Another Routine Day of 'Monetary Insanity'

What the Fed did and Jerome Powell said today... The Treasury's plans to fund Uncle Sam... All eyes on bond yields... Will new trends stick?... Stocks today and what to watch next... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] What the Fed did and Jerome Powell said today... The Treasury's plans to fund Uncle Sam... All eyes on bond yields... Will new trends stick?... Stocks today and what to watch next... --------------------------------------------------------------- Today in Fed-land... The U.S. central bank kept its giant monetary policy finger on the "pause" button again and decided to keep its benchmark bank lending rate right where it has been since late July. That's a range of 5.25% to 5.5%. The decision was widely expected on Wall Street (and here in the Digest). So was the Federal Reserve saying it will keep trimming its balance sheet, but that it will leave the door open for further rate hikes if it deems it necessary. All in all, though, it marked another slowdown in the Fed's supposed "fight" against inflation. Chair Jerome Powell and his friends increasingly say they're weighing risks to the economy versus making moves to crush Uncle Sam's "official" inflation data numbers... As Powell put it in a post-meeting press conference today... The stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation, and the full effects of our tightening have yet to be felt. Yet he also acknowledged recent data, like a recent third-quarter GDP estimate near 5%, that suggests more rate hikes may be needed to slow the pace of inflation to the Fed's desired 2% annualized rate. So, those are the nuts and bolts of what the Fed did today, and we'll stop there for the moment. As we've been saying for a while, the likely macroeconomic consequence in the grand economic experiment of the past three years is "higher for longer" for both interest rates and inflation. Today, I (Corey McLaughlin) will explain another reason why... Another large part of the equation... Typically, the financial media obsesses over the Fed, and not the Treasury or Congress. But the latter institutions also play a large role in the economy and markets (and in inflation, government spending, and devaluing of the U.S. dollar over time). Earlier today, the Treasury got a few hours of fame as more folks appeared interested in the fiscal part of the U.S. economic equation... specifically how Uncle Sam plans to practically fund itself via a typically routine policy announcement from the Treasury. As global news service Reuters reported, it wasn't as bad as expected (but still bad)... The U.S. Treasury Department on Wednesday said it will slow the pace of increases in its longer-dated debt auctions in the November 2023 to January 2024 quarter and expects it will need one more additional quarter of increases after this to meet its financing needs. Treasury yields fell after the announcement on relief the increases were not as large as some had feared. It comes after the U.S. government on Monday cut its borrowing estimate for the October-December quarter to $776 billion, $76 billion less than its forecast in July. Oh, the relief – for now. The increased interest in bond issuance is mostly because bond yields have risen in the past few months. A 10-year Treasury yield near 5% for the first time since 2007, and 400 basis points higher than this time in 2020, will get people wondering why... To this point, the first question from the media at Powell's post-meeting press conference today was whether the recent rise in bond yields had anything to do with the Fed's policy decision. His short answer: Not yet, but it helps support "tight" policy... You may have your answers already... It's all part of the same "higher for longer" story. Or, as our colleague Dan Ferris recently put it, we're in [a new investing "epoch"]( where ultra-low interest rates of the past 15 years are not coming back. Turns out, dumping trillions of largely unnecessary stimulus dollars into the U.S. economy at essentially the same time (2020, 2021, and not letting up) has consequences and changes the environment for a while. Who would've thought? Well, our founder Porter Stansberry, for one. As he explained recently in [his latest free video presentation that debuted last week](... It's really extraordinary. The bailout that we saw of the mortgage banks and brokers back in '08 and '09, I thought that was the final peak of monetary insanity. But over the last 15 years, they added onto that. There's actually been about $25 trillion of new money and credit that have been created out of nothing. And the consequences of that level of inflation are going to be severe. Our Director of Research Matt Weinschenk picked up on this theme in [the latest issue of our Forever Portfolio publication](... The government has two levers to affect the economy... - Monetary policy controlled by the U.S. Federal Reserve, and - Fiscal policy in the form of spending by Congress. In the wake of the financial crisis, the expansion mostly came from monetary policy. To save the economy, the Fed drove interest rates down by buying bonds from the private sector. The fact that it didn't have enough cash on hand to buy all those bonds in the traditional sense didn't matter... As the country's central bank, it had the power to buy, for instance, a $1 million bond from a private bank simply by saying, "You have an extra $1 million in your Fed account now." (That's what it means to "print money.") That strategy worked with interest rates near zero and official inflation numbers under 2%... That's not the case now, not after the government response to the pandemic and Uncle Sam running higher and higher deficits. As Matt continued... After the COVID-19 pandemic, it was fiscal policy that ramped up. We sent out stimulus checks, paused student loans, increased unemployment insurance, and gave out small-business loans. On top of that, the Inflation Reduction Act of 2022 earmarked another $433 billion for spending. The national debt has grown to $30.9 trillion. With higher rates and our huge pile of debt, interest payments alone will cost $900 billion. For decades now, deficit hawks have crowed that the rising debt is unsustainable. And yet so far, we seem to have kept adding debt without ill effect. But there is a limit somewhere... and our government finally seems resolved to find it. Most recently, the Treasury has been unloading billions of dollars in new debt into the market to finance the government following Congress' debt-ceiling agreement. It has been a major catalyst for the rise in longer-term interest rates (along with stronger economic growth and higher inflation expectations). As [we wrote on August 7](... More notably, bond yields are rising (and inversely, bond prices are falling) since the U.S. Treasury announced it would boost the size of its quarterly bond sales for the first time in more than two years. It's making the move to finance trillions in fiscal spending obligations. Last Monday, the Treasury said it's targeting an increase in its cash balance to $750 billion at year-end. And it plans to issue more debt (in the form of Treasury bills, notes, and bonds) in 2024 as well. So, cue up attention on bonds... When the Treasury made a typically routine announcement for the next fiscal quarter ahead, we saw enough headlines – about bond-issuance plans, go figure – that we want to address them. For example, the Treasury said it will increase its 2-year and 5-year T-note auctions by $3 billion per month and continue to increase its monthly issuing of 10-year and 30-year Treasury bonds by $2 billion and $1 billion, respectively. That sounds like – and is – a lot of dollars. But the latter moves actually represent a slowdown in the pace of debt growth. Monthly auctions of 10-year and 30-year bonds have been currently been increasing by $1 billion more. On balance, these moves could help temper the last few months of rise in longer-term yields. With a less-than-expected supply of new bonds to fund the government, that's a tailwind for bond prices. (Remember, higher bond prices mean lower yields.) In essence, it's also a large nudge for more "normalization" of the yield curve that we've been tracking... and has been eating away at the value of bond allocations in many investors' portfolios lately, banks included. In reaction to the Treasury's plans today – and notably before this afternoon's Fed announcement – longer-term yields moved lower. The 10-year Treasury yield moved 16 basis points lower to around 4.8% and the 30-year bond yield was off 14 basis points to 4.95%. This continues a recent mini-trend. The 10-year yield is down about 40 basis points and the 30-year yield is down 30 points since their October 19 closing highs around 5% and 5.1%, respectively. At the same time, short-term yields have moved down as well. This could mean yields across the curve are "topping out" in the short term, at least, which could give a boost to stocks. We'll continue to watch if the trend sticks for longer than a few weeks. Uncle Sam's debt, and the higher cost of it, definitely isn't going away. Neither is monetary insanity, though we wish it would. As for stocks today... All of the major U.S. indexes finished up today, with the tech-heavy Nasdaq and benchmark S&P 500 each more than 1% higher. Of note, the S&P 500 has closed higher for three straight trading days and is less than half a percentage point from reclaiming its 200-day moving average... Looking ahead, we'll be paying attention to the latest earnings report from Apple (AAPL) after tomorrow's market close. Yes, I'm interested in Apple's plans for AI chips and the rest of its business... But more importantly for the market, the stock makes up the largest weighting of the S&P 500 (more than 7%) and the Nasdaq Composite Index (almost 14%). So, as usual, what the company reports and says and investors' reactions to it will have an influence on the performance of "stocks" in general. So will the next major jobs report on Friday. --------------------------------------------------------------- Recommended Links: [A Sneak Peek at the End of the World]( Dangerous things are happening in the financial markets right now. Despite what the media reports, you may sense something's wrong, too. That's why Porter Stansberry, founder of Stansberry Research, is returning for the first time in three years. He has a big warning for you about what's coming next and how you should prepare. [Click here for Porter's new warning](. --------------------------------------------------------------- ['I Found the Answer to Retirement']( A subscriber from New York came forward with his unique story of how he retired early and worry-free WITHOUT stocks... thanks to ONE single idea that anyone can use. Now he sees 16%-plus annual returns with legal protections... and he NEVER has to worry about another market crash again. [Get the full story right here](. --------------------------------------------------------------- New 52-week highs (as of 10/31/23): Structure Therapeutics (GPCR), iShares 0-3 Month Treasury Bond Fund (SGOV), and Invesco DB U.S. Dollar Index Bullish Fund (UUP). In today's mail, feedback on a recent essay by our founder Porter Stansberry on "[how to raise cash]( published in Dr. David "Doc" Eifrig's free daily Health & Wealth Bulletin... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I want to thank you. A couple of weeks ago, I requested a more detailed explanation on how to hold cash and what do you know, Porter now has answered that question specifically. Thank you so much." – Stansberry Alliance member Jack W. Corey McLaughlin comment: Glad you found the information helpful, Jack. I agree. If anyone is interested in the practical ways to "raise cash" today, be sure to check out Porter's recent essay on the subject. He covers it all: what assets you ought to consider selling if you want to raise cash, the best places to park your cash (and generate around a 5% annual yield), his general recommendations for how much to hold, and why to hedge against the U.S. dollar, too. Here's an excerpt... While we're thrilled to earn a real yield on our cash for the first time in years, we also recognize that the U.S. dollar – like all fiat currencies – is inherently unstable and doomed to collapse. And it's possible that collapse is already underway. To guard against this risk, we recommend holding a small portion of your cash in physical gold bullion and bitcoin. You don't need a lot... Putting 5% to 10% of your cash in gold and 1% to 5% in bitcoin is plenty to protect you from the loss of value in your cash over time, while allowing you to patiently wait for the generational opportunities in stocks that are likely in the months ahead. There's a lot of great additional detail in the essay, too. [You can read it right here in Doc's Health & Wealth Bulletin](. All the best, Corey McLaughlin Baltimore, Maryland November 1, 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 1,215.2% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,063.4% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 792.6% Extreme Value Ferris WRB W.R. Berkley 03/16/12 604.2% Stansberry's Investment Advisory Porter wstETH Wrapped Staked Ethereum 02/21/20 577.4% Stansberry Innovations Report Wade BRK.B Berkshire Hathaway 04/01/09 505.2% Retirement Millionaire Doc HSY Hershey 12/07/07 453.5% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 384.2% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 308.2% Stansberry Innovations Report Engel BTC/USD Bitcoin 01/16/20 301.8% Stansberry Innovations Report Wade 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 3 Stansberry Innovations Report Engel/Wade 2 Retirement Millionaire Doc 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 wstETH Wrapped Staked Ethereum 12/07/18 1,416.9% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,126.7% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,067.9% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 820.6% Crypto Capital Wade MATIC/USD Polygon 02/25/21 790.8% 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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