Investing

This Greed Is Freaking Scary

By John Del Vecchio  |  January 17, 2020

One of my favorite strategies is the “30-Second Millionaire” approach. I could care less about the news of the day. While many are distracted by the noise, most months I simply add to my broad market stock position. Randomly.

It takes about 30 seconds for me to log on and make a trade. Do it long enough, ride the wave, and you’re assured to accumulate well over a million bucks.

Just do it. Stay out of your own way. Watch your account exceed seven figures.

It’s not any more complicated than that.

I talk in great detail about these types of strategies and more in my new book Unbounded Wealth, which offers a great perspective on investing relative to what you might hear from your financial planner.

Lately, I have been buying emerging markets, which have lagged the rest of the world for a while. I believe quite strongly that, over time, emerging markets will catch up. After all, that’s where the growth is in the world. Growth and beaten down valuations are a good recipe for better future returns.

U.S. markets, meanwhile, scare the shit out of me.

First, the level of greed is way up in the stratosphere. Just take a look at this chart:

The pedal is to the metal here. Investors are completely leaning in one direction. As I point out in Unbounded Wealth, the masses are asses. So, when they lean in one direction, returns are terrible.

Take the examples of two of the most pivotal moments for financial markets in recent history. There was too much greed in 1998 and too much fear in 2009. Investors got it wrong in both cases and cost themselves heaps of money.

Today, stocks have gone to the moon and are way overbought. The number of stocks above the 200-day moving average is at the highest level since September 2014. Boy, do things change! Just a year ago, the market had the lowest number of stocks above the 200-day moving average since 2011.

Intense greed. Stretched stocks.

What could go wrong there?

Valuations are at nosebleed levels too. Based on cyclical P/E ratios, we are at peak levels. What’s more, the earnings growth in the S&P 500 is coming from stock buybacks. Profit margins have maxed out. Tax benefits are no longer a tailwind. Revenue growth has moderated.

I have always been fearful when others are greedy. A lot of people in my private circle have been talking incessantly about their stock returns. That scares me!

Now, we are in an election year, and that could stave off a major ass-kicking in the stock market. But I feel 100% certain that if I bought U.S. stocks here and now, that surely will result in an intermediate result.

So, while I follow the 30-second millionaire strategy and continue to invest in emerging markets, I’m holding my nose when it comes to U.S. stocks.

I’m completely putting on the brakes. I wouldn’t buy the U.S. market with counterfeit money.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR