You can’t trust the snapback rally in stocks… This beaten-down asset is a better bet… In the mailbag: “You idiots don’t even know what the word ‘socialism’ means”…
As the old-timers say, bear markets seek to punish as many people as possible.
They do that by sucking investors back into shaky markets with “snapback rallies” – sharp rallies that come hot on the heels of a dramatic fall.
These rallies make investors feel good again. People start to wonder what they had been so worried about.
But history shows they are often followed by devastating plunges.
It tracks the biggest bear market rallies going back to the turn of the century… and the gut-wrenching plunges that followed them.
As you can see, the most powerful bear market rally was during the 2007-09 bear market. The S&P 500 shot up 24% in less than two months.
That led investors to believe that the worst was over. But the index plunged 28% over the next three months.
We also saw this play out during the 2000-02 bear market. The S&P 500 rallied 21% over six months… before plunging 34% over the next seven months.
Between September 20 and December 24 last year, the S&P 500 plunged 20% – the biggest fall since the 2008 crash.
But since the December low, the index is up 18%. And people are starting to feel that the bull market is back on track.
Our take: The stock market may eke out more gains before the final curtain drops on this bull market. But as the chart above illustrates, the snapback rally off the December low could be setting investors up for a big fall.
So where can we find attractive profit opportunities now?
As we’ve been tracking for you here at the Cut, the crypto market has gone through a long and painful “Crypto Winter.”
From its all-time high in December 2017, Bitcoin is down 80%. And the “crypto market cap” – the total value of all traded cryptos – is down 84% from its all-time high in January 2018.
But as we’ll show you today, despite these price falls, the number of new crypto users is growing.
And that suggests that the long-term bullish case for cryptos is still intact.
As world-renowned cryptocurrency investor Teeka Tiwari has been telling his readers…
When you’re analyzing early-stage tech, you can’t let price be your only barometer. If you panic sell every time a speculative asset like bitcoin takes a plunge, you’re never going to make real money.
A much better metric to look at is the rate of adoption. Are more people using the technology? This is the important question you need to be asking… not what price it’s trading at today.
And although crypto prices went straight down in 2018… the rate of crypto adoption has been picking up.
Take a look at this next chart…
You’re looking at the number of users of blockchain “wallets” – digital apps that allow you to store, send, and receive cryptos.
Wallet use surged more than 40% during 2018. At a time when crypto prices took their worst hit in years, use of cryptos was ramping up.
For more on that, we turned to Marco Wutzer.
Marco heads up our Disruptive Profits advisory. And he’s been involved with digital currencies since before bitcoin was invented. Marco…
No matter if we are in a bull or bear market, the crypto “meme” is spreading and reaching more people. Even during the current bear market, more people learn about blockchain technology every day.
When the market eventually turns bullish again, this recently growing pool of new adopters will be ready to participate for the very first time. That means when the next bull market starts, the network effects will be even stronger than the last time.
Crypto prices have been beaten down by a brutal bear market. But crypto adoption is booming.
I deal with cryptos and blockchain technology on a daily basis. So it’s easy for me to forget there are billions of people who have never heard of blockchain technology.
I was reminded of this recently at Doug Casey’s estancia in Uruguay. We were having dinner with a cosmopolitan, affluent Uruguayan couple. She is a lawyer and real estate broker. He is retired with a background in many business ventures, including being a stockbroker at one time. They’re wealthy, educated people who travel the world… not isolated farmers. But when Doug asked them what they think about cryptocurrencies, it turned out they had never even heard about Bitcoin.
After our conversation that evening, they might not investigate the topic much further right away… But two more people on the planet are now aware that cryptocurrencies exist and offer superior solutions to many problems.
Variations of this conversation play out thousands of times a day across the globe. That’s why the number of people who use blockchain wallets has been growing steadily.
And it’s part of why Marco sees an explosion in crypto adoption ahead…
Only 0.3% of the world’s population owns cryptos today. That means 99.7% of people haven’t bought cryptos yet. If you get positioned right now – before we reach mass adoption – you’ll profit from the biggest growth wave to hit the crypto market yet.
Bitcoin is the reserve asset of the crypto market. You need it to buy most other cryptos out there. That makes it a great way to capture the explosion Marco sees ahead.
Just make sure to treat cryptos as speculations. Never risk money you can’t afford to lose. Keep your position sizes small.
And to prevent your funds from being stolen, always keep your cryptos in a wallet – never on an exchange.
If you’ve never bought bitcoin before, check out this guide Teeka’s team put together. It shows you the three exchanges Teeka recommends to buy bitcoin… four digital “wallets” you can use to store your bitcoin… and where you can trade it for other cryptos.
On Monday, Legacy Research cofounder Doug Casey said America was on its way to becoming a full-fledged welfare state.
And it ruffled some feathers in the ongoing mailbag debate over socialism…
Well, somehow, I think Doug “doth protest too much.” Doesn’t he have a ranch somewhere in Venezuela or Argentina, or South America somewhere. Probably a Swiss bank account, and maybe a yacht and or a villa in some other country; so don’t worry about Doug, as some of his ads describe him as a millionaire. And he also has a government that provides the rich with major tax relief for the rich, which I believe is a form of socialism.
Yes, America already has many forms of socialism, such as food stamps, Medicare, tax relief for the 1%, agriculture subsidies, and the list goes on. All of these socialist programs already exist in America, so people, don’t get too righteous when you write in to rant about socialism.
– Robert J.
You idiots don’t even know what the word “socialism” means. The term now is totally misused! As you write this, please send me all of your Social Security checks, will you please? Because Social Security, according to some, is socialism. Don’t be a hypocrite! You hit the wrong chord when you blame all the world’s ills on the socialists. This is a complicated word.
– Lee N.
You can’t make the poor rich by making the rich poor. With more than 50% of our population on some form of welfare from the state, our politicians have only to appeal to a “something for nothing” mentality. When elected, they will proceed to “share the wealth,” until either that wealth is gone, or the people who have the wealth are gone to another country.
Not a pretty scenario to predict or to see happen. Will we awaken from this dream before it turns into a nightmare? Bet on emotion, not intelligence, in the voting booth.
– Richard E.
Is America already socialist? Is that a good thing? Write us at [email protected].
March 7, 2019