How the ‘Fearful Idiots’ Will Win 2022 (A Daily Reckoning Exclusive)
It’s a question that becomes less silly with each passing week…
Are we on the cusp of another historic bubble burst?
Are investors that are banking on never-ending growth about to get what’s coming?
And if so…
What’s the smartest route to the exits…before the stampede?
We’re tackling these questions head-on in today’s Daily Reckoning Australia.
I’d say we’re putting our reputations on the line with it.
But that assumes we care about reputation.
Awards and accolades aplenty go to those who get buy calls right.
There’s little incentive for those with the guts to say SELL.
But one thing we’ve never cared about in this daily letter is looking silly.
And, unlike the mainstream hordes, incentives are not our bag either.
Our only incentive is to keep you reading, learning, thinking, and, hopefully, over time, making the right investing decisions at key times.
The remit of our experts is to do the research…and call it like they see it.
From there, the ball’s in your court.
And that’s exactly what our analyst Vern Gowdie does in his controversial new report, which has just gone live.
It’s called ‘Four Code Red Investments to Sell Now’.
Nothing ambiguous about that title.
But if you sense something isn’t right in the markets right now…you should read it as soon as you get the chance.
One thing we know is this…
The bulls versus bears fight has reached the 12th round
As you know, we talk about ‘fat tail’ events all the time. It’s our thing.
But when regular finance journalists start having the same discussions, you know something’s brewing…
Take this recent article in Fortune, titled ‘Is This the Sound of a Stock Market Bubble Popping?’:
‘Today’s profit bonanza is a craze unto itself.
‘Any convincing view on where stocks are headed must forecast that earnings will fall, or at least go flat, from here. “Corporate profits are in a bubble,” says Chris Brightman, CEO and chief investment officer at Research Affiliates.
‘“They’re absurdly elevated. Investors have been extrapolating growth that can’t go on forever.” But Brightman acknowledges that the earnings bash has lasted much longer than he expected, and that the recent leaps from already seemingly unsustainable heights to fresh records is an especially big surprise.
‘The ascent’s longevity and recent firepower makes it extremely difficult to predict when earnings will stall or fall, he cautions.
‘“I’ve been saying the rate of corporate profit growth has been not sustainable and the level is in bubble territory, and that earnings have to revert for a decade,” says Brightman. “But profits keep going up.”’
There’s the rub.
Aside from a wobble in August, everything’s just gone up.
When every sane bone in your body tells you they shouldn’t.
This is why the bull camp remains so staunch.
One of their supreme leaders is Cathie Wood, who has been fighting her corner all year.
First, she faced down Dr Michael Burry of Big Short fame.
He — and a growing number of Wall Streeters — have started taking out big shorts on her growth tech darling, ETF ARKK Innovation.
And last month, Wood butted heads with market bear Rob Arnott at a Morningstar investment conference.
Rob argued…just like Vern Gowdie in today’s just-released strategy report…that the code reds are now too big to paper over.
That the relentless rise of the tech-heavy, big-cap stocks is now so out of whack with fundamentals, it would be a minor miracle if it continued in 2022.
Wood, chief of ARK Invest, countered:
‘This is no bubble’
She said ‘profound platform opportunities’ will keep stocks pumping for years to come.
The bears are fearful idiots who ‘just don’t get it’ is her basic argument.
They’re plagued by ‘muscle memory’ from the tech bust and the GFC.
These horrible, retirement-wrecking things don’t happen anymore, you see.
Busts are a thing of the past.
Or landline telephones.
Or…global flu pandemics?
Vern Gowdie makes a clear and concise argument for how wrong this is.
This is a pre-crash pattern that is as old as the financial markets themselves.
It’s known as the 98/2 rule.
The smart 2% of the market willingly sell out to the gullible/mindless/starry-eyed 98%.
Happens every time. And, as you’ll see here, the quiet liquidating has been taking place in tech since June.
There’s a reason Vern’s going on the front foot with these four sell recommendations, starting today.
According to Vern, there’s more at stake than most investors realise…
He says it’s any investment you have tied up in superannuation.
It’s any other kind of speculation you own.
It’s your property…your income channels for the future…your kids’ financial futures.
If a crash does finally come — and you’ve not prepared in advance for how shockingly huge it could be — you stand to lose years’ worth of wealth and security.
Jeremy Grantham, John Hussman, Carl Icahn, and Jim Grant see quite clearly that we’re living in the exact same noonoo land that existed in 1999…and 2006.
So what do you do if think history is about to repeat in 2022?
Well, the smart thing is to consider these possibilities first…and then act if you are convinced.
Because, as you’ll see here, when valuations revert to the mean, it could all happen frighteningly quickly.
And when that move is underway…it’ll be too late.
Many believe this should have happened already, several years ago.
But then came the pandemic.
Trillions in stimulus spending.
A revenue bonanza for big tech companies that thrived on people being imprisoned at home.
Those trends are waning.
So what happens next?
Publisher, The Daily Reckoning Australia
PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.