In Pursuit of Normal

The Stansberry Conference is sold out... You can still watch on our livestream... See you in Boston... The next item in the 'bottom is (probably) in' checklist... The telling quirk in this indicator... In pursuit of normal... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The Stansberry Conference is sold out... You can still watch on our livestream... See you in Boston... The next item in the 'bottom is (probably) in' checklist... The telling quirk in this indicator... In pursuit of normal... --------------------------------------------------------------- Our annual Stansberry Conference is fast approaching... In less than three weeks – from October 24 to 26 – the 20th anniversary edition of our annual Stansberry Conference will kick off at the Encore Boston Harbor resort and hotel... and we couldn't be more excited... In addition to getting a chance to see familiar names like Doc Eifrig, Dan Ferris, and Eric Wade in person – plus our colleagues and subscribers from out of town – we also have a terrific lineup of guest presenters as usual. Over the next few weeks, I (Corey McLaughlin) am going to highlight a bit more of what you can expect from the event, where attendees can sit among like-minded people and hear market insight and actionable investment ideas that you won't hear anywhere else... I'm also writing about this today to report that in-person tickets are now sold out... But while that is the case, you can still catch all of the presentations from the conference on our livestream... and watch them on demand afterward for 60 days, too. [Get the details on how to access our livestream here](. Our lineup of guests this year includes several big names... The list begins with New York University professor of marketing Scott Galloway, one of the brightest commentators on the economy and the markets today. Plus, we'll hear from best-selling author and former Wall Street investment banker William Cohan... We're looking forward to hearing from Facebook "whistleblower" Frances Haugen, the charismatic hedge-fund manager and market commentator Hugh Hendry, and the always insightful Meb Faber of Cambria Investment Management... and many more. I'll be sharing updates from the Encore Boston the week of the conference in the Digest, including highlights from our editors and guests' presentations and some color from the conference rooms, hallways, and maybe the bars or restaurants... Personally, I am very excited... Even after a few years working at Stansberry Research, I still haven't been to our conference in person... The 2020 event was remote because of the pandemic. And this time last year, my wife and I had just welcomed another child to our family, so it was time to be home. But this year, papa's on the job and able to get away for a few days... Stay tuned here for more on what you can expect from our presenters at the conference... which also includes familiar names like Empire Financial Research founder Whitney Tilson, our editor-at-large Daniela Cambone, and Chaikin Analytics founder Marc Chaikin. As a final note for today, I'm pleased to tell you we've arranged for all Digest readers to hear directly from Scott Galloway, who writes [a weekly No Mercy/No Malice newsletter](. We'll share a special guest essay from him here in the next few weeks... Be sure not to miss it. Moving on, it's time to cover the next item on my 'bottom is (probably) in' checklist... On Tuesday, [we covered "market breadth,"]( or the strength or weakness of the stock market. Today, it's weak, with only about 20% of the S&P 500 Index companies trading above their 200-day moving average, a simple technical measure of a long-term trend... Yesterday, we highlighted how [the U.S. dollar has been an "uncorrelated asset" to stocks]( this year... and why I think the strength of the dollar will have to peak for a market bottom to be truly afoot. It hasn't happened yet. The U.S. Dollar Index ("DXY") was up more than 1% for the second straight day today and is close to a 20-year high. Today, we're going to give an update on another indicator we've mentioned several times this year... I'm talking about the yield curve. This "curve" represents the various yields that Treasury bills, notes, and bonds offer over various time frames. Typically, in normal economic times, longer-term yields are higher than shorter-term yields... and the curve slopes higher over longer durations... As we've said many times before, this makes sense. When you lock your money up for a longer period of time, you want a higher interest rate in compensation. But when enough investors in the $22 trillion Treasury market – which includes the Federal Reserve itself – are scared or nervous about trouble ahead, the curve can "invert." This happens when shorter-term yields go higher than longer-term yields... Just this morning, our friends at our corporate affiliate Chaikin Analytics illustrated this change. In [today's free PowerFeed newsletter]( Chaikin Chief Market Strategist Pete Carmasino shared... Here's what the yield curve across the spectrum of U.S. Treasurys looked like back [in January]. It's considered "normal" – meaning the longer-maturity end of the curve offers higher yields... And then Pete showed what the same data looks like now... Today, the rates on these short-term U.S. Treasurys are higher than longer-term bonds. That's where the term "inverted" yield curve comes from. Take a look... As you can see, the six-month U.S. Treasury bill's yield now exceeds the 30-year U.S. Treasury bond's yield. That's nuts! Agreed... Now, since we're talking stock market bottoms here, we should note that Treasury yields are more of an economic indicator than a direct stock market indicator. But it's useful to look at them when thinking about the forward-looking stock market, too. Yields offer a look at general market expectations for growth (and inflation) over various timelines... And as I'll explain, when the yield curve "reverts," it could be a good sign a bottom for stocks is near, which hasn't always been in the case. Right off the top, though, I'll tell you today's yield curve is still flashing warning signs for the economy for the months and year ahead... The yield curve suggests an 'official' recession is getting closer... Regular readers have seen the following chart before... This is the 10-year/2-year Treasury yield spread, or the 10-year yield minus the 2-year yield... The difference is usually a positive number. But when this number goes negative, it's part of an inverted yield curve like the one we shared above from Pete... You'll notice I said it's "part of" an inverted yield curve. That's because people look at different comparisons of yields, like the 10-year/3-month, or 30-year/5-year. But the 10-year/2-year spread is widely followed and works for our purposes. Essentially, looking at this spread is a good way to gauge what direction short- and long-term yields are going... and what their relation is to each other. And here's the really powerful, relevant part of this exercise... As you can see above with the shaded gray areas indicating recessions, every time the 10-year/2-year spread has gone negative since the 1970s, a recession has followed afterward... In fact, a negative reading in this spread has preceded each of the last 11 recessions since 1955, while it flashed only one false positive... And today, the "10-2" spread hasn't been this low since the start of the dot-com bust and has been negative for three straight months... We could get into various thoughts about why this is, but for now just know this behavior has historically been an early warning sign of trouble ahead. And it has been so far this time – with one notable difference from the past. This is where the "bottom fishing" part of the discussion comes into play. In short, stocks usually peak after the yield curve 'inverts'... U.S. stocks have risen 21% on average for about 18 months after yield-curve inversions. This means, usually, stocks have peaked after the yield curve gets funky. That's likely because the bond market is typically quicker to reflect a view of trouble ahead than the stock market. In other words, we normally wouldn't spill this much ink on the yield curve... But this year, the trend of yields getting funky long before stocks peak has been broken... The major U.S. indexes have already fallen by double digits, and so have bonds. That means yields have risen... and shorter-term yields have been rising higher than longer-term yields. Like I wrote in the [July 26 Digest]( after the 10-year/2-year spread went negative for the second time in 2022 (and has stayed that way since) after briefly inverting in late March... The longer I keep watching what's happening, the more I think today could be like the one other time in the past five decades when stocks peaked before the yield curve inverted. In 1980, stocks peaked just two months after the yield curve inverted. And in 1973, the market actually peaked two months prior to the first inversion. More from July... That just so happened to be the last time inflation was as high and rising significantly as it is now... This year, stocks peaked in January. [The yield curve inverted for the first time in March]( the same two-month gap as that outlier in 1973. But whether that's simply a coincidence or a real signal doesn't necessarily matter. The point is, Treasury yields have been inverted for the entire month of July, so this is not a one-off, one-day signal. That's still the point today... Yield spreads have largely been inverted for months. A recent report showed that 65% of the various combinations of Treasury spreads were upside-down, a large enough number to suggest a recession is coming... What to watch this time... If stocks peaked before the yield curve inverted this year, it's reasonable to think that stocks will bottom before or around the same time the yield curve begins to revert to normal... This would mean longer-term yields would be headed higher than shorter-term yields again, indicating that both the short-term inflation and growth outlook have improved from what they have been lately. That sounds like it would be a remedy for a lot of fears about stock prices today, doesn't it? So, with all this in mind, let's zoom in for a closer look at what the 10-year/2-year spread – the benchmark we'll be using – has been doing lately. It is still negative, but it has been bouncing sideways around -0.4% for the past month... To me, it looks like this spread might be trying to begin to revert... It hasn't made a significant new low since August, but it also hasn't yet started a new trend either. While recent bond market behavior is slightly encouraging, more evidence is needed before we could say these yields are "returning to normal." In other words, this indicator doesn't suggest a stock market bottom is in yet. Maybe it's happening right now, but the thing about bottoms is we can't be completely sure we're living in one as it's happening. But we can manage risk according to what we see. If yields start getting back to normal, I believe stocks could head higher in general too... I will continue to watch how the yield curve behaves... and you can too. All the data is public (via Treasury yields). The St. Louis Federal Reserve keeps some good charts updated too, [including this one of the 10-year/2-year Treasury yield spread](. In particular, we'll want to see if shorter-term yields creep closer to longer-term yields. This will be a sign that, on balance, bond investors – which notably includes the Fed as a major buyer of Treasurys – are more confident about the economy's future, including the path of inflation and growth. For now, though, I'm not checking the box for Item No. 3 on my "bottom is (probably) in" checklist yet. The same goes for the first two indicators we explored this week. What will the final two show? I'll share those – and potentially a bonus sixth indicator – next week. Until then, enjoy Dan's latest Friday missive tomorrow... --------------------------------------------------------------- Recommended Links: ['Here's the EXACT Moment to Sell Your Stocks']( If you don't have an exit plan for stocks, think about what a 50% hit to your portfolio would mean. Would you have to delay retirement by 10 years? Downsize your home? Tell your grandkids you can't pay for their college? A top expert says that could be the case for most people who don't take [this ONE simple step today](. --------------------------------------------------------------- [Have You Claimed Your 2022 Stansberry Conference Ticket?]( You can still claim your spot to view the entire annual conference live from the comfort and convenience of your own home. You'll get access to all the speakers, recommendations, and investing ideas... for 60% OFF the price of an in-person ticket. But time is quickly running out – [click here for conference livestream details](. --------------------------------------------------------------- New 52-week highs (as of 10/5/22): CTS (CTS), Revance Therapeutics (RVNC), Texas Pacific Land (TPL), and Xometry (XMTR). In today's mailbag, more feedback on our "market breadth" discussion from Tuesday's Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. We can't provide individual investment advice, but we'll try to answer any questions as best we can. "Your extended description of various facets of market breadth was well done and very useful. I've often wondered whether a five or ten day moving average-type adjustment would be useful in smoothing out the spikey data that is recently occurring. "Would you think that this would be useful or might it wash out the usefulness as the results might be mush. Thoughts?" – Stansberry Alliance member Robert H. Corey McLaughlin comment: Thanks for the note, Robert. Without getting into individual advice, it depends on your timeline and goals for the portfolio positions you have in mind. But using multiple moving averages can be helpful to "smooth out" volatility... For example, I've heard of certain traders who use a 40-day moving average and a 50-day moving average to do exactly what you are talking about with what they intend to be longer-term positions... Doing this keeps them from trading in and out of positions too frequently and lets them see whether volatility spikes will settle. If a certain price breaks both averages, then you have a turn in trend. If not, it can be a signal to stay patient until the trend does change, if it changes at all. All the best, Corey McLaughlin Baltimore, Maryland October 6, 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 11/11/10 891.8% Retirement Millionaire Doc ADP Automatic Data 10/09/08 844.4% Extreme Value Ferris MSFT Microsoft 02/10/12 765.6% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 535.9% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 491.8% Stansberry Innovations Report Wade AFG American Financial 10/12/12 412.2% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 395.3% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 380.6% Stansberry's Investment Advisory Porter TPL Texas Pacific Land Trust 11/05/20 309.1% Stansberry's Investment Advisory Porter NTLA Intellia Therapeutics 12/19/19 299.0% 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 5 Stansberry's Investment Advisory Porter 2 Retirement Millionaire Doc 2 Stansberry Innovations Report Engel/Wade 1 Extreme Value Ferris --------------------------------------------------------------- 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 1,167.8% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,160.7% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,092.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 850.6% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 436.7% 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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