It’s a seller’s market.
You might think that’s a misprint. After all, the Dow Jones Industrial Average just topped 20,000 for the first time ever. The S&P 500 and Nasdaq are at record highs, too.
In short, greed is in the air. And that’s exactly why you should be nervous about U.S. stocks.
But don’t take our word for it. Take it from Warren Buffett, arguably the best investor of all time:
Be fearful when others are greedy and greedy when others are fearful.
Today, we’re going to show you just how greedy investors have become. As you’ll see, now might be the perfect time to step aside and wait for the next big buying opportunity.
• The U.S. stock market has been abnormally calm…
As of today, the S&P 500 has gone 50 days without a 1% move. That’s the longest stretch without a big move since 1970.
But that’s not all.
The S&P 500 hasn’t had a 1% drop since October 11. That’s 90 trading days without a big decline—the longest streak without a 1% decline since 2006.
This is a serious red flag.
• You see, volatility is normal…
During bull markets, stocks should have the occasional down day. This allows the market to catch its breath before heading higher.
This hasn’t happened in months.
But U.S. stocks have basically gone up for the last four straight months.
This isn’t just abnormal. It’s unhealthy.
• Think of volatility as the market’s energy level…
When volatility is high, the market is using a lot of energy. When volatility’s low, the market is storing energy.
Because stocks have been so calm, the market’s barely used any energy.
Instead, it’s been stockpiling energy for its next big move. Volatility has now been suppressed for so long, it’s like lightning trying to get out of a bottle.
Unfortunately, we don’t know if stocks will skyrocket or crash next. Only time will tell…but we have a good reason to be worried.
• Investor sentiment has shot through the roof…
Look at the chart below.
It measures investor sentiment. A high level means investors are bullish. A low level means investors are bearish.
You can see investors have become extremely bullish over the last few months. According to this chart, investor sentiment is now at its highest level since January 2014.
Investors are acting like nothing can go wrong.
• President Donald Trump has a lot to do with this…
You see, Trump’s a businessman. He built a multibillion-dollar empire. He’s managed tens of thousands of employees.
Because of his background, many investors are betting that Trump will be good for the economy. That’s why U.S. stocks have climbed to record highs.
Look, we get the excitement behind this. But let’s be honest. Trump’s still a total wild card. That’s been on full display since he moved into the White House.
No one knows what he'll do next.
He could sign a bill that creates thousands of new jobs. He could piss off one of America’s biggest trading partners. He could also say something that sucks the air right out of this rally.
In short, you shouldn’t be complacent, even if you like Trump.
• At the same time, we don’t encourage you to bet against U.S. stocks…
As you just saw, they’re in an uptrend. This is bullish. It means momentum’s on their side.
Until this changes, we don’t recommend shorting (betting against) U.S. stocks.
But you should still take steps to “crisis proof” your wealth. Here are three ways to get started:
Prune your portfolio. Go down the list. Look at every stock you own. If you wouldn’t buy it right now, get rid of it. Use the proceeds to buy something you’re bullish on.
If you don’t have stocks that you want to buy, hold more cash than usual. This will help you avoid big losses if stocks fall. It will also put you in a position to buy stocks the next time you see something you like.
Own physical gold. As we often say, gold is the ultimate wealth insurance. It’s one of the only assets that can do well when stocks or bonds tank. Because of this, investors buy it when they’re nervous.
But here’s the thing. U.S. stocks don’t have to crash for gold to do well. We’ll explain why in tomorrow’s Dispatch.
Delray Beach, Florida
February 21, 2017
Doug Casey May Have a Spot on His Team for You
Casey Research is looking for a seasoned analyst to work closely with best-selling author and multimillionaire investor Doug Casey.
Do you have a genuine passion for markets and investing?
Are you a first-rate researcher with 15 to 20 years of financial experience?
Do you love talking to people you don’t know for information?
Are you willing to travel anywhere and everywhere?
Do you have experience writing about or investing in commodities?
If so, you may be the right person to help Doug on an exciting new project.
You should also be prepared to relocate for at least six months to Delray Beach, Florida, where our head office is located. (USA Today calls it the most fun small town in America.)
If you've ever wanted to make a living reading, writing, and thinking, please send us:
Your full name.
The total per-share dividends Silver Wheaton has paid out over the last 12 months.
The percentage change in the TSX Composite Index in 2015.
The price of platinum in euros in the London AM fix on January 25, 2016.
An investment idea. Tell us about an opportunity. Explain the fundamentals. (Don’t just show us a bunch of charts.)
A letter telling us about yourself. We don’t care much what school you went to. We do care what you’ve learned doing whatever it is you’ve been doing. We appreciate odd jobs, but we’re also willing to consider Wall Street refugees.
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Get in touch at firstname.lastname@example.org. Put “Commodities Analyst” in the subject line. That’s your first test.
The compensation will depend on your level of experience. For the right person, this position will be a stepping stone to a very lucrative career. Several writers in our group earn up to $500,000 annually. Over the years, the company has made millionaires of more than 30 employees.