This Time, Again, Is Not Different

The impact of higher rates is showing up... Reversing trends of the last 15 years... This time is not different... A recession indicator is flashing... Is it all 'priced in' to stocks?... Yes and no... 'Tired of waiting for rates to drop?'... This was a pitch from a mortgage lender that I (Corey McLaughlin) saw […] [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The impact of higher rates is showing up... Reversing trends of the last 15 years... This time is not different... A recession indicator is flashing... Is it all 'priced in' to stocks?... Yes and no... --------------------------------------------------------------- 'Tired of waiting for rates to drop?'... This was a pitch from a mortgage lender that I (Corey McLaughlin) saw today. The marketing e-mail was trying to encourage folks to do one of two things... If you're looking to buy a home, you should take on a new loan today, because you could always refinance should interest rates go lower in the future... and this lender was offering cash back to do so if or when that time comes. Or if you're already paying down a mortgage, you should take out a certain amount of home equity by refinancing at a higher rate today, since that would still be cheaper than taking on a personal loan at today's rates. Let that pitch sink in... Lenders are typically willing in one way or another to juice you into taking on debts, but I haven't seen an offer quite like this one in a while... It acknowledges the reality that high interest rates have real effects on people's buying decisions. It just then urges Americans to disregard these effects and borrow money anyway. If someone wants to take this deal, so be it. There could be reasons to accept either offer from this particular lender based on a person's financial position. But from my view of analyzing the economy and markets, I'm filing away this anecdote with a growing list of signals that the U.S. economy is possibly beginning a notable slowdown... If enough people were mindlessly taking on new loans and accepting the going interest rate as the cost of doing business, this lender wouldn't need to make such a contorted appeal... Today's rates are becoming more and more prohibitive, especially as the so-called "resilient" U.S. consumer's savings have been eaten away. The highest interest rates since 2007... That's the historical marker you'll most commonly see today, and it grabs one's attention for good reason. That was before the financial crisis... before "quantitative easing" entered the financial lexicon. We learned that term when the "Too Big to Fail" banks failed in the financial crisis – and the folks in charge of the banking system at the Federal Reserve responded by keeping interest rates near zero for 15 years... Then when the pandemic struck, they did what they had gotten used to... They fired up the money printers to record levels at the start of the pandemic. Coupled with congressionally approved spending, this fueled today's inflation... and ultimately led the Fed to raise its federal-funds rate past 5%. This bank-lending rate isn't the only thing to hit its highest level since 2007. So did short-term Treasury rates, like a 1-year or 2-year note yielding 5.5% and 5.1%, respectively... Longer-term rates are at 15-year highs, too, like the 10-year Treasury that yields around 4.7%... You can also see on the chart that Treasury yields now exceed their levels during most of the stretch from the middle of 2002 to the first quarter of 2006. Said another way, the "price of money" has reversed significantly already from its super-cheap days of the last decade-plus. The open question now is how much further this reversal can continue... In other words, how much higher will rates go? Interest rates are arguably the biggest macroeconomic trend there is... and they influence the values of assets like stocks and real estate. Case in point: Mortgage demand is cratering, so we see e-mails like the one we shared today. Last week, mortgage applications were down 27% versus the same week a year ago. The better news... Now, what this means for stocks and other risk assets is another matter... The economy and markets tend to behave on different timelines... Remember, the benchmark S&P 500 Index sold off by 20% in 2022, with many individual stocks down much more. And bonds, which trade inversely to yields, had their worst year since the Civil War. In early 2022, as I recall Ten Stock Trader editor Greg Diamond telling me, the market was anticipating the effects of the Fed launching into a "higher for longer" era... essentially reversing post-financial crisis and pandemic era trends of extremely cheap lending. The higher rate hikes went, the more stocks sold off. Move ahead to today... If you're interested in whether the markets have already "priced in" whatever is coming next, I'm here to say that the answer is an unsatisfying "yes and no." Increasingly, it looks like the Fed's current monetary plans and expectations for some kind of slowdown into 2024 are baked into the market. In other words, future economic pain won't necessarily hurt stocks further because they've already sold off in anticipation. If they're right, stocks are already priced correctly. Bond traders expect the central bank to raise rates no more than one more time through the end of this year... then cut them slightly next year. This is because the economy will presumably need juice by then thanks to the effects of today's higher rates. However, should any number of variables behave differently than expected today, the Fed's plans could change. It could raise lending rates higher than expected if the economy rebounds. Or unemployment could spike to a level few folks are anticipating and the economy could bust in the year ahead more than the market perceives right now (which would likely put an additional dent in prices for assets like stocks). In any case, here's what I do know: Over the past few weeks, the bond market has increasingly suggested the probability of a recession over the next six to 12 months that will cause the Fed to cut rates. This time is not different... Let's talk about the inverted yield curve again... Regular readers know this is when shorter-term yields like the 2-year Treasury rate are generally higher than longer-term yields like the 10-year. This behavior has preceded each of the last eight recessions in the past five decades by anywhere from six to 24 months. There's a lot we could explain here about what this indicator is actually reflecting. But in general, as our friend Joel Litman at our corporate affiliate Altimetry said [during his must-watch presentation]( last week, it means banks are less willing to lend... Very simply: It means banks don't make money lending in these conditions. So they stop. This is obviously not suggestive of economic growth based on debt, at least. Now, here's another important feature to note... The last time we saw a deep yield-curve inversion like we've had for the past year or so was during similarly high inflation in the 1970s and '80s. In these circumstances, the yield curve starting to "revert" – with shorter-term rates that more closely track monetary policy remaining the same while longer-term rates rise – has been a signal of a recession coming not long after. You can see this in the chart below, originally published by our Stansberry NewsWire editor Kevin Sanford... We're seeing this 'reversion' happen right now... We'll use the 10-year/2-year Treasury spread as our example, [as we have in the past](. Since July, longer-term yields have been rising more as short-term ones have remained flatter. This trend has accelerated over the past few weeks. You may also notice the same thing happened back in March during the bank crisis, before easing as stocks rallied into the early summer... Additionally, the really short end of the yield curve has already normalized. Already, 1-year yields are higher than 6-month yields, which are higher than 3-month, and 1-month yields. The trend stops with 2-year notes, which offer about half a percentage point lower yield than a 1-year. As longer-term yields have gone higher, longer-term bond prices have headed lower lately. The major U.S. stock indexes are down over the past two months, too. The benchmark S&P 500 is off 6% since its July high. So, stocks and bonds have both been down. Add it all up and to me, it looks like more and more investors are bracing for an economic slowdown that will hit a low sometime in the next year. Has everyone? It's hard to say. There could be some more downside ahead... In any case, there's still time to prepare for what may lie ahead. One way is to [hear out Joel's recommendation]( for what he described last week as the "best strategy for the next several years." And we'll be back tomorrow with a few more suggestions from our editors. BRICS Nations Are a Clown Show Joel also joined our editor-at-large Daniela Cambone for a related discussion on the state of global monetary policy. "I think they absolutely want [to take down the dollar]," Joel said of the so-called BRICS nations... but he questioned whether they can work together enough to do it. [Click here]( to listen to this episode of The Daniela Cambone Show right now. For more free video content, [subscribe to our Stansberry Research YouTube channel](... and don't forget to follow us on [Facebook]( [Instagram]( [LinkedIn]( and [X, the platform formerly known as Twitter](. --------------------------------------------------------------- Recommended Links: [This Signal Happened in 2008 – Now It's Happening Again]( If "credit" makes you think of a card in your wallet, your money is at risk. It could actually be the key to a looming national disaster and the most reliable potential gains of the next three to five years... that is, for the few who understand what's REALLY going on. Forensic accountant Joel Litman – who called both the 2008 and 2020 financial crashes – is stepping forward to explain everything, including his biggest warning since 2007 and a tool he has waited 20 years to share with the world. [Full details here](. --------------------------------------------------------------- [The Top Five AI Stocks to Buy in 2023]( Investors are getting very rich in AI stocks right now. And according to 50-year Wall Street veteran Marc Chaikin, there are FIVE AI companies Wall Street is buying hand over fist that need to be on your radar immediately. [Click here for the names and tickers](. --------------------------------------------------------------- New 52-week highs (as of 9/29/23): Structure Therapeutics (GPCR) and Ryder System (R). In today's mailbag, feedback on [Dan Ferris' latest Friday essay](... and yet more of your reports and thoughts about theft in the U.S. and Canada... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Dan, Thanks for relentlessly retesting the reality of Mr. Market versus the fads, narratives, and hype he's been thriving on with 20 years of free money. Your sensible counsel is paramount to my permanent Stansberry & Extreme Value subscription of 7 years. I've dodged many down days and ridden many uptrends due to your wisdom. "Mr. Market's main mantra, even of late, has been 'Buy Tech stocks'. But what if the price is 90x sales; even then? Great article. "Here's my question for consideration, perhaps even for a deeper-dive article: What if the FDIC Friday [Silicon Valley Bank] decision had been left to stand without the following Sunday Billionaire Crybaby Bailout by Yellen, Powell & Co?... Oprah, Harry, Meghan & Roku wouldn't be happy, but I bet my bottom billion there'd be no 90x sales tender. "Years of thanks, Dan." – Subscriber H.D. "I live in B.C., Canada. It is rare to watch the evening news from Vancouver without seeing a story about one or more businesses being hit by organized thieves. Apartment and condo complexes are another popular target. Many of these thefts are caught on security cameras, including clear views of vehicles being used to smash through entrance doors and plate-glass windows. It is extremely rare to see a follow-up story about thieves being arrested!" – Subscriber Bill M. "I am a second-generation small business owner – hardware and housewares store – we have been in business since 1982. In the last 5 to 10 years our shoplifting has increased drastically. We are hit every single day and are on track to lose over $400,000 this year – about the same dollar amount the last 2 years. "We have very little organized shoplifting and no smash and grabs – mainly people who think they can take whatever they want because the punishment is so minor – slap on wrist. But at least our police respond to shoplifting calls and cite the shoplifter. People need to be held accountable for their actions and if the laws of our society say stealing is not going to be punished then it will become even more widespread and commonplace. Maybe shoplifters should have to work off the amount of what they stole at the pay rate of incarcerated people and pay back the victim (store). "Personally, I think I should be allowed to go to their house and steal something from them – their cat, their dog, their refrigerator – maybe then they would understand that stealing what other people have worked so hard for is WRONG but probably not." – Subscriber Suzanne S. "I just retired however I worked at a grocery store. Back in the early 80s if you were caught shoplifting you were taken out back and beaten up, that's how we dealt with it. Sometimes you were held until the police showed up. Somehow over the years employees were not allowed to even confront a shoplifter. At the end (as I retired) you would be terminated for even confronting a shoplifter. In return, people come in, fill up a shopping cart, and just walk out the door. Store security is there however their job is only to watch the employees of the store and try to fire them. They are not allowed to confront shoplifters either. It creates too much liability for the company. I know it sounds like I'm just making s*** up, but this is what is actually happening." – Subscriber Mark N. "I live in rural Utah. Have motion detector lights, game cameras, dogs, but we still don't lock our doors at night or when we leave home. If some tried this BS of theft, I would beat them to a pulp or shoot their ass. If I was not home my neighbor would do it for me. No joke, no bravado, just fact..." – Subscriber W.J. All the best, Corey McLaughlin Baltimore, Maryland October 2, 2023 --------------------------------------------------------------- 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 1,173.3% Retirement Millionaire Doc MSFT Microsoft 02/10/12 990.8% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 865.8% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 604.3% Stansberry Innovations Report Wade WRB W.R. Berkley 03/16/12 567.2% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 521.1% Retirement Millionaire Doc HSY Hershey 12/07/07 484.9% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 388.4% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 326.1% Stansberry Innovations Report Engel ALS-T Altius Minerals 02/16/09 322.3% Extreme Value Ferris 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 4 Stansberry's Investment Advisory Porter 2 Extreme Value Ferris 2 Retirement Millionaire Doc 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 wstETH Wrapped Staked Ethereum 12/07/18 1,456.3% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,044.5% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,022.9% Crypto Capital Wade MATIC/USD Polygon 02/25/21 760.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 616.4% 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 Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc 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 ^ 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}. 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