Sjug's Bold Prediction Is Coming True

Sjug's bold prediction is coming true... Tencent is now worth more than Facebook... Are we 'playing both sides' of the argument?... Debt hits a new record (again)... Remembering what happened 50 years ago this week...


We wrote it... Did you buy it?

Earlier this year, Steve Sjuggerud made a bold prediction to his True Wealth subscribers.

He said Chinese tech giant Tencent (TCEHY) – a firm most folks had never even heard of – would eventually surpass household names like Amazon (AMZN), Alphabet (GOOGL), and Apple (AAPL) to become the world's largest company. From the April issue of True Wealth...

Tencent owns all the "eyeballs" in China. It owns your screen time.

For better or worse, your mobile phone is your main source of entertainment in China... This is where folks spend their time. Tencent dominates China's social networks. But its reach goes beyond that...

Tencent is also the world's leader in electronic gaming, based on sales. And gaming continues to be the company's largest growth engine.

I'm barely scratching the surface here on this exciting story. All you need to know is this:

Tencent owns the most valuable thing in the world – users' time... specifically, hundreds of millions of users in China.

And Tencent's commanding control of screen time is why I predict it will become the world's largest business (by market value) within the next five years.

Just eight months later, it's starting to look like Steve may not have been bold enough...

You see, at the time of Steve's recommendation, Tencent wasn't even one of the 10 largest companies in the world.

But today, that's no longer the case. In fact, as of this morning, Tencent's market cap broke into the top five for the first time.

Tencent shares rallied more than 2% to a new record high in Hong Kong trading this morning. The move pushed the firm's market cap to as much as $534.5 billion, and knocked social-media behemoth Facebook (FB) from the No. 5 spot.

Today's record follows another on Monday, when Tencent became the first Chinese tech company to reach a $500 billion market cap. But it may not be the last this year...

Tencent is now within striking distance of online-retail giant Amazon – the world's fourth-largest company – and its $546 billion valuation.

The rally continued in the U.S. this morning. Tencent shares eclipsed $56 during intraday trading. As of yesterday's close, True Wealth subscribers who took Steve's advice are up 91% in a little more than eight months.

Regular Digest readers know Steve also believes the 'Melt Up' could continue for years...

This contrasts with Porter's view that a significant bear market – and potentially much worse – could begin as early as next year.

And as yesterday's Digest illustrated, many of our readers apparently don't appreciate this difference of opinion. Many folks have accused us of "playing both sides" so that we can "claim victory" no matter what happens.

Of course, as Porter explained, that isn't the case at all. It isn't a conspiracy. Both he and Steve are simply trying to serve you – our loyal customers – as best they can.

But as Steve reminded us in a private e-mail last night, he and Porter aren't as far apart as many readers think. He asked us to share the following note with Digest readers today...

I've said for years "interest rates will stay lower than you can imagine for longer than you can imagine, and that will drive stock prices higher than you can imagine."

Porter says that stocks have been driven to crazy heights by a credit bubble thanks to abnormally low rates for an abnormally long time. Same thing.

So when does it end? Porter and I published the exact same chart on Friday. We both said it's a major "get out" warning for us...

The chart shows us that when we get an inverted yield curve, stocks peak and a recession is around the corner. That is "inevitable if the Fed continues to raise rates," as Porter said. We both agree on that.

As Steve explained, he and Porter only disagree about when the yield curve will turn negative...

Porter says it could turn negative by early next year. I think that day happens in 2019 or even 2020. Only time will tell... But whenever it does happen, don't take it lightly. Bear markets happen a lot faster than bull markets. And great bear markets tend to follow great bull markets.

For now, the boom continues...

And American consumers continue to rack up more and more debt as it does.

Earlier this year, we noted that U.S. household debt had quietly returned to record highs. As we wrote in the May 18 Digest...

It took nearly 10 years, but it finally happened...

According to a new report from the Federal Reserve Bank of New York, Americans have now borrowed more money than any time in history.

The report showed total household debt rose $149 billion in the first quarter of 2017 to $12.73 trillion. As you can see below, this has officially surpassed the previous all-time record of $12.68 trillion, set just before the financial crisis...

Unfortunately, this trend has continued since...

Household debt rose $114 billion to $12.84 trillion in the second quarter. And just this week, the New York Fed's latest Household Debt and Credit Report showed debt rose another $116 billion to a fresh record high in the third quarter.

Total household debt now sits at $12.96 trillion. It has now risen for 13 straight quarters and is almost certain to surge above $13 trillion before year-end. And once again, consumer debt is leading the rise.

Credit-card debt was up 3.1% to $808 billion. Student- and auto-loan debt increased 1.9% and 1.0%, respectively, to $1.4 trillion and $1.2 trillion.

Again, we can't know exactly when this boom will end...

But we can guarantee it won't end well.

We were reminded of this certainty last night. You see, this week marks the 50th anniversary of when the British government devalued its currency, the pound, in a misguided attempt to ease unemployment and boost its weak economy.

On November 19, 1967 – after reportedly denying plans to do so no fewer than 20 times – Prime Minister Harold Wilson devalued the pound by 14% against the dollar and other major currencies.

If you were a Brit, you saw the real value of your savings slashed by one-seventh overnight. And to add insult to injury, even after they did it, government officials still denied that the money in YOUR pocket was worth any less. As Wilson famously said at the time...

From now the pound abroad is worth 14% or so less in terms of other currencies. It does not mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

Of course, it absolutely did. And as you might expect, the devaluation had none of the expected benefits on the British economy... Yet inflation soared from 2.2% to more than 9% over the next few years, making savers even worse off.

This was a relatively small example. The size of today's problems suggests our government's "solution" will be far more extreme. But whether it's through massive inflation and debasement of the U.S. dollar, or through an all-out "Debt Jubilee," one thing is certain...

No matter what the government does – and no matter how it tries to sugarcoat it – it won't be good for your hard-earned savings.

New 52-week highs (as of 11/20/17): AMETEK (AME), iShares MSCI BRIC Fund (BKF), Blackstone Mortgage Trust (BXMT), Global X China Consumer Fund (CHIQ), CME Group (CME), Cisco (CSCO), Emerging Markets Internet & Ecommerce Fund (EMQQ), Grubhub (GRUB), ETFMG Prime Mobile Payments Fund (IPAY), iShares U.S. Home Construction Fund (ITB), KraneShares CSI China Internet Fund (KWEB), iShares MSCI China Index Fund (MCHI), Naspers (NPSNY), Overstock (OSTK), Tencent (TCEHY), VF Corporation (VFC), Verisign (VRSN), and Wells Fargo – Series W (WFC-PW).

The mailbag is overflowing with responses to Monday's Digest. We'll publish some of the best from both sides of the "debate" tomorrow. In the meantime, be sure to let us know what you think at feedback@stansberryresearch.com.

"I learned so much watching Grant Williams explain the insanity of what is going on in the financial markets in such a rational, clear way and how to maintain a toehold in reality and sanity by having some gold in your portfolio. Thanks for sharing this!" – Paid-up subscriber Kay S.

Regards,

Justin Brill
Baltimore, Maryland
November 21, 2017