Capitalism works so well as a system because it works just like the ultimate system — Mother Nature.
In capitalism, we deal with companies. In nature, we deal with species. But in both systems, only the strongest survive for the long-haul.
And right now, in this bear market, we’re about to see just which companies will be strong enough to survive until the next bull market.
If it’s anything like 2007, nearly half of the stocks trading today will be completely wiped out…
Unless your portfolio is stacked with only the bluest of blue chips, which have been around for decades, it’s very likely you hold a few names that’ll trend toward zero.
Today, I’m coming to you with a brand-new video all about how my proprietary Stock Power Ratings system keeps you OUT of the bad names… And only IN the ones that are strong enough to survive.
I’ll also share which sectors are still cheap and strong, compared to the sectors which are still highly expensive and getting weaker by the day.
Check out the video below:
(Read a transcript.)
Yesterday, my good friend Mike Carr went live with his Shakeout Trades strategy.
Mike is, in a way, doing the opposite of what I’m talking about today. He’s not targeting the strong stocks. He’s targeting the weakest stocks in the market — but he’s doing it in a way that makes money as they fall.
As this bear market continues, there will be plenty of opportunity to make money as these weak stocks crater. And Mike’s newest trading system is, I believe, one of the best ways for you to do it.
Catch up with Mike’s newest research right here.
Regards,Adam O’DellChief Investment Strategist, Money & Markets
Market Edge: Not Too Pricey, But Not Cheap Either
By Charles Sizemore, Chief Editor, The Banyan Edge
|Adam unfortunately jogged a memory I would have preferred to forget … the Pets.com sock puppet.
This ridiculous thing became the unofficial mascot of the 1990s tech stock bubble. Looking back, it should’ve been a clear sign of what was to come.the “Silicon Shakeout.”Along with Adam and Ian King, we covered this earlier this week in The Banyan Edge Podcast, and I recommend you take a minute to give it a watch. (Next week we’re going full-throttle geek mode, picking apart the market with some of our favorite metrics.) I’ll give you an early look at one of mine… I regularly use the cyclically adjusted price-to-earnings ratio, or CAPE, as a quick-and-dirty scan of the market. The CAPE takes a 10-year average of S&P 500 earnings and compares it to prices. The idea is that, over any 10-year window, the ebbs and flows of the business cycle should average out. But the CAPE has one glaring weakness: It doesn’t account for interest rates. In a low-rate environment, stocks should be worth more than in a high-rate environment. So … enter the Excess CAPE yield! This metric flips the CAPE upside down, turning it into an earnings-to-price ratio as opposed to a price-to-earnings ratio. It then subtracts the inflation-adjusted yield on the 10-year Treasury note. Here’s a chart of the ratio going back the past 140 years…
Of course, Pets.com and plenty of other stocks with even more ridiculous business models that never made sense eventually failed. Even the winners of that period suffered nasty declines. My friend and colleague Mike Carr believes we’re in a similar period of reckoning, and calls it
(Click here to view larger image.)
A high number means the broader market is cheap. You’re getting a high-earnings yield on your investment, above and beyond what you would get if you just dumped your money in risk-free Treasurys. A low number means the market is expensive, and your return compared to Treasurys is lousy.something more than simply buying and holding. And that, as we’ve been telling you all week, is where Mike Carr comes in. Mike believes right now is the time to focus on the short term, and nimbly trade in and out of stock market volatility to capture excess gains along the way. As I speak, Mike is up 72% on a trade in Google (GOOG) in four days … and just recently closed out another in Paccar (PCAR) for 63% in four days. This is what Mike does… In and out, often in less than a week, and making big returns for his trouble. Go here to see how Mike’s been scoring these wins in this bear market, and how you can get involved.
So, where are we today? Roughly the middle of the pack. When the metric gets to the top of the shaded area, the market is a steal. When it dips near the bottom of that box, you should likely steer clear. Interestingly, despite falling in 2022, stocks didn’t get all that cheap … because bonds also fell. The relative value between the two didn’t change all that much. So … what’s the takeaway? At current prices, stocks are ever so slightly more attractive than bonds. But neither really offer truly spectacular potential returns. To find those returns, you’re going to need to do