The 'smart money' is selling... Even art owners are raising cash... 19 more signs stocks are overvalued... Investing in sideways markets... Obsessing about the Fed...
 The selling continues...
Last month, I (Dan Ferris) told you the "smart money" was raising cash. Legendary investor Warren Buffett recently sold roughly 60% of Berkshire Hathaway's (BRK-B) largest equity position, Apple (AAPL). Berkshire once held a little more than a billion shares and now holds just 400 million shares. Berkshire has also begun reducing its large position in Bank of America (BAC) from slightly more than a billion shares to around 900 million shares. Meanwhile, Berkshire is now holding a record amount of cash and safe securities like T-bills. And now, another important Berkshire executive is selling... Ajit Jain heads up Berkshire's insurance operations. Buffett admires Jain so much that in his 2016 shareholder letter, he wrote: When Ajit entered Berkshire's office on a Saturday in 1986, he did not have a day's experience in the insurance business... Since then, Ajit has created tens of billions of value for Berkshire shareholders. If there were ever to be another Ajit and you could swap me for him, don't hesitate. Make the trade! Buffett doesn't just think Jain is immensely talented. He also genuinely loves the guy. Buffett has admitted that Jain is like a brother or a son to him. Well, according to U.S. Securities and Exchange Commission regulatory filings, Jain recently sold more than half of his stake in Berkshire Hathaway – 200 Berkshire A shares – for proceeds of roughly $139 million. Now, insiders tend to buy for one reason (they're bullish), but they sell for any number of reasons. Maybe Jain is selling to begin the process of dividing up his estate for his heirs... though he could do that by converting his A shares to lower-price B shares and distributing them. A Fortune article suggests Jain might be selling now because he thinks capital gains tax rates will rise after the next president gets into office. But since Jain could rearrange his estate without selling, I assume that Jain wants the cash. Now, it could be sheer coincidence that Buffett's most valued employee has reduced his stake in Berkshire – which I assume is Jain's largest holding – by almost as much as Buffett reduced Berkshire's stake in its biggest holding. And maybe the fact that a big part of Jain's job is to understand the risk of loss is also just a coincidence. Perhaps Jain thinks the stock is fully valued and he could get a better return investing the money elsewhere. But Buffett has often said that his favorite holding period for an investment is forever. And Jain is an insurance guy, not a trader. His job is to buy good insurance operations and hang onto them for the long term. So it's notable that some of the smartest money ever is selling stocks and raising cash right now. As I've said before, it's no time to take big risks. That's why I've told The Ferris Report subscribers to buy short-term T-bills and newly issued government-guaranteed mortgage-backed securities... and have made a few sell recommendations lately (and several others in Extreme Value). Both government-backed investments I recommended are safe sources of income that should maintain the value of your principal in a steep bear market or other chaotic environment. These are two of the safest – and, yes, smartest – plays on Earth right now. Buffett and Jain are lucky they're not trying to sell art... Bloomberg reports that "the major May New York [art] auction season fell about 23% by value from the prior year." It makes you wonder... What does a poor rich person do if they need cash to buy a sports team or renovate their estate and can't sell their art? Why, borrow against it, of course. Deloitte estimates outstanding loans against art could surpass $36 billion in 2024, up from $29 billion to $34 billion last year. That also compares with $20.3 billion to $23.6 billion of such loans outstanding five years ago, according to Deloitte. Thank goodness these poor souls found a way to get cash for their art. Art, gold, and land are the three traditional stores of value for wealthy, old (mostly European) families. Art and land occasionally become more difficult to sell. But you can always borrow against them. Art has the advantage of not fluctuating in value daily, as most fine art collections are appraised at most once a year. Land can fluctuate, but its owners generally aren't obsessed with getting daily quotes the way most folks do with stocks and bonds. And gold... well... if you're selling your gold, maybe you have bigger problems than a need for cash. In short, it's not just Berkshire executives raising cash today. But hardly anybody else is... Stocks are wildly overvalued right now... Last week, I showed you a valuation measure that says stocks have never been more expensive than they are today... It comes from economist and portfolio manager John Hussman. Hussman's ratio compares the total market cap of U.S. nonfinancial companies with a measure of their profitability called gross value added ("market cap/GVA"). Hussman has compared this measure with subsequent 10-year and 12-year returns in the market and found that when market cap/GVA is high, market returns are consistently low. When it peaks, returns go flat or negative for 10 or 12 years. Market cap/GVA hit its all-time peak on August 23. That's higher than the previous market cap/GVA peak in 1929. In short, stocks have never been more expensive than they are today based on this ratio. Well, this week, we have 19 more valuation measures showing stocks are expensive. According to data originally published by Bank of America and reposted on social network X by certified financial analyst Win Smart, the S&P 500 is expensive in 19 out of 20 different valuation measures. All but one of the 19 metrics are double- or triple-digit percentages above their long-term averages, with some of the data going back as far as 1792. The exception was the equity risk premium, which compares a stock's yield with a government bond yield (usually the 10-year Treasury note). It's a mere 7.9% above its average value since 1980. I've said before that valuation metrics aren't timing indicators... If you understand valuation and are buying for the long term, timing hardly matters (and most timing indicators are totally worthless). Cutting your losses quickly and with discipline can protect you from bad timing. But as we explained last week, not understanding valuation and thinking that you'll be okay if you just hold long enough can lock you into mediocre returns for a decade or more. And it sure looks like today is one of those occasions. Imagine getting caught up in the dot-com mania and putting a big chunk of your 401(k) into a Nasdaq Composite Index fund in March 2000... and leaving it there as the index lost 78% of its value and went sideways for 15 years. Or imagine thinking Japan was a great bet in 1989 and watching as your investment declined 76% and went sideways for 34 years. The main reason it's hard to be a long-term investor is because people get scared out of the market during the times they ought to be buying as much as they can. The flip side of that is that too many folks tend to commit the biggest sums of money at the very worst times to buy (like right now). That's what I'm afraid folks buying regular, market-cap-weighted S&P 500 Index funds are doing today. It's why I'm always telling you that you're better off buying great businesses and preparing your portfolio for a wide variety of outcomes. Someday, after stocks fall far enough, I'll say nearly the opposite: to forget about anything but stocks. But most folks tend to have the highest conviction at the exact wrong moment. And we're likely to see more of that in the weeks ahead... The folks from Research Affiliates just put out a note that says in elections that are too close to call, history suggests that the market is likely to rise in the week prior to election day and continue higher after some volatility around the election itself. Just remember what I said last week: The more you pay for an investment, the lower your return will be. Finally, since we're all way too obsessed with the Federal Reserve... The Fed's hotly anticipated meeting will take place next Tuesday and Wednesday. Fed Chair Jerome Powell has publicly said that the Fed is now in cutting mode, so it seems likely we'll see an interest-rate cut next week. But it's a little crazy that so many folks are obsessed with how much the Fed will cut. Millions of people are wringing their hands wondering if it'll be 25 or 50 basis points. In other words, will the top end of the Fed's target range drop to 5.25% or 5% from the current 5.5%? In the end, it doesn't matter. Fed policy is simply a reaction to economic reality, poisoned by the deeply flawed belief that the Fed can and should try to do something about it. The Fed couldn't prevent the great inflation and sideways market from 1966 to 1982, numerous recessions, the savings and loan crisis in the 1980s, the dot-com bust of 2002, or the 2007 to 2008 great financial crisis. So we have no reason to believe it will prevent the biggest financial mega bubble in recorded history from bursting. And as we've repeatedly pointed out in these pages, a rate-cutting cycle is nothing to get excited about, unless you really like recessions and bear markets... because that's when rate-cutting cycles tend to happen. We've had four big drawdowns since 2000: the dot-com bust, the great financial crisis, the pandemic crash, and the 2022 bear market. The Fed cut rates during three of those times. It raised rates in the last one. Rate cuts are an attempt to stimulate economic activity during a time of weakness. Praying for rate cuts is like praying for a recession. It makes no sense. The only reason people want lower rates is because we saw them for most of the period between 2008 and 2022, and investors liked seeing the S&P 500 Index rise 600% (from its March 2009 bottom to the January 2022 top). People loved speculating on all kinds of garbage that went up a lot more than that, sometimes over very short time frames. In short, folks are addicted to the idea that low rates are good, even though they're one of the most important signs of slowing economic activity. The probability of rates falling back to zero and staying there for most of the next decade and a half is very low. (I'm reminded of the old bumper sticker seen in Silicon Valley after the dot-com crash, which said, "Please God, just one more bubble.") So you had better hope that when the Fed cuts rates next week, it's followed by plenty of hot consumer price index reports and falling unemployment. Because if it's not, the Fed will feel like it has to keep cutting until unemployment stops rising and "prices stabilize." However, prices never truly stabilize. The Fed would be better off leaving rates unchanged, or at least confining them to a much narrower range (with current levels making up the bottom of the range). Instead, the Fed goes on lengthy cutting and hiking cycles. And through it all, it fails to prevent booms, busts, bubbles, recessions, and full-blown financial crises. It makes you wonder why the Fed even exists. The Fed's true purpose... The Fed was created in 1913 to backstop bankers' fortunes because bankers love using leverage to try to make as much money as quickly as they can before the next blowup. The Panic of 1907 scared Wall Street bankers enough that they knew they had to do something. So they shoved the Federal Reserve down our throats as a lender of last resort for the next time they needed one... And they'll always need one. Bankers can take more risk, use more leverage, and generally screw things up for everybody else because they know the Fed is there to save them when it all goes wrong. The 2008 crisis proved beyond a shadow of a doubt that the Fed will help its friends out. If there was nobody to bail anybody out, we might just get more prudent behavior out of bankers. The Fed either hasn't figured out or doesn't care that it's part of the problem, and that letting the business cycle run its course – including letting overleveraged banks fail – would likely be much better for everyone. So here we are, once again, waiting for the Fed to tell us all what it'll do. Just remember, a rate cut is not a buy signal. It's a signal that the laziest, least competent bankers on the planet have a large enough pile of data telling them the economy is weakening. So I'll repeat my advice from above: Focus on buying great businesses instead of index funds that mix great businesses with less-than-great ones. And buy alternative investments that will keep your money safe and generate returns while you wait for more attractive valuations to arrive in U.S. stocks. See you on the other side of Wednesday's Fed announcement. New 52-week highs (as of 9/12/24): Alamos Gold (AGI), Altius Minerals (ALS.TO), Altius Renewable Royalties (ARR.TO), Alpha Architect 1-3 Month Box Fund (BOXX), Costco Wholesale (COST), Fair Isaac (FICO), Fidelity National Financial (FNF), SPDR Gold Shares (GLD), Intuitive Surgical (ISRG), Nuveen Preferred & Income Opportunities Fund (JPC), Kinross Gold (KGC), London Stock Exchange Group (LNSTY), NYLI CBRE Global Infrastructure Megatrends Term Fund (MEGI), Omega Healthcare Investors (OHI), Oracle (ORCL), Sprott Physical Gold Trust (PHYS), Planet Fitness (PLNT), RadNet (RDNT), Sherwin-Williams (SHW), Skeena Resources (SKE), S&P Global (SPGI), Stryker (SYK), ProShares Ultra Gold (UGL), Vanguard Short-Term Inflation-Protected Securities (VTIP), and Utilities Select Sector SPDR Fund (XLU). In today's mailbag, a thought on some history that we shared earlier this week – about the market predicting who wins the White House, most of the time... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Where the mailing [on Tuesday] said: 'In the 23 presidential elections since 1928, 14 were preceded by gains in the three months prior. In 12 of those 14 instances, the incumbent (or the incumbent party) won the White House.' "The thing is, this says that [in] 2 of the 14 instances the incumbent didn't win... This could be the 3rd of 15 instances [this] year!" – Subscriber Richard A. Good investing, Dan Ferris
Eagle Point, Oregon
September 13, 2024
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. | Investment | Buy Date | Return | Publication | Analyst | MSFT
Microsoft | 11/11/10 | 1,387.4% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 1,362.1% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data Processing | 10/09/08 | 1,003.5% | Extreme Value | Ferris | WRB
W.R. Berkley | 03/16/12 | 798.1% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 699.4% | Retirement Millionaire | Doc | HSY
Hershey | 12/07/07 | 493.9% | Stansberry's Investment Advisory | Porter | TT
Trane Technologies | 04/12/18 | 474.9% | Retirement Millionaire | Doc | AFG
American Financial | 10/12/12 | 462.9% | Stansberry's Investment Advisory | Porter | NVO
Novo Nordisk | 12/05/19 | 395.3% | Stansberry's Investment Advisory | Gula | TTD
The Trade Desk | 10/17/19 | 391.5% | Stansberry Innovations Report | Engel | Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals | | 5 | Stansberry's Investment Advisory | Porter/Gula | | 3 | Retirement Millionaire | Doc | | 1 | Extreme Value | Ferris | | 1 | Stansberry Innovations Report | Engel |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Investment | Buy Date | Return | Publication | Analyst | wstETH
Wrapped Staked Ethereum | 12/07/18 | 2,291.8% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 1,446.1% | Crypto Capital | Wade | ONE/USD
Harmony | 12/16/19 | 1,127.7% | Crypto Capital | Wade | POL/USD
Polygon | 02/25/21 | 720.6% | Crypto Capital | Wade | OPN
OPEN Ticketing Ecosystem | 02/21/23 | 279.3% | Crypto Capital | Wade | Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.
Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios | Investment | Symbol | Duration | Gain | Publication | Analyst | | Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | | Microsoft^ | MSFT | 12.74 years | 1,185% | Retirement Millionaire | Doc | | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | | PNC Warrants | PNC-WS | 6.16 years | 706% | True Wealth Systems | Sjuggerud | | Maxar Technologies^ | MAXR | 1.90 years | 691% | Venture Tech. | Lashmet | | Silvergate Capital | SI | 1.95 years | 681% | Amer. Moonshots | Root | ^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%.
Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio | Investment | Symbol | Duration | Gain | Publication | Analyst | | Band Protocol | BAND/USD | 0.31 years | 1,169% | Crypto Capital | Wade | | Terra | LUNA/USD | 0.41 years | 1,166% | Crypto Capital | Wade | | Polymesh | POLYX/USD | 3.84 years | 1,157% | Crypto Capital | Wade | | Frontier | FRONT/USD | 0.09 years | 979% | Crypto Capital | Wade | | Binance Coin | BNB/USD | 1.78 years | 963% | Crypto Capital | Wade | | 
No comments:
Post a Comment