The 'Healthy' Economy Is a Lie

The wage-price spiral... The undisputed king of fighting the last war... Fed eve... Thank goodness for earnings season... The 'healthy' economy is a lie... Mailbag: Mr. Market, the overactive manic-depressive... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The wage-price spiral... The undisputed king of fighting the last war... Fed eve... Thank goodness for earnings season... The 'healthy' economy is a lie... Mailbag: Mr. Market, the overactive manic-depressive... --------------------------------------------------------------- Higher costs just won't stop... We've talked for months about "hotter than expected" inflation, mostly in consumer prices. This morning, inflation showed up somewhere else... the cost of paying workers. The U.S. Department of Labor reported that its "employment cost index," which measures worker salaries and benefits, grew by 1.2% in the first quarter of 2024, its highest rate since the third quarter of 2022, and above Wall Street's expectations. Year over year, compensation costs for civilian workers have grown by an average of 4.2%, and at a higher rate of nearly 5% for government workers. That's notable on multiple inflation-causing fronts... given Uncle Sam is the nation's largest employer and is already running a multitrillion-dollar deficit. While making more money feels good to everyday people (and, by all means, if you have valuable skills, you should be compensated for them), for businesses, higher salaries and benefits can create the kind of "wage-price spiral" that can doom an economy... and keep central bankers up at night. Higher earnings are the latest evidence in the growing pile that high(er) inflation – certainly above the Federal Reserve's supposed 2% annual target – likely isn't going anywhere anytime soon. Of course, the timing isn't great... In my (Corey McLaughlin) view, there's never a good time for higher-than-expected inflation, but tomorrow, the Fed "speaks." The central bank will announce its latest policy decision(s) in the afternoon, followed by Fed Chair Jerome Powell's press conference. The markets were uneasy again today. The major U.S. indexes were all down, with the benchmark S&P 500 Index off by 1.5% to finish the month of April with about a 4% loss, breaking a five-month streak of gains. Meanwhile, U.S. Treasury yields were a touch higher today. The 10-year Treasury yield rose to nearly 4.7%. And the volatility could continue. If I've learned anything from "Fed watching" these last few years, it's that the central bank is the undisputed king of fighting the last (financial) war. By that, I mean the Fed reacts far too late about things that have already happened or sequences that were put in motion way earlier... and the Fed's delayed reaction inevitably causes other knock-on consequences down the line, like the type of crisis it's trying to avoid. For example, late last year, Powell signaled that interest-rate cuts were coming in 2024. And even amid sharply rising oil prices, he literally guaranteed it in front of Congress earlier this year (without knowing the future, of course)... The 'data' on the higher-inflation trend has been piling up... But now, things have gotten obvious enough that the Fed has changed its tune on the prospect of rate cuts possibly happening at all in 2024. My sense is that Fed officials have begun to fear a full-fledged inflation rebound of the 1970s variety. I wouldn't count out the idea of Powell throwing the possibility of more rate hikes on the table tomorrow, or at least alluding to it... which could stun some people. But if he instead sounds similar to [how he did at a conference earlier this month]( and holds the line on "peak rates" having already been reached, that could be bullish. In the balance... A higher cost of borrowing might be the right thing for the central bank's spreadsheet... and for the Congressional "dual mandate" world of stable prices and maximum employment (for which we have official measures). But a renewed "higher for longer" interest-rate environment is different from what many investors have been (and still are) expecting. A notable policy shift, be it holding rates where they are through the entire year (or even the prospect of another rate hike), will have an impact on the markets... and will have more consequences on everyday Americans' budgets. It will also affect corporations and banks facing higher borrowing costs than they may have been expecting... and impact the global economy if a stronger dollar persists. (On that point, the Japanese yen, [which we talked about yesterday]( has held on against the dollar for the past 24 hours, but we'll keep watching.) So we expect some volatility – one way or another – tomorrow afternoon on the Fed announcement and Powell's remarks. We've seen this story before. I'll report back tomorrow evening. We'll also update you on the Treasury's borrowing plans announced tomorrow morning. At least there are earnings... Bulls might be saying, "Thank goodness for earnings season." Despite all the bad news about a relatively slower-growing economy and higher inflation, S&P 500 companies continue to report good margins overall. As FactSet reported yesterday, the net profit margin for the S&P 500 companies that have published their 2024 first-quarter financials so far is 11.5%, in line with the five-year average and above the previous quarter's net profit margin. Of course, individual results depend on the company or sector... After hours today, for example, Amazon (AMZN) reported better-than-expected revenue and earnings numbers, and its shares rose, while Starbucks (SBUX) missed Wall Street revenue and earnings estimates, and its shares fell. But the headline is that, on average, companies are still keeping margins up despite higher costs, at least for now. But on the other hand... There's a good argument to be made that the 'healthy' economy is a lie... For starters, we're seeing ever-rising costs at a greater pace and for a longer duration than the U.S. economy has seen in decades. This crippling inflation and two major wars are adding $5 billion to the U.S. government's debt every single day. Longtime readers know that we believe skyrocketing debt levels – for the government, businesses, and consumers – are a cause for concern... and will catch up with the economy eventually... if they haven't already. Our colleague Mike DiBiase detailed this idea in a terrific Digest two weeks ago titled "[There Will Be No Soft Landing]( He's not the only one who thinks so... According to Stansberry Research's founder, Porter Stansberry, only one thing is keeping most companies from plummeting, and it likely won't hold up much longer. Major cracks are starting to show. (I would also add that the longer inflation stays high, the worse this situation will probably get.) You may have seen some notes in your inbox already about Porter's warning, but I want to make sure Digest readers don't miss it... Take steps to prepare now... Porter has a history of predictions that you ought to consider... like warning about the 2008 financial crash, the loss of America's AAA credit rating, and the more recent regional-banking collapses... Porter was laughed at by the mainstream media and financial elite for each of these warnings, but each time, he was right. Now, he's stepping forward with a new, urgent warning that goes directly against the mainstream media and the U.S. government's narrative. It has to do with a $130 trillion market that's at the center of the Western economy. If you have any money invested in the stock market, Porter says you could be blindsided unless you take a specific step today... To find out more, [click here now to hear directly from Porter]( and learn about what this warning potentially means for your money and how to prepare. One sneak peek: Among other things, Porter is sharing "the most terrifying chart in finance" that he says is a harbinger of what's next for America and disproves the lies that you're likely hearing in the mainstream media. Again, [click here for all the details now](. On this week's Stansberry Investor Hour, Dan Ferris interviews David Trainer, the founder and CEO of New Constructs, an investment research firm that analyzes thousands of stocks and funds with robo-analyst technology... [Click here to watch the interview now](... and to hear the full audio version of this week's Stansberry Investor Hour (where Dan and I discuss the Fed and inflation), visit [InvestorHour.com]( or find the show wherever you listen to your podcasts. --------------------------------------------------------------- Recommended Links: ['The Greatest Legal Transfer of Wealth in Human History']( This year, a crisis could rip the financial markets in two... yet nobody sees it coming and nobody is warning you. However, Porter Stansberry says, despite the dangers ahead, this could be the greatest wealth-building opportunity of your lifetime. While millions of unprepared people will be on the losing side of this transfer... if you own the right investments, you could see significant returns. Porter tells you what to buy, [right here](. --------------------------------------------------------------- [May 1 Warning]( This 24-year market veteran's warning is already coming true. What's about to happen is worse than anything AI can do to your money. [Get the details here](. --------------------------------------------------------------- New 52-week highs (as of 4/29/24): ABB (ABBNY), Agnico Eagle Mines (AEM), Alamos Gold (AGI), Grupo Aeroportuario del Sureste (ASR), Cambria Emerging Shareholder Yield Fund (EYLD), Freeport-McMoRan (FCX), Kinross Gold (KGC), Liberty Energy (LBRT), Ryder System (R), Sprouts Farmers Market (SFM), SilverCrest Metals (SILV), Teck Resources (TECK), Teradyne (TER), Tyler Technologies (TYL), Veralto (VLTO), and Vertiv (VRT). In today's mailbag, a great question about the nature of the stock market stemming from [yesterday's Digest]( and we answer in part with a great piece from Dan... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "This comment from today's 'Breaking the Yen' Stansberry Digest really caught my eye... Plus, as frequently happens, there's a good chance Powell will make some offhand remark that will make analysts question something or cause Wall Street trading algorithms to go wild. So there's a decent chance of some volatility on Wednesday. "Is our stock market system based on a logical thought process, algorithms not backed by a logical thought process, or on a knee-jerk reaction? Lately it seems like every piece of news causes an outsized reaction, and a few days later we see a reaction in the opposite direction. It's like driving a car fast in forward, then going into reverse, and see-sawing back and forth. Is the market truly 'surprised' at every report that comes out? And is this the best way for a system to run, or is it just 'how we've always done it.'?" – Subscriber Ellis G. Corey McLaughlin comment: Ellis, I'm glad you asked this question because you've hit on a couple of timeless points about why the markets are so fascinating and how they reflect all there is about human nature, in my view. We – as in, people, including myself – may like to think we're always logical, but we – including investors of all stripes – are emotional creatures, too (and, most often, fear and greed are the strongest emotions in the market). I wrote about this in the past [here](. And, yes, there are the algorithms we mentioned yesterday, which (as you noted) aren't emotional but are programmed by real people trying to eliminate emotions from decision-making, for better or worse. Perhaps the machines essentially acknowledge our fragile human nature. When I read your question, I was also reminded of something our friend and colleague Dan Ferris once wrote in the Digest about the idea of "Mr. Market" being an "overactive manic depressive" – and, most importantly, how you can avoid falling into the trap of getting caught up in the daily market gyrations that might not make any sense to you. As Dan explained [in an April 2023 essay](... Have you met Mr. Market yet? If you've ever traded a stock, yes, you have... In his landmark 1949 classic book The Intelligent Investor, the economist, college professor, and investor Benjamin Graham said the stock market behaves like an individual he named "Mr. Market." Graham, who died in 1976, is widely known as the "father of value investing." He hired a 24-year-old Warren Buffett, one of his students at Columbia University, in the 1950s to work at his investment firm. You can bet that one of Graham's lessons was why understanding Mr. Market's personality was important. As Graham wrote in a single paragraph in The Intelligent Investor... Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly. When I (Dan Ferris) read that paragraph, I'm led to believe that, according to Graham, two traits define Mr. Market... First, he's "very obliging indeed," meaning that he's a very active trader, always wanting to buy or sell. Second, he's manic-depressive, frequently letting his emotional highs and lows get the better of him. An overactive, manic-depressive trader seems destined to spend his life transferring all his wealth into other people's accounts... Unfortunately, lots of folks behave that way... And thus, so does Mr. Market because... Mr. Market is "lots of folks"... He's the personification of the herd, which buys at the top, afraid of missing out on gains that have already been enjoyed by early investors... And the herd also sells at the bottom, when its members can't bear the thought of further losses. At the same time, other folks like Buffett, Stanley Druckenmiller, and Paul Tudor Jones amass fortunes by exploiting Mr. Market's mistakes... They win when he loses. Perhaps that's why immediately after introducing Mr. Market to the world in his landmark book, Graham points out in the next paragraph that it's better not to worry about him most of the time... You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position. The Buffetts, Druckenmillers, and Tudor Joneses of the world do that. They beat Mr. Market by forming their own ideas based on their own research. You are free to do the same and decide for yourself whether Mr. Market's view is "plausible and justified" or "a little short of silly," based on your own research (or that of someone you trust, like Stansberry Research), then act accordingly. Wise words from Dan, huh? All the best, Corey McLaughlin Baltimore, Maryland April 30, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,338.2% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,276.8% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 886.0% Extreme Value Ferris WRB W.R. Berkley 03/16/12 704.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 610.9% Retirement Millionaire Doc HSY Hershey 12/07/07 472.4% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 446.5% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 382.4% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 359.2% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 341.8% Stansberry Innovations Report Engel 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 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,597.5% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,215.9% Crypto Capital Wade MATIC/USD Polygon 02/25/21 810.1% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 389.5% 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 Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud 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 PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ 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%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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