I’m starting to feel like a broken record…
I’ve been talking about the Melt Up for years. I first gave a speech on the topic at our annual Stansberry Conference and Alliance Meeting way back in 2015.
It hadn’t yet started back then, of course… But I saw the underlying pieces moving into place.
In my mind, an eventual Melt Up was a certainty. And I’ve done everything possible to tell the world about it since then…
There have been plenty of starts and stops of Melt Up behavior in recent years. And for the most part, stocks were on a one-way cruise higher as we headed into 2020.
It even looked like the final swing of the Melt Up was upon us at the start of the year. But then, COVID-19 crashed the party…
Make no mistake – that bust was painful and record-breaking. However, the recovery since then has been just as impressive. And to me, it’s proven a crucial fact. The final leg of the Melt Up is here. That means you’ve got to be on board the ride now.
But just as important, it means you’ve got to be ready for the Melt Down.
Let me explain…
A lot has happened since the market bottomed in March. The Federal Reserve has pumped trillions of dollars into the financial system… The government has spent trillions on fiscal stimulus… And investors have bid stocks up to dramatic new highs.
Seven months ago, investors wondered when the market would find a bottom. Now they’re wondering how much higher things could run.
My answer is that they could run far higher than most would believe. This is a Melt Up, after all. The hallmarks are here. And that means prices can, and likely will, soar to stratospheric heights.
Simply put, you ain’t seen nothing yet.
That reality creates its own set of the problems, though. Because as longtime readers know, a Melt Down typically follows a Melt Up. And all the gains of the Melt Up go away. I am not kidding. The market gives back everything it gained during the Melt Up. All of it.
I just want you to realize that we are playing with fire here – 100%.
Based on history, once the general public buys in like it has over the summer, our time is short. Typically, it means we’re down to the last 12 months. That means we could see a major market top and the start of a Melt Down by next summer – or sooner.
I don’t mean we’ll see a market top like we saw in February. That decline could look like nothing in comparison to a true Melt Down.
When the tech bubble burst, the S&P 500 fell by more than 50%. But what was even worse was that the decline lasted nearly three years.
There was no quick fall and rebound like we saw this year. And in a true Melt Down, the market will take everyone down over what could be years, not weeks.
Worst of all, the Nasdaq – the real heart of the dot-com era Melt Up – fell nearly 80% over a similar time frame. It took 15 years to recover those losses.
I don’t tell you this to scare you. I tell you this to make you aware of what’s happening today… so you are aware of what’s possible in the not-so-distant future.
You want to own stocks today to profit from the Melt Up. But you also need a plan to protect yourself in the coming Melt Down… to know exactly when you’ll sell.
The best way to do that is to have and follow your trailing stops. I need you to trust your trailing stops deep down in your toes.
You can’t have any reservations about selling anything you own. It only takes a sliver of doubt when times get tough for you to blow it.
You’ll know the companies you own. You’ll know their prospects. And you’ll come up with reasons why you shouldn’t sell… even though you hit a stop.
If you do this, it’ll absolutely crush your portfolio. You will risk losing everything – which is what happens to most people in a Melt Down.
Simply put, if you make the mistake of not following your stops when this all unwinds, you might never recover that money.
Times are good. You want to ride the Melt Up as high as you can. But now is also the time to prep yourself for the Melt Down. Have your stop losses in place… And be ready to follow them.
Good investing,
— Steve
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Source: Daily Wealth