Today's inflation report was well received... Doc's 'New Year Money Challenge'... Last call... Is poker a game of skill or chance?... Drop your baggage... Mailbag: More on the recent jobs report...

As inflation turns, so does the market...

This morning's latest inflation data, as we expected, moved the market a bit... The producer price index ("PPI"), a measure of companies' production costs, reportedly grew by 0.2% for December.

That still made for year-over-year growth of 3.3%, but the monthly pace is closer to the Federal Reserve's supposed 2% goal. It was also better than Wall Street expectations for 0.4% growth, which is what PPI measured in November.

As I (Corey McLaughlin) wrote yesterday in looking ahead to this week's inflation reports – the December consumer price index ("CPI") readings come tomorrow – if these numbers didn't "shock to the upside," enough investors could take it as good news to boost the markets.

That's because, given the recent string of inflation data above 2% annualized, enough investors have worried that the Fed won't juice the economy with as many rate cuts as they'd hoped.

However, if inflation stays lower, the Fed can send more monetary "juice" flowing into the economy.

Today, the major U.S. indexes opened higher after the pre-market PPI report and closed that way. The Russell 2000 Index led, gaining 1.1%, the Dow Jones Industrial Average was up 0.6%, and the benchmark S&P 500 moved 0.2% higher. The tech-heavy Nasdaq Composite Index finished just a touch higher.

The same scenario is in play ahead of tomorrow's CPI report...

Should this inflation be as low as expected, or lower, it could provide a lift to the markets and temper concerns about fewer rate cuts in 2025. On the other hand, elevated inflation could embolden those who think the Fed's rate cuts may be over, pushing down stocks and bonds.

Putting this together, if the market's behavior early this year is any indication, it's reasonable to expect more volatility in the months ahead. The market is poised to react strongly to inflation data (in either direction) as investors weigh what the numbers might mean for Fed policy.

In the end, I'm reminded of what Fed Chair Jerome Powell said in September when the central bank began lowering rates...

The actual things that we do will depend on how the economy evolves. We can go quicker if that's appropriate. We can go slower if that's appropriate. We can pause if that's appropriate.

In short, they don't know what they're going to do.

Plus, the folks at the Fed also won't tell you this, but they probably don't mind a little higher inflation... It frightens them less than the alternative of deflation and/or a recession, and it helps eat away at the existing massive U.S. debt.

The decent news, though, is this type of uncertainty is predicated around the idea of a U.S. economy that's growing. The question is if it's by "too much." On that point again, long-term bond yields rose... with the 10-year Treasury trading above 4.8% this week for the first time since November 2023. (It closed at 4.79% today.)

The good news is, you can use fears, uncertainties, and volatility to your advantage...

For more on this point, I want to turn things over to our Dr. David "Doc" Eifrig. As longtime subscribers know, Doc is the editor of our Retirement Trader advisory, among other things. You most recently heard from Doc over the weekend in our Masters Series here and here...

Recently, he debuted a free presentation detailing what he's calling his first-ever "New Year Money Challenge," and it goes offline at midnight tonight. So before that happens, I wanted to make sure all Digest readers had a chance to hear about Doc's challenge. It's last call.

Stansberry Alliance members and Doc's existing Retirement Trader subscribers already have access to the strategy he describes.

But for everyone else, if you haven't tried what Doc calls his favorite trading strategy of all time, one he learned decades ago while working on the trading desk at Goldman Sachs, this is a great time to give it a try.

It can produce steady, safe returns over the long run, even in volatile or down markets. Yet most people still have never heard of it. With Doc, you won't find a better teacher to learn the details. We've heard from many subscribers over the years who've done it.

Just keep reading...

I (Doc) know just reading the word "options" is enough to make most of you stop reading.

I know that most of you probably know only enough about options to think they're complex and risky. But that's because you didn't dig deep enough.

The first time you tried to drive a car, it probably seemed complex and risky, too. Now you do it every day. You put the time into learning how to drive because it made your life better.

Options will do the same for your finances. And just like learning to drive when you were 16 years old, better finances and larger income streams give you more freedom.

I don't blame options skeptics.

I blame those who taught them options. Most folks get introduced to options the exact wrong way... as a way to make big, fast gains in the stock market. But when put into practice, this "big gain" tactic leads to big losses.

That's why we take the opposite approach in my Retirement Trader service. We use options to reduce the risk of our investments while creating returns that don't exist for other investors.

Today, I'm going to show you the right way to use options. If you choose to learn, please read on...

If trading options doesn't scare you, does the word 'derivatives'?...

Options are considered a type of derivative, a broad term for investments that are based on other investments. With derivatives, you don't invest in an asset. Instead, you bet on a contract that "derives" its value from another.

During the financial crisis of 2008 to 2009, you couldn't find a word scarier than derivatives. Remember hearing about those credit-default swaps that nearly blew up Wall Street?

Those were derivatives. They were bets that tied their payoff to the default status of mortgage bonds.

Perhaps you've read about rogue trader Nick Leeson blowing up Britain's Barings Bank in 1995. He was using derivatives. Or Jérôme Kerviel, who lost 4.9 billion euros for French bank Société Générale with derivatives. And you might recall when a JPMorgan Chase trader known as the "London Whale" cost the financial giant $2 billion in 2012, again due to derivatives.

These guys give options and other derivatives a bad name...

They used them as a way to load up on risk and leverage, allowing them to make massive bets with little capital up front. Of course, their bonuses depended on taking stupid risks.

That has shaped the perception of novice investors regarding options... But it's flat-out wrong.

With options, you can make a bet on whatever sort of market activity you expect.

A typical investor has two ways to play the market: He can buy stocks he thinks will rise or short the stocks he thinks will fall.

An options trader adds several more tools to his bag: He can bet that stocks will rise, fall, stay the same, move within a certain range, rise then fall, and just about everything in between. Options can be used to increase leverage and risk or, just as easily, to reduce it.

But most investors do it the wrong way...

The standard options pitch goes something like this...

Let's say you think a $20 stock is going to rise. Well, you could buy 100 shares for $2,000. If the stock rises to $25, then you'll have $2,500... a profit of $500 that gives you a 25% gain.

Instead, you can buy a call option on that stock for just $150. Since each option contract represents 100 shares of stock, your $2,000 investment now lets you "control" 1,300 shares (via 13 call options) instead of 100.

Based on the pricing of this particular option, if the stock rises to $25 within the month, it might turn your $2,000 into $3,250. That's a 62.5% return. And your gains quickly multiply with every penny the underlying stock moves higher. Phew!

Who wouldn't be interested in boosting returns like that?

The trouble comes with the first assumption. You may think a stock is going to rise, but when you trade options like this, you make a leveraged bet that a stock will make that move in a very specific period of time.

No matter your investing prowess, you're going to get that wrong most of the time. And when you get it wrong as an options buyer, you'll likely lose your entire investment.

People who learn to use options this way often lose their shirts on the first trade and quickly give up.

We have a better way...

At Stansberry Research, we love to earn higher returns, but we know that true investment success comes from obsessing over risk. In my newsletters, that's what we do all day long.

At our different publications, we reduce our risk by employing the best analysts, focusing on quality and value, monitoring our position sizing, using bonds and other nontraditional investments, and using options to custom-tailor our returns.

In Retirement Trader in particular, our focus on risk lets us consistently make gains month after month, keeping our capital growing... and keeping our subscribers in the market.

We do it by doing the exact opposite as the folks who lose money trading options.

Let me ask you a question... Is poker a game of skill or chance?...

On one hand, you need to get great cards. You can make all the right moves but still end up busted by a straight flush. On the other hand, making careful moves and controlling your risk tends to pay off in the end.

People argue over poker because it's hard to prove that skill beats luck. Over any single game, month of games, or even years, the best player can lose.

But here's the question that settles it for me: Can you sit down at a poker table and intentionally lose all your money?

That's a stupid question, right? Of course you can. The reason poker is a challenge is that everyone is pursuing the same strategies and the same ultimate goal. That competition makes any edge held a small one.

But when you take the opposite strategy from everyone else... it's easy to succeed.

My options strategy makes it easy to reach your goal...

Now, obviously, we're all about making money.

My options strategy flips the game so that we're the only ones playing a certain way.

Here's what I mean...

Most individual traders buy options. And most of the time, they lose money. Instead, we sell options... And we almost always make money. Over 15 years and more than 720 recommendations, 95% of our positions have ended up winners.

We've put together win streaks of 211, 108, and 136 consecutive trades. I expect our track record will only get better... and our current 31-win streak (and counting) could break new records.

That's the key to our strategy. Selling something you don't own sounds like an impossible arrangement. But it's just the vocabulary that makes it confusing.

If you knew you could make double-digit returns in stocks... while reducing your risk... and could do so even if the market goes nowhere for the next few years... would you take the time to learn how?

My bet is you would.

The only thing holding you back is what I call "options baggage." Options trading looks difficult, and many people have traded options improperly in the past and lost money.

Drop that baggage...

Keep an open mind, and I promise to show you that absolutely anyone can learn how to make conservative, risk-reducing options trades.

I've shown thousands of people from all walks of life how to do it over the years, even my own mother. And I've used this strategy myself to generate income and pay everyday living expenses.

I want you to be able to do it and collect $1,000... $3,000... $6,000... even $8,000 or more each month in extra income, as many of our subscribers have had the chance to do.

So, to begin 2025, I decided to make it incredibly straightforward for you to try and take on this challenge... and we've sweetened the pot in big ways for you to get started.

You can take the next three full months to try out this strategy in my Retirement Trader advisory, look things over, and still have the opportunity to change your mind. (That's triple the length of our usual 100% satisfaction policy.)

But given the track record, I doubt you'll find yourself wanting to do that. I suspect that after you try my favorite strategy, you'll likely realize you don't need anything else to consistently grow your income... in all kinds of markets.

Click here for the full details and get started with this New Year's challenge today.

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In today's mailbag, a question and answer about December's jobs numbers, which we wrote about yesterday... plus a thank-you note for our Crypto Capital editor Eric Wade for his Friday update for subscribers... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The 'nonfarm payrolls' report showed the U.S. economy added 256,000 jobs in December, about 100,000 more than mainstream economists were expecting.

"Does this number include seasonal hiring? If so what percentage of the 256k does seasonal hiring represent? And how many will be terminated in January and February?" – Subscriber Daniel E.

Corey McLaughlin comment: Good question. Yes, it does. I hesitate to give a precise percentage given the vagaries of the data, but the short answer is seasonal hiring for the holiday season was a large part of the result, though not the entire reason.

We can infer this from the reporting that the number of part-time workers grew by 247,000 while full-time employment increased by only 87,000. Retail employment also grew by 43,000 after a 29,000 decline in November, a swing of 72,000 jobs to the upside.

But significant gains were also seen in health care (46,000), leisure and hospitality (43,000), and government jobs (33,000). And part-time jobs have been trending higher since early 2022 while full-time job growth has been falling, so that's not new.

(On that point, if you really want to dig into part-time/full-time growth trends – and how what we're seeing today has been seen in recessionary periods in the past – here's a good look from a piece from Advisor Perspectives.)

So, the holiday season alone wasn't the reason for the "unexpected" gains in December. But they were significant, as you point out. It's hard to say how many of these jobs will disappear this month or next, but I'd expect a decent amount – which would be a factor in upcoming jobs reports.

"Please give Eric Wade a grateful thank you for his team's Friday's report (1/10/2025). His 'Rabbit Hole' is actually what I have been questioning about crypto's safety factor (as a retired engineer) since 2019. Eric is one of my main mentors that keeps me focusing on the positive outlook of the future and having an open mind.

"I want to thank everyone involved in Crypto Capital. I am a 'HODL', been burnt from the over dreaming, but [with] the fun of it and trusting in what you are attempting to learn (plus learning from it) in this great new adventure, I am determined to make it my generational investment... Thank you all." – Subscriber Gary N.

McLaughlin comment: Done, Gary. I passed along your note, and Eric says "thank you" right back.

All the best,

Corey McLaughlin with Dr. David "Doc" Eifrig
Baltimore, Maryland
January 14, 2025