand that the Delaware court ruling isn't a signal at all... It's neither a buy signal nor a sell signal. Whether APE shares convert to regular AMC shares or not has no effect on the real reason the company is headed for bankruptcy. Aron acknowledged this fact in his letter... The conversion might help the company raise equity, keeping it alive for a little while longer. But it's not headed for bankruptcy because the Delaware court won't let it convert one class of shares to another. It will go bankrupt because the business is failing. Aron proved that he knows everything I'm telling you is true by using the word "bankruptcy" three times in the letter. He was talking about "the risk of financial collapse" similar to bankrupt movie-theater chain Cineworld and bankrupt fellow meme-stock Bed Bath & Beyond. I mean... it's not even subtle. Aron is explicitly comparing himself with a bankrupt movie-theater chain and another failed meme-stock company. And he's incessantly repeating the need for raising new capital. Here's the third mention of bankruptcy in Aron's letter... AMC Entertainment must put ourselves in a position to be able to raise equity capital. That is what will make it more likely that first we survive and then that we thrive. Indeed, over the last several years, there has been an enormous short share position in AMC stock. In my view, the wisest way to defeat that short thesis is to take bankruptcy risk off the table, to the extent possible. And we do that by AMC being able to raise equity if, as, and when needed. Elsewhere in the letter, Aron writes that AMC must roll over its debt starting early next year. And the company won't be able to do that if it doesn't raise equity capital. We're watching a bad horror movie... AMC shareholders are like the poor, doomed fools on the screen. You know, the characters who start out full of bravado and sex appeal. But in the end, they cower in the wrong hiding place before meeting their inevitable and gruesome end. The moral of the story is simple... When AMC rallied instead of plummeting Monday, it became clear to me once again... The biggest financial mega-bubble in all recorded history isn't over yet. When it's over, AMC's apes will flee the stock market. And they won't return for a decade or more – if ever. Though this saga has persisted longer than I would've guessed possible, it can't go on forever. Sooner or later, the fundamental reality of owning equity in a business that's going bankrupt will have to assert itself and finally obliterate the last of AMC shareholders' capital. People can't withstand infinite losses. That's the most heartbreaking aspect of the AMC story. It's hard knowing that these stubborn shareholders are very likely the type of people who can least afford to do that. You don't put your money into a company like AMC if you know a lot about business and have already built plenty of wealth. You put your money into AMC if you know little about business and love to gamble. While I don't want to make a prediction about how long it'll take for all this to unravel... Folks who've stubbornly held onto garbage stocks are finally showing signs of exhaustion... A couple weeks ago, the Wall Street Journal noted that ARK Innovation Fund (ARKK) shareholders are bailing out of their failed investment in Cathie Wood's flagship exchange-traded fund ("ETF"). Specifically, the Journal reported that... [Investors] have pulled a net $717 million from the ARK Innovation ETF over the past 12 months, according to FactSet. That exodus marks a notable shift for a fund that had consistently drawn investor cash since its 2014 inception. Astute Digest readers will remember that ARKK peaked at a closing price of $156.58 per share on February 12, 2021. Notably, that was [one day after I first warned about it](. Since then, ARKK has closed as much as 81% below its peak. It's now trading about 65% above its December 28, 2022 bottom of $29.64 per share – but it's still nearly 79% below the peak. In other words, folks who held through an 81% drawdown are now up around 65% in seven months. But over the long term, they're still sitting on massive losses in the ETF. And the recent rally hasn't bolstered their confidence in ARKK. Rather, it has given them an opportunity to exit with slightly less of a gigantic loss – and perhaps slightly more dignity. Their mentality changed from confidently buying every dip to desperately searching for an exit... As we look back at this moment a few years from now, maybe we'll say... That was it. That was when the sideways market began. And it was the moment the U.S. stock market switched from "buy the dip" to "sell the rally." If ARKK is the bellwether for the average uninformed investor's appetite for cash-burning tech companies, maybe it tells us that these folks have finally had enough. It would certainly make sense for such a trend to start among the garbage stocks. Then, it will spread like a virus to everything else. That's how the latest bear market started... ARKK peaked in February 2021, roughly the same time as bubbles grew in clean energy, cannabis, and special purpose acquisition companies ("SPACs"). Then, the whole Nasdaq Composite Index peaked in November of that year. And finally, the Dow Jones Industrial Average and the S&P 500 Index peaked within the first couple trading days of 2022. So maybe now it's happening all over again. But instead of selling out at the top this time, investors are bailing out because they feel like they've won enough back to leave the casino without being totally wiped out. I've said a lot about the ongoing financial mega-bubble in the Digest this year... But I haven't spent much time on what comes next. So let's do that now... If you made money in the long bull market in stocks and bonds that started topping out in 2020, congratulations for getting it right. But that's over. Now, the question is, "What trend is in its earliest stages as the biggest financial mega-bubble in all recorded history continues to top out?" My favorite answer right now is... A commodity hypercycle. You've probably heard the term "supercycle" before. In simplest terms, it's a long period of rising commodity prices in which large amounts of capital pour into commodity production. These events are so important (and can be so lucrative) that we created an entire research service to exploit them. As regular readers know, it's called Commodity Supercycles. A hypercycle is a supercycle on steroids. I can't predict the future. But if I'm right about the coming commodity hypercycle, it'll likely include a combination of larger commodity-price moves than in previous supercycles and a longer bull market in commodities than previous supercycles. That's the hypercycle. Why am I expecting a commodity hypercycle and not just a supercycle or bull market? Think of Newton's third law of motion... For every action, there is an equal and opposite reaction. The biggest financial mega-bubble in all recorded history sucked capital out of commodity-based industries and into ephemera like cryptocurrencies, non-fungible tokens, and all manners of software-based businesses. So now, it's reasonable to expect the next big, decadelong movement of capital will go into commodity-based industries. An equal and opposite reaction would generate the biggest commodity hypercycle ever. If I'm only half right about that, we're still looking at a serious bull run for commodities. As that opportunity unfolds, you could make five to 10 times your money without a sweat – and possibly as much as 50 to 100 times your money with a lot of sweat. At the Rule Symposium in Florida on Monday, I spoke about one commodity in particular... Copper. Humans have used copper in meaningful quantities longer than any other metal. It has been around for more than 10,000 years. And we've mined about 700 million metric tons of it. At a conference in Africa last year, mining entrepreneur Robert Friedland estimated that we'll need to mine another 700 million metric tons of copper in the next two decades. During a similar event in Chile last year, mining analyst Erik Heimlich estimated that the world would need to increase its annual production capacity by the equivalent of eight Escondida mines over the next eight years. (And we'll need even more after that.) If you're not a mining expert, you need some more context to understand that last line... Escondida is the world's largest copper mine. It's capable of producing about 1.4 million metric tons of copper per year. That's more than the next two largest mines combined. Much of the new demand comes from global governments. They're mandating the use of electric vehicles and so-called "green" power-generation technologies (like solar and wind). The trouble with Friedland's and Heimlich's predictions is that the world doesn't have anywhere near that much copper-production capacity. Analysts at S&P Global estimate that copper production will be nearly 10 million metric tons short of annual demand by 2035. Even worse, the current copper price of less than $4 per pound isn't enough to incentivize new production... The key price for bringing new copper production on line is roughly $5 per pound. And historically, capital doesn't really flow into the industry until the market price reaches two times that price – or roughly $10 per pound. Copper exploration has fallen off a cliff... Last year, market-intelligence firm S&P Global put together research on 228 copper discoveries from 1990 to 2021. And its data shows a big discrepancy over that period... On average, companies made around 10 discoveries per year in the first half of that period. Then, they made less than four discoveries per year, on average, over the second half. Now, you've probably heard us say before that low prices are the cure for low prices... In other words, the longer copper stays low... the more the supply will fall short. And that will virtually guarantee a rise in copper prices to a level that incentivizes new production. So a bullish trend in copper prices might not be imminent... But it's absolutely inevitable. You can't have a modern economy without copper. It's everywhere. It's in every modern building and every modern vehicle. Wherever there's electricity, there's copper. Silver and aluminum both conduct electricity. But they aren't viable substitutes. Silver costs about 100 times more than copper, and aluminum doesn't conduct electricity as well. I've learned a lot about copper over the years. And I'm most excited by the fact that you don't need to take big risks to make five to 10 times your money in the space... You can do that by simply owning the biggest, best-run, cash-gushing, dividend-paying companies with the best assets and best business models. Everything I've told you about copper in this Digest is just a small part of the research I shared in the current issue of The Ferris Report. I also included a copper stock in my Extreme Value Commodity Hypercycle Portfolio (for Extreme Value Premier subscribers). In the end, I hope you understand what I'm saying... I'm all-in on copper as we emerge on the other side of the biggest financial mega-bubble in all recorded history. It's an excellent long-term opportunity. I recommend looking into it. --------------------------------------------------------------- Recommended Links: [Must See: Incredible New Stock-Predicting AI System]( The financial industry is the next in line to be completely disrupted by artificial intelligence. And leading that charge is a groundbreaking AI algorithm called An-E. What makes An-E so revolutionary? There are two reasons: 1) An-E can predict stock prices four weeks in the future with incredible accuracy... and 2) it's specifically designed for the everyday person – NOT Wall Street. And you can begin using it today on 3,000 stocks. [Click here to see it in action](. --------------------------------------------------------------- [Have You Claimed Your Spot for Vegas Yet?]( The 2023 Stansberry Conference is shaping up to be our best event of the year. We've booked incredible big-name speakers, added new amenities, and prepared a few surprises, too. [Reserve your ticket today before they sell out](. --------------------------------------------------------------- New 52-week highs (as of 7/27/23): Covenant Logistics (CVLG), Commvault Systems (CVLT), Alphabet (GOOGL), New York Community Bancorp (NYCB), Invesco S&P 500 BuyWrite Fund (PBP), Textron (TXT), and Vicor (VICR). In today's mailbag, we're sharing more feedback on Federal Reserve Chair Jerome Powell's latest press conference that [we recapped on Wednesday](... and a thoughtful, insightful note on Digest editor Corey McLaughlin's recent reports ([here]( and [here]( about the box business. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "[Wednesday's] article makes me think of Harry Truman referring to economists: 'I'd like a one-armed economist, so he can't always say, 'On the other hand...'" – Subscriber Steve S. "Corey's features on the box-making business have been heartening to me because I've been part of it for 40 years. We generally don't get very good press and the perception is of an industrial backwater but I can tell you that making boxes has made a lot of people extremely happy over the years. I'll never forget one of my son's friends coming to our place for a barbecue a few summers ago and when he walked through the door he couldn't hold back his feelings and said instinctively 'Wow, all this from cardboard boxes?' "But although my company makes corrugated boxes we are at the opposite end of the spectrum from [Packaging Corporation of America] because our business is making and selling boxes by the tens of thousands whereas they sell boxes by the tens of millions. We are in a very specialized industrial segment of the market and as well as supplying the U.S. market we export our products to many far-flung corners of the world. "When the pandemic arrived I have to admit I was a little smug about it all because while restaurants and bars were closing we were still very busy and then it hit us. The fact that we ship in container loads meant we were at the mercy of the international logistics industry and when it all went pear-shaped, little companies like ours, which send one container at a time, were (literally) sidetracked so the big players, the Amazons, etc., could continue their high volume shipping without too much interruption. "Some of our customers in the Far East had to wait six months between us dispatching their orders and them being received. Our boxes are good, but not that good, and clearly if the customer can't get the product, they go elsewhere. I had people from overseas who had dealt with us for 15 years or more calling me at all hours of the day and night to say how sorry they were to be moving their business, but if they couldn't rely on getting our boxes in a reasonable time, they had no choice. "The situation has eased a little now, but the damage was done, so our company has downsized by over 50% in terms of warehouse space and number of employees. We've used the same principles [that] Stansberry espouses for investment and cherry-picked the best of our remaining customers, so we now only supply where the margins are excellent, payment is secure, the manufacturing process is straightforward, and logistics are as reliable as they can be. "Which leaves me with more time to read the Stansberry Digest! Many thanks." – Subscriber Neil D. Good investing, Dan Ferris Eagle Point, Oregon July 28, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,202.0% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,037.2% Stansberry's Investment Advisory Porter ADP Automatic Data 10/09/08 895.5% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 703.9% Stansberry Innovations Report Wade HSY Hershey 12/07/07 564.5% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 552.2% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 519.3% Retirement Millionaire Doc AFG American Financial 10/12/12 416.4% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 344.0% Stansberry Innovations Report Engel FSMEX Fidelity Sel Med 09/03/08 325.5% Retirement Millionaire Doc 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 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Stansberry Innovations Report Engel/Wade 1 Extreme Value Ferris --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 1,602.5% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,070.0% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,030.0% Crypto Capital Wade MATIC/USD Polygon 02/25/21 813.6% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 678.5% 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 Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade 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 ^ 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%. 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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