'This Time Is Different'? I'm Not Buying It

The Weekend Edition is pulled from the daily Stansberry Digest.

Nope. I'm not buying it...

I keep hearing analysts say they're bullish and that it's time to buy stocks again.

They reason that stocks are cheaper and more attractive now that they've fallen about 23% (like the S&P 500 Index)... around 34% (like the Nasdaq Composite Index)... or perhaps even further (like many of the speculative "garbage" stocks we've discussed in the Digest).

Heck, I even read an article from Bloomberg last month about institutional investors finding 30-year U.S. Treasurys attractive because they yield more than they have since 2014.

At first, I thought maybe these Treasurys yielded something attractive like 8% or 10%. But no... the yield at the time was only about 3.5%.

Look, I get it. In most cases, it's good to be a contrarian...

If you want more of something, you should be happy when its price falls. And yes, I do realize that viewing every market decline as the start of a crisis is a recipe for losing money.

The overwhelming majority of the time, when the stock of a great business is down a lot for some reason... you should buy it hand over fist.

No big deal. Every dip is just another buying opportunity.

So since stocks and bonds are down so much this year, I won't say you're stupid if you think they're more attractive. I won't even say that if you think it's time to "buy the dip."

I would say you're pretty normal.

In my Extreme Value newsletter, I've told my subscribers to buy plenty of stocks. In fact, more than 20 of them are active recommendations right now.

But there's more to it than that. And frankly, as an investor, you need to know all of it...

The short version is that every major asset class is still in a massive bubble...

Stocks were more expensive than ever before in history in late 2021 and early 2022. The S&P 500 exceeded a price-to-sales (P/S) ratio of 3.0 in December and January. That had never happened before.

The S&P 500's P/S ratio is around 2.2 today. That's just below where it was at the dot-com peak. So yes, it's down from earlier this year... But it's still clearly in mega-bubble territory.

It's the same thing with the benchmark index's cyclically adjusted price-to-earnings ("CAPE") ratio, which hit 36.9 in January. That CAPE ratio was second only to the dot-com peak in 2000 (when it was around 44). Again, it's lower today at around 27... But it's still in mega-bubble territory.

We're living through an even bigger bubble in the bond market...

This is a $127 trillion global market. And it has been in the single biggest asset bubble in all of recorded history for a while now. It has been scraping 5,000-year lows for at least four years (according to Sidney Homer's classic book, A History of Interest Rates, which cites interest-rate data going back to Mesopotamia in 3000 B.C.).

The 10-year U.S. Treasury – the No. 1 return benchmark in global asset markets – yielded as little as 0.5% in August 2020. Then, the amount of sovereign debt selling at negative nominal yields hit $18 trillion in December 2020. Both are never-before-seen extremes.

Bonds have been brutalized. The 10-year Treasury yields around 4.2% today. That's still historically low.

And of course, overall inflation has been running at 40-year highs for months...

The CPI rose 8.2% in September from the previous year. Food, energy, new vehicles, and transportation services all inflated at double-digit rates. And fuel oil was up an incredible 58% over September 2021.

In the October 14 DailyWealth, I said the market behaves normally 95% of the time, but that the other 5% "makes or breaks you as an investor."

By that, I was talking about the current mega-bubble...

None of the stock, bond, and inflation stats I just cited can be called "normal." They're all extremes – multiyear, multidecade, and even multimillennial (in the case of bonds).

What has happened after those extreme highs?

The S&P 500 is nearly 23% below its January peak. U.S. stocks went through their worst first half of the year since 1970.

The 10-year U.S. Treasury has just had its worst six months since the U.S. Treasury market was created in 1788.

Housing prices have come down a little bit. But they're still roughly as unaffordable as just before the housing bust. And importantly... household wealth just experienced its biggest-ever decline in the second quarter of this year.

If you think this is a normal bear market, maybe it seems like a bottom is in.

But do you really want to tell me that the greatest extreme highs in history... followed by the worst decline in stocks in 50 years... along with the worst Treasury market since George Washington was in charge... is normal?

A clear disconnect exists between what folks are saying and what's really happening...

I guess that's why so many folks don't seem to view high inflation numbers and lower stock prices going forward as highly likely.

And the perfect symbol for that disconnect appeared right on cue last month...

According to a Bloomberg article published on September 14...

That's right...

ARK Investment Management founder Cathie Wood aggressively bought the massive dip on Tuesday, September 13. Specifically, she bought 27 stocks in her firm's eight exchange-traded funds ("ETFs").

Bloomberg data showed that the company's biggest purchase that day was streaming-device maker Roku (ROKU). That's notable because it was already the third-largest position in ARK Invest's flagship ARK Innovation Fund (ARKK).

Roku is the type of stock that Wood loves...

The company went public at $14 per share in September 2017. Its CEO said the company's goal was to "power every TV in the world." That apparently sounded like a grand vision...

Roku's stock rose 67% in its first day of trading. Then, it climbed 34-fold over the next four years.

However, the company still hasn't generated positive net income. So like most of the holdings in Wood's ETFs, shares tumbled as investors started getting impatient... Roku's stock is now down roughly 89% from its July 2021 peak of nearly $480 per share.

You may recall that I called Wood the "Gerald Tsai of today" in the February 27, 2021 DailyWealth. Tsai ran the Manhattan Fund in the "go-go" stock mania of the 1960s. He sold the fund to an insurance company in 1968... just as its fantastic results were fading and the bull market started weakening.

The Manhattan Fund stuck with the same, previously successful momentum-based strategy. And eventually, it became the worst-performing fund in history.

These days, the ARK Innovation Fund is headed that way. And it's doing that by doubling down on money-losing stocks like Roku.

Folks did the same thing in the "Nifty Fifty" bust of the 1970s and the dot-com bust of the early 2000s.

Today's mega-bubble will only end one way... And it will be far worse for everyday investors than the companies – some of which will survive after their stocks plunge 90% or more.

Don't fall into the trap of thinking that "this time is different"...

It's never different.

That's the whole point of that phrase. If you know it, you also know that people only use it sarcastically.

As I do many times in my essays, I'll defer once again to GMO co-founder and portfolio manager Jeremy Grantham.

The 84-year-old British investor has studied a few dozen bubbles in his decadeslong career. And like me, he distinguishes mega-bubbles (which he calls "superbubbles") from the rest...

The first thing to remember here is that these superbubbles, as well as ordinary... bubbles, have always – in developed equity markets – broken back to trend. The higher they go, therefore, the further they have to fall.

They always break back to trend. And the higher they go... the further they have to fall.

At its most recent bottom in October, the S&P 500 was down 25% from its all-time high in early January. And the Nasdaq had fallen 36% from its November 2021 peak.

Am I supposed to believe that after the mega-bubble to end all mega-bubbles, we'll get off that easy?

I believe we won't get out of this without the most affected index falling more than twice as far as the S&P 500 and Nasdaq have fallen...

In 1929, the most affected index was the Dow Jones Industrial Average. And in 2000, it was the Nasdaq Composite Index.

Before the dust settled in the early 1930s, the Dow fell nearly 90%. And during the dot-com bust from 2000 to 2002, the Nasdaq plunged 78%.

This time, the most affected index is really two – the Nasdaq and the S&P 500.

The S&P 500 is the one everyone knows and tracks. And the Nasdaq has all the unprofitable "vision and growth" tech companies that Wood and everybody else loved in the good times.

Longtime readers know I don't do predictions. But history says we won't get out of this mess without both indexes falling at least 50% or 60%. And based on what happened in the early 1930s and the early 2000s, that would still be getting off easy by mega-bubble standards.

However, as bad as everything looks here in the U.S., everywhere else looks worse...


At the beginning of September, the Wall Street Journal reported that investors were pouring money into U.S. stocks as a "safe haven" from the chaos in the rest of the world. From that article...

Investors around the world are piling into U.S. stocks, even as they brace for the prospect of a rocky autumn, because they say there's nowhere better to shelter from the turbulence in global markets.

Chew on that for a minute. Imagine thinking...

"Well, in the U.S., their mortgage rates have only doubled (and then some)... their stock market is only down 19% or so... and they've only had the worst market for their sovereign debt in 234 years. Sure, that sounds like a safer bet than my country."

I know most of you live in the U.S. So it's probably hard to think like that. But you have to get out of that narrow mindset and put yourself in the shoes of a foreign investor.

If you can do that, you'll see how scary the world really is right now...

Investors like us here in the U.S. are living through one of the worst mega-bubbles ever. And yet, investors elsewhere think "there's nowhere better to shelter from the turbulence."


At the same time, some analysts want us to believe that everything is swell. They're pushing the narrative that we can just "buy the dip" and make money again.

Nope. I'm not buying it. And neither should you.

Good investing,

Dan Ferris

Editor's note: A few days ago, Dan went on camera with a dire warning about where the markets are headed. He said the economy is spiraling in a new direction... and almost no one else is talking about it. What's more, this event could require you to dramatically change the way you invest – because if you're not prepared, the coming years could mean a major threat to your wealth... If you missed Dan's urgent message, you can watch the replay for a limited time right here.