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The Market Is a Bubble About to Burst

The Market Is a Bubble About to Burst

Episode #66  |  December 16th, 2021
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In This Episode:

Are we looking at a bear market in 2022?  A growing number of indicators suggest that stock market valuations are downright frothy… Meanwhile, there are new questions about whether or not the economy can continue growing in this environment when the Federal Reserve pulls back on its liquidity.  In this episode, Trish Regan is joined by Stansberry Research’s technical analyst Greg Diamond, editor of Ten Stock Trader.

Greg uses his technical and fundamental expertise to determine the best market opportunities for investors. Hear his ideas on this podcast now, and if you’re interested in taking your investing to the next level in terms of technical analysis, Ten Stock Trader is the best place to start.

 Click here for all the details. You can follow Trish on twitter @Trish_Regan and subscribe to her newsletter at https://AmericanConsequences.com

Guests:

Greg Diamond

Editor, Ten Stock Trader & Stansberry Newswire
Greg Diamond has 16 years of trading and portfolio management experience across every asset class. Greg is the editor of Ten Stock Trader, a trading service based on technical analysis. He monitors the global macro environment, including equities, currencies, commodities, futures, interest rates, and more.

Transcript:

Trish Regan:               On my show, I’ve talked about Marc Chaikin and the “Power Gauge” system he developed for Wall Street’s elite traders. But what I haven’t told you is the reason why he’s now sharing this system with everyday investors like you. You see his wife, Sandy, suffered a catastrophic financial loss in her life. She lost nearly 50% of her life savings, which she had earned working at L’Oréal Cosmetics when she was a trusted money manager. So Mark’s system helped her recover everything she lost in the market.

 

                                    And since then Sandy has tripled our 401(k) by simply typing “stock tickers” into this powerful new website. You can get the whole story. She’s got a terrific story. It’s a story about a husband and wife. And by the way, a lot of money that he was able to help her earn back. You can get the full message at www.sandymessage.com. Again, that website is www.sandymessage, S-A-N-D-Y-message.com.

 

[Music starts and stops]

 

                                    The market has been a little bit all over the place, so what does this mean as we head into 2022? Hello, everyone. Welcome to this week’s edition of American Consequences. I am Trish Regan. It’s really good to have you here. If you read my piece last week in americanconsequences.com, what did I talk about? Volatility. Volatility making a pretty big comeback. We saw the VIX, known as the fear gauge, spiking. It spiked again recently up into the, you know, in the mid-20s after having been in the low teens earlier in the month.

 

                                    So what do you do with that information? How should you think about this as an investor when you know there’s more fear that’s out there. Does that mean you stay by the sidelines or do you have nerves of steel and you go in at a time like that? I mean I argue you ought to be going in when everybody else is fleeing for the hills. Not always. Not always. But in general, the idea is to buy low, sell high. I’m joined today by a technical analyst from Stansberry Research, Greg Diamond, who loves this stuff like the VIX and loves looking at all these technical indicators for clues as to what they can mean for the overall direction of the market.

 

                                    And it’s a really important kind of indicator to look at. I mean you can be all about fundamentals, and believe me, I am, and I love looking at the fundamentals that are in our marketplace… what they may cause Federal Reserve, for example, to do next when you look at the inflation rate that we just got. Wow. Nearly up 10%, up nearly 10% on wholesale prices. Now when we see consumer prices, wholesale prices, all showing mass inflation, what will that mean for the Federal Reserve? Therefore, what will it mean for the overall economy? But is there a way to look at this differently through a different prism, the technical prism? There absolutely is.

 

                                    And that’s what Greg Diamond is here to help explain today for us. He spent 16 years trading every asset class, really. He’s traded for a $3 billion hedge fund, a $35 billion pension fund. He’s managed multimillion-dollar portfolios all across various asset classes. He is a chartered market technician, and he is the author of Stansberry’s Ten Stock Trader – the author and editor. And you can get more information at stansberryinvestor.com. But, Greg, welcome to the program. It’s good to have you here.

 

Greg Diamond:           Thanks for having me on, Trish.

 

Trish Regan:               So like I said, I spent a lot of time looking at all the fundamentals. But lately, I’ve become quite interested in this VIX because I think there are certain things that we can learn from it, certain things we can learn from technical indicators all around. I want to get to that. But first, let’s talk a little bit on you. How did you get so interested in the technical side of stocks?

 

Greg Diamond:           Yeah. It was kind of by accident. So you mentioned the hedge fund I work for, and it’s actually one of the oldest in the country. And that hedge fund based their trading decisions, their investment decisions strictly on price, the systematic or black box type of fund. And my first boss worked for a legendary trader named Paul Tudor Jones, and he introduced me to, you know, how he traded.

 

                                    And this was before systems were introduced. This is before, you know, really computers time took off. And he basically said, look, if you want to understand how markets behave, why price does what it does, you have to understand technical analysis. And you know, from there – so before that, I was, you know, studying for my CFA, and I was going to get my MBA. And I basically took those books, I threw them in the trash. I turned to the route of technical analysis, and I’ve never looked back.

 

                                    So it’s a unique story, but it’s one that – and we’ll get into this a little bit. I think that technical analysis is a bit misunderstood. I think there’s a lot of sort of nonsense out there. But from a professional level, it really helps you understand whether you trade 10 times a day or 10 times a year, it really helps you understand how markets operate.

 

Trish Regan:               So you were sort of, you know, a quant back when it was first becoming a thing. I can remember sort of back in the early days. What year was this, by the way, when you first got interested?

 

Greg Diamond:           This was 2003 to 2004.

 

Trish Regan:               So I can remember going back to the late-nineties, I had a job at a well-known firm called D.E. Shaw where they were doing a lot of this kind of stuff as well, and really mastering started the computer side of things. Right? And I remember it first being described to me sort as noticing those very, very, very small, tiny movements, and benefiting, and benefiting, right, from those very small movements on a mass scale. But those movements overall, I think, they tell a story. Right?

 

                                    And numbers tell a story that in some ways can help either solidify what you might be thinking from a fundamental perspective in the markets or can actually maybe cause you to maybe rethink some of your theories. I mean there are those that just swear by the technical side, those that swear by the fundamental side, and then there are those that say, you know, you need a little bit of all of it, right, in your decision making. Where do you come out?

 

Greg Diamond:           Yeah. With that you just said. I think – well, I’ll go back to out with what you just said I think well I’ll go back to Paul Tudor Jones, who’s a legendary trader. I think he summed it up best. He said: “Price comes first and fundamentals come second.” And Trish, I can’t tell you how many times over my career where I’ve gone back to back that quote from Paul Tudor Jones and said, “My God, he’s right again.” And what I mean by that is you’ll see something like you’ll see the S&P, you know, is dropping today.

 

                                    And then something will come out, and it’s like, well, you know what, this kind of looks like a low here. And then some fundamental, you know, news item or economic release, or earnings, or whatever might be, and then you see the price move on the back of that fundamental picture. But if you’re paying attention to the price assets, to the technical, it was actually there, you know, before that. So that’s kind of where I fall, but it doesn’t mean – and I’ll do some fundamental analysis in a bit with you, but it doesn’t mean, I think you have to look at both. But what I’ve found is that price tends to lead the fundamental outlook.

 

Trish Regan:               Very good point that it can often lead. So before we get into all that, just so that the listener knows what you’re thinking about the markets right now. Here we are coming up on the end of the year. It’s been a heck of a year, right? I mean just an incredible, incredible ride for investors since the dark days of March 2020. And a lot of people are asking whether or not that is sustainable going into 2022. What’s your overall thesis on that right now, Greg?

 

Greg Diamond:           So I would say the short term, you know, I’m still bullish in the short term. It’s really quite simple, you know, the market has been on an uptrend and hasn’t broke. We’ve seen some things fall behind. But for the most part, the major indexes are still rallying. And, you know, the important part. And, again, this is where kind of the fundamentals come in is there’s still a lot of money sloshing around. You had the infrastructure bill passed. You know, we’ll have some type of social spending bill or whatever the heck it’s called. You know, more money into the system.

 

                                    But on the flip side, you know, there’s inflation and the Fed, and we’ll find out a lot more tomorrow on Wednesday when the Fed makes this decision. But, you know, for now, as the old saying goes, “The trend is your friend until the end.” And so far, it hasn’t ended yet.

 

Trish Regan:               Are there things that you look for that might signal an end from a technical perspective?

 

Greg Diamond:           Absolutely. And this is kind of where time comes into play. And I know many listeners might say, well, what in God’s name are you talking about? So I utilized something that was really founded back in the 1920s to 1930s by someone named W.D. Gann. And he incorporated time analysis into his investment and trading decisions. And I won’t get into everything right here because it’s very detailed and a little cumbersome. But basically, I look for time as a way to think about when something is going to happen and not necessarily look for specific price target.

 

                                    So I’d say the biggest thing is time, price, and then the fundamental follow-up. And so I’m not going to give everything away because I have specific trading recommendations for my subscribers over the next, call it, three-six months, but I do think that we will see volatility start to come into play. But say heading into – I’ll give you a little sneak peek. I would say if we see a little – if we see a low into, say, the week Christmas, that to me is where the fear really comes, and you talked about that at the beginning. You know, this is kind of something where you take advantage of fear. That’s where I would step in. So over the next week, it’s hard to believe that Christmas is literally next week. If we see a low come into play, I think that would be maximum fear and opportunity to buy, you know, heading into 2022.

 

Trish Regan:               Again, just so those are listening right now know where to go, stansberryinvestor.com is where they can find your Ten Stock Trader. Again, that’s stansberryinvestor.com because Greg does have a lot of ideas. So let’s talk a little bit about using volatility to your advantage. I mean, I was going back in and doing my own sort of little technical analysis of the VIX, and looking back it at those times when it really got pushed.

 

                                    I mean, you see how it hit a high back in 2008 shortly – well, about a month after Lehman Brothers imploded and declared bankruptcy. And, gosh, you know, that was sort of, I guess, a signal. It was reaching out to us, telling us, I can’t remember off the top of my head, you probably know, it was around 89 or so. And then again we saw that materialize in March 2020, where again the VIX just had this massive spike. And just to take a step back, I think it’s worth explaining to people what the VIX is and how it is a measurement of volatility because it’s basically measuring options activity for the next 30 days.

 

                                    And options become more expensive the more traders fear they won’t be able to get their prices. And so as a result, you see that VIX indicator spike. And I guess as an investor, you need to watch this, right? Because I think it tells you certain things. If it’s in the teens, if it’s in the low 20s where it is right now, you know, that’s a very different story than when it creeps up into the 30s, 40s, 50s, and gosh, 80s.

 

Greg Diamond:           So I will add to that. You actually need to watch it, but you need to watch it in conjunction with something else. The VIX is a good measurement of fear and greed against what? Against the S&P 500. I don’t actually really like trading the VIX or the derivatives, and there’s a reason why. It is a perfect example. So the VIX is up about 11% today. The derivatives are only up about five.

 

                                    Now as a trader, as an investor, that drives me crazy because let’s say you got this right and you’re trading something that’s up 11%, but the actual instrument you’re trading is only up five. That’s frustrating. So what I would advise –

 

Trish Regan:               Forgive me, but back up for a second. When you say the instrument, are you talking about like an ETF that is trying to mimic the VIX?

 

 

Trish Regan:               Which by the way, can’t. Like I’ve looked at them too and it’s amazing how little, I mean there’s definitely a correlation but it’s not as strong a correlation, I think, as you’d like if you were really trying to be moving in and out of VIX.

 

Greg Diamond:           Right. Exactly. It’s not one to one. And, again, that’s frustrating. And you look at the two popular ETFs that a lot of people trade off this is the iPath Series B, ticker VXX. And then the ProShares VIX Short-Term which is VIXY. Again, you know, the VIX is up, you know, 10 to 11%, and those are up 4.5 to 5%. So what I would say and how I utilize the VIX is I definitely look at it, but I’m going to look at it in terms of what are the major indexes doing? The S&P 500, Dow, and the Nasdaq.

 

                                    And this is simple technical analysis that anyone can get started on, but are there higher lows? Are there lower lows? Because the stock prices are going to rule what the VIX does. The other thing I would point out, what’s the VIX relative to the actual Fear & Greed Index? And this is on CNN.com. It’s actually a pretty good indicator of sentiment. And so if you see it start to tick down into this fear mode, which we’ll see today given the sell-off, but VIX can’t really rally while S&P, Nasdaq, and Dow are holding support. You know, and that’s something that I think we’ll probably see next week at the Christmastime, I mentioned. That’s probably a good time to jump in.

 

Trish Regan:               So, you know, you see a reading of 75, which is, you know, once a, I don’t know, maybe it’s like once in a decade. Right? That sort of – I mean is there a number that would get your attention that would cause you to say, OK, now I’m going to go look at that Fear & Greed Index. Now I’m going to go look at this relative to the S&P. I mean is it when it hits 40? Is there any kind of magic number that really gets your attention?

 

Greg Diamond:           Not necessarily a specific number. Again, I think you need to look at relative to everything else. You need to look at it relative to the VIX. You need to look at it relative to the other indexes. And then this is where really technical analysis comes into play. Is support holding or not? Is resistance going to break or not? You know, you can also look at the Commitment of Traders reports and get sentiment there.

                                   

                                    What are professional traders, speculators, investors doing? Are they on a relative basis over the last year or two? Where is there positioning over the last year or two? So it’s not necessarily, “Oh, this went down to 75 today so we should buy.” I think you have to factor in various different things.

 

Trish Regan:               So what has you thinking that the market is poised for an additional leg up, simply the trends?

 

Greg Diamond:           So this is something that I’m going to turn to the fundamentals here actually. I’ll switch gears here. But it incorporates the technicals. So like I said, the trend is still up, but this is something that is actually keeping me up at night. And I think your listeners appreciate it. So when I think about catalyst, and you know, big, large macro fundamental. Now, you know, you look at fundamentals. You look at that. You look at earnings. You look at price-earnings, all that stuff. That’s great.

 

                                    But as someone who traded every asset class, you know, I kind of look at the world as a big chessboard, and I want to know what the big fundamental catalysts are. So the markets tend to discount certain things that happen by a few months. So if you look at when Joe Biden was president, the market took off. Now why did that do that? They were going to spend, spend, spend, spend, spend. And they’ve done that. So the market priced in the infrastructure deal. The market price in the social deal. And you’re talking hundreds of billions, trillions of dollars coming into the economy, coming into the market. Well, that’s all priced in.

 

                                    Now we’ll see if this social spending bill gets passed in December. Let’s assume it does. OK. While that’s happening, the market’s already priced that in. What do you have next? The Federal Reserve is starting to pull back. The Federal Reserve is worried about inflation. So as they reduce liquidity, that increases volatility. At the same time, you have inflation rising, and there’s no other big fundamental catalysts that the market has to price in for more money coming into the system.

 

                                    So this is kind of the three-headed monster that I really worry about heading into 2022 because the market’s already priced this in. So basically the powers that be have to hope, and hope is not a really good strategy, that the economy is just going to take off on its own without the help of the Federal Reserve with inflation rising and with no more, you know, big spending bills out of D.C.

 

Trish Regan:               You know, there were two different reports. I think Morgan Stanley and Goldman Sachs this week had very conflicting views on what they thought the Federal Reserve would do. Morgan Stanley didn’t think it would be as active as Goldman Sachs. Goldman thinks, you know, the Fed is going to not only pull back as promised, and they’re currently doing that, of course, with the tapering and that $120 billion we were pumping into mortgage-backed securities and other debt instruments like Treasurys.

 

                                    The thinking is that not only will they do that, but they will up rates in 2022. Morgan Stanley doesn’t seem to think they will up rates. I mean those are two really extreme different viewpoints. As an investor, is there any scenario where the Fed can be upping rates, Greg, while simultaneously the market still continues to prosper because somehow magically the Fed gets it right and our economy is still growing?

 

Greg Diamond:           There’s definitely a scenario like that. And, you know, look, if rates are rising because there’s demand out there, and you know, people are getting jobs and that as a signal of growth, then that’s a good thing. That’s when interest rates are rising are a good thing. But if it’s the opposite where, you know, wages are stagnant. You know, we have all these jobs that are open and nobody wants to work. I mean you know the supply-chain storages. You know the restaurant shortages. If that is – that stagnation, that’s when rates rising a really, really bad thing.

 

                                    So I think, and you know the other thing, if you look at the Treasury market, and you look at, so interest rates as inflation is going higher, interest rates haven’t really been doing much. And you can argue that – I think this is where Goldman and Morgan Stanley have that conflicting issue, is the bond market pricing in a Fed error? So they’re basically saying, look, they have to raise rates, but the economy can’t handle it. You see the 30-year interest rate is actually declining. I mean it is from highs made back in March.

 

                                    So that’s a big problem I think that investors need to be focused on is how is this whole thing going to be taken when the Fed really starts tapering, and then actually raising rates in combination with actual inflation, and then the real economy. But the stock market as I alluded to earlier is going to start to discount that, and you’ll start to see that reflected in the price action.

Trish Regan:               So let’s go back to that idea because I’ve been perplexed by the Treasury market and this insanely low yield on the 10-year. You think maybe the bond market is telling us that the Fed has gotten it wrong?

 

Greg Diamond:           I think that they’re saying that the Fed is between a rock and a hard place. How can you raise rates if the economy doesn’t support it? You know, it’s a very, very difficult thing to try to understand because you’re trying to predict the future. But, again, this is where technical analysis becomes so critical because I can just look at the price action, and say, well, what is it telling me? And then I just go back to what I just said about the 30-year or 10-year interest rate, whichever one you want to look at. Inflation is rising. The Fed is tapering.

 

                                    Why aren’t rates rising? Well, the only reason they’re not rising is basically because the bond market is discounting the fact that the Fed might make a mistake. And there’s an old saying on Wall Street that the bond market, the bond traders are the smartest guys in the room. So basically what that means is that the bonds and interest rates are going to move first, commodities next, and then equities are going to follow. And so when you look at to try to answer your question, again, interest rates might be telling us, you know what, there’s a big issue coming here in the next six to 12 months.

 

Trish Regan:               It feels like the bond market has just, you know, typically yes, and by the way, it’s a much larger market. It tends to get these things right. But I mean it’s sort of like defying logic here. I mean I’m looking at the forecast right now for fourth-quarter GDP. And the expectation is, you know, in the vicinity of 5% growth. Q1 of 2022 in the vicinity of 4 to 4.5% growth. Those are decent numbers. Right? I mean if we’re growing at that kind of rate, shouldn’t we have room to move rates higher?

 

Greg Diamond:           Yeah. So maybe some of your listeners won’t like what I’m about to say next, but I don’t – and this is someone who worked on Wall Street for a very long time, I just don’t listen to what Wall Street has to say. Because I would love to know what their track record it’s for first, you know, their 12-month S&P targets, and then you look at their growth projections. I mean I can remember very specifically especially when I was trading at the pension fund, I had lines into every major bank as you can imagine.

 

                                    And there would be this big GDP number, inflation point, whatever it might be. And they could come into me and they would say, “Hey, Greg, we just revised down or revised up our growth projections by 0.105%.” What did that do for me? That doesn’t do anything for me. And they all do it. They all do it. And I’m not talking bad about anybody, but my point is that, you know, just because they do something and say that it’s going to be, it doesn’t necessarily mean that. You really have to pay attention to it.

 

                                    But I would say what you need to do is in terms of our 4% growth, 5% growth, whatever the number is, how does that correlate into what the Fed is going to do? Are they going to – the Fed is not going to look at those growth rates and say this is what’s going to be. They’re looking at these inflation numbers. So that’s going to be the critical factor over the next six to 12 months.

 

Trish Regan:               And we did get a really, really big inflation number this week. Wholesale prices growing the most they’ve ever grown like in history as far as we’ve been, you know, tracking this stuff. Jumping, which didn’t surprise me, almost 10%. And I hear that sort of anecdotally, Greg. I hear from producers and I’ve spoken to some companies that need to kind of operate in a – any company does. Right? Any small business, big business, you need to know what your costs are. And their costs just keep going up, up, up. And it’s this, you know, fixed prices that just keeps escalating.

 

                                    And some of that you can hedge in, right, which, you know, they’re lucky if they can do that. The labor cost, however, has also just skyrocketed, and that’s not something that you can hedge in. So, overall, they’re seeing a much larger increase, and I just assume that those costs have to get passed on to consumers, who thus far have shown an ability to weather that. Right? And you know we’ve seen growth and even in the face of these higher prices.

 

                                    So yeah, I mean I don’t know how the Fed – I’m going to get real fundamental for a second, and slam the Fed for a minute because to me, they’ve wasted the last seven months where they could have been more proactively tapering. They could have been more proactively gearing up for higher rates. And now you run the risk that, you know, it’ll be too much too late.

 

Greg Diamond:           And so this goes back to exactly what I talked about with Paul Tudor Jones. Price comes first. Fundamentals come second. So your fundamental observation of that lines up with what? What we just talked about with the 30 and 10-year interest rates that popped back in March. It’s starting to lead. And those are telling us exactly what you’re saying. How can they do this? Why did they wait so long? So we’re speaking the same thing, we’re just looking at it from two different angles.

 

Trish Regan:               So, you know, you and I have both seen a lot of bubbles burst – not a lot, but you know, you go back to 2000, and you go back to what happened in 2008, and there’s a lot of questions right now about whether we are in the midst of something else, another asset bubble. Do you have any thoughts on that and are there any technical indications that would suggest to you that maybe it’s Treasurys again, I don’t know, that we’re in a problem. I mean I look at Treasurys, right? And I’m actually comforted by the fact that there as low as they are on the 10-year. That tells me, OK, well, you know, look, maybe there won’t be a kind of catastrophe in the works.

 

Greg Diamond:           So I would say, yes, there are a lot of significant, just a lot of significant things out there that make me think this is a bubble. You know, I had someone email me the other day, a good friend, “Hey, do you have any fun stocks to trade?” I said, “What are fun stocks?” And he said, “Well, you know, I just like to – I like to pick random stocks and see if they skyrocket or not.” I mean this type of stuff is, you know, what you saw in 2000 and 2008 in terms of homes.

 

                                    And I look at some of the stuff with non-fungible tokens, these NFTs, or pictures of pictures or something. And they’re selling for millions of dollars. You know, it seems like it’s that frothy environment. Now that can last longer than you think. And then the other one that I’ll point out is bitcoin. And I know that there’s going to be a lot of interesting things happening with bitcoin, the blockchain technology and bitcoin.

 

                                    But what I’m focused on particularly in bitcoin and relative to the bubble speak is, look, you know, or its entire existence, which hasn’t been very long, bitcoin and stocks have been a risk-on market, meeting when stocks go up relatively speaking, bitcoin goes up. Well, bitcoin is now starting to top out, you know, it topped out last month. It’s down 30%. So the biggest question I had going forward is like, look, we have we have interest rates that we just talked about which have topped out. Bitcoin, let’s say that tops out.

 

                                    And then, you know, if stocks are the last one to the game, which I mentioned earlier, you know, if stocks start to go and you start to see bitcoin – bitcoin is not going to be the safe-haven asset that everyone thinks it is. It’s really all about money. And when people get scared, it doesn’t matter. They’re going to take money out of the system. So that’s one of the biggest thing that I’m focused on over the next six months in terms of the bubble is watching the correlation between bitcoin and stocks.

 

Trish Regan:               Well, I don’t think bitcoin, you know, that’s been a misnomer. People think it’s a safe haven. I’m like are you kidding me? That’s the last thing I’d be looking to as a safe haven. My gosh, it’s all over the place.

 

Greg Diamond:           The other thing I’ll point out with it is a lot of people say, you know, that it’s a hedge against inflation. And that’s just not the case right now. Now, again, it’s a very young asset class. We’re going to find out, you know, let’s say inflation keeps rising. I mean we had a pretty big print today again, producer inflation is really, really high, but bitcoin can’t rally.

 

Trish Regan:               Yeah. It hasn’t been behaving like an inflation hedge. Right? Like it just – the behavior from bitcoin behaves more like, you know, a crazy tech stock in 1999 than an inflation hedge. With that in mind, I’ll be honest, and I love gold because I feel like it’s just one of those safe plays in a portfolio, but it’s not really behaving like an inflation hedge either. In fact, we got the print today on wholesale prices, so you’d think gold would rally, and instead gold traded down a bit. Any sense of what’s going on there?

 

Greg Diamond:           Yeah. So I’ll give your listeners two big scenarios that I’m watching in gold and silver, and the dollar and stocks really. So I see it as one of two ways. No. 1, it’ll be kind of like a 2011 scenario where markets coming out of a recession, which is exactly what we had 2020, and then, you know, 2009, two years later. Here we go. Back in 2011, what happened is we saw gold and stocks rally together. And then everyone was worried about inflation because of QE and central brand printing. And what happened? One day we woke up, and inflation wasn’t a big deal. Stocks kept going. Gold crashed.

 

                                    The other scenario is basically the late 60’s and 70’s. Inflation gets out of control. Gold skyrockets and [inaudible] a two-to-five-year sideways the bear market. So those are kind of the two scenarios that I’m looking at. You know, gold is going to have to start rallying here to really get that scenario in play. As you said, it’s really not. Silver as well.

 

                                    But you have to consider the dollar because the dollar is just strong. It’s a reserve currency, about 70% of all outstanding dollars are held overseas. That is the safe haven. And we saw that in March 2020 crash. Everyone blocked the dollars because there’s a shortage of them. So it’s simple economics. If there’s a shortage, and people have demand for it, it’s going to go up.

 

Trish Regan:               OK. I want to pursue that dollar. But just quickly, if anyone’s listening and they want more from Greg, he’s got the Ten Stock Trader newsletter, stansberryinvestor.com. stansberryinvestor.com. I encourage you to go check it out. Anyway, so let’s follow up on the dollar here because, look, we’re all invested in dollars as Americans. Right? If you’re listening overseas, you may want more dollars.

 

                                    But part of what, you know, I think about is the deterioration in our dollar in terms of its spending capacity thanks to inflation. So, yes, I get that it’s still the safe haven for the world, but do investors need to be cautious about how inflation affects their spending ability and power of the U.S. dollar?

 

Greg Diamond:           Yeah. There’s no doubt. And we kind of touched on it earlier, again, you know, wages aren’t increasing at the same capacity as inflation, and their dollar is going to be not as strong. And that hurts. And then it’s just a cycle. It just continues to eat away at your purchasing power because, hey, you’re not making as much and everything is going up. I mean it’s simple to understand but it’s kind of scary. If that continues, and again, the 60’s, 70’s style market environment where you have the gas lines and high unemployment, and 15% interest rates, that’s a big issue.

 

Trish Regan:               Yeah, it’s tough. You know, the hardest thing for people, I think, is if you’re investing your retirement, and you’re there as a long-term investor, it’s tricky because it’s hard. Right? It’s just hard to watch the market go down, and this is your money and your livelihood. And yet simultaneously like when the market’s going down, that’s actually the opportunity. I mean if you’ve got to think, I guess, long term enough and be there long term.

 

                                    Alternatively, I mean, you know, they say you can never catch a falling knife. If we start going lower, it’s like what do investors do? Is there any kind of strategy, and I don’t want to get too wonky, [laughter] but is there a strategy to kind of say, all right, you know, I’m going to take my gains from over here and work them back into the market when things really get dicey? I mean do you get into that at all, and we don’t have to give it away, but like, again, I think it’s so hard for people to just sit here and see the bloodbath that comes at times.

 

Greg Diamond:           So I kind of wear two hats in the fact that I’m obviously a long-term investor as well. But, you know, through my service at Stansberry Research Ten Stock Trader, you know, I’m a little bit more focused on the short term and making money on any market environment. That’s pretty much the goal at Ten Stock Trader. However, in your scenario, I think you what your listeners should really subscribe to is kind of what Porter Stansberry, our founder at Stansberry Research, has made just incredible basic insights.

 

                                    Look, you’re going to want to own quality American companies that have sustained, you know, the recessions, you know, whether 2008, 2009, and 2000. If you go back and you look at those big companies, and if you do the research yourself, and they’ve paid dividends through those bad times, you’re going to want to own that stock forever unless it is taken out through technology change and what have you. But, you know, a stock like Hershey. It’s not going away. People are going to be eating chocolate for a long time. They continue to pay a dividend. It’s a great stock. You know, that type of thing, it’s like, look, OK, we have this downdraft. I’m moving money here, but I have this core portfolio of great quality American companies that have been around for 20, 30, 40, 50 years. I know they’re going to pay a dividend. I know they’re going to survive through the bad times and do well through the good times. And those are the kind of stocks that you want from a long-term perspective.

 

Trish Regan:               Yeah. No, I think that’s good advice. I mean I think that people just, you know, they need to sometimes be strong. And if you’re right. Although it sounds like you think it could go one of two ways. We could get low you think into Christmas week. And if that’s the case, it’s an opportunity for investors because maybe it’ll sort of, in your view, decline, but see a better start to the year.

 

Greg Diamond:           So I’m looking at that as a pure trading opportunity. And there’s a difference just in terms of, you know, again how I operate Ten Stock Trader, and I trade options, which is inherently short term. So it’s a little bit different, but again, it doesn’t mean that investors can’t take advantage of a little volatility to add to their position. From a longer perspective, I think 2022 is going to be where the more difficult decisions come into play.

 

Trish Regan:               And that’s because some of this meme activity, some of this sort of this frothiness that’s reminiscent of 1999 into 2000 is catching up with us?

 

Greg Diamond:           Yeah. I think, again, it goes back to the market environment and just kind of how people who normally don’t pay attention to the stock market are all of a sudden expert traders. They’re expert investors. You know, from a technical thing, I just really hate social media but I kind of have to be a part of it. But I’ll jump on it and just see people just who claim to be technical experts, and they’re drawing lines, and they’re making up patterns. And, like, oh, this is what’s going to happen. I mean this is the type of stuff that you see in market tops. There’s no doubt about it. History repeats, and we’re seeing it again.

 

Trish Regan:               Yeah. I mean, look, I can remember all the investing clubs and the frenzy around these investing clubs back in ’99 and 2000. And it’s very similar now. I mean it’s different. Obviously your point about social media where everybody’s talking about this online, but there’s a lot of, I think, parallels and then you think about how everybody was holed up, right, in their home, and they didn’t have anything to do when we were shut down with COVID. And they were getting their stimulus checks. And, you know, it was like I know that the casinos were hurting in Vegas, but all of a sudden there was this whole new thing that opened up to people, again, reminiscent of those day traders back in ’99 to 2000.

 

Greg Diamond:           Right. And I remember a specific story that I shared with subscribers a couple weeks ago, and this was one of my bosses who shared this with me. He came home, and his wife is a doctor. And he came home, and she was on the computer. And he said, “What are you doing?” She said, “Charting.” He said, “Charting what?” She said, “Stocks. A colleague at work told me how to do it.” And this was March 2000. And he’s like, “Honey, you just saw the top.” [Laughter]  

 

Trish Regan:               This is in March 2000? Wow. [Laughter]

 

Greg Diamond:           Exactly.

 

Trish Regan:               I’ll also say to add to that because it’s so hard to time these things, a friend of mine who is a professional investor said he got a call from his mother-in-law, like you know, it wasn’t even March 2020. It might have been April, May, June. And she’s wanting to put money to work, and she knows nothing, right, literally nothing about the stock market. But her friends are doing this. And so he said, “I don’t know. Isn’t this kind of indicative of the top?” But clearly it wasn’t. Clearly his mother-in-law was onto something. So I guess I can go one of two ways. We’ll see how much sort of runway there is.

                                    But, again, I want to thank you just for all your perspective today, and just encourage people again to go to stansberryinvestor.com to check out your newsletter. I think you know for those of us that really want to be involved, and not just kind of sit back and be on the sidelines, having a trading strategy to be able to put to work to capture things, whether it’s going up or going down. Volatility, in this case, if you’re an active trader, is in fact your friends so check out Ten Stock Trader from Greg. And I appreciate your time today, Greg. Really interesting.

 

Greg Diamond:           I appreciate it as well, Trish. Thanks for having me on.

 

[Music starts and stops]

 

Trish Regan:               So it’s really interesting because you look at the technical perspective, you look at the fundamental perspective, and they really do eventually all merge. I think they’re kind of all telling us the same thing. But I just want to highlight again what Greg said, watch very carefully to see whether or not we get a low going into Christmas. If you want to know more about this, you can read his report Ten Stock Trader. It tends to be for the more sophisticated, as he was saying, people who like to get in and out of things, and trade more on a regular basis. But that is his newsletter, Ten Stock Trader… stansberryinvestor.com is where you can find it.

 

                                    And there’s a lot to watch right now. The one caveat to this is we worry about the economy. I would just like to point out, and I’m writing on this in americanconsequences.com, so do check out the piece, is that there’s a lot still to propel us forward into this next leg of the economy. And as much as people are saying, OK, tech stocks are overvalued. They’re kind of done. I think we’re setting up for something pretty big. And we can’t entirely be sure on the timing of it, but there is a new leg, if you would, coming in technology. And I say that because of what you might refer to as Web 3.0. That’s just a little precursor.

 

                                    We’re going to talk about it a little bit as I said on americanconsequences.com. So I encourage you to go and read my article there. But there’s a lot of change coming to the Internet as we currently know it, and we’re on the cusp of this. You know Mark Zuckerberg of course changed the company name to Meta, as in metaverse. And there’s reason for that.

 

                                    There’s a reason this is happening. And it’s because – if any of you have ever played Roblox or Minecraft, you know about these worlds online. What if those worlds could really become 3D in a way that you could interact with them like you’ve never seen before. And it’s a hard thing to even get your head around. I get it. Right? Because, look, we only know what we know. And we’re talking about something that almost feels kind of impossible.

 

                                    I encourage people, if you’ve never experienced virtual reality to go check out the rides at Disney’s Epcot, Avatar being one, Soaring being the other. And it gives you a sense of what can be and what could be. And what I think actually may not be that far off. So, yeah, Mark Zuckerberg’s changing the name of his company. You have companies like Roblox, like Minecraft and like Epic Games that are on the forefront of this technology and these 3D worlds that could be. We just need to get the chip makers.

 

                                    And by the way, they’re working on this. You’ve seen a video come out with its Omniverse chip that it’s working on. In the first quarter of 2022, Intel is expected to come out with its higher-grade chip to help power this new metaverse. But that’s one of the things that encourages me. While we may have challenges and I expect them to come in the coming months in part because of what I would argue has become reckless policy by the Federal Reserve, there is something fundamental going on within our economy. And that shift is going to be something that you want to take part of.

 

                                    That’s just a little precursor to get you to go to americanconsequences.com where I’m writing on this, this week, and I’m continuing to write on this, I think there are actually, within the tech space, some pretty interesting years ahead. So thank you so much for tuning in. I will see you on American Consequences. I will see you on the Trish Regan Show where I am every day.

 

                                    And I do want to remind you to go to stansberryinvestor.com. Check out all the research there. It will help you. And it’s important to be grounded in some of that research both from a fundamental perspective and a technical perspective right now. Thank you so much. I’ll see you next week.

 

Announcer:                 Thank you for listening to this episode of American Consequences. Want more Trish? Read her weekly articles Thursdays in our magazine at americanconsequences.com, and subscribe for free to get all of our daily articles and the monthly magazine. We’d love to hear from you too. Send Trish a note: [email protected]

 

                                    This broadcast is for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Trish Regan’s American Consequences is produced by Stansberry Research and American Consequences and is copyrighted by the Stansberry Radio Network.

 

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