Investing Observation & Opinion


  • Economy & Politics
  • Investing
  • Personal Finance
  • Related Posts

    Is The ‘Easy’ Money Over For European Stocks?
    Europe Cracks Down On Bitcoin, Virtual Currencies To “Curb Terrorism Funding”
    For Caterpillar The Depression Has Never Been Worse… But It Has A Cunning Plan How To Deal With It
    A Modest Proposal: All Companies Should Shut Down At Age 18
    Star Wars Could Break Box Office Records After This News
    Leave Bitcoin Alone. Abolish Cash Instead.
    What UnitedHealth Doesn’t Mean For Obamacare
    This Could Be The Next Weapon Of Mass Destruction
    Warren Buffett Stocks To Ditch In 2015
    What Are The Stock Buyback Benefits For Investors?
    The Eerie Link Between The Federal Reserve And The Sinking Of The Titanic
    What The $16.6 Billion Nokia Merger Means For Investors Today
    New Salmon Is The First GM Animal Approved For Sale As Food
    Wal-Mart Scrimped On Hiring As Store Space Grew Rapidly
    Aetna Says Individual Obamacare Business Performing As Expected

    Where We Are Now In Our Stock Market ‘Script’

    Our stock market "script" is still on track.

    I’ve been calling it the "Great Migration." As my regular readers know, it is the idea that Mom and Pop America are about to buy stocks… big time. They can’t live on zero percent interest. Out of necessity, they will migrate away from ultra-low-interest investments (like cash and bonds) and into stocks.

    And that will kick the market into a major boom phase.

    Our investing script is a three-act play. We’ve already made some pretty big gains in "Act I." And I keep looking ahead to "Act II." But we’re not there yet. Let me update you on where we are today.

    The "Bernanke Asset Bubble" is shorthand for my long-term theory that asset prices — namely U.S. stocks and U.S. housing prices — can and will soar to unimaginable heights, thanks to the Federal Reserve’s commitment to printing money and keeping interest rates at zero for years.

    The first stocks Mom and Pop America will buy when they migrate out of cash are the big dividend-paying blue chips: big-name stocks like Johnson & Johnson, Pfizer and Merck. That’s Act I.

    Mom and Pop have stuck with this trade. And so have my True Wealth subscribers. They’re up 124 percent on these stocks through the ProShares Ultra Health Care Fund (RXL). RXL’s largest holdings are Johnson & Johnson and Pfizer, each making up more than 10 percent of the fund.

    We’re well into Act I. But I keep looking ahead to Act II and Act III, where Mom and Pop will take on more and more risk. I keep thinking that we must be near the end of this period of "safe" stock-buying, as these stocks have run up a lot.

    Our script says the next step for Mom and Pop — Act II — will be to take on a bit more risk and buy Big Tech stock names (like Apple). I still believe these stocks will be the next to soar. But that hasn’t happened yet.

    Big Tech stocks are dirt cheap today. The median forward price-to-earnings (P/E) ratio of the top eight holdings of the Dow Jones Technology stock index is just 11. That’s crazy cheap. And it gives us an enormous upside opportunity when Big Tech stocks finally take off.

    While I’m personally looking forward to Act II getting underway, we’re not there yet. Safe, dividend-paying healthcare stocks are moving higher, while technology stocks are still behind.

    Once Act II is in full swing and Mom and Pop see profits on both their big safe names and their Big Tech names, they’ll really start to get back into the stock market. Once they start to believe that they can’t lose money in stocks, we will move on to Act III in our script.

    In Act III, Mom and Pop start buying speculative stocks, like emerging markets (such as India and Russia) and small mining companies.

    Today, the Act III trades are incredibly cheap.

    Take emerging markets, for example. The table below shows just how cheap the Act III emerging-markets trades are right now.



    Dividend Yield














    Based on history, we have a legitimate shot at hundreds-of-percent returns, once these trades get going.

    But we are not in Act III today. These trades — just like gold and commodities stocks — aren’t ready for us yet.

    Mom and Pop are not into Act III yet. They’re not into Act II yet. They have not upped their risk tolerance yet. If anything, their risk tolerance has fallen lately. It will happen. But not today.

    So for now, we need to sit tight on our Act II and Act III trades.

    In my True Wealth newsletter, we’re focusing on our Act I trades. That means safe, dividend-paying stocks, like healthcare.

    I strongly believe in the Bernanke Asset Bubble. I strongly believe Mom and Pop America will keep allocating more and more money to the stock market. And I strongly believe we will see another dot-com-style boom in stocks, ending with soaring stock prices in speculative sectors like emerging markets and small mining companies.

    We are not there yet, though. We are still in Act I.

    Be patient. Play it smart. Make sure you have money ready for the big boom.

    I could be wrong, of course. The script could change along the way. But this has been our script for months, and it has been right so far.

    Good investing,

    — Steve Sjuggerud

    This article was originally published on April 29, 2013, at

    Dr. Steve Sjuggerud is the founder and editor of one of the largest financial newsletters in the world, True Wealth. Since inception in 2001, True Wealth readers have made money every year with safe, contrarian investment ideas. Steve did his Ph.D. dissertation on international currencies, he's traveled to dozens of countries looking at investment ideas, and he's run mutual funds, hedge funds, and investment research departments. Steve's investment philosophy is simple: "You buy something of extraordinary value at a time when nobody else wants it. And you sell it at a time when people are willing to pay any price to get it." It's harder than it sounds, but Steve continues to be able to do just that for his readers. Click here to learn more.

    | All posts from Dr. Steve Sjuggerud

    Discuss this Story:

    Comment Policy: We encourage open discussion. Comments including racist statements, profanity, name calling or spam will be removed at our discretion. We use filters for spam protection. If your comment does not appear it is likely because it violates the policy.

    Oil Trades Near Three-month Low As Excess Supply Takes Toll
    Number Of $5 Billion-plus Takeover Deals Hits Record
    Investor Gabelli Joins Millennials Cutting The Cable Cord
    Gap Cuts Full-year Profit Forecast As Dollar Weighs
    This Is How GOLD Acted During Past Rising Rate Cycles
    Tumbling Treasury Yields Signal Possible Fed ‘Policy Error’ Being Priced In
    WTI Tumbles Back Below $40, Goldman Warns Risk Of “Sharp Leg Lower”
    Former Subway Pitchman Jared Fogle Is About To Be Sentenced
    This Is The Biggest Diamond Found In More Than A Century
    What ISIS ‘Blood Oil’ Really Means For Oil Markets
    The Day Before Thanksgiving Actually Isn’t The Busiest Time To Fly
    Gender Equality Is Now Better In Rwanda Than In The US
    Anonymous Could Hobble ISIS By Hacking PlayStation Consoles
    The Best Advice If You Find Yourself In A Terror Attack: Do Not Play Dead
    Not Much Evidence Mass Surveillance Works
    Home Depot & Lowes Avoid The Retail Bloodbath With Strong Earnings
    It’s REIT Time: Stock Up Durable Dividends Now
    A Global Financial Literacy Test Finds That Just 57% Of Adults In U.S. Are Financially Literate
    Starboard Asks Yahoo To Drop Alibaba Stake Spinoff Plans
    Oil Slides Again As Focus Returns To Heavy Glut
    Best Buy Comparable Sales Miss On Low Demand For Mobile Devices
    Stock Futures Rise After Fed Minutes Soothe Investor Nerves
    U.S. Consumers Favor Amazon For Online Holiday Shopping
    Pfizer-Allergan Talks Accelerate Amid New Inversion Clamp-down
    Soothing Fed Sounds Send Shares, Emerging Markets Higher
    Crude Tumbles To $40 Handle After DOE Confirms Significant Cushing Inventory Build
    U.S. May Bring Criminal Charges Against JP Morgan, RBS Executives, Prosecutors Pretend
    BlackRock Liquidates Its Macro Hedge Fund Following Worst Loss Since Inception, Surge In Redemptions
    It Will SUNE Be Over: Axiom Says SunEdison “Credit Event Appears More Likely”, Sees Price Dropping To $2/Share
    Read more from Investing...

    Liberty Investor Digest

    Get today's most important
    financial headlines all in
    one place by email!



    Sign Up For Liberty Investor Digest™!

    Get Liberty Investor Digest FREE By Email!

    Input your name and email address in the fields below and get today's most important financial headlines sent straight to you inbox!

    Privacy PolicyYou can opt-out at any time. We protect your information like a mother hen. We will not sell or rent your email address to anyone for any reason.