The 'Chainsaw' Effect

Stocks are up again... The global divergence is in motion... An update on Javier Milei's 'chainsaw' policy... The effects of shock therapy in Argentina... The 10,000 peso note... It won't fly here... Stanley Druckenmiller is bullish... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Stocks are up again... The global divergence is in motion... An update on Javier Milei's 'chainsaw' policy... The effects of shock therapy in Argentina... The 10,000 peso note... It won't fly here... Stanley Druckenmiller is bullish... --------------------------------------------------------------- 'Bad news' was good again today... The major U.S. indexes finished higher across the board and inched toward all-time highs again. That's on the same day that weekly jobless claims in the U.S. hit their highest reported level since August of last year. Translation: Wall Street saw more reasons to believe in a weakening jobs market... and for the Federal Reserve's monetary policy to loosen (with lower rates) before it gets any tighter. And that's a bullish tailwind for stocks and bonds. The Dow Jones Industrial Average was up for the seventh straight trading day, for instance, and the 10-year Treasury yield fell slightly... But as I (Corey McLaughlin) will keep saying to anyone who will listen, this "weaker jobs market/Fed cut" concept doesn't mean high(er) inflation is gone forever. Far from it. It could stoke it. To this point, the price of gold in dollars jumped 1% today, too... Energy stocks, which can hedge against inflation, were among the S&P 500 Index's leading sectors as well. The 'divergence' is in motion... But the Fed's still not "there" on a move yet... Its outlook on interest rates and inflation continues to differ from that of other global central banks. This divergence that we wrote about [earlier this week]( was on full display today... This morning, the Bank of England left its lending rate unchanged – but strongly signaled rate cuts to come, possibly as soon as its next meeting in June. As Governor Andrew Bailey said... It's likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates. So, across the pond, England's version of Fed Chair Jerome Powell is saying that more rate cuts might be needed than investors are thinking about... And, as we explained earlier this week, we expect a similar "dovish" tone from the European Central Bank at its policy meeting in June. This should boost European stocks, according to Stansberry Research senior analyst Brett Eversole. For the bulls... Speaking of Brett, he wrote in his "[Review of Market Extremes]( update to True Wealth Systems subscribers yesterday about U.S. stocks as well. Specifically, he shared timely history showing that after a pullback like we've just seen – a 5% drop in the U.S. benchmark index after five straight months of gains – stocks have returned an average of nearly 13% over the next year. That's about 5 percentage points above "average" annual returns in U.S. stocks since 1950, leading Brett to conclude... I understand that it's tough to get bullish after watching stocks drop. And I know that many investors are nervous about the new rally that started last week. You might be wondering if it's about to end... or if the recent dip was the beginning of something much worse. History shows that worrying is the wrong posture, though. Ending this kind of monthslong streak isn't a bad omen. It tends to lead to even larger gains. True Wealth Systems subscribers and Stansberry Alliance members can find Brett's full analysis [here](. Our Ten Stock Trader editor Greg Diamond is in a similar bullish mood – for different reasons – given his technical trading approach. As [he told subscribers yesterday]( after recommending a new trade, "I'm looking to buy weakness." Elsewhere, take note, the 'chainsaw' is having an effect... Argentina is Latin America's second-largest country and third-largest economy, weighed down by bloated government spending and runaway inflation. When running for president there last year, Javier Milei promised to upend the political establishment and tear down the Argentine government should he win office. Milei wasn't subtle. As the Associated Press reported in October... "The caste is trembling!" he yelled while brandishing a chainsaw spewing diesel fumes on a crowded street... In the poor, northwestern province of Salta last week, his caravan was welcomed by a group of workers waving their own buzzing chainsaws in the air. The message and imagery were well received. The next month, Milei – a self-described "anarcho-capitalist" and an uncompromising libertarian – was elected president by a wide margin... and he soon started making good on campaign promises... By January, he'd already set in motion a series of policies to strengthen the value of the Argentine peso... Then in January, he boldly told the world, specifically hundreds of the world's biggest financiers at the World Economic Forum, about why he believed he was doing the right thing. It was a stunning speech – the verbal equivalent of a Greek soldier being let into Troy voluntarily and burning the place down – that we reported on in a Digest headlined, "[A 25-Minute Case for Freedom](... [Milei] talked about how free-market capitalism has brought the world more riches and less poverty in the past two centuries than the previous 1,800 years... He talked about the mistakes he said government leaders, many sitting in the crowd, have been making recently that stagnate economic growth by limiting free competition. Milei said... If the state punishes capitalists when they are successful, they will destroy their incentives... This will harm society as a whole. Successful entrepreneurs are the real heroes, he said. More regulations, on the other hand, create a "downward spiral" of more regulations that ultimately stifle growth, make people poorer, and leave people's lives at the behest of a "bureaucrat sitting in a luxury office." There are no "market failures," he said, but broken models used by economists... This leads to more, costly interventions to get it "right." Milei said... With tools like printing money, debt, subsidies, control of the interest rate, price controls, and regulations to correct the so-called market failures, they can control the lives and fates of millions of individuals. We still wonder if Milei will be invited back to Davos for the 2025 edition... In any case, those in the room couldn't ignore his message, and the speech has been viewed nearly 600,000 times on YouTube. If you missed it, you can watch it [here](. (A transcript is also available [here]( Milei has called his approach 'shock therapy'... In a move that was maybe not what the people had in mind at first, Milei began by putting in motion more inflation. That's in a country that was already seeing triple-digit price growth annually. As we'll explain, the rate has since come down. In order to "dollarize" the economy, Milei started by devaluing the peso... raising its official exchange rate in December from 366.5 to 800 pesos per dollar. It was a step for Argentina to break its "addiction" to fiscal deficits, Milei's economic minister said. And at the same time, Milei started taking his metaphorical chainsaw to government spending with practical decisions and firings. By January, he'd already reduced the number of Argentine government departments from 18 to nine and laid off 5,000 government workers, exactly what the people who elected him wanted to see. As our Stansberry's Investment Advisory team [wrote back in January](... More than a century ago, Argentina was a rich and prosperous country. But for decades now, Argentina has been locked in a cycle of economic crisis and hardship. The political class has destroyed this once-great nation with misguided policies and institutionalized corruption. The economy stagnates under the weight of regulations. Bureaucrats mismanage hundreds of state-controlled enterprises. The government prints money to pay for its largesse. Inflation is turning the currency into dust. And Argentina's poverty rate has eclipsed 40%. The Argentine people have had enough. Under Milei, Argentina is set for one of the most radical, pro-market, and pro-business economic-reform programs since Poland went capitalist in the early 1990s. The "shock therapy" had an undeniable effect. As an opinion piece from Project Syndicate noted this week about the sequence, starting with the devaluation of the peso in December... The price surge did terrible damage to consumers' pocketbooks. But it had a silver lining: it diminished the purchasing power of the excess pesos. Between November 2023 and February 2024, the real value of the central bank's monetary liabilities fell by nearly 40%, sharply diminishing the monetary overhang's future inflationary potential. The jump in prices also had budgetary consequences. In an illiquid local peso market, the central bank could fund itself by issuing notes at much lower interest rates than during the previous administration. What economists call the "quasi-fiscal" deficit began to fall. And so did the fiscal deficit, because most expenditures – including big ticket items like pensions and public-sector wages – are set in nominal terms, so when inflation unexpectedly spikes, the real value of those expenditures falls. Add to that a freeze in public investment and deep cuts in transfers from Argentina's federal government to the provinces, and the net effect was a sharp drop in government spending. That is why Milei could solemnly announce, during a prime-time television speech, that in the first quarter of 2024 Argentina achieved a small fiscal surplus – the first since 2008. In other words, the new Argentine government inflated away future debts at the expense of short-term pain... The month-over-month consumer price index ("CPI") in Argentina rose to 26% in December 2023... and has fallen back to only 11% as of March. Milei said the rate could drop below 10% when April data is released... Yet at the same time, the Argentine government launched a new banknote on Tuesday: the 10,000 peso, "which it hopes will ease issues including people carrying unwieldy wads of cash, the demand for huge numbers of bills and banks running out of vault space," according to global news service Reuters. A few questions... Will inflation keep falling in Argentina? After all, it's still on pace for triple-digit annual gains... I can't tell you. Maybe the pace will stay high or rebound even higher, and Milei won't stay popular for long. But at the very least, the "shock" shows what policy that actually values your own currency can do. Second, is this a blueprint to follow for the U.S. – or other "advanced" economies that have dealt with 40-year-high inflation and have spent like there's no tomorrow? Well, yes, but don't hold your breath. The U.S. could take a bite of its nearly $35 trillion in debt by inflating it away... Some have argued that's exactly why the Fed does not mind higher inflation. But the other end of that equation, to make it work, requires taking a chainsaw to government spending. We don't see Congress agreeing to that, and nobody is running gas-powered tools on the campaign trail for the White House. Instead, we've seen annual deficits grow to trillions-plus. That includes $1.7 trillion this year, a trend that accelerated in the great financial crisis... and then again during the pandemic... Again, the roads lead to more, higher inflation. 'The only free market leader in the world right now'... As we also wrote in January about Milei's speech, "Was anyone in Davos really listening?"... Maybe not, but somewhere, Stanley Druckenmiller was... In an interview Tuesday on CNBC, the famed investor eviscerated all kind of financial folly. Druckenmiller also revealed that after he watched Milei's speech from Davos several months ago, he started seeking out ways to invest in Argentina. Specifically, Druckenmiller said he decided to buy the five most liquid American Depositary Receipts ("ADRs") for Argentinian companies. ADRs represent foreign stocks that trade in the U.S. Druckenmiller said... I followed the old [George] Soros rule of "invest, and then investigate." I bought all of them, we did some work on them, I increased my positions... The only free market leader in the world right now, bizarrely, is in Argentina of all places. That may be true, but we don't want to make it sound like investing in Argentina doesn't come with risks... It does. Back in January, our Stansberry's Investment Advisory team looked at the developments in Argentina and recommended an alternative investment in a neighboring country instead. That's in part because... Milei's prescription is exactly what Argentina needs. His drastic market reforms just might save the country... eventually. But investors should be aware of the risks. Sure, the potential payoff is incredible. But an investment in Argentina could go wrong in many ways. Milei faces monumental challenges in bringing his vision to reality. The government cuts and austerity will be painful for the Argentine people... with scores of government workers left jobless and citizens suddenly receiving fewer government benefits... One of Milei's campaign promises was to "dollarize" by replacing the Argentine peso with the U.S. dollar. Ironically, Argentina doesn't have enough dollars to dollarize. The country will already struggle to come up with even enough dollars to pay off its dollar-denominated debt coming due. Basically, investing in Argentina is a gamble. Yet as our Dan Ferris wrote [in his January edition of The Ferris Report]( investors who got ahead of Argentina's trend toward economic freedom could have made an excellent return. On Monday, November 20 – the day after Milei won the Argentine general election – the Global X MSCI Argentina Fund (ARGT) jumped 12%. This fund is currently up more than 300% since its March 2020 lows, but as Dan said, he won't recommend the fund in The Ferris Report because it's too small and illiquid. And its largest component is more than 20% of the fund, meaning that one stock will dominate the fund's returns... You could create a better portfolio by buying equal portions of the fund's components on your own. Still, the gains in the fund are impressive and show that investors are excited about Milei's shake-up. And the stock market performance is symbolic of what a financial "chainsaw" can do in the hands of someone motivated – and with the power – to use it. Tim-berrrrr. Or as Milei said at the end of his Davos speech, "Long live freedom, damn it!" --------------------------------------------------------------- Recommended Links: [Tonight at Midnight, Marc Chaikin Is Closing the Doors]( Until then, claim one free year of his Power Gauge system... and FREE access to his new Market Insights (a $999 value). See where cash is going – BEFORE it gets there – for the chance to double your money, over and over again. By midnight Eastern time, [click here for the full details from a Wall Street veteran](. --------------------------------------------------------------- [Porter: 'A New Form of Money Is Making Some Rich – Should You Get It?']( Porter Stansberry is one of America's most controversial CEOs, and he says a new form of money is making some Americans (including Elon Musk and Jeff Bezos) rich. This has nothing to do with gold, bitcoin, or anything like that, but it's 100% legal. The problem? Porter says few Americans have a real understanding of how it works. [Learn more here](. --------------------------------------------------------------- New 52-week highs (as of 5/8/24): ABB (ABBNY), Agnico Eagle Mines (AEM), Commvault Systems (CVLT), Dimensional International Small Cap Value Fund (DISV), iShares MSCI Spain Fund (EWP), Comfort Systems USA (FIX), iShares U.S. Aerospace & Defense Fund (ITA), Kinross Gold (KGC), Markel (MKL), Motorola Solutions (MSI), Toast (TOST), Trane Technologies (TT), United States Lime & Minerals (USLM), Vertiv (VRT), Wheaton Precious Metals (WPM), Utilities Select Sector SPDR Fund (XLU), and Zebra Technologies (ZBRA). In today's mailbag, a few thoughts on jobs numbers in the U.S... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Hi, In the Digest there are many references to the reported unemployment numbers. In my humble opinion, these numbers should be reported excluding the huge increase in U.S. government jobs... that are not adding much value but [come] at a huge cost to all taxpayers." – Subscriber H.U. All the best, Corey McLaughlin Baltimore, Maryland May 9, 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 1,353.8% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,303.7% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 882.7% Extreme Value Ferris WRB W.R. Berkley 03/16/12 715.9% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 620.5% Retirement Millionaire Doc HSY Hershey 12/07/07 490.9% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 454.1% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 423.3% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 358.5% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 345.6% 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 1,528.8% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,223.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 803.9% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 411.1% 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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