Wall Street Is Starting to Expect More 'Pain'

The perverse world of finance... A question we never want to answer, but will again... Wall Street is starting to expect more 'pain'... Almost two jobs for every unemployed person... Where are the 'bull market geniuses'?... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The perverse world of finance... A question we never want to answer, but will again... Wall Street is starting to expect more 'pain'... Almost two jobs for every unemployed person... Where are the 'bull market geniuses'?... --------------------------------------------------------------- In the often-perverse world of finance... The "good" news can often be "bad"... while the "bad" can be taken as "good" just as frequently. Making heads and tails of the whys can be even more confusing... I (Corey McLaughlin) realize this is a melancholy start to a Digest, but today marked a shining example of what I'm talking about... and, frankly, we wish it hadn't... (But remember, wishing and hoping is not a good strategy, so away we go...) The latest U.S. jobs report came out this morning and it smashed Wall Street's expectations, showing 1 million more job openings than anticipated. If we were to take this fact at face value, a person on the street would probably think of it as a good sign... Before this Job Openings and Labor Turnover Survey for July, the number of job openings in America had dropped for three straight months... More job openings mean more people can have jobs, of course. And the fact that today's Bureau of Labor Statistics data showed 11.2 million openings indicated businesses still want to hire workers... Again, at face value, tens of millions of job openings indicate demand for whatever those businesses are selling is strong and their balance sheets are presumably healthy enough to add payroll and other expenses... In other words, companies want to grow right now. But then we're hit in the face with the facts of the 'real world'... Reality is more complicated than logic... As we'll explain today, counterintuitively, more job openings now likely means more pain for the U.S. economy later... and Wall Street is only just starting to accept this fact, as recent market action shows. You see, in the economy and markets, our focus here, central banks like the Federal Reserve wield a heavy dose of financial power. And they manipulate things at every twist and turn as they see fit... Higher interest rates, lower rates... Buying bonds and mortgages, not buying any... Is inflation a thing? Or is it not? Let's hit a few buttons on the computer and create dollars from nothing... Oh, and then loan them to ourselves at the rate of our choosing. It's too much, frankly. And this economic manipulation is a fickle game that causes a lot of knock-on consequences over the long run... like the roughly 122% debt-to-GDP ratio of the U.S. right now... or the sky-high inflation the Fed helped create in the first place... We may not like it, but the point is, every piece of data that central bankers might look at is scrutinized by Wall Street, too. If it's surprising or notable enough, like today's jobs report, it's then followed by the question we need to consider once again, even though we don't want to: "What will the Fed do?" The answer today was 'Bring more pain'... Following the release of the jobs report this morning, the major U.S. indexes went from slightly positive or flat at today's open to closing down more than 1%. But most notably, it was an "everything is down" day like we saw a lot in the first half of the year... Each of the 11 major S&P 500 sectors was down, with energy off the most at 3.5%. Oil prices were down roughly 5%. The only thing up was volatility, as measured by the CBOE Volatility Index ("VIX"). The measure popped intraday to 27, which we consider "high." After a massive 20% rally from mid-June, the benchmark S&P 500 is now down roughly 7% over the past two weeks and dipped back below its 50-day moving average – a good technical measure of a short-term trend – for the first time since July. Just two weeks ago, the S&P 500 had rallied up close to its longer-term 200-day moving average. In other words, this has been a sharp reversal lower. The tech-heavy Nasdaq Composite Index is faring worse, off 10% in the same span... Another new reality is settling in... [In April]( when the Fed was signaling it would be more aggressive with its policies – interest-rate hikes and balance-sheet trimming – than most people wanted to believe, we wrote that the market was just starting to accept the conditions... Indirectly and left unsaid, these moves will likely slow economic growth. This is why, [as we noted last Friday]( folks are concerned about a recession within the next year or two... A new reality is starting to set in... Four months later, it's happening again... On Friday, Fed Chair Jerome Powell had just finished telling the world to expect "some pain" ahead as the Fed tries to fight inflation... Of course, everyone's definition of some pain is different. The answers we give to a "pain scale" of 1 to 10 are subjective... But here's what we know... [A stronger-than-expected jobs market]( tells the string-pullers of the Fed that there is room to keep tightening monetary policy. In practical terms, that means making borrowing costs more expensive and destroying job openings... In its view from on high in Fed land, today's data gives it no reason not to take a bite out of businesses' growth prospects... It will do what it can to slow demand for goods and services, generally speaking, to combat higher prices. And not only that, as Stansberry Research senior analyst Matt McCall shared today in his Daily Insight note, a "tight" labor market – or one with a lot of job openings – is potentially inflationary itself because workers can seek higher wages and salaries given the increased demand. (This brings up another economic perversion... The Fed doesn't want wages to grow too much – they were growing at a 5% annual clip as of July – even if they're not keeping up with inflation because higher costs to pay workers will decrease margins and ultimately pass through to consumers with higher prices, leading to more inflation.) If a recession happens because of tougher monetary policy, so be it... That's what Fed officials have been saying, in so many words... Powell said in June that job losses would be a "successful outcome" rather than high inflation sticking around. I know what he meant, but as a person with a job, this made it painfully obvious that these guys and gals live in their own insulated world. But here's the point... If we are to believe Powell (as Mr. Market is starting to), tens of millions of open jobs today mean much more room for the macroeconomic picture to get significantly tougher... As Stansberry NewsWire editor C. Scott Garliss shared in a private note today, when you compare 11.2 million job openings with the fact that there are 5.9 million "unemployed" –people who say they're actively looking for work – Americans in the market... There are 1.9 available jobs compared with every unemployed person... Prior to the COVID-19 pandemic, the ratio averaged around 1 job opening per unemployed person... Scott provided more analysis on the jobs data in a NewsWire piece today. You can read it [here](. Powell has also said he wants this ratio to move lower. In other words, in the Fed's view, it can do whatever is necessary to destroy as many as 6 million potential job openings before the unemployment rate starts to rise... no matter what "pain" it inflects elsewhere... This also makes you think, "What are the nearly 6 million unemployed people in America doing today?" Of course, not every job opening is likely a perfect fit for those searching for a job, but we're being told there are two open jobs for every person who wants one. But at the same time, as we reported earlier this month, [more folks are taking on part-time jobs](... and credit-card balances are soaring... That's a big disconnect... Are 6 million people really trying to get a job? Is the data simply misleading and not reflective of reality? My hunch to the latter is "probably," but it doesn't matter... The Fed's going to rely on this stuff anyway to make decisions... Here's the takeaway... If inflation falls enough in the months ahead – either because of the Fed (stalling the housing market, etc.) or because of the natural wills of the world, and that happens before the unemployment rate rises – it will be the ideal scenario for central banks... Whether it's the best for everyone else is up for debate... But that still means interest rates – in the U.S. and around the world – will likely keep rising in the meantime... until the inflation rate and the Fed's benchmark lending rate at least begin with the same digit... Ideally, interest rates would be higher than inflation. Like [we said yesterday]( the Fed's preferred inflation gauge (personal consumption expenditures, or "PCE") checked in at 6.3% for July (4.6% not counting food and energy). The Fed's benchmark rate range is between 2.25% and 2.50%. Even with the Fed's expected 75-basis-point (0.75%) hike next month, there are possibly 1% to 3% of rate hikes still to come, depending on the gauge. (It's unclear, since Powell has said "core" PCE matters most, but that the Fed will consider energy prices.) Today, this is precisely the situation that New York Fed President John Williams (if Jerome Powell is Tony Montana in Scarface, Williams is his right-hand man, Manny) described to the Wall Street Journal. Williams said of the current policy stance... This is not something we're going to do for a very short period and then change course... I do think with demand far exceeding supply, we do need to get real interest rates... above zero. We need to have somewhat restrictive policy to slow demand... We're still quite a ways from that. Officials in Europe are saying basically the same exact things. The European Central Bank is considering a 75-basis-point rate hike of its own next month, just like the Fed. This is the macro backdrop for everything else happening in the markets today. Overall, this is not the era of the "bull market genius," like in the second half of 2020, where every stock was going up while the Fed was throwing trillions into the financial system without thinking twice. Today, the story is different... I haven't heard much about Dave "Stocks Only Go Up" Portnoy's trading prowess lately, have you? No, the real winners today are quietly going about their business. It pays to be picky, do the research, and follow trusted guides like our team of editors and analysts. It doesn't mean there aren't shares of great companies that are worth owning today, like those with strong balance sheets that pay out generous dividends. You want to keep compounding your wealth, especially when prices are down. This doesn't mean going "all out" is necessarily the answer, either. Was June the "bottom" for 2022? As Stansberry Research senior analyst Brett Eversole shared [in today's DailyWealth]( there's one simple technical indicator that suggests it could have been... The latest bear market rally marked a 50% recovery from the S&P 500's previous highs in January. When this has happened in the past 10 bear markets over seven decades, it has signaled the "ultimate bottom," Brett said... In today's case, stocks regained more than half their overall losses on August 12. Take a look... The S&P 500 Index jumped 17% from June 16 to August 16. And that rally regained 57% of the overall bear market loss... That doesn't mean we'll see a one-way run-up from here, though. And even so-called "infallible" indicators can fail eventually. But a 10-for-10 track record over 70 years is darn good. Stocks have been falling since hitting this crucial level. And there's a good chance we'll see more downside ahead. But history suggests, at worst, stocks will approach the June low... without breaking it. We'll know more soon enough... At the very least, we expect more high volatility through the rest of the year. The mid-term elections are approaching... as is another earnings season, where the realities of business life will enter the discussion on Wall Street again... With this in mind... It's always wise to first protect your wealth so you can grow it in the future, too. Here are a few general ideas that may fit with your own goals or preferred portfolio allocations, which can be different for everyone... Today, you can grow your cash with incredibly low risk and without locking your money up for any significant length of time. A one-month Treasury bill is now paying a nearly 2.2% yield... the same number a 30-year bond was offering just six months ago. If you're undecided on a stock-buying opportunity, maybe you take the advice of the sage John Doody, editor of Gold Stock Analyst, and buy half of the position size you're considering. That way, you're half right no matter what happens. Or perhaps you consider the advice of our friend and Chaikin Analytics founder Marc Chaikin. He wants everyone to know there are certain sectors (and stocks) worth buying and others you don't want to touch today. He has made a career out of identifying the difference... [You can listen to Marc's newest message right here – for free](. And we'll keep watch on the market action here in the Digest while trying to parse out the "good" from the "bad." Bear market rallies are a heck of a thing, and so are their reversals. The '12th Sector of the S&P' On this special episode of Making Money With Matt McCall, Matt catches up with Shark Tank star Kevin O'Leary and WonderFi CEO Ben Samaroo to talk about how cryptocurrencies could become the "12th sector of the S&P." Watch for all the details... [Click here]( to watch this episode right now. And to catch all of Matt's shows, plus more videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: # [Wall Street Expert Issues NEW Urgent Warning]( A few months ago, Wall Street legend Marc Chaikin issued a dire warning for U.S. stocks. Almost like clockwork, we suffered the worst sell-off in half a century. Now, he says we're about to witness a new historic shift that could soon create and destroy fortunes, starting before the end of 2022. [Click here to get his urgent message](. --------------------------------------------------------------- # [The Most BULLETPROOF Investment on Earth]( Learn how you could compound your wealth by at least 20% per year for decades in a bulletproof investment – one that's TWICE as good as gold when it comes to beating inflation. Plus, there's the chance to see 1,000% upside in EACH of three specific U.S. stocks. [Click here to learn more](. --------------------------------------------------------------- New 52-week highs (as of 8/29/22): Texas Pacific Land (TPL). In today's mailbag, feedback on the Federal Reserve and inflation, which we talked about (again) [in yesterday's Digest](... and more of your thoughts on student-loan forgiveness... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Our Federal Reserve bank is (along with every other bank) a fractional reserve bank. It started in the 1700s and 1800s and it went like this. The rich goldsmiths in Europe often kept customer's gold due to their strong safes. The customer paid a small fee to keep their gold safe. "When the customer wanted to buy something without paying with gold, the goldsmith would write a note (paper) for the amount. That note became money. The bankers soon realized that the customers rarely wanted their gold. So the bankers, being the crooks they were, would lend out more paper (money) than the gold they had. If they had 10 dollars' worth of gold, they would lend out 100 dollars' worth of paper, gaining interest or usury on all 100 dollars! Would you rather have interest from 10 dollars or from 100 dollars? This is what a fractional reserve bank is. Of course if there was a run on the gold and let's say 100 customers wanted their gold, the goldsmith could not pay, as he only had 10 dollars in gold. "Our Federal Reserve is a shell Ponzi scheme. As Ron Paul said, 'End the Fed'! Go back to government money as the constitution calls for. A private (or pirate) bank like the Federal Reserve should not be in charge of our nation's money." – Paid-up subscriber Mark M. "The cause of inflation is always the same, an increase in the money supply." – Paid-up subscriber M.R. "I think there will be some blowback regarding this buying votes ploy [student-loan forgiveness]. "People who never went to college and are struggling to pay bills will ask themselves 'Where's my bail out, do students deserve better treatment than me?' "People who have been paying off their student loans or have paid off their loans will say to themselves, 'I'm being penalized for paying off my loans; people who put off paying their loans are being rewarded'... "People like me and I think most Stansberry readers will be polarized – this is an obvious attempt to buy votes..." – Paid-up subscriber Ed M. "Sure, it's convenient to have college debts eliminated by the government. But it doesn't teach our next generation about their financial responsibilities to obligate themselves and become contributing members to society. "What got us to this state are the unchecked, spiraling costs involved with our unbridled college tuition system and the usurious state of our student banking loans. Our capitalistic society may have beaten the communistic way of life, but has lost our way in sustaining our country's educational system. We are not properly preparing our next generation to compete and sustain our role as the undisputed high-tech superpower we once were. Our educational system can no longer operate effectively as a basic capitalistic construct... "Our capitalistic society must construct a financial system that provides a free education for all our young citizens. And those that demonstrate further capability are then encouraged to go on for advanced degrees. Such a system will revitalize the U.S. and reestablish us as the great society that continues to lead the world." – Paid-up subscriber Herman V. "Call me a liberal with a bleeding heart, but I have an alternate perspective about this. I'm all for paying back what you borrowed, but imagine being a Millennial (me) and going to college during or before the '07-'08 housing crisis... "Crony capitalism, skyrocketing costs for higher education, and stagnant wages make it nearly impossible to achieve the same success our older generations had without working twice as hard..." – Paid-up subscriber Daniel C. "In my view, not paying a government backed student loan is the same as not paying your income tax. Enough with the excuses. Stop loaning money to people to go to college and get degrees that will never earn enough to pay them back. "I'm not sure why any loans should be given to students attending private, for-profit colleges, especially those that have multi-billion dollar endowments." – Paid-up subscriber Tim M. "[Student-loan forgiveness is] just another gift from politicians to curry favor with the indebted. Higher education and healthcare are maybe the only sectors of the economy where you don't see any recessionary trends. Both are protected by government politicians. "I would just like to see a congressperson introduce a bill to force colleges and universities to guarantee the loan. Keep the great Digests coming everyone!" – Paid-up subscriber Jim L. All the best, Corey McLaughlin Baltimore, Maryland August 30, 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 11/11/10 951.3% Retirement Millionaire Doc ADP Automatic Data 10/09/08 873.2% Extreme Value Ferris MSFT Microsoft 02/10/12 817.7% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 552.5% Stansberry Innovations Report Wade HSY Hershey 12/07/07 542.8% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 416.4% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 409.7% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 368.4% Stansberry's Investment Advisory Porter FSMEX Fidelity Sel Med 09/03/08 297.1% Retirement Millionaire Doc NTLA Intellia Therapeutics 12/19/19 293.0% 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 3 Retirement Millionaire Doc 1 Extreme Value Ferris 4 Stansberry's Investment Advisory Porter 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 ETH/USD Ethereum 12/07/18 1,279.2% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,174.0% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,058.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 841.5% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 440.3% 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%. 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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