The Weekend Edition is pulled from the daily Stansberry Digest.
Folks, I'm in a tricky spot today...
Longtime readers know I spend my days working as an analyst with Steve Sjuggerud. And as I've explained in the past, I love picking some of his best ideas apart.
His latest bold call is no exception...
You see, Steve recently made a big prediction about the future of the "Melt Up" that is currently playing out. And frankly, I'm not sure that I'm on board with what he believes...
That's because Steve is calling for the end of the Melt Up. He has even started the clock on when he thinks it will officially end... And his clock points to sometime later this year.
Steve is waving the warning flag... He's shifting his focus to make sure that his subscribers get the very most out of the end of this Melt Up. And at the same time, he's working to make sure as many folks as possible are able to survive what comes next.
I want to trust him... After all, Steve has a phenomenal long-term track record. He expertly navigated the dot-com bust, the housing crisis, and the ensuing "Bernanke Asset Bubble," which grew into what we call the Melt Up today.
Yet here I am... still finding bullish opportunities. I still see plenty of upside in stocks today.
So where does that leave me? Am I simply wrong? Am I ignoring the wisdom of a seasoned professional with a nearly impeccable record?
Let's get to the bottom of it...
My guess is that a fair number of you feel the same way I do...
After all, it's hard not to be bullish if you've looked at any charts lately... All three major indexes are at or near all-time highs again.
Plus, the latest round of earnings recently came in... And they all looked good, too.
This will have a "cooling effect" on some of the outrageous multiples we've seen lately...
For example, the benchmark S&P 500 Index's price-to-earnings (P/E) ratio recently peaked at 45. That's more than twice its historical average. But now that earnings are rising (they're the denominator in the P/E ratio), we expect to see that multiple come down.
All of this simply means that the market might not be as hot as it looks.
What's more, the world is awash in cash right now. Nearly every nation's reserve bank has taken a unified posture... And their message is, "Don't worry... We've got your back."
So I get it... It's darn easy to be bullish right now. And based on that evidence, it seems like the Melt Up has plenty of runway. It doesn't feel like the good times will end anytime soon.
The problem is... everyone else feels that way, too. And you've probably started to notice that the mainstream media is filled with stories pushing this bullish sentiment...
This week in DailyWealth, my colleague and friend Chris Igou detailed a recent example of this euphoria... A 14-year-old kid made $78,000 off a single options contract.
Insanity.
That's great for the kid. But of course, it takes huge risk to make huge returns like that. And after hearing stories like this, millions of others want in on the action... risk be darned.
Steve's thoughts on this phenomenon are clear. It doesn't matter what the numbers look like... When the euphoria starts, you know that the end of the Melt Up is near.
So today, we're going to focus on a single question...
What would it take for you to see the building euphoria?
I really mean it. This isn't a rhetorical question.
If you don't think we're getting near the peak... if you think the "Melt Down" is so far off that it's not time to start preparing for it... then what would it take to change your mind?
I've already made it clear... If you set sentiment aside, I personally believe we could see another extended bull run in the market.
But the thing is, we can't ignore the signs of euphoria all around us today...
Football player Trevor Lawrence is a great example.
On April 29, the Jacksonville Jaguars selected the 21-year-old quarterback with the top pick in the NFL draft. And just days before that, he signed a major endorsement deal with Blockfolio, a global cryptocurrency-focused company. He also said that he would invest his entire signing bonus – more than $20 million – in an account with Blockfolio.
You probably have your own thoughts on cryptocurrencies... But whether positive or negative, millions of dollars are being spent for a 21-year-old football player to be the face of a burgeoning financial-services firm.
Really, stop and think about that for a second... When was the last time you wanted investment advice and thought about asking a football player?
It's nothing personal against football players, but they're generally the embodiment of the "earn it and burn it" windfall cycle. It's a plague on the sport. And veteran players are just starting to form groups to help the younger generation avoid the pitfalls of fast money.
Now, you might be thinking these are just eccentric examples specific to the crypto space...
But these days, everywhere you look in the markets, you can find "eccentric examples" of the building euphoria...
Was the GameStop bubble a one-off situation? What about Tesla founder Elon Musk's bizarre ability to move the price of specific assets with his Twitter account?
I've also previously detailed how investors intentionally piled into companies that were on their way to bankruptcy... like rental-car operator Hertz Global and clothing retailer JC Penney. And yet, when those trades went sideways like they were destined to from the outset, the investors begged the bankruptcy judges for bailouts.
Chris recently sent me another interesting story, too... It was a link to a video of a shirtless "surfer bro" talking about his day-trading strategy.
My point is... everywhere you look these days, you can find stories about "unusual suspects" trading in their day jobs for a shot at striking it rich in the markets. Surfer bros, 14-year-old kids, stay-at-home moms, you name it...
But please, don't be fooled into thinking this is a "new normal"...
The general public – including all those surfer bros and teenagers – is bullish on the market right now. But in normal times, the general public couldn't care less about the market.
That's the most important takeaway here.
We often say the "dumb money" is a sentiment indicator... These are the people who are more generously described as "retail traders." They're the speculators out in the world, just looking to make a quick buck.
It's normal for these retail traders to pile into the markets in euphoric times and create sentiment extremes.
At the other end, you'll find institutional traders – the so-called "smart money." They're the folks who've been living in the trenches and know what to expect. They're usually better at timing the markets.
But folks, we're not even talking about the dumb money here... We're talking about the "money with no brain at all."
The financial-services industry is using football players and 14-year-old kids who struck gold to appeal to the non-investing public... And it's working.
Today, the general public seems to believe the misconception that the market is nothing more than a way to make a quick buck. That is not normal.
It's the telltale sign that the party is on limited time... And you'd be foolish to ignore it.
So, do I still want to believe more time remains in the current Melt Up than Steve thinks? Sure, of course I do. But in reality, we're talking a matter of months... maybe a year or so.
I asked myself the question we started with at the top... "What would it take for you to see the building euphoria?"
And in the end, I just can't ignore the preponderance of evidence all around us right now. You might not like the conclusion that forces... because it tells us that the end is near.
You're living in an alternate reality if you choose to ignore it.
Whether we have three months, six months, or 12 months left of this Melt Up, you'll want to start getting ready for the Melt Down now...
And you'll want to position your investments to get the most out of the limited time that remains.
You might be like me... Maybe you want to hold out hope that Steve's countdown clock is too conservative. Maybe you believe we can still ride this bull market for years to come.
But there's no getting around the most powerful indicator we have... The "money with no brain at all" is in the market today. And that means it's time to start preparing for the end.
The good news is, Steve is already one step ahead of the game.
Personally, I'm still holding out hope for more time... But no matter what, I'll be following Steve's advice. And I suggest you do the same.
Good investing,
Vic Lederman
Editor's note: Steve just updated his Melt Up playbook to share how you should prepare your portfolio for what's to come... and get the most out of the "Final Surge" of the Melt Up. Regardless of how you feel about the market today, you need to hear what he has to say... Click here to listen to Steve's update on the Melt Up.
