The Reason to Be Careful in 2024

Last call for Joel Litman's free event tonight... The fragile economy... Reasons for optimism and concern... The jobs market continues to weaken... The Federal Reserve always gets this wrong... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Last call for Joel Litman's free event tonight... The fragile economy... Reasons for optimism and concern... The jobs market continues to weaken... The Federal Reserve always gets this wrong... --------------------------------------------------------------- Before we get into it today, one quick reminder... In less than two hours, Joel Litman, founder of our corporate affiliate Altimetry, will debut a brand-new free video presentation that we urge you to check out. It starts at 8 p.m. Eastern time. [You can sign up here](. I (Corey McLaughlin) have mentioned Joel's event a few times over the past week, so we'll keep today's pitch brief... Joel is a world-renowned forensic accountant, sought out for his unique views on the market by Wall Street clients and government agencies like the FBI. He has consulted with the Pentagon, too, and delivered several popular talks at our annual Stansberry Conference. But here's why we've been talking about Joel lately... Right now, he has an urgent message to share about a rocky road he sees ahead for the economy and markets in 2024. It's one worth listening to. In short, given the signals he's seeing "under the hood" of the U.S. economy, he hasn't been this worried about the markets since ahead of the financial crisis 15 years ago. As I wrote in the November 30 Digest about Joel... Back then, he was waiting for the "other shoe to drop" based on concerning indicators he was seeing. Then more than one shoe dropped in the form of the great financial crisis... Joel also called the recession and market crash in 2020... and issued a string of 16 recommendations that went on to double or more. The latter part of that excerpt refers to the better news... Joel says you still have time to prepare for the next crisis, though it's getting short. And tonight, he plans to tell individual investors just how to get ready for what he believes will be a "brutal" period – in early 2024 in particular. So check out what he has to say... Just for tuning in, you'll hear four free recommendations – two from Joel and another pair from Chaikin Analytics founder Marc Chaikin – whom Joel collaborated with to create a powerful stock analysis tool called the "Perfect Stock Detector." For just a little while longer, before the event kicks off tonight, you can get access to a version of this tool – which gives you a letter grade on the true health of more than 500 stocks instantly. Plus, you'll get a pair of special reports covering the stocks Joel says to buy right now... and multiple companies that could go bankrupt in 2024. If you're interested, [click here to register for the event now]( to make sure you don't miss anything. Some of our Stansberry editors are warning about 2024, too... I would urge anyone to read Stansberry's Credit Opportunities editor Mike DiBiase's [essay from November 27]( to get the full picture of the fragile state of the economy today. As Mike explained... All of the things you'd expect to see before a recession and credit crisis are already happening. Corporate profits have shrunk over the past three quarters. Delinquencies, defaults, and bankruptcies are rising... and rising at the fastest pace since the last financial crisis. Every single recession indicator is screaming the same thing... We're headed for a recession. There's no avoiding it. And remember, the stock market doesn't bottom before recessions. It always bottoms during or after recessions. Mike suggested paying attention to one number to know when the next crisis is beginning or has arrived. This indicator is critical to his work in the credit markets, and it can tell you a lot about the economy in general, too. Today, I also want to talk about another trend to follow... We've shared here over the past few months the signs of a weakening jobs market. The economy is feeling the sting of the Federal Reserve's 11 interest-rate hikes in the past two years... Let's explore it some more. The pace of inflation has been coming down along with those rate hikes, but now we're starting to see the other effects of the highest "cost of money" in the U.S. in 15 years. Debt levels – consumer, corporate, and government – are hitting new records. Consumer spending has held up but is also showing signs of slowing down and could struggle more ahead (we'll get into that momentarily). For one thing, even with mortgage rates at 20-year highs, home values – a large source of many Americans' net worth – have remained high. We posit there's simply not enough new housing supply in this country – in part a consequence of the financial crisis in 2008 and 2009, incidentally – so prices have stayed steady. Commercial real estate might end up being a different story... But high home prices have shielded Americans from a full-blown, everyone-including-your-neighbor-is-talking-about-it financial crisis. This complacency has led to the prevailing idea that we'll get the "soft landing" ahead that so many in the markets have been counting on for two years. That is, that no more rate hikes are coming, yet no disasters are either. Now, there are reasons for optimism... Right now. In the past five months, core Personal Consumption Expenditures ("PCE") data – the central bank's preferred measure of inflation – has averaged 0.2% month-over-month growth. That would add up to total yearly inflation that's in the ballpark of the Fed's 2% annual goal. And aside from March's regional-banking panic, the Fed hasn't found reasons to come up with any obvious newfangled multibillion- or multitrillion-dollar rescue efforts to calm investors' nerves. But that's all in the past now... From here, the markets are going to behave based on what is expected to happen or does happen in the future, just like always. And there are risks to consider, too... In the future. The biggest risk is the labor market... Also right now, the jobs market has shown signs of weakening for the past few months... and more quickly than mainstream economists and financial analysts have been expecting. Yesterday, for example, the latest Job Openings and Labor Turnover Survey ("JOLTS") data from Uncle Sam showed the number of job openings in the U.S. dropped to 8.7 million in October. That may sound like a lot, but it was well below the Wall Street estimate of 9.4 million. This means that instead of two jobs per unemployed person a few months ago, we're down to 1.3 jobs per unemployed person. And keep in mind that this data lags by a month, so odds are that the same trend is continuing to play out as we speak. More recent data tells the same tale. Today, payroll-processing firm Automatic Data Processing reported that private U.S. companies added just 103,000 workers in November, well off estimates and below the "downwardly revised" 106,000 in October. Wage growth is also cooling. As we reported last week, continuing jobless claims – a proxy for people receiving unemployment benefits after losing their job – are up by nearly 270,000 since early September to 1.93 million. That means those people still aren't finding work. And as I mentioned earlier this week, on Friday, we'll get another read on the labor market... That's when we'll see the government's latest monthly jobs report covering November, including an updated unemployment rate. Keep an eye on these numbers... Because while it looks like the Fed has conquered 40-year-high inflation, we're now facing the knock-on effects of that. That can come in the form of businesses cutting costs and hiring fewer people... and everyday people losing their incomes and spending less money. And remember, consumer spending is tied to roughly 70% of U.S. economic activity. Yes, "We the People" still matter... The jobs market might not "break" next week, or next month. But soon enough, you're talking about a real recession. And this trend of people losing and not being able to find jobs likely won't change unless the Fed sparks a change in economic conditions (meaning rate cuts). Keep in mind that the labor market is weakening at the same time GDP is allegedly growing north of a 5% annualized rate... So current growth isn't helping the labor market as much as the higher-rate environment appears to be hurting it. The bond market is signaling rate cuts in the first half of 2024... The bond market has been behaving for weeks like it's expecting the Fed to not only pause rate hikes but cut interest rates in early 2024 because of a recession. We see this with longer-term bond yields falling dramatically. The 10-year Treasury yield is closer to 4% today than 5%. In addition, federal-funds futures traders are increasingly betting on rate cuts starting soon. They predict a 25-basis-point cut at the Fed's meeting in March 2024, followed by further cuts continuing at the bank's meetings through the rest of next year. This is an expectation and behavior we've seen in fits and spurts before in the past two years, but now there appear to be actual reasons for it. If the labor market continues on its current track, the unemployment rate will be higher over the next few months. In its last round of projections, the Fed was expecting unemployment to rise to just 4.1% in 2024, down from the 4.5% it had predicted back in June. Yet history suggests the Fed is now underestimating what will actually happen to the jobs market. The Fed has consistently gotten this wrong... Time and again, the central bank's economists underestimate how many jobs will be lost during a recession. For example, in 2007, the Fed was forecasting below half a percentage point of a rise in unemployment... and the rate ended up growing by more than 10 times that amount. The bank significantly miscalculated the rise in unemployment in 1973, 1981, and 1990, too. According to ClearBridge Investments, since 1969... Specifically, Fed forecasts have underestimated the rise in unemployment by 2.5% on average. If this holds, unemployment could rise above 7% in the coming potential downturn, which is hardly consistent with a shallow recession. We doubt anyone in the U.S. government, even Mr. Inflation Fighter Jerome Powell himself, wants to see unemployment that high. After all, he testified before Congress that he didn't. We originally published these comments [in a March 7 Digest titled "Famous Last Words"](... Republican Sen. John Kennedy of Louisiana cited research suggesting that during the last 10 times the U.S. economy had "disinflationary periods" since the 1950s, for every 2% reduction in the inflation rate, unemployment went up by 3.6%. Powell didn't dispute that. So Kennedy did the math... Based on current numbers, unemployment would have to hit 7% to get the consumer price index from its current 6.4% down to 4.4%. "That's what the record would say," Powell replied. And to get inflation down to 2.2%, based on history, Kennedy said the unemployment rate would have to go to 10.6%, right? To which Powell said... I don't think that kind of a number is at all in play. Write that down somewhere for posterity in the event it happens... And note that even after he agreed with the research that led to this conclusion, Powell didn't even want to think about the idea of double-digit unemployment. The better news is that the CPI is down to 3.2% as of November already, so maybe Powell is right about double-digit unemployment not being "at all in play." But, at the very least, if the jobs market and the pace of inflation continue on their current paths, eventually the Fed will be cutting rates... perhaps as early as 2024. This might hit as good news to you. Conventional Wall Street wisdom says as much. After all, as we've said before, quoting Warren Buffett, "Interest rates are to asset prices... like gravity is to the apple. They power everything in the economic universe." That is true and timeless advice over the long run. In the shorter run, though, if the Fed sees a need to cut rates, that means the economy, businesses, and everyday people are hurting financially – whether it's called an "official" recession or not. Tomorrow, we'll get into what this possible scenario – the onset of Fed rate cuts – has typically meant for the stock market in prior instances. It's not a straightforward answer that leads to an "all in" or "all out" market call. It has been both bad and good, depending on your timeline and how "expensive" the market has been. But the "bad" has been bad enough that it warrants discussion. It's About to Be 2008 All Over Again Joel Litman and Rob Spivey of Altimetry joined Dan Ferris and me on the latest Stansberry Investor Hour to talk about why they think we're staring down a 2008-type economic crisis once again – and how to prepare... [Click here to listen]( to this episode 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: [Tonight's Buy Alert: The 40x Recession Trade]( There's ONE trade that could have grown your money by 4,000% during the recessions of the past 40 years. It doesn't involve trading options, cryptocurrencies, or anything highly speculative... But according to two Wall Street legends, it could save your wealth in the early weeks of 2024. [Here's the No. 1 step to take with your money ahead of a recession](. --------------------------------------------------------------- [A Special Holiday Invitation for You]( For this holiday season, a fellow Stansberry Research reader wanted us to rush this urgent message to you. There's a big update to his unique story of how he retired early at 52 thanks to ONE single idea that anyone can use. He sees 18%-plus annual returns with legal protections. And he never has to worry about a market crash again. [He explains everything from his living room here](. --------------------------------------------------------------- New 52-week highs (as of 12/5/23): Costco Wholesale (COST), Fidelity National Financial (FNF), Sherwin-Williams (SHW), Spotify Technology (SPOT), and Trane Technologies (TT). In today's mailbag, feedback on [yesterday's guest essay]( in which Altimetry founder Joel Litman described a CEO who kept telling Wall Street analysts to look at the company's "safety measures" to see if things were going well for the business... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Yep [the Alcoa CEO, Paul O'Neill] had it spot on. Many of my top-tier construction clients and projects adopted this mantra. Losses fell and profits increased and no one had to give a widow a condolence call." – Subscriber Mark W. All the best, Corey McLaughlin Baltimore, Maryland December 6, 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 1,281.1% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,177.7% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 836.3% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 771.1% Stansberry Innovations Report Wade WRB W.R. Berkley 03/16/12 658.7% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 529.5% Retirement Millionaire Doc HSY Hershey 12/07/07 457.8% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 406.9% Stansberry's Investment Advisory Porter BTC/USD Bitcoin 01/16/20 390.6% Stansberry Innovations Report Wade PANW Palo Alto Networks 04/16/20 322.6% 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 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 1,701.2% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,101.6% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,079.1% Crypto Capital Wade POLYX/USD Polymesh 05/19/20 1,068.3% Crypto Capital Wade MATIC/USD Polygon 02/25/21 837.4% 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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