Sadly, it can't get better before it gets worse... Brace for impact... Handicapping the Federal Reserve's next rate hike this week... 'Watch the Fed and listen to the market'... Sign up for the 'Financial Lifeline Event'... 'Is the economy going to get worse before it gets better?' "No. I don't think so. We hope we can have what they say, 'a soft landing'"... This was the exchange last night between interviewer Scott Pelley and President Joe Biden on CBS' long-running news program 60 Minutes. Sadly, I (Corey McLaughlin) laughed out loud. First, as we've covered here throughout the year, you can debate what is and isn't "priced in" to the stock market at any point. But it's hard to find any evidence or indicators today suggesting the economy is going to get better before it gets worse. (If you have it, let us know.) Yes, inflation is going down a little – at least by headline numbers. But it's still at 40-year highs in the U.S. and around the world. Plus, the prices of a lot of things – like rent and food – are rising much faster than any pay raises people are getting. Yet the unemployment rate is at an all-time low. And it can't get better, only worse. The Federal Reserve – whose only congressional mandate is to balance "stable prices" with "maximum unemployment" – has decided to attack inflation at the expense of jobs... Second, as regular readers know, we don't think hope is a good strategy in any endeavor. And finally, even Fed Chair Jerome Powell has abandoned using the analogy of a soft landing. It's just central-banker speak for gliding the economy "down" comfortably into a higher-rate, slower-growth environment without the turbulence you'd see in a recession... We said months ago that "soft landing" is the new "transitory" inflation. Now it's more like 'brace for impact'... We've been starting to see this new reality set in more and more in the markets over the last few weeks, starting with Powell's short and not-so-sweet speech in Jackson Hole at the end of August... He told anyone listening to expect "pain" in some undetermined amount on some undetermined time frame... In other words, he made a vague but concerning blanket statement that doesn't suggest things will get better for the economy before they get worse... Until then, with inflation numbers starting to ease, a lot of folks had been ignoring Powell and buying stocks with the hopes of a "Fed pivot" to lower rates. But as our colleague Mike DiBiase wrote last week in a must-read Digest... Ironically, when Powell was wrong about inflation being transitory, investors believed him. Now that he's finally right about inflation, investors are ignoring him. It's going to be another painful lesson for those investors. Since Powell's concise and direct speech on the morning of August 26 indicating the Fed will keep raising rates "until the job is done," the benchmark S&P 500 is down 8% and yields on U.S. Treasurys have taken off like a rocket to the moon. A two-year Treasury currently yields almost 4%. That's 1,700% higher than one year ago (not a typo). The 10-year U.S. Treasury note yields nearly 3.5%, almost the same as a 30-year bond. And remember, since bond prices trade inversely to yields, that means prices of supposedly "safe" bonds have cratered. That's been terrible news for the conventional 60/40 portfolio, which many people have relied on to "just work" over the past 40 years. But this isn't the past 40 years. Stock prices and bond prices have continued to fall in tandem... Hopefully, you've already taken steps to avoid the damage... If not, there's still time. As we've been warning all year, cash is a good friend... for now. With rates going higher and higher all over the world, the U.S. dollar is still getting relatively stronger compared with its struggling peers, like the euro. To this point, we want to reemphasize this passage by Stansberry Research partner Dr. David "Doc" Eifrig from the first lesson of our Stansberry's Financial Survival Program published back in April... During a bear market, nothing is more important than cash. And it's not hard to understand the basics of why... In fact, you could define a bear market as the rising value of the U.S. dollar versus financial assets. Likewise, when commodities... or real estate... or foreign currencies... go through a bear market, what you're really seeing is the rising value of the U.S. dollar as compared with those other assets. The most important factor in determining how successful you can be as an investor during a bear market is simply how much cash you have (and can raise) as asset prices fall. Over the long run, shares of high-quality, cash-producing businesses that have "pricing power" – meaning they can keep selling their goods or services in a recession (or boom) because they are essential or incredibly in demand – are stocks you want to own. These businesses won't steer you wrong as core portfolio holdings. Even if their share prices tumble, the compounding effect you'll get from a generous, consistent dividend (reinvesting them in more shares at lower prices) could turn out fabulously when things do get better... But we're not even at peak pain yet... Here's what all of the people talking in the mainstream or on Sunday night television programs are missing, avoiding, or not saying... First, the economy is going to get worse... The Fed is making conditions tougher in an already slowing economy. But bear markets end with "capitulation," a fancy term for when enough people "just can't take it anymore" and sell every risky asset they own. At that point, the mainstream news will say it can't get any worse. Counterintuitively, that will be a great time to buy stocks... In the meantime, you could pick your spots, as you feel comfortable. Perhaps certain stocks that are already down 20% or 30% or more from their previous highs are appealing buys now. Plus, volatile times can be great for short-term trading, if you have good guides to follow... but just know the environment you're stepping into... The Fed is back in the spotlight this week... The central bank has another two-day policy meeting. On Wednesday, it will announce its latest policy decision. Odds are on another 75-basis-point rate hike, though a 100-basis-point (or 1%) raise in its benchmark lending rate is on the table, too... Headline inflation may have "peaked," but prices in several major parts of the economy – like food and rent – are still on the rise, so the central bank doesn't have any justification to pause or even slow rate hikes. Thus, the odds of a recession – and everything that comes with it – grow... For now, that includes a stronger likelihood of lower stock prices, generally speaking. Our colleague and DailyWealth Trader editor Chris Igou shared another indicator suggesting as much today... Chris noted that the past seven bear markets didn't end – or "bottom" – until after the Fed began cutting rates and unwinding all the effects of an economy-slowing rate-hike cycle. We're a long way from that point, Chris said in today's DailyWealth Trader... When is the Fed likely to change course? Well, we can't know for sure, but it's unlikely to happen by the end of 2022. Inflation is still above 8%... and coming in higher than expected. Rates have to go much higher from here to bring that number down. So the Fed will probably hike rates into early 2023 before starting to cut them again. In the meantime, Treasury yields have been rising in line with these expectations for a "higher for longer" interest-rate environment. That also eats away at the appeal of owning stocks at their previous valuations, given the prevailing higher "safe" yields in the market. The unlikely alternative scenario is the Fed pivots. But then inflation would likely be higher for longer... rotting the economy endlessly over time in a way that will make the last year or so look like the good old days... Another alternative is that the interest on the government's $30 trillion in debt – which it created and pays interest on ($500 billion over the past 12 months) – becomes too much for the country and the economy to bear... and the central bank is forced to cut rates with inflation still high. In any case, right now, according to the CME Group's FedWatch tool, the odds in the fed-funds futures market are above 80% for a 75-basis-point rise in the Fed's benchmark rate. That would put it in a range of 3% to 3.25% after Wednesday's policy announcement. From there, traders of fed-futures contracts (which go for $5 million each) are now expecting the central bank's benchmark rate to be between 4% and 4.5% by the end of the year... and between 4% and 5% throughout 2023, with some easing potentially starting next November. Earlier this year, these same traders were pricing in rate cuts starting in the middle of 2023. In other words, the expected timeline on all of this has been pushed back at least six months, much like the "peak inflation" story was delayed at the start of this year... This once again reminds me of one of the biggest lessons I've learned working at Stansberry Research. Trends in the market can go on much longer than one might think... but you also want to know what to look for to gauge when they might turn. We'll have more on the Fed later this week after its announcement. And be sure to follow our Stansberry NewsWire team for the latest updates on the central bank's moves and other news and numbers moving the markets. Our NewsWire is a totally free resource, so be sure to sign up. Speaking of seeing the full picture... You might have seen a few e-mails about this already, but I want to make sure all Digest readers see the information... Many of you may be familiar Marc Chaikin, the founder of our corporate affiliate Chaikin Analytics... We've mentioned him here a few times before, most notably for his call for a "rolling crash" earlier this year – with lows in May and June and a possible bottom in October – that has played out just as he's envisioned so far... I haven't come across many people who have a better finger on the general pulse of the markets than Marc. I had the pleasure of interviewing him in 2021 when he became affiliated with the Stansberry Research family. You can read those interviews here and here if you're interested. From my experience, hearing a Wall Street legend – someone who has five decades of investing experience and has invented tools that pro investors use today – explain the markets in simple terms gave me some confidence that successful investing doesn't have to be all that complicated... I could listen to Marc about the markets all day long... Everything he says is an educational opportunity for folks who want to learn more about investing and building wealth over the long run. Here's what I mean... Marc recently sat down for an interview with Stansberry Research senior analyst Matt McCall. The pair covered a lot of ground, from Marc's latest forecast for stocks... to several specific tickers he's keeping an eye on... and a line of advice via the late investor Martin Zweig (author of Winning on Wall Street) that is worth adding to your collection of investing quotes... Watch the Fed and listen to the market... The Fed is telling you what they're going to do. Powell keeps reinforcing it, starting with the Jackson Hole conference. The Fed is going to keep their foot on the brakes and do whatever it takes to break this inflation cycle. So I'm focused less on inflation and more on the Fed, and the market's reaction to the Fed. As I mentioned, Marc helped build Wall Street. He was doing technical analysis in the pre-Internet days. His "Money Flow" indicator, for example, is part of every Bloomberg Terminal in the world. Marc has worked with some of Wall Street's biggest investors and firms... But after the financial crisis 15 years ago, he decided to turn his energy toward educating and helping Main Street investors with their money... Now, Marc is getting ready for his newest event to help everyday folks... He is joining up with Joel Litman, founder of our affiliate Altimetry, to share details on why the next few weeks could play a big role in what your wealth looks like over the next decade. If you think things have been crazy in the stock market this year, they both agree that you might have not seen anything yet. That's why Joel, who has spent his career denouncing Wall Street, joined forces with Marc to put together a new event to share the details. They're calling it the "Financial Lifeline Event" and it goes live at 8 p.m. this Thursday. If you've ever wondered how big Wall Street institutions and legendary investors manage to come out on top during the most fragile and terrifying moments in financial history, this is an event you won't want to miss. Just for signing up, you'll get access to Marc and Joel's new "Perfect Stock Detector" report. And just for tuning in, you'll hear both of them give away two stocks to buy now and two more stocks each to avoid... And best of all, it's free. We at Stansberry Research just ask that you sign up in advance here. The Fed Will Try to Destroy Your Wealth "The bond market knows the more the Fed is tightening today, the more long-term damage will be done to the economy," says Alfonso Peccatiello, publisher of The Macro Compass. And in a recent interview with our editor-at-large Daniela Cambone, he shared his latest outlook on the markets...
Click here to watch this episode right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime. | Recommended Links: | A Massive Wave of Bankruptcies Is Coming It's actually much bigger and more important than what happens to the Nasdaq or S&P 500. Yet some of the world's best investors are practically drooling in anticipation because this crash will create a slew of 100%-plus opportunities... backed by legal protections that stocks can only dream of. A top analyst tracking the story believes this could happen within months – and you must prepare now. Get the full story here right away. | |
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| New 52-week highs (as of 9/16/22): None. In today's mailbag, feedback on our Sunday Masters Series essay from Chaikin Analytics chief market strategist Pete Carmasino... as well as Dan Ferris' latest Friday Digest... What's on your mind? Let us know what you think at feedback@stansberryresearch.com. "I lived [the 1979 to 80s recession] back then... Just finished building a home in late '79 before rates went through the roof (15%!). It certainly was not a recession without casualties... over 2,200 banks (mostly savings and loans) closed their doors, one of which was my mortgagor. "It solved the inflation but was a pyrrhic victory like all recession battles are. There were many causes for the inflation, not the least of which was OPEC tripling the cost of crude (we were a major oil importer back then). This caused gas shortages and [sent] prices sky high... and everything depended on energy (oil) back then like today. "Some other causes were: stupid programs like the FHA 235 program which put the 'poor' into homes that they could not afford; and government spending. Much like the problems we have today." – Paid-up subscriber Joe G. "Dan, Great article. In an America full of spin doctors, some people may not be outright lying but they're definitely spinning half-truths. It starts at the top (politicians) liars, the Fed (spin doctors) and maybe lying on occasion (inflation is transitory). I called bull*** then and I do now. Bankers (definitely liars), local and state politicians (liars and spin doctors), so it's no wonder people lie to themselves so they can remain naive, stupid and irresponsible. "I recently took an active shooter defense class for our church (that in itself says a lot about our society) and they emphasized emphatically that you have to yell and scream "Call 911" because people's first reaction in America is denial. So is it any wonder they want to believe the bottom is in (economic denial) and the Fed removing liquidity and raising rates will not end in anything but wealth, demand, profit, and security destruction (denial)...?" – Paid-up subscriber Richard S. All the best, Corey McLaughlin Baltimore, Maryland September 19, 2022 Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock | Buy Date | Return | Publication | Analyst |
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MSFT Microsoft | 11/11/10 | 875.3% | Retirement Millionaire | Doc | ADP Automatic Data | 10/09/08 | 826.7% | Extreme Value | Ferris | MSFT Microsoft | 02/10/12 | 751.2% | Stansberry's Investment Advisory | Porter | HSY Hershey | 12/07/07 | 523.1% | Stansberry's Investment Advisory | Porter | ETH/USD Ethereum | 02/21/20 | 516.7% | Stansberry Innovations Report | Wade | AFG American Financial | 10/12/12 | 410.5% | Stansberry's Investment Advisory | Porter | BRK.B Berkshire Hathaway | 04/01/09 | 387.3% | Retirement Millionaire | Doc | WRB W.R. Berkley | 03/16/12 | 373.4% | Stansberry's Investment Advisory | Porter | NTLA Intellia Therapeutics | 12/19/19 | 314.5% | Stansberry Innovations Report | Engel | FSMEX Fidelity Sel Med | 09/03/08 | 301.6% | Retirement Millionaire | Doc |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. Top 10 Totals |
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3 | Retirement Millionaire | Doc | 1 | Extreme Value | Ferris | 4 | Stansberry's Investment Advisory | Porter | 2 | Stansberry Innovations Report | Engel/Wade | Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock | Buy Date | Return | Publication | Analyst |
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ETH/USD Ethereum | 12/07/18 | 1,213.3% | Crypto Capital | Wade | ONE-USD Harmony | 12/16/19 | 1,168.3% | Crypto Capital | Wade | POLY/USD Polymath | 05/19/20 | 1,070.9% | Crypto Capital | Wade | MATIC/USD Polygon | 02/25/21 | 838.7% | Crypto Capital | Wade | BTC/USD Bitcoin | 11/27/18 | 427.0% | Crypto Capital | Wade |
Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment | Symbol | Duration | Gain | Publication | Analyst |
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Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | Band Protocol crypto | 0.32 years | 1,169% | Crypto Capital | Wade | Terra crypto | 0.41 years | 1,164% | Crypto Capital | Wade | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | Frontier crypto | 0.08 years | 978% | Crypto Capital | Wade | Binance Coin crypto | 1.78 years | 963% | Crypto Capital | Wade | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | Rite Aid 8.5% bond | 4.97 years | 773% | True Income | Williams |
^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. |