The bull market that nobody’s noticed…
From Porter Stansberry in Stansberry Digest:
It’s the bull market nobody’s noticed…
You see, a huge bull market has begun in a sector that has been left for dead. And nobody is paying attention… yet.
Where’s the ‘crowd’ in today’s stock market?
The most popular recent winning trade is the so-called “FANG” stocks – Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL) – and other similar technology and media plays.
Today’s market is very reminiscent of the big tech and telecom boom of the late 1990s. Instead of worthless dot-com companies, today’s debt bubble is pushing up worthless “virtual currencies” – hundreds of them. The outcome will be the same, trust me.
Most investors buying the FANG stocks for the first time today and those buying virtual currencies are going to take a beating. Just like folks who piled into tech stocks in 1999… and just like folks who piled into real estate and commodities in 2007.
Investing late isn’t smart. Investing late into what’s wildly popular is deadly.
No, I don’t have a crystal ball…
I can’t tell you when the punishment will start. But I can tell you how it will finish. The leading names will fall more than 50%. And the fringe stuff will go down 90% or more. Most of those virtual currencies will end up being the punch line to a bad joke. Or they will be completely forgotten in less than five years.
And here’s something else that’s remarkably similar to the market action I last saw in the early 2000s… Gold is suddenly outperforming stocks, and commodities have rallied, too.
And nobody – and I mean nobody – is paying attention.
Since the end of 2015, when the credit markets contracted and Glencore (the world’s biggest commodity-trading firm) almost went bankrupt, the world’s big commodity businesses have been grinding higher and higher.
Specifically, gold is up 14% this year. This year will probably be the first time since 2011 that gold outperforms stocks.
But that’s not the most important move…
The real foundation of the world’s commodity markets is copper… The metal goes into everything that the modern world needs. Copper is up more than 50% from its lows in late 2015. And nobody has noticed yet.
The resulting returns in commodity-based stocks and commodities have dwarfed the stock market. Since the end of 2015 the S&P 500 is up 20%. Glencore (GLEN.L) is up 254%. Freeport-McMoRan (FCX), the copper giant, is up 115%. Rio Tinto (RIO), one of the largest commodity producers in the world with huge iron ore production, is up 66%. That’s three times more than stocks over the last 18 months in a huge, low-return producer of Stone Age commodities.
Here’s another way to see how quiet the bull market in commodities has been…
Glencore has outperformed ALL of the FANG stocks over the last two full years.
Another sign of a new bull market in commodities: Russia and Brazil’s stock markets are booming…
Russia is up almost 50%. And Brazil is up 70%. These economies are largely driven by commodity prices. Even with oil prices continuing to be depressed, their stock markets are still booming. But nobody is talking about these trends. And virtually zero “big name” investors have bought, yet.
Not a single notable hedge-fund manager owns Glencore or Rio Tinto. The only well-known investors who owns Freeport-McMoRan is Carl Icahn – who, ironically, became interested in the company because of its oil assets, which have weighed heavily on the company’s balance sheet. Nobody is buying Russia or Brazil right now, either.
Do yourself a favor…
If you don’t own any commodity-related companies right now… sell off 50% of your exposure to U.S. technology and any of the big highfliers you’ve got. Reallocate 20%-30% of your portfolio into this emerging commodity bull market. Buy only the highest-quality names – like Franco-Nevada (FNV) for gold, Freeport-McMoRan for copper, and Glencore for base metals. Don’t forget to add some of the new critical commodities, too, like lithium. (SQM is the big producer.)
The only commodity I’d make sure to avoid right now is oil. There’s just too big of a glut as U.S. production and reserves continues to increase at historic rates.
If my colleague Steve Sjuggerud is right and this bull market continues to head higher, investors in these commodity plays will be the surprising winners. These stocks are a smart way to add a lot of “alpha” – that’s return in excess of the market’s return – to your portfolio today, without taking on the risks of investing “with the herd.”
One more thing… don’t tell anyone…
The longer this bull market stays quiet, the better for us.