MarketCycle Wealth Management
MarketCycle, in private client updates, predicted the recent pullback, stated that it would be a “V” bottom, and that the market would recover in a more generalized manner rather than merely large-cap mega tech stocks leading the charge. All correct.
In my opinion, this current bull market will be the biggest in history and it is still in the very early stages. This new bull market started in late October of 2023, just ten months ago, but it is now picking up its pace and broadening out. It likely has FIVE MORE years to run, with the final 2-3 years (2027-2029?) going parabolic and being extremely profitable… and I do mean extremely profitable.
When it finally reaches its ultra-euphoric stage, it will end. The bull will then collapse under its own weight, but that is not now and that is not today.
Our proprietary SECULAR (long term view) indicators just went from strong to super-strong. Strength on top of strength.
The bell will officially ring when the Fed finally starts its ‘two year’ program of interest rate cuts, beginning on September 18th… roughly three weeks from today’s Musings publication.
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One way to judge the strength of a bull market is to look at MARGIN DEBT. Margin debt is money that investors borrow from their brokerage (like Interactive Brokers) in order to increase the amount of money that they have in investments. If they have $100,000 in their investing account and borrow another $100,000… then they have $200,000 in investments. They pay daily interest to their brokerage for the privilege of borrowing and using this money. The brokerage can call back the loan at any moment and they sometimes do so at the absolute worst time possible. Frankly, I don’t know why people would borrow on margin when there are leveraged ETFs on the market that are dramatically safer, but people do borrow in order to invest and this won’t change in the future.
When MARGIN DEBT is very low, like now, it represents the best possible time to invest for the long term. History teaches us that margin debt is always low at the BEGINNING of major new bull markets… and then, years later, the amount of borrowed margin debt becomes (too) euphorically high just as the bull becomes fatigued and stops running.
Margin levels will become too euphorically high when investors themselves reach crazy levels of euphoria over stocks. This process normally takes years. On top of margin debt, investors will even start taking out second mortgages on their homes in order to buy additional stocks. This all happened in the late 1920’s and again at the end of the 1990’s… and, in my opinion, the late 2020’s will be a re-do. Just after the (stock market’s) “Roaring 20’s” and immediately before the “Crash of 1929”, Joseph P Kennedy of the famous USA Kennedy family stated that “when the shoeshine boy starts giving stock tips, then the smart money should finally sell.” Riding the stock market up during the roaring 1920’s and selling at the ultra-euphoric top and then shorting the market on its way down, only to re-buy at the panic bottom is what made the Kennedy family (and other prominent U.S. families) a permanent financial dynasty.
Right now we are looking at extreme lows in the margin debt levels. On the chart below, I expect the margin level to, once again, rise WAY above its top trendline (above the yellow line). This journey should take about five years, ending some time around 2029. And yes, home prices and mortgage rate levels will likely collapse at the same time. Late 2030-ish may prove to be a once-in-a-century chance to buy an underpriced house for anyone with the patience to wait and with the courage to invest when the world is in panic. The next (giant) bear market as well as the entire 2030’s will require highly specialized investing and I am already preparing (in my mind) for that scenario. Any situation can be profitable if one can move relative to what is actually happening.
So, the takeaway is that one should invest in very particular stocks and bonds and gold and cryptocurrencies NOW and then practice patience. Certain assets will beat the general market by huge amounts, huge amounts just like at the end of the 1990s, and this is how MarketCycle’s client accounts (are and) will be positioned. This is how MarketCycle will earn its keep.
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I’m predicting that by 2029, the blue line shown below will be WAY above the yellow line, with margin debt reaching, perhaps, 4.5% of the S&P-500 market cap and topping out at a greater than +2 standard deviation. A SUPER-BULL.
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MARKET SUMMARY: MarketCycle is bullish on stocks in the near-term, intermediate-term and longer-term and we see risk levels as being below average. Since (hard to know ahead of time) negative news events often move stocks in the very near-term, Middle East volatility could cause some stock market volatility over the next couple of weeks (bonds and gold would likely go up if stocks briefly moved down). But any brief (multi-day) pullback would allow MarketCycle an opportunity to invest new client money, so there is always opportunity within any chaos.
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Thanks for reading!
MarketCycle Wealth Management manages investor’s accounts… people just like you. We strive hard to earn our keep. There is a contact form on the website.
Our REPORT (paid subscription service) can be reached via the link on our website.
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