The 'fake' wasn't far from the real thing... Still waiting on an inflation peak... The knock-on effects... Same story, different month... The odds now favor a 1% rate hike... Is the worst over?...
 Today's inflation data was so highly anticipated that a 'fake' circulated last night...
With another round of official inflation data on many folks' minds, yesterday, someone took the time to make up a fake Bureau of Labor Statistics ("BLS") press release about its June Consumer Price Index ("CPI"). The real thing was published this morning. The document, which circulated on social media enough that the BLS released a message addressing it, had the hallmarks of a fake... Some details were wrong, like the last sentence, which referred to May instead of June... It also had a weird icon right in the middle of the image that spread around the Internet, and part of a chart was incorrect. But the fake did get one big thing right... Today's inflation report – the real one – was higher than many expected or hoped for... The fake proclaimed a 10.2% year-over-year growth in prices. Wall Street estimates were in the high 8% range. The June CPI reported this morning was 9.1%, a 40-year high. It was 8.6% in May and 8.3% in April. And beyond the headline numbers – which are annual comparisons – the latest CPI report shows that costs rose compared with previous months as well. They jumped 1.3% from May. "Core" numbers – which exclude energy and food – rose as well. In other words, inflation still hasn't peaked yet... We never made a formal prediction here, but the fact that official inflation numbers are still rising does not surprise us. As our colleague Mike DiBiase wrote in the Digest just two weeks ago... We're more likely to see double-digit inflation before we see it return to 2% – or even 5%. We've also been hammering the point home that the Great Monetary Experiment of 2020 and 2021 – unprecedented trillions of fiscal and monetary stimulus in response to the pandemic, including zero-percent interest rates in the face of rising inflation – would have serious consequences... Here they are... Sure, supply-chain issues and war in Eastern Europe have played a role in making inflation worse. But we were headed down that road thanks to government mismanagement anyway. Federal Reserve Board Governor Christopher Waller was the first person connected to the Fed that we heard admit that last week – kind of... During a conference, he said the central bank didn't start "tapering" its balance sheet "soon enough." He said... Risk management would have suggested that we move sooner. The Fed's nearly $9 trillion balance sheet, the first stop for a lot of the world's money supply these days, is the biggest driver of inflation, as Mike described in his recent Digest. And the central bank kept letting it grow – all the way to $8.96 trillion, to be precise – until April 13. (It's down a smidge to $8.89 trillion as of last week.) As I (Corey McLaughlin) wrote in the February 10 Digest, when January's CPI came in at 7.5%, which was also above Wall Street estimates and when people were also hoping to see "peak inflation" data that never arrived... For better or worse, the acute inflation today was unleashed the moment that central banks printed trillions of dollars into existence during the "COVID crash" in March 2020... with the backdrop of record-low interest rates and wild supply-and-demand imbalances that may not be resolved for years. At the time, all that stimulus looked like the right thing to do – a lot of people needed help, and being a money-printing country, the U.S. had the means to do it. For the stock market, the sentiment that the "government has our back" no doubt fueled a record-fast rebound to new highs. But like we said when all of this was happening, there would be consequences... Sure, we could print money, but we'd pay for it down the road... Now we are down the road... And persistent inflation is one of these consequences. Until we see evidence to the contrary, our baseline when it comes to the inflation – and thus the markets in general – has been "hope for the best, prepare for the worst." We said it in February, and we'll say it again today. That might sound disheartening or pessimistic, but it has been and still is the best way to think about the markets today... There will be a future. If there's not, we really don't have anything to worry about. But we're in a tough world today. It doesn't mean we're not looking for good long-term buying opportunities or that we want to get out of stocks completely. But it also doesn't mean we're ignoring the possibility that this bear market might last longer than many people expect... Today's inflation number is another log on that fire. This higher-than-expected inflation 'print' has knock-on effects... First and foremost, it increases the odds that interest rates might go even higher, quicker, as dictated by the Federal Reserve's attempts to fight inflation and slow runaway costs. As Fed Chair Jerome Powell said recently at a conference of central bankers in Europe, "Our job is literally to prevent that from happening." Of course, they haven't done this job very well. The central bank continues to be behind the curve on inflation by about six months. But I believe them when they say they're going to "use their tools." And that's what matters for the markets moving ahead. "Using their tools" essentially means raising interest rates and cooling demand for goods and services, even if the central bank admits it can't do much directly about the energy and food prices that are driving a good chunk of the inflation today. Many investors on Wall Street – and thus the stock market – are still following the Fed's lead... slow and steady (though perhaps increasingly quicker) into a potential recession... Same story, different month... Very quickly today, just like this time last month, futures traders have raised the odds on the Fed hiking its federal-funds rate range by a greater amount than expected at its next policy meeting later this month... The odds on a possible 1% rate hike instead of the expected 0.75% have risen from 7% yesterday to 85% today, according to foreign-exchange company CME Group's FedWatch Tool. It was at 40% when we started writing today. This tool assigns probabilities for Fed interest-rate decisions based on the prices of fed-funds futures contracts – investible derivates of the Fed's benchmark bank-lending rates. There's a lot of money involved in these contracts. They trade for $5 million each. We saw similar behavior last month, after May's CPI data came in higher than expected. Back then, odds for a 0.5% rate hike were above 90% one day and greater than 90% in favor of a 0.75% hike just a few days later. The same thing is happening now, but the numbers just keep getting bigger. As our friend and Stansberry NewsWire editor C. Scott Garliss wrote today... Coming into this report, money managers anticipated the central bank will raise interest rates by 0.75% at this month's policy meeting. After all, that's what policymakers have endorsed. But by taking such a step, the Fed would achieve its target of getting to neutral interest rates (where they neither hurt nor help the economy). For reference, the neutral rate is the central bank's long-term inflation forecast of 2.5% from the June Summary of Economic Projections. By getting to that level, the central bank is not technically losing ground to inflation... but it's not gaining on the metric either. However, by raising rates a full 1% this month, in the Fed's eyes, it's starting to combat inflation growth because monetary policy will move into restrictive territory. So, don't be surprised if the central bank raises rates by 1% in a couple of weeks. A 1% jump in the Fed's overnight lending rate might not sound like a lot on its own, especially if you don't follow this stuff like we do. But this is the rate that dictates a lot of related lending rates in the economy, like mortgages, car loans, or other short-term sensitive debt... Not very long ago, we could have expected an entire year or two to go by without rates going up 1%. This would be a big, rare move... The last time the Fed raised rates by 1% or more at a single central-bank policy meeting was in February 1982, when inflation was around 8% and the economy was in the middle of a year-plus recession. Before that, it was April 1981, which preceded said recession. We might be getting ahead of ourselves a little, but it's worth talking about the possibility today and consider that a 1% rise in rates today means a lot more than it did in the 1980s – especially after three decades of persistently low rates. If you could make returns directly trading the fed-funds rate, so far this year you'd be up roughly 2,000%, up from 0.08% to 1.58%. And that number is going higher soon. In the 1970s and early 1980s, interest-rate increases were nominally larger. But they were much smaller in relative terms, never growing more than 85% in a year. But here's probably the most important takeaway... We're talking about dollars becoming more "expensive" in an economy that already started to contract last quarter... and is projected to shrink again when second-quarter gross domestic product numbers come out in two weeks. In other words, the Fed's making economic life harder for businesses in what's already a slowdown... To this point, a subscriber wrote in with this comment worth sharing... After reading yesterday's Digest about our warning that Wall Street still hasn't priced in the possibility of a recession – or at least the full scale of it – paid-up subscriber Richard L. sent us an e-mail questioning that thought. He said... Many tech companies' stocks are already down between 50 and 70 percent. Their PEs between 10 and 12. These stocks can still drop but most of the damage is done. The market told us about the recession months ago. It always does. Earnings will decline but for the most part, it's already been forecast, damage done. I do not think Richard is alone in his opinion. More people are aware of the potential for a recession than they were a month ago. They also know we are in a bear market today... In fact, everyone with some amount of money in the markets is looking for the bottom in stocks today. So I wanted to share this note and raise some more ideas for discussion. Yes, damage has already been done to stock prices, particularly in growth stocks. But how much more damage could we see? That's the big question today. We can't answer with complete certainty... But we can think through the possibilities... and prepare accordingly... Yes, the stock market has been ahead of an "official" recession call once again... That's because stock prices are forward-looking and economic data is backward-looking. Just today, our friend and colleague Greg Diamond wrote to his Ten Stock Trader subscribers on this very point... For much of 2022 I've noted that we are already in a recession. This goes back to the famous saying by Paul Tudor Jones that "price comes first, fundamentals second." What we are witnessing right now (and for much of 2022) is a perfect example of this. Stocks and bonds (especially bonds) have a way of discounting or pricing in the future by way of the free market – the price action is telling you something. You just have to figure out what it is. We're only now getting to a point where slowing economic growth is showing up in the earnings reports of companies for a full quarter... but stocks have been reflecting this expectation for a while. Until the path of inflation becomes a little more clear – other than continuing to increase – I'm inclined to think that not all the damage has been priced in or accurately forecast... No major Wall Street firms projected June CPI as high as 9.1% yesterday. That means not only did the pros undershoot inflation (again), but they also weren't banking on the knock-on effects... like the Fed potentially raising interest rates even higher, quicker. That means Wall Street also hasn't been banking on as much of an economic slowdown. As Scott told us today regarding the possibility of a Fed 1% rate hike... This is going to weigh on technology stocks near term... Hedge funds have been loading up, saying inflation has peaked and the Fed is going to back down. Longer-term they're likely right, but short-term they got too far ahead of it. Because almost half of the companies in the S&P 500's sales come from abroad – and because higher interest rates will lead to increased cost to borrow – the increased price of selling American goods overseas will hurt corporate profitability. Then we pair all of this with the market breadth indicators we've been tracking. The number of stocks on the New York Stock Exchange trading above their long-term, 200-day moving average has ticked back down lately to around 17%, still in a downtrend. Today, the S&P 500 opened down about 1% then bounced around throughout the day back to around even. This is all to say, all the bad news might not be priced in yet because the story keeps getting worse. Some of that story is the risk of the Fed itself presents. At worst, it could raise rates substantially, and we could still have higher costs in the economy and a recession... without killing inflation. In sum, we're getting closer to a bottom, but we want to see more evidence that we're there before getting overwhelmingly bullish again. | | | | Don't Miss the Stansberry Conference Our biggest event of the year is headed to Boston... Get your ticket now to the 20th annual Stansberry Research conference, slated for October 24 to 26 at the Encore Boston Harbor resort... Our editors and analysts, a dynamic lineup of industry speakers, and you – our subscribers – will be there to talk in person with other smart, like-minded folks at a unique, business-mixed-with-pleasure event...
This is your chance to be shoulder to shoulder with your favorite editors, including Dr. Steve Sjuggerud, Dr. David "Doc" Eifrig, Dan Ferris, and Eric Wade. And you'll have the chance to hear exclusive stock recommendations and get more guidance on navigating this volatile market. Tickets are already selling fast, so make sure to reserve your spot today... Click here for more details and to see our entire speaker lineup. If you act now, early tickets also come with a $1,000 free gift – for a limited time only. | | | | |
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New 52-week highs (as of 7/12/22): None. In today's mailbag, more feedback on yesterday's Digest, which also included notes on oil from our colleagues Steve Sjuggerud and Brett Eversole... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "[We can see this through the U.S. oil-rig count. It measures how many rigs are actively pulling oil out of the ground.] "Not exactly. Rigs do not pull oil out of the ground. There is no correlation between active rigs running and current oil and/or natural gas production. Rig drills the well. When rig leaves, the well is a DUC aka Drilled Un Completed. DUC well may not be completed and actually producing for a year or more. I've been in the biz one month shy of 48 years." – Paid-up subscriber Eugene P. All the best, Corey McLaughlin
Baltimore, Maryland
July 13, 2022
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios | Stock | Buy Date | Return | Publication | Analyst | MSFT
Microsoft | 11/11/10 | 906.1% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 778.2% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data | 10/09/08 | 753.4% | Extreme Value | Ferris | HSY
Hershey | 12/07/07 | 521.2% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/12/12 | 433.5% | Stansberry's Investment Advisory | Porter | ETH/USD
Ethereum | 02/21/20 | 397.8% | Stansberry Innovations Report | Wade | BRK.B
Berkshire Hathaway | 04/01/09 | 391.6% | Retirement Millionaire | Doc | WRB
W.R. Berkley | 03/16/12 | 367.4% | Stansberry's Investment Advisory | Porter | NTLA
Intellia Therapeutics | 12/19/19 | 305.6% | Stansberry Innovations Report | Engel | FSMEX
Fidelity Sel Med | 09/03/08 | 291.3% | 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 | | 3 | Retirement Millionaire | Doc | | 4 | Stansberry's Investment Advisory | Porter | | 1 | Extreme Value | Ferris | | 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 | ONE-USD
Harmony | 12/16/19 | 1,154.2% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,057.3% | Crypto Capital | Wade | ETH/USD
Ethereum | 12/07/18 | 995.2% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 764.2% | Crypto Capital | Wade | TONE/USD
TE-FOOD | 12/17/19 | 446.6% | 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 | | 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%. | 
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