The Melt Up will end sometime this year.
That's the big prediction I shared with DailyWealth readers last week. It's a major shift in opinion for me.
I've made a name for myself calling the Melt Up in recent years. I've been bullish and right. But I can't ignore what I see brewing in the markets right now.
Today, I'll share why I believe this major prediction is a near certainty.
What's happening today is simple... It's the Greater Fool Theory.
Folks are hoping that by buying today, there will be a greater fool than them to pay a higher price tomorrow. But think about this for a second...
Right now, we've got multiple rock stars (and Elon Musk!) pushing Dogecoin – which the founder admitted was formed as a joke and should never be worth much.
Once Musk, Snoop Dogg, Gene Simmons, and all the kids in the local high school have put their money to work... where can the next greater fool possibly come from to drive prices higher?
"The single most dependable feature of the late stages of the great bubbles of history has been really crazy investor behavior, especially on the part of individuals," legendary investor Jeremy Grantham wrote earlier this year. "For the first 10 years of this bull market, which is the longest in history, we lacked such wild speculation. But now we have it. In record amounts."
That gets to the heart of it...
To me, what we're seeing now is "really crazy investor behavior, especially on the part of individuals."
The thing is, to make the most money, you want to buy when everyone is fearful and sell when everyone is greedy (to quote billionaire investor Warren Buffett). And right now, individual investors – many of whom are buying for the first time – are darn excited...
An astounding 28% of all Americans bought GameStop or other viral stocks in January, according to a Yahoo Finance-Harris poll. The median investment, according to the poll, was just $150. The largest group of buyers was men aged 18 to 44. And 43% of these folks said they had just signed up for a brokerage account in the last month.
So in new individual investors, we have seen a dramatic shift in investor attitudes and behaviors. In short, basically since GameStop, we moved from a stock market boom to an investing bubble.
We may not know the exact date... But the Melt Down is coming. And if I haven't convinced you yet, consider this...
The main index of tech stocks – the Nasdaq – hit another scary record last month. From its bottom, it was up 105% in 47 weeks. To give you some frame of reference, that was the best 47-week performance in the 50-year history of the index.
The Nasdaq has only been up over 100% after 47 weeks twice in history... The last two 100% moves ended in March 2000 and in July 1983. The stock market performed terribly immediately after those huge moves higher. Take a look...
The last two times in history that we saw a market up over 100% in the same short period of time, the Melt Down was knocking at our door. It's as simple as that.
There are several points here. But the takeaway is an easy one...
Market sentiment and performance are both hitting bubble levels. And that tells me the top is near.
I expect the Melt Down to begin sometime this year. And that means the time to prepare is now.
Good investing,
Steve
P.S. I believe a Melt Down will begin in the financial markets before the end of this year. In other words – this could be the last chance many of us get to make irrational gains in the U.S. market for years or decades to come. So I'm not recommending you sit on the sidelines... You can learn the full details right here.
Further Reading
Steve believes that the Melt Down will happen here in 2021. When folks who aren't usually investors are piling into the market, you know there's no one left to buy. And that means the end of the Melt Up is in sight... Read more here: The Melt Up Will End in 2021.
Everyone will lose money when the Melt Down is in full effect. Folks will ride the market lower and lower in hopes that their stocks turn around. But losing your portfolio while the market collapses doesn't have to happen to you... Get the full story here: How to Avoid the Harsh Reality of a Melt Down.
If you want to do well in the stock market, you need to know how much you are willing to risk. And these simple questions can help you determine what's right for you...
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
W.R. Berkley (WRB)... insurance
JPMorgan Chase (JPM)... financial giant
American Express (AXP)... financial giant
Visa (V)... payment-processing giant
Automatic Data Processing (ADP)... payroll processor
Expeditors International (EXPD)... logistics
Dropbox (DBX)... cloud storage
Restaurant Brands (QSR)... fast food
Flutter Entertainment (PDYPY)... "vice" stocks
Altria (MO)... cigarettes
Comcast (CMCSA)... cable TV
AutoNation (AN)... car retailer
CarMax (KMX)... used cars
CBRE Group (CBRE)... real estate services
U.S. Concrete (USCR)... concrete
NEW LOWS OF NOTE LAST WEEK
Not many... It's a bull market, you know!
