Joe Biden and Jerome Powell talk inflation... A meeting of the minds... Inflation will do what it will... There's no such thing as free money... A fresh batch of 'inflation protection' research... It looked like quite the party... Yesterday, President Joe Biden invited Federal Reserve Chair Jerome Powell to the White House to supposedly talk about lowering record-high inflation. Treasury Secretary Janet Yellen was there, too... The meeting made a lot of headlines in the financial media yesterday. Of course, that was the point. With midterm elections getting closer, the Biden administration is attempting to appear seriously concerned about skyrocketing prices across the country. And what did they actually talk about? Here's the punchline... It doesn't matter. Unless the trio secretly escaped the White House to construct a bunch of new oil refineries or harvest wheat, I (Corey McLaughlin) am willing to bet the meeting turns out to be nothing more than an ill-conceived PR stunt. Here's how Bloomberg described it... Biden seized on the Oval Office session to argue that while fighting price increases is his top priority, that work was primarily the purview of the Federal Reserve. "My plan is to address inflation. That starts with a simple proposition: respect the Fed, respect the Fed's independence, which I have done and will continue to do," Biden said. That came a day after an op-ed piece in Biden's name was published in the Wall Street Journal. It promised the president wouldn't "meddle with the Fed" and has ideas on lowering prices, but stated that the central bank "has a primary responsibility to control inflation." So, Biden met with Powell to talk about inflation, which is sort of meddling on its own. But the biggest message from the White House – made clear again yesterday – was that the Fed is responsible... There's really two plausible outcomes from this meeting of the minds... The first possibility is that behind closed doors, Powell got the green light to go Paul Volcker style and hike interest rates higher than anyone thinks possible – stopping inflation but crashing stocks and sending the economy into a brutal recession... We doubt that's the case. But even if this did happen, the Fed likely won't go there, at least not until it sees what the "official" inflation numbers do over the next few months... We'll be watching closely, but there's a good chance they go down, relatively speaking. More likely, the White House chat was a half-hearted public attempt to deflect the blame for inflation to the Fed. While we strongly agree that the Fed holds significant responsibility, we have just as much distaste for appearance-focused political stunts. It wasn't a smart move anyway. Few voters care about the nuances of the Federal Reserve. Inflation and the Fed only made mainstream news in March after the war in Ukraine started. Most Americans simply care about that big number at the gas station going higher... whether they'll have baby formula for their kid... why their medical bills are so high... why the financial crisis happened... and whether the government is really sending them free money. There are a lot of contributing factors to these scenarios. But as we've learned over time, one problem is at the root of them all. And we didn't hear anyone mention it at the White House meeting... The government keeps printing money... To describe this problem in more technical terms, the trouble is "expanding money supply." Our Stansberry's Credit Opportunities editor Mike DiBiase talked about this in our Masters Series Q&A over the weekend... He pointed out the Fed has grown money supply – all the money in the financial system, including cash, checking accounts, mutual funds, and other assets – by more than 40% since the start of the pandemic as it looked to shore up the economy. That's an astonishing number. Using the typical 7% annual rise in money supply over the past 60 years, that's five years' worth of creation jammed into two. That's why we have inflation. As Mike said... The Fed is a long way from fixing the problem. In fact, it was still increasing money supply at an annual rate of 10% as recently as two months ago, when it reached nearly $22 trillion. Inflation had been at multidecade highs for months at that point... That's unprecedented and abnormal. The only time the money supply has even approached that pace of growth was from 1975 to 1977, when the money supply grew around 30%. Not surprisingly, right after that, inflation rose to more than 10% and didn't peak until 1980 at nearly 15%. It took Fed Chairman Paul Volcker raising interest rates to 20% to bring it back down. Most folks declare that inflation has happened because of "unanticipated and large shocks," as Yellen said on television after the meeting yesterday... like the war in Ukraine, the pandemic, and supply bottlenecks. Those factors made things worse, yes – but we were already headed this direction anyway. Expanding money supply, which has gone on for decades, paired with strong demand... and coupled with those supply shocks... means higher prices. It's that simple... In short, there's no such thing as free money... Stansberry Research senior analyst Alan Gula wrote about this concept in a special report sent to subscribers of our flagship Stansberry's Investment Advisory just on Friday... He highlighted the Consumer Price Index ("CPI"), a government measure of price changes across a basket of consumer goods, like transportation, food, and medical care. Today, the CPI is reflecting sticker shocks in the real economy... The question is, at what rate are prices going up? When the rate of inflation is low – say, around 2% – folks tend not to notice. But when inflation kicks up to 8.3%, as it did in April, everyone tends to notice it. That's the highest rate of inflation since December 1981. It's in your face everywhere... from the gas pump to the grocery store. This is why I say what Biden and Powell talked about yesterday doesn't really matter. If war and global supply-chain issues are really the sources of inflation, they can't do anything about them anyway... They can't cut the prices you'll pay at the grocery store this week. The Fed has two tools that Powell can employ to fight inflation. It can do something about money supply (which it finally started decreasing as of today, with plans to dial it back by $47.5 billion in each of the next three months)... and it can cool the economy by raising interest rates. Combined, this makes business and dollars more expensive. And it can lead to recession-like results such as companies cutting job openings – which fell by nearly half a million in April, we learned today, after the Fed's initial rate hike from near zero in mid-March. Higher rates and less juice in the economy can also dampen demand in certain sectors. For example, the housing market slumps when loans become less affordable. But a bunch of central bankers can't do much about the other end of Economics 101: supply... Unless they go out to a farm, construction site, factory, or port and help make or ship something tangible, Powell and the Fed string-pullers won't help bring more goods to market – especially not while "tightening" financial conditions for businesses. The point is, the damage has been done. We're dealing with the consequences... We picked on Joe Biden today. But we don't really care who is in office. Everyone who has a hand in "printing money" is guilty of the crime of inflation... Spending other people's money is one thing most politicians agree on, even if they use seemingly different methods to commit the offense. Look back to our writing when the unprecedented emergency stimulus of 2020 was moving forward without a second thought. Then it happened again in 2021 with the American Rescue Plan. We warned about the consequences, like inflation, in the March 10, 2021 Digest... In the short term, another round of stimulus is probably a boon for stocks and more fuel for the ongoing "Melt Up" in the months ahead... Yet it's also more kindling for inflation fears... And it's another sign of "kicking the debt can down the road" at grand scale, too. Nobody today seems to care about the long run... But we'll surely see unintended consequences of the government's actions at some point in the future. Even folks enjoying the government support today will be caught up in these consequences in the years ahead. Specifically, our colleague and Income Intelligence editor Dr. David "Doc" Eifrig wrote in January 2021 about another round of proposed fiscal stimulus... Monetary policy alone didn't create inflation. But now the government has stepped in... We do think that this stimulus will cause inflation to pick up in 2021 and beyond. Inflation is like toothpaste. You can't put it back in the tube once it's out. Maybe you'll get a small dollop back in, but only with a mighty struggle and even more mess on your hands to clean up. No matter what anyone says, we're going to have to wait and see what inflation does over the next several months, or even years. That's why our base case has been "hope for the best, prepare for the worst" when it comes to higher prices. What's more, if we're at peak inflation now, as many are hoping, some prices might go down or at least rise more slowly. Some already are. But others – things people depend on most, like energy or food – will stick higher. You can see why inflation can be tricky to measure using one number or metric. Just know it's always there and always happening... so long as governments are printing money. It can be wise to think about your investments in this context... The seeds for today's inflation were planted years... decades... and centuries ago as soon as paper money was invented. As I wrote in the March 17 Digest... That dates to at least 10th-century China, when high demand for coins exceeded supply of precious metals. Someone had the bright idea to create credit notes ‒ or paper money ‒ and enough people trusted in the system that a new way of doing business was born. We've been screwed ever since... But certain decisions have compounded the problems more than others... like going off the gold standard in 1971 or, most recently, printing nearly $6 trillion of U.S. dollars into existence in two years. When stuff like that happens, someone might win an election and feel good for a few months. But over the long run, the value of every other dollar that was already in existence goes down. And that means the costs of everything go up. Ta-da: That's inflation, or devaluation, as paid-up subscriber John M. told us we should refer to it. He is right... Our Gold Stock Analyst editor John Doody makes this point clearly... In the context of the case to own a "hard asset" like gold – which has a limited supply – in a Masters Series essay earlier this year, John traced the reasons for inflation back to August 15, 1971. That's the day President Richard Nixon decided to officially kill the dollar, and free the currency completely from the gold standard, in an effort to lower inflation (then 5.8%) and unemployment (6.1%) ahead of a 1972 presidential reelection campaign... As John wrote... One constant factor driving gold is that politicians' No. 1 job is to get reelected. To do so, they're always trying to get nine slices out of an eight-slice pizza and reward voters. This economic trickery requires policies that are either inflationary or involve deficit spending... or both... Because of this, gold's price, measured in dollars, is the barometer that shows the impact of these policies. And it's up almost 5,500% in price per ounce since 1971. Meanwhile, John said... As you can see in the chart below, it now takes more than $7 to buy the same "stuff" that cost $1 in 1971. And in the next chart, you can see the dollar has lost 86% of its purchasing power over that period... How can an investor protect his savings? By owning assets that grow in value faster than the dollar falls. You might look at the U.S. dollar right now – measured by the U.S. Dollar Index ("DXY") – and see it's trading near multiyear highs. But that's mainly because the rest of the world's major currencies are being devalued even more... So what to do about all of this if you're looking to make your money grow and enjoy life? If nothing else, know this... Inflation is why goods and services with real, tangible value will always be... well... valued... No matter how weak or strong a currency is... or what it is (dollars or cryptocurrency or delicious, crunchy potato chips)... things with real worth will always be worth something – no matter the means of exchange, and no matter what any government does. For example, in the recent special report Alan wrote for Stansberry's Investment Advisory subscribers, he mentioned that hard assets – like gold or farmland – can preserve purchasing power and are solid investments in inflationary times. So are real assets, like energy or food, that will always be in demand and could keep rising in value in the months or years ahead. But as Alan wrote... There are alternatives in the stock market that offer investors similar or even superior inflation protection. We're talking about firms that have the power to increase prices faster than their costs increase... or that have businesses that generate greater revenue as inflation rises with higher volumes. These companies are hedges against rising prices – or even leveraged bets on that trend. I talked a little bit about this in a different way in yesterday's Digest. The companies that can generate gobs of "free cash flow" and use it as they wish – like rewarding shareholders – are businesses that you want to own in today's times... or anytime. As I wrote yesterday, rather than chasing the latest speculative craze or hot stock tip, high-quality businesses are the best way to grow your stock portfolio over the long run... and survive and even thrive amid market volatility. And, in times of high inflation, it pays to be especially cautious... Investments that pay off in nominal terms could still lose money in "real" terms. Businesses need to beat inflation in real terms to generate a profit. In Stansberry's Investment Advisory, we've just published a fresh batch of 'inflation protection' research... In the report from Alan we've referenced already, he shares five stocks that are well-positioned to benefit from higher prices, including two energy names and one gold company. And in another report, also sent to subscribers on Friday, Alan goes deeper on one of those recommendations, which he calls "the No. 1 stock on Earth to beat inflation." And, lastly, subscribers received a report from Doc Eifrig about two "secret assets" to own in a time of crisis. Today qualifies. If you are an existing Stansberry's Investment Advisory subscriber or Alliance member, I suggest you check out this new, timely research that is now available to you here. And if you don't subscribe, now's a great time to give us a try... Today, we've arranged for a special offer for Digest readers. You can access the Stansberry's Investment Advisory newsletter – our flagship publication – for a full year for only $49. That's 75% off the regular price. You'll get access to all of the special reports I mentioned... and a lot more. For starters, our team is publishing the newest monthly issue of the Investment Advisory on Friday with a brand-new portfolio recommendation. If you're interested, click here to learn more from our colleagues Dan Ferris and Daniela Cambone and claim your discounted subscription to our flagship publication today. It's a no-brainer as far as I'm concerned... If you sign up and don't like what you see for whatever reason, you can cancel within 30 days, and we'll refund you every penny, no questions asked. And you'll still get to keep everything you received... the recommendations, the special reports... all of it. Click here to take advantage of this risk-free offer now. The Fed Doesn't Know Its Next Move "The Fed will never be successful because they are ignorant, and they refuse to let a free-market system work," says Todd "Bubba" Horwitz, the founder of bubbatrading.com. And he tells our editor-at-large Daniela Cambone that the central bank "doesn't know what to do next." Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter. | Recommended Links: | Be Warned: A Specific Type of Market CRASH Is Coming Soon It's actually much bigger and more important than what happens to the Nasdaq or S&P 500 Index. 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. 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TICKETS SELLING FAST! You don't want to miss our biggest and best event of the year: Stansberry's 20th Annual Conference. With the volatile, confusing stock market so far in 2022, tickets are selling FAST. For the dates, speakers, and all the details, click here. | |
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| New 52-week highs (as of 5/31/22): Black Stone Minerals (BSM), CTS (CTS), and Viper Energy Partners (VNOM). In today's mailbag, a glass-half-full view of a stock market sell-off... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Can't understand [why] people get their panties in a wad about the stock market. The stock market is like an overgrown bush, needs a good pruning for healthy growth. Might look like [crap] for a while til the new growth comes back. Let's all hope for a good 50% haircut!!!!" – Paid-up subscriber Lee D. All the best, Corey McLaughlin Baltimore, Maryland June 1, 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 | 973.7% | Retirement Millionaire | Doc | MSFT Microsoft | 02/10/12 | 837.3% | Stansberry's Investment Advisory | Porter | ADP Automatic Data | 10/09/08 | 784.9% | Extreme Value | Ferris | ETH/USD Ethereum | 02/21/20 | 669.8% | Stansberry Innovations Report | Wade | HSY Hershey | 12/07/07 | 500.4% | Stansberry's Investment Advisory | Porter | BRK.B Berkshire Hathaway | 04/01/09 | 460.2% | Retirement Millionaire | Doc | AFG American Financial | 10/12/12 | 442.3% | Stansberry's Investment Advisory | Porter | FSMEX Fidelity Sel Med | 09/03/08 | 302.8% | Retirement Millionaire | Doc | BTC/USD Bitcoin | 01/16/20 | 276.3% | Stansberry Innovations Report | Wade | ALS-T Altius Minerals | 02/16/09 | 268.9% | Extreme Value | Ferris |
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 | 3 | Stansberry's Investment Advisory | Porter | 2 | Extreme Value | Ferris | 2 | Stansberry Innovations Report | 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 | 1,494.4% | Crypto Capital | Wade | ONE-USD Harmony | 12/16/19 | 1,466.6% | Crypto Capital | Wade | POLY/USD Polymath | 05/19/20 | 1,081.2% | Crypto Capital | Wade | MATIC/USD Polygon | 02/25/21 | 798.5% | Crypto Capital | Wade | BTC/USD Bitcoin | 11/27/18 | 746.4% | 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%. |