I'm Breaking This Rule With My Melt Up Thesis... Here's Why

The Weekend Edition is pulled from the daily Stansberry Digest.


I am pretty dumbfounded that it happened again...

I was asked to ring the opening bell at the Nasdaq this past December in New York. It was the second time in 2019 that I'd rung the bell.

Even though I've done it a number of times over the years, ringing the bell never gets old. It's an iconic part of Wall Street history.

I never imagined that this kid from Florida would be called up to give speeches or ring the bell. But that's exactly what has happened... several times now. I'm thankful and honored.

I thought back to a speech I gave at the New York Stock Exchange ("NYSE") nearly eight years ago. Let me share one PowerPoint slide from that 2012 speech with you...

"Conditions are in place for the greatest asset bubble in all of history," I told the crowd back then.

Let me explain something important about that 2012 crowd, though...

The last thing they wanted to hear about was a potential Melt Up in stocks...

The crowd I spoke to at the NYSE was a brilliant group of investors – but they were also dyed-in-the-wool value investors.

It's hard to understand from the outside... But there are cliques among types of investors, and unwritten – but very real – rules among those cliques.

One of the rules among value investors is that it's totally uncool to talk about (or even worse, predict) coming asset bubbles. It's seen as unseemly – or low class.

Even if they could see the value in the markets, I knew I would be seen as a complete fool for talking about staying in stocks to see higher prices. And I knew I would be considered a fool in this crowd for making a bold prediction.

You don't want to set yourself up to be seen as a fool among your peers. Normally, as a speaker, you give the audience what they want.

But the billionaire who invited me to ring the bell told me to speak my mind, whatever was on it. So I did. And I was 100% right. (The billionaire reminds me of that NYSE speech every year. He e-mailed me again a couple of months ago, just checking in.)

I hope the crowd took my advice back then. (And I hope you have, too!) As you know, I've been bullish for a decade now, and stocks have been on an incredible run.

I also rang the closing bell at the NYSE last April – another important time for me...

I was invited by the folks from KraneShares – asset managers specializing in China funds. (Actually, I banged the gavel at the close... It's a two-man operation up there – one man bangs a gavel, and one rings the bell.)

Immediately after the closing bell, we premiered my China movie, New Money, inside the halls of the NYSE – with a couple hundred friends, family members, and subscribers in attendance. Since that premiere, New Money has more than 5.4 million views on YouTube.

Both of these "bell ringings" marked milestones for me...

  • I'm incredibly proud of my bold and longstanding call for a Melt Up in stock prices. I'm proud that I stood up in front of a "hostile" crowd in 2012 and told them what they didn't want to hear.
  • I am also incredibly proud of my China movie and my China bull market call. I'd never made a movie before, and it turned out better than I could have ever imagined.

Each call was a huge success. Both U.S. stocks and Chinese stocks absolutely soared last year...

  • U.S. stocks were up 28% (as measured by the S&P 500 Index).
  • Chinese stocks were up 33% (as measured by the KraneShares MSCI China A Fund).

The reality is, stocks don't go up around 30% a year, on average. Far from it...

And folks know that. We all know 2019 was an extraordinary year. So looking out to 2020, the game has got to be over, right?

I don't think so. And it's the details of my latest bell-ringing that prove it...

Those other times, I rung the bell at the NYSE. But this time, I did it for the Nasdaq...

The differences in the two exchanges were obvious...

The NYSE is "old school." It has ExxonMobil (XOM) and Home Depot (HD)... old, impressive architecture... a gavel to bang... etc.

The Nasdaq is "new school." It has Amazon (AMZN) and Facebook (FB)... fancy computers... and cameras everywhere.

Joe Kernen and Becky Quick were filming CNBC's Squawk Box at the Nasdaq immediately before we booted them to ring the bell. (Or more correctly, to push the button – which looked like an electronic version of Staples' big red "Easy Button.")

My friend Andrew Chanin of Procure Holdings invited me to join him for the ringing. Andrew is young, but he's going places... Bloomberg Markets magazine did a story on him in 2015 and his "one-man, $1.2 billion ETF shop."

Here's a photo of Andrew and me at the bell-ringing, along with his business partner Bob Tull...

If you're wondering why there's a giant "UFO" hovering above our heads – figuratively speaking – that's the ticker of Andrew's new exchange-traded fund ("ETF"). It's called the Procure Space Fund (UFO).

So what does a space ETF have to do with my belief that the stock market has room to soar much higher in 2020?

If you know me, you know my investment mantra – "cheap, hated, and in an uptrend"...

That's how we make the most money in investing.

If you can get all three ingredients – great! You're set to make big money!

But often, you can't get all three... So if you can only get two, then the two I want are "hated" and "in an uptrend."

The question is... how do you define "hated"? Stocks were up roughly 30% last year. They hardly seem "hated"... right? People don't feel bad about the stock market, do they?

I size up what's "hated" in two ways...

  1. In "real dollars" – what people are doing with their money
  1. In public sentiment – how people feel

Which one of these ways is more important? Which one is more useful?

I have learned that what people are doing with their money is more useful information than what people say they're doing with their money...

So what are people doing with their money? Shockingly, people have been GETTING OUT of stocks!

Amazingly, the Investment Company Institute tells us investors pulled nearly $200 billion out of their stock funds (stock ETFs and stock mutual funds) in 2019. This is the second-largest outflow from stock funds in recorded history.

That's right... Investors were only more scared one other time in history – in 2008, when they pulled more than $200 billion out of their stock funds. As I'm sure you recall, that was about the worst year to be an investor in generations... Every asset class fell – a lot.

I expect massive outflows to happen when the markets are crashing (like we saw in 2008). And I expect massive inflows to happen when the markets are peaking (like we saw in 2000).

Investors piled into stocks during the last Melt Up peak. Stock funds experienced $300 billion in inflows in 2000 – the largest inflows in recorded history.

And as we all know, the most money flowed into "new school" stocks... the attention-getting industries like technology and biotech.

But that's not what we're seeing today. Again, investors ran for the hills in 2019 – with the second-largest outflows from stock funds on record.

Not only that, but folks aren't getting into flashy "new school" investments, either...

Andrew's Procure Space Fund – as "tech" as it gets – only has about $23 million in assets right now. People aren't buying tech-stock ideas the way they do at a blow-off top – yet.

What does a peak in the market look like? It looks like the year 2000 – with massive inflows from mutual fund and ETF buyers – particularly focused on tech stocks. We are not there yet. If anything, we are in the opposite situation.

So let's summarize here...

  • In the last stock market mania (2000), we saw record inflows as classic investor euphoria took over – particularly in tech stocks.
  • In the last massive stock market bust (2008), we saw record outflows as scared investors ran for the hills – setting up 2009 as a fabulous buying opportunity in stocks.

Ask yourself, where are we today? Are we seeing classic euphoria? Or are investors running for the hills, setting up a fabulous buying opportunity?

It turns out... it's the latter. The market doesn't "feel" hated. But it is – investors were scared for most of 2019. And they pulled plenty of money out of the market last year.

I feel like I'm at the NYSE in 2012 all over again...

I'm delivering the message you don't want to hear. What I'm saying doesn't seem possible – that stocks could soar, after so many years of incredible returns. But it is possible...

This is why I've continued to pound the table on my Melt Up thesis. And it's why I recently hosted a major Melt Up event.

During the event, I revealed in greater detail why I expect stocks to soar from here. Importantly, the first signs of excitement are starting to enter the market now. So we covered how to invest for the biggest gains... before time runs out.

I even invited legendary stock-picker Matt McCall to talk about where he sees the biggest upside from here. And he shares a free recommendation that he believes could return multiple times your money from here.

If you want to hear his top stock idea... and learn how to navigate this life-changing time for investors... then I hope you'll watch a free replay of the event while it's still online. Check it out right here.

Good investing,

Steve

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