More bad news is more good news for stocks – for now... More signs of a weakening jobs market... Same story with inflation... Connecting the economic dots... A life of 'inventory shrink'... A big jewelry heist... More people and businesses are hurting...
 Picking up on our theme of 'bad news is good news for stocks – for now'...
It has continued... After a fresh jobs report and updated GDP projections yesterday and a new look at the Federal Reserve's preferred inflation gauge this morning, the major U.S. stock indexes have continued to climb... The benchmark S&P 500, tech-heavy Nasdaq Composite Index, and Dow Jones Industrial Average have rallied over the past week to end August down only around 2% – a much better monthly finish than these indexes were on track for most of the past few weeks. As I (Corey McLaughlin) wrote on Tuesday, "bad news" in the form of a slowing economy is being perceived as "good news" for stock prices – for now. That's because of the expectation that the Fed won't raise interest rates much higher to keep "fighting" inflation. Whether that's true or not is another matter, and what the economy will look like in the months and year ahead is unknowable as well... In any case, though, the market is open... Yesterday, payment-processing company ADP reported that private employers added 177,000 jobs in August, well below the 371,000 from July, and about 20,000 fewer than mainstream economists expected. In other words, more weakening in the labor market... Also yesterday, the government revised an estimate for second-quarter GDP growth down to 2.1% annualized, from the 2.4% previously reported. In other words, more slowing of the economy than expected... Then this morning, we learned the latest read on the personal consumption expenditures ("PCE") index. The "core" PCE reading, which the Fed favors when gauging inflation because it doesn't include "volatile" food and energy prices, showed 4.2% year-over-year growth in July. That was slightly up from the 4.1% growth in June, but it was in line with expectations based on how headline PCE is calculated (year over year). Most important, month-over-month growth came in at 0.2%, which was same as the month before... Overall PCE, with food and energy, also grew 0.2% month over month, the same as in June. In other words, as far as economists and many investors appear to be concerned, the numbers showed nothing too bad because inflation isn't accelerating, according to this measure. Yet we still have inflation and always will so long as fiat currency is a thing. Tomorrow marks the arrival of another big data kahuna... the monthly government jobs report covering August. A new update on the national unemployment rate and wage growth comes with it. Keep an eye out for more numbers like this... Our colleague and Ten Stock Trader editor Greg Diamond wrote to his subscribers yesterday with an idea that applies to the monthly jobs numbers coming out tomorrow. It should also apply to whatever data follows the next few weeks... If this data continues to come in near or below expectations, that will benefit "risk-on" markets like stocks. It will also be good for gold and bonds. That's because many investors appear to perceive a weakening U.S. economy as leading to a "pause" in Fed rate hikes and thus a relatively weakening U.S. dollar. Should the market think that interest rates won't go higher or much higher and the dollar won't get relatively stronger versus other currencies, assets denominated in dollars can get a boost in their prices. We've seen this for much of the past year. Here's more from Greg... I'll say it again... It's not the best economy. Inflation has come way down, but it's still elevated. So the market is focused on the future and that means discounting what the Federal Reserve will do regarding interest rates. If the data is so-so, the Fed won't be pushed to hike rates, which is a win for stocks. If you think about this relative to 2022, it makes sense... The Fed was pushed to raise rates and that was bad for stocks. It's a simple macro analysis, but sometimes simple is best. As Greg said, this is the "macro analysis" of the relationship between what's likely a deteriorating economy and its knock-on effects on interest-rate policy moving ahead – which can then influence growth expectations and stock prices. It's like a game of connect-the-dots... In the end, though – I hate to have to say it, but it's true – the currency suffers and inflation will win in the long run. It has for decades in our fiat-currency-based system. As we've said before, it has been this way since at least the 10th century. That's when ancient Chinese merchants might have first invented the idea of fiat currency after there weren't enough precious metals to make the coins that they needed to conduct business. And let's not kid ourselves and think the Fed cutting interest rates at any point might not lead to a rebound in inflation accelerating again... like everyone might have been used to for the past 40 years. Also, remember that when the Fed cuts rates, it means the economy is really in the crapper and the central bank thinks it needs to make lending and borrowing money more attractive. (Don't forget, we're following the wake of the USS Fed, which is sailing by the stars under cloudy skies.) To that point, here's another related game of connect-the-dots that I think is useful for anyone dealing with dollars to understand, courtesy of market opiner Peter Schiff on X, the platform formerly known as Twitter... All that is true, yet still so is this... Bad news may be good news for stock prices – for now. That's why we want to own shares of high-quality businesses while being aware of the risks for the broader market ahead. I'll also add a piece of evergreen advice that can't be said enough... -
Save more money than you spend in a month, week, etc. -
Invest the rest. As for the real world... Many popular U.S. retail companies that are in towns and states across the country recently reported their quarterly earnings. A key theme is theft having a greater and greater hit to their balance sheets, as people's budgets get squeezed, inflation sticks, and anxiety rises on Main Street. As our Stansberry NewsWire editor Kevin Sanford wrote earlier this week... Retail giants Dick's Sporting Goods (DKS), Lowe's (LOW), Macy's (M), and Kohl's (KSS) all released earnings reports over the past week. And they collectively portrayed a weakening sector driven by cautious consumer behavior and concerns over retail theft. Quarterly gross margins at Dick's fell by about 1.5% year over year. The company's CEO Lauren Hobart cut full-year guidance, saying profits came up short for the quarter "due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers." Dick's shares tumbled more than 20% in a day on its earnings report. 'Inventory shrink' is corporate speak for items that go missing... It could be due to theft, fraud, accounting errors, or damage, like falling off the back of a truck or something. But let's be real... Inventory shrink isn't surging across the retail industry because everyone suddenly forgot to close the truck doors. Here in Baltimore – and many other metro areas and anywhere else in the U.S. – stealing is not a new issue for retailers. But I've seen at least one unusual brazen successful attempt lately that might signal things are getting different. At 2:30 a.m. one night a few weeks ago in a busy part of town, three men drove a stolen van through the front glass doors and windows of a jewelry store... They fled with $700,000 worth of items in another getaway car, while leaving $150,000 in damage behind. The thieves targeted specific luxury handbags and did the whole deal in three minutes. That's some Ocean's Eleven stuff and very deliberately pre-planned. This isn't like swiping a Snickers bar in your pocket at the gas station... or even a shirt at Dick's. Police here were investigating whether the heist may have been related to other "smash and grabs" in the area. No one has been arrested in connection yet. When folks use the word "resilient" about the U.S. consumer, I don't think this is what they had in mind. We already took issue with that description, too, calling the everyday buyer more resigned to higher prices than anything. Here are some more reports from the real world... Kevin also recently shared in the NewsWire a series of responses to a regional Federal Reserve survey that the central bank purportedly uses to inform policy decisions. Kevin made the point that while Fed Chair Jerome Powell hasn't yet proclaimed that the economy is weakening significantly, many business owners are saying otherwise. According to the Federal Reserve Bank of Dallas' most recent Texas Manufacturing Outlook Survey, released this Monday, things on the ground aren't looking promising in one of the most populous parts of the country. Here is an excerpt from Kevin's excellent daily morning NewsWire brief from yesterday with the details to close us out today. He takes things from here... The production index – which measures state factory activity in Texas – fell again in August, down to a reading of negative 11.2. That's the lowest level since 2016 (excluding 2020). For reference, any reading below zero represents a contraction in output. Take a look... The last few times we saw levels this low were in 2020, 2016, and 2015. But when looking at the bigger picture and the recent peak near 50, this is the largest net decline in production since the global financial crisis in 2008. And remember, the Fed's monetary policy is dependent on the data. So this should point toward slowing growth and an end to rate hikes... right? Well, so far, Powell & Co. haven't provided any indication that they see a slowing economy. In fact, in Powell's speech at Jackson Hole last Friday, he said the economy wasn't cooling as expected. So it's possible that this data may not sway the Fed either. Even still, the actual accounts of "ground conditions" give us a real look at how the economy is doing... It doesn't look good... Here are some comments from the Dallas Fed survey respondents (by industry)... Computer and electronic product manufacturing "High interest rates are affecting industrial production like never before... This is the time to stop raising interest rates." "For the first time in a long time, we are seeing customers reduce or cancel orders due to softening end-use demand. We expect this trend to continue over the next few months." "Customer orders came to a sudden halt. The overall volume dropped 51% year over year." Food manufacturing "We are still in the new 'new normal' from a margin's perspective." "We have seen a contraction in government contracts. Customer discretionary spending capability has decreased." Machinery manufacturing "Slow and steady is the current environment. Hopefully, this isn't the new normal." "The phone is not ringing. Our sales team is working harder with less results. Projects are being postponed and, perhaps even more telling, payments are increasingly protracted." Primary metal manufacturing "Our industry is in a technical recession." Printing and related support activities "We have been very fortunate to have a large job that has sustained us for most of the summer and will continue into September. Without this large job, we would have been stupid slow like a lot of our competitors are. There seems to be a softness in our industry right now, and because of that, we are worried about what six months from now looks like." Transportation equipment manufacturing "Vendor price increases have slowed but have not been rolled back. Interest rates are killing our industry." While there were a few responses that painted a somewhat brighter outlook (things more or less remaining stable), the overwhelming majority were concerned about current and future business conditions. Now, keep in mind, the impact of interest-rate hikes usually takes about 12 to 18 months to show up in actual economic data. In other words, we're just beginning to see the initial effects of the first few rate increases in the data. However, consumers and businesses are already experiencing the challenges of "higher for longer" rates. This is why these surveys are so important. They are real-time accounts of what consumers and businesses are facing on the front lines. While Powell & Co. are waging war on inflation back at the camp, consumers and businesses are fighting the real battle. And they are feeling real pain. Today. And conditions will only get worse the longer the Fed refuses to end rate hikes. That's why, in my opinion, any scenario that saw the central bank crushing high inflation while also avoiding a recession was always a pipedream. As is our theme, bad news can be good news for stocks – until it's not. New 52-week highs (as of 8/30/23): Brown & Brown (BRO), Cameco (CCJ), Alphabet (GOOGL), ICON (ICLR), Innodata (INOD), Intuit (INTU), Iron Mountain (IRM), Roper Technologies (ROP), TFI International (TFII), Sprott Physical Uranium Trust (U-U.TO), Global X Uranium Fund (URA), United States Commodity Index Fund (USCI), Visa (V), and Verisk Analytics (VRSK). In today's mailbag, some feedback for our Ten Stock Trader editor Greg Diamond, whom we featured in a new Q&A last week in our "late-summer series"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Hi Greg, People often complain so I make it a point to be positive when I can as well. "Just wanted to say thank you for your service. A friend was looking at my library the other day and saw a book called Trading in the Zone. After our conversation, I immediately went to my Excel sheet I use to track my trades (I keep it simple). Greg, You are a serious 'Edge'. "I don't make very big trades. At most, I may have $20K in trades at any given time. At this point, that is what I am able to lose without having a meltdown. There is red in our chart, but it is overwhelmed with green. Our wins far outweigh our losses. I'm up 165%, across the board with your service. "The wins have made a difference in my life for my family. I've taken my family on vacations that would not have been in our budget. They help pay for the truck payments that I would never been able to fit in the budget. I can afford the travel baseball team my son wanted to join. There have been a few months where it has supplemented my income. "All that said, I just want to say thanks. I read your updates religiously and have learned so much. Keep doing what you are doing. It makes a difference for middle-income class guys like me..." – Subscriber John C. All the best, Corey McLaughlin with Kevin Sanford
Baltimore, Maryland and Charleston, South Carolina
August 31, 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 | 1,197.8% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 1,033.1% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data Processing | 10/09/08 | 908.7% | Extreme Value | Ferris | wstETH
Wrapped Staked Ethereum | 02/21/20 | 683.4% | Stansberry Innovations Report | Wade | WRB
W.R. Berkley | 03/16/12 | 544.2% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 540.2% | Retirement Millionaire | Doc | HSY
Hershey | 12/07/07 | 527.4% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/12/12 | 404.1% | Stansberry's Investment Advisory | Porter | TTD
The Trade Desk | 10/17/19 | 331.4% | Stansberry Innovations Report | Engel | FSMEX
Fidelity Sel Med | 09/03/08 | 305.0% | Retirement Millionaire | Doc | 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 | 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 | wstETH
Wrapped Staked Ethereum | 12/07/18 | 1,572.4% | Crypto Capital | Wade | ONE-USD
Harmony | 12/16/19 | 1,051.6% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,029.4% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 774.6% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 625.1% | 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%. | 
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