A Controversial Truth About the Financial Markets

There's a controversial truth about markets...

It's simple, but it's counterintuitive. And you'll need a big scoop of humility if you're going to take advantage of it.

Are you ready? Here it is... You need to accept that you can't know everything.

The simple fact is that we live in a world of information. It invades our everyday lives. And it invades our investment decisions, too.

Do a Google search for "outlook on tech stocks" or "stock market valuations," and you'll get millions of results. There's no end to the opinions on the market. And this leads to a common logical "hiccup"...

Learning more won't necessarily make you a better investor.

You shouldn't embrace ignorance, of course. But you can't know everything. And the good news is, you don't need to.

Today, I'll share why...

I've been in the investment world for two and a half decades. I've learned a lot over the years. But this might be the single most valuable lesson...

About 95% of the investment information out there is useless. The hard part is figuring out the 5% that matters.

I've put this to work with great success throughout my career...

In the mid-2000s, I began studying and eventually recommending gold and gold coins. The metal was coming off a 20-year bear market. But I saw the writing on the wall from the Federal Reserve.

We had entered a period of easy money. And after decades of losses for the metal, that made a major rally a near-certainty. Gold went on to rally from less than $400 an ounce to nearly $2,000 an ounce.

I didn't need to understand mine supply or global demand to figure out what would happen with gold. Those pieces were secondary to the big idea. I found the 5% of information that mattered – and ignored the rest.

I did this again in 2010. That's when I unveiled my "Bernanke Asset Bubble" thesis, which longtime readers should remember.

It was a simple idea. I noted that the Federal Reserve would do anything necessary to boost stocks and the economy. It wanted to keep the easy money flowing. So my simple thesis was...

Interest rates would stay lower than anyone could imagine for longer than anyone could imagine. And that would cause asset prices to soar.

Sure, we were just a year removed from the worst stock bust in nearly a century. Europe was in a debt spiral. The U.S. debt problem was far from fixed... And the global economy in general was on shaky ground.

The 95% of information contained plenty of warning signs. But none of it mattered.

The 5% – the part that did matter – told me that stocks and real estate could soar. So I pounded the table. And I've been doing so ever since.

That has been the right call. Stocks and real estate have soared. And I've stayed bullish because the 5% that matters continues to point me in that direction.

Today's 5% is the massive market Melt Up that's currently underway. It seems like no matter the negative headlines, stocks continue pushing higher. We're late in this bull market, but gains are accelerating.

I've seen this before. It's exactly what happened in the late 1990s during the run-up to the dot-com peak.

Of course, the bust that followed was brutal. But savvy investors who followed the market higher – and smartly got out – made a killing. That's what I plan to do this time around, too.

For now, the 5% of information driving the market says the Melt Up is in full force. And that means we want to stay long.

Good investing,

Steve

Further Reading

Most investors don't believe that valuations can keep going higher. But they can – and for much longer than anyone expects. Vic Lederman details why the Melt Up still has room to run right here: 5,000 on the S&P Is Closer Than You Think.

"We've seen this part of the economy contract for five consecutive months," Chris Igou says. But this signal doesn't spell doom for the bull market. In fact, history says it could lead to strong outperformance in stocks... Learn more here.

Market Notes
HIGHS AND LOWS

NEW HIGHS OF NOTE LAST WEEK

Blackstone (BX)… asset management
American Express (AXP)… credit cards
MGM Resorts (MGM)… gambling
Las Vegas Sands (LVS)… gambling
Activision Blizzard (ATVI)… video games
Snap (SNAP)… social media
RingCentral (RNG)… cloud communications
Shopify (SHOP)… e-commerce “picks and shovels”
Qualcomm (QCOM)… semiconductors
Leidos (LDOS)… “offense” contractor
Raytheon (RTN)… “offense” contractor
PulteGroup (PHM)… homebuilder
Masco (MAS)… “fixer upper” stock
Union Pacific (UNP)… railroads
Kansas City Southern (KSU)… railroads
Medtronic (MDT)… medical technology
Becton Dickinson (BDX)… needles and syringes
Johnson & Johnson (JNJ)… consumer goods
Coca-Cola (KO)… “World Dominating Dividend Grower”
Monster Beverage (MNST)… energy drinks

NEW LOWS OF NOTE LAST WEEK

Sprint (S)… telecom
Spirit AeroSystems (SPR)… Boeing supplier
Pearson (PSO)… educational media
EQT (EQT)… natural gas