The First Rough Draft of History

The Federal Reserve (sort of) listens... The narratives of today... 'Full-on crash mode'... A spaceship worth of cash... The trouble with economic manipulation... The dollar is going parabolic... The first rough draft of history... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The Federal Reserve (sort of) listens... The narratives of today... 'Full-on crash mode'... A spaceship worth of cash... The trouble with economic manipulation... The dollar is going parabolic... The first rough draft of history... --------------------------------------------------------------- While stocks were plunging (again), the Fed was pretending to listen... On Friday afternoon, with the major U.S. indexes and markets around the world enduring another steep sell-off, the Federal Reserve Board of Governors gathered around a large conference table in Washington... It was the first time the seven-member board, the governing body of the U.S. banking system, was in a room together in nine years, Fed Chair Jerome Powell said in his opening remarks at this session. It was called "Fed Listens." Eight "everyday" Americans also sat around the table. Among them were a restaurant owner, a small-business logistics expert, a food-distribution executive, a middle manager from a major hotel chain, a representative from retirement organization AARP, and a community-college president... These folks shared their views on the economy... their experiences over the past two years and how their sectors have changed... and the challenges they're facing in their workplaces, from hiring to inflation. They said a lot, but we want to highlight one anecdote in particular: from Derrick Chubbs, the president and CEO of Second Harvest Food Bank of Central Florida. After thanking the Fed for the opportunity to speak, he gave it to them straight... During the pandemic we had a strong national response... but that enhanced support with unemployment assistance, stimulus checks, child-care assistance, homeowner assistance was wonderful, but now that we've combined it with inflation, that means that the problems are cropping up all over again. What's different this time is that the level of support we received during the pandemic is on the decline. He brought up a statistic he once heard that said most Americans only had a couple hundred dollars set aside for a rainy day... and how an estimated 53 million Americans don't know where their next meal is coming from... and how his organization is serving 250,000 meals per day versus 150,000 before the pandemic. With inflation running wild, he told stories about folks selling their food stamps to make rent... and others making $40,000 per year who can't afford to pay theirs, and how people with two jobs are coming to the organization looking for help getting food for their families. And he shared a variety of anonymous first-hand accounts from folks using the food bank's services, like this one... The script has flipped. First there was a shutdown and lack of income and funds. Now two years later, we're paying back everything, and it's hurting more than ever before... Here are the faces of Fed governors Christopher Waller, Lael Brainard, and Powell as Chubbs started to speak... They tried to interrupt, but Chubbs politely held his ground, saying he was sure he'd answer their questions during the rest of his presentation. (This was Fed listens, after all.) When he yielded the floor, Brainard expressed confusion... I'm still struggling a little bit. We've got this hot jobs market and wages have grown a lot and food security is really fragile and it sounds like no relief in sight. How do I reconcile those things? Chubbs didn't have an easy answer for the Fed... I'm not entirely sure. Those that we provide services to are struggling to recover... and we've seen a 40% increase in people who are seeking out our services for the first time. Perhaps the Fed officials were truly curious about the group's real-life experiences. But based on the questions they asked the other presenters, they were also fishing for answers that would confirm that their policies – of destroying demand for goods and services in the economy and choking growth to potentially bring down inflation – are sound. They asked: So you're able to pass through high prices to consumers? The answer was generally, yes. So you still can't find workers? Again, yes. We could see the thought bubbles turning on the other part of the table... "So. We. Must. Crush. Demand." As the two-hour session concluded, Powell said... This has been enormously informative. We get to spend a lot of time with data here at the Fed, but I need to hear narratives. I need to hear stories about what's really going on out there for it to sort of all make sense. You want narratives? I'll give you narratives... Inflation is at 40-year highs... War in Eastern Europe is holding a lot of people hostage in a variety of ways... The economy is slowing down... More people are losing their jobs, and for those who still work, paychecks aren't keeping up with higher prices... This picture hasn't changed much in the past six months. It's why parts of the market started selling off in 2021 and the broader U.S. stock markets topped in January. This was even before Russia invaded Ukraine, when the Fed signaled plans to start raising rates. We've said it all year long... Central banks around the world seem intent on creating recessions to defeat inflation. Today, that's still the case, even if there are signs that inflation has peaked already... and even if the U.S. economy is already weakening. But here's the thing... As we've seen over the past few weeks with the benchmark S&P 500 Index selling off roughly 10% since September 12, it seems that more folks with money in the markets are realizing this cause-and-effect scenario only now. Once again today, the major U.S. indexes were down. The S&P 500 was off another 1% and traded right near its June lows. Meantime, U.S. Treasury yields zoomed higher again, too. The 10-year note was up 21 basis points to 3.9%, its highest yield since 2010. The kind-of-good news? More and more people are preparing for the worst... Certain indicators suggest retail and institutional traders have rarely been more bearish. Whitney Tilson – our friend and founder of Empire Financial Research, one of our corporate affiliates – shared a few charts from SentimenTrader's Jason Goepfert [in his free daily e-mail today]( showing one bearish extreme in the market... Now, over the longer run, this sentiment is probably a bullish sign... Whitney also highlighted another indicator – the American Association of Individual Investors ("AAII") survey – which last week showed a rare spike in bearishness. More than 60% of respondents are bearish on the next six months. As Goepfert also points out, this number in the AAII survey is more than double the historical average and only the fifth time that more than 60% of respondents have been bearish in 35 years of the survey. After each of the previous four instances, one-year returns for the S&P 500 were 22.4%, 31.5%, 7.4%, and 56.9%... That precedent should land well for folks who have had enough of this bear market. But we haven't seen enough signals to suggest that we're near a turnaround to positive returns over any timeline just yet. The story, Mr. Powell, is turning from how high inflation will be to how deep a recession will be – and what the Fed and central banks will "break" while driving us there. Today, we'll share one concerning possibility... The monetary crime family... The cozy relationship between the Fed and Treasury, plus the willingness of congresspeople to do seemingly whatever seems best for them in the moment, feels like we're looking at a crime family that has the authority to create its own money. As the Florida food bank CEO suggested, the central bank and government created this mess – and now they're making things worse the best way they know how... Forget "helicopter money." The Fed and Congress unloaded an Independence Day-style alien spaceship worth of cash into the world... and was doing it until March despite inflation being at historic highs. And fiscal policy has only made things worse. All in all, two years after triggering massive inflation, central banks and other policymakers are doing all they can to lower it. That means making borrowing costs higher and strengthening the U.S. currency by shrinking money supply. Of course, this has consequences... These decisions might lower inflation, but they definitely hurt everyday people, making homes unaffordable, for one. Job losses could grow. And as we've chronicled in recent months, this policy also makes other major global currencies even weaker against the U.S. dollar. In the past few trading days, the value of the British pound has crashed to an all-time low of $1.04 this morning. A big part of that is the country is digesting sweeping tax-cut policies from new prime minister Liz Truss, and a return to "trickle-down economics," but a stronger dollar doesn't help either. In all, the market movement was concerning enough that the Bank of England head Andrew Bailey published a statement this morning saying the bank was monitoring markets "very closely," but he also reiterated plans to keep raising interest rates to fight inflation. The trouble with economic manipulation... Do we need any more evidence of the problems of so much financial power in the hands of a few? Whenever something "unexpected" happens – like inflation, political upheaval, or the like – things can go terribly wrong depending on the response. The offensively named "Inflation Reduction Act" is one example... More spending to reduce inflation? Um, OK. States are doing it, too... Today, 17 U.S. states are offering inflation-relief checks to offset the costs of inflation... You see, some of them are still sitting on cash from the spaceship worth of federal pandemic funding and apparently can't find any better use for it. One man's suggestion: Invest in something real... If you've been following along with us these past few years, this stance shouldn't be new. We've rehashed the problems of never-ending economic manipulation via fiat currency more than enough. In short, with money decisions in the hands of short-sighted politicians, "We the People" suffer the consequences. The only solution for inflation might be to actually have a currency pegged to something real. Remember, even in the "good times" of fiat currency, the inflation goal is 2% per year – not 0%. The "real" assets could be gold (or "digital gold" if you prefer)... or anything. Baseballs. Golf balls. Mothballs. Anything, please! Steve Forbes, founder of the magazine that bears his name, said as much at the Forbes Global CEO Conference in Singapore today. He said the "real cure" for inflation is to "stabilize currencies" and lamented the 1970s collapse of the Bretton Woods system, in which the U.S. dollar was fixed to gold and other currencies were fixed to the dollar. Forbes said... No central banker today – hardly any – talks about stable currencies. It's about depressing the economy to fight inflation... They do it by artificially raising interest rates. So they have fewer people employed... that is not the real cure. The real cure is to stabilize the currency. You don't have to make people poor to conquer inflation. Currencies are decidedly unstable today. Gosh, the dollar is going about as "parabolic" as it can, up another 1% today, according to the U.S. Dollar Index ("DXY"), which measures the dollar against the euro, pound, Swiss franc, Japanese yen, Canadian dollar, and Swedish krona. Desperate times call for... Today, European Central Bank head Christine Lagarde said the economic outlook for Europe is "darkening." She said that 2023 would be "certainly, a difficult year" and that the ECB is now projecting a nearly 1% decline in economic growth in the eurozone. That's a sour outlook when seen against projections for 1% growth before Russia recently cut off the major Nord Stream 1 natural gas pipeline to Germany. Now, as the inflation and energy crisis worsens, the ECB could be on the verge of bending conventional financial-stability rules, as senior quantitative analyst Karina Kovalcik of our corporate affiliate Chaikin Analytics reported today [in the free PowerFeed newsletter](. She wrote that "central-banking insiders" believe the ECB is about to tell German banks that they don't need to increase their "reserve amounts," meaning how much money they keep on hand. This is a troubling sign, Karina said... These rules are in place to protect your money. The government tells banks they need to always keep a specific amount of money in reserves. The banks can't lend out that money. The government decides how much money banks need in reserves every day. And when countries head toward uncertain times, the rule is that banks should start increasing their reserves. That's in case more people need to dip into their savings to make ends meet... Messing with banks' capital buffers could have long-lasting consequences. In the short term, it allows the banks to lend more easily. But a cold winter – literally and metaphorically – could present a serious challenge for the banks... After all, a lot of Germans might need to quickly access their money as energy costs surge. Karina wrote that this move signals a shift to desperation by the ECB, which is raising rates to fight inflation while starting toward a concerning winter... and it makes her wonder what other basic financial-integrity rules it's willing to break. Us too. Chalk this up as another warning sign flashing for the global economy. Any trouble with the German banking system, of course, is not going to be an isolated incident. As measured by gross domestic product, Germany is the world's fourth-largest economy. History is deciding... Earlier this year, reporter Michael Derby of the Wall Street Journal hit Powell with a good question at a press conference... He asked whether the Fed and Congress overdid pandemic-related economic stimulus and caused inflation with it. This was in January, right after the Fed signaled it would start raising interest rates and trim its balance sheet sometime in 2022. In the January 6 Digest, we called this the "[last call for easy money]( A few weeks later, with the writing on the wall, Derby asked Powell... Do you feel that monetary policy and fiscal policy maybe did too much to react to the [pandemic] crisis and that part of the inflation problem that we're having right now is because the government response, collectively, was more than what the economy ended up needing? Powell responded, kind of admitting as much without doing so directly... I think it's too soon to write that history, really. But what I would say is this... If you remember what it felt like at the beginning of the pandemic, literally the global economy shutting down in large part, including our own economy, and people going to their homes for weeks on end in masks, and there are no vaccines, and it could be a really long time to get them... There was a real risk of lasting damage... He then said that the trillions of stimulus from Congress and "income replacement" via the $2.2 trillion CARES Act was a "remarkable achievement," and he continued about fiscal policy and the Fed's monetary policy... What we did was a lot, and what we have now is the strongest recovery of any country... and a recovery that looks completely unlike other recoveries that we've had because we've put so much support behind the recovery. And we're managing the relatively high-class problems that come with that, which are high inflation and a labor shortage. Was it too much? Again, I'm going to leave that to the historians. In 25 years, we'll look back at this incident, which will be a two-, three-, four-, five-year period. And we'll have a much better basis to make a judgment about the actions that people took. But it was all founded, though, in a very strong reaction to a unique historical event. In media circles, folks like to call journalism the "first rough draft of history." And the first draft of history today says, yes, the Fed and Congress did overdo it. As Powell spoke that day, the central bank still had interest rates pegged near zero... and it was fueling a real estate bubble, among other asset-price binges. His "high-class problems" comment also rubbed us the wrong way, as we wrote immediately afterward [in the January 27 Digest](. By March, it was clear (at least to us) that the Fed was in a situation where it had to [sacrifice economic growth]( to even try to fight high inflation. It's all it could do with its "tools." Trouble was already ahead before Russia invaded Ukraine. That made things worse, but today we're seeing the other side. The Fed is still bringing the "pain" – no matter what it hears about folks struggling already and them being unequipped to handle it, or wondering where their next meal is coming from... And the Fed knows this. It has heard the stories and is plowing ahead anyway... Powell's "high-class problems" are becoming everyone's problems. Manage your money and your portfolio accordingly. The Financial Dam Is Ready to Break The Fed's efforts are futile since we're already in the early stages of a global crisis, says Bert Dohmen, founder and president of Dohmen Capital Research. "We have to get ready for the worst – we can't change what's happening, but we can protect ourselves," he tells our editor-at-large Daniela Cambone... [Click here]( to watch this interview right now. And to catch all the videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: ['SELL THIS POPULAR RUINED STOCK IMMEDIATELY']( Wall Street titan Marc Chaikin and world-renowned forensic accountant Joel Litman just delivered an urgent crisis warning... and shared their No. 1 step to take with your money right now to protect yourself. Plus, Joel revealed his No. 1 stock you should SELL immediately. It's a beloved American retail giant that he says is headed for disaster. [Click here for details before tomorrow's opening bell](. --------------------------------------------------------------- [Energy Crisis: Think You're Safe?]( A top analyst says NOBODY is safe from the crazy-high energy bills he's forecasting in the weeks and months ahead. It doesn't matter where you live or how much money you have... If you're not ready to deal with what's coming, you could get absolutely blindsided. [See his full warning here](. --------------------------------------------------------------- New 52-week highs (as of 9/23/22): the short positions in Capital One Financial (COF) and iShares U.S. Real Estate Fund (IYR). In today's mailbag, feedback for Dan Ferris on [his latest Friday essay](... thoughts on JPMorgan Chase CEO Jamie Dimon's [recent comments before Congress](... and a report about inflation in Europe... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Dan, Thanks for sharing your insight on the blue chips!!" – Paid-up subscriber Larry N. "Dan, Thanks for your no nonsense investing truths. We need more (trust God, but tie your horse) disciplined investing truths. As one of our poets of our time sang, 'A Hard Rain's Going To Fall'..." – Paid-up subscriber Jeremiah G. "Dimon, the CEO of JPMorgan Chase, couldn't have said it better. Spending $6 trillion is off the charts. One trillion is 1,000 BILLION. Spending is so ridiculous now no one in Congress even pays attention to how many zeros follow the first digit in the number. "We are now at a point where spending is in excess of 100 percent of the GDP. And sadly none of our fearless leaders have a clue as to where that path will lead for the population of the U.S. and obviously don't care. The dollar is now worth about 3 cents. Argentina now has 100% inflation. "Contrary to public opinion, that same thing could happen here. All we need to do is keep putting politicians in power who believe that the road to prosperity is creating massive debt." – Paid-up subscriber John M. "My brother-in-law is stationed in Belgium, and they are feeling the pinch with their electric bill. They receive an allowance for their utilities, but it doesn't cover all. Last year, they only had to make up a small difference, but they were hit with a $5,500 euro bill (and that's after their allowance paid) just for the last six months due to the surging cost for electricity!" – Paid-up subscriber Daniel C. All the best, Corey McLaughlin Baltimore, Maryland September 26, 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 11/11/10 850.0% Retirement Millionaire Doc ADP Automatic Data 10/09/08 815.7% Extreme Value Ferris MSFT Microsoft 02/10/12 729.0% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 533.1% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 484.9% Stansberry Innovations Report Wade AFG American Financial 10/12/12 396.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 374.8% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 354.6% Stansberry's Investment Advisory Porter FSMEX Fidelity Sel Med 09/03/08 279.2% Retirement Millionaire Doc NTLA Intellia Therapeutics 12/19/19 276.4% 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 ONE-USD Harmony 12/16/19 1,158.0% Crypto Capital Wade ETH/USD Ethereum 12/07/18 1,155.1% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,062.4% Crypto Capital Wade MATIC/USD Polygon 02/25/21 830.7% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 413.4% 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 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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