The Fed chair just said what's coming... It's a bullish message... He could be wrong, of course... A reminder about fiat currency... What always loses... 'Don't develop ulcers'... The small investor's advantage...
 The Fed's inflation 'fight' is unofficially finished...
Yesterday, Federal Reserve Chair Jerome Powell spilled the beans... Over in Portugal – this guy gets around – Powell sat and answered questions as part of a wide-ranging panel discussion at the European Central Bank ("ECB") Forum on Central Banking. Powell joined the presidents of the ECB and Brazil's central bank – Christine Lagarde and Roberto Campos Neto, respectively – and the trio fielded questions from a capable moderator. I (Corey McLaughlin) want to share a few highlights. They should whet bulls' tongues heading into a long holiday weekend... beginning with something Powell said near the end of the hourlong session yesterday. With just a quick answer, he indicated where U.S. monetary policy is likely headed and what concerns the Fed most today. It's not inflation anymore. That was clear. Powell was asked where he thought inflation would be a year from now... "Mid to low twos," he said. When asked to clarify, he said "between 2% and 2.5%" in the headline personal consumption expenditures ("PCE") index. This number is at 2.6% year over year as of May's reading and has averaged 2.6% since February. That suggests to me that the Fed thinks the inflation "fight" is pretty much over. So, when the Fed says it has a 2% target, it might mean anything up to 2.999%. Of course, Powell could be and probably will be wrong. If the Fed cuts rates by the end of the year like the market expects, the pace of "official" inflation could easily pick up again by a year from now. The Fed has successfully gotten all of its predictions wrong in recent years. But the point is that Powell's commentary and the Fed's general stance – loosening or tightening – can color the backdrop of the present market sentiment. And whether you agree with them or not, this is important to understand when making investments. Right now, the central bank is pointing investors toward an easier monetary environment with cheaper money and lower interest rates in as soon as a few months. In the Fed's June meeting minutes released this afternoon, after an early pre-holiday market close, U.S. central bankers were shown to have discussed wanting to have "greater confidence" in lower inflation data, but Powell's comments yesterday are newer and more revealing. I don't think it's a coincidence that the benchmark S&P 500 Index and tech-heavy Nasdaq Composite Index closed at new all-time highs yesterday and again today. The potential outcomes... Now, for real people, lower interest rates may sound good on the surface. That's true for investors like us, too. Indeed, a drop in rates is generally considered juice for the markets in the short term, and a tailwind for both stock and bond prices. On Main Street, folks might also benefit from a lower mortgage rate to buy a house, and lower interest rates on a credit card could provide some relief to a household budget. But it's also a reminder about how our fiat currency system works and often disregards the future for the sake of the present. What is justified in the moment (great financial crisis, a pandemic) as a policy or decision that is "temporary" or "emergency" – like trillions of stimulus dollars – has long-lasting effects years down the road... For citizens and business owners today, the likely upcoming scenario also means this message from the Fed: Take your 40% or 80% or whatever percent insurance premium hikes, higher food and rent costs, and a 25% hike in prices broadly since January 2020 (according to the website Truflation), and deal with it. This you can always bank on. As our colleague Dan Ferris says, the value of the currency always loses. Inflation is always there. Another reminder: When the economy weakens enough to spark rate cuts, which appears to be the bank's greatest concern now, it also means potential trouble for businesses – especially those with tight margins or a lot of poorly managed debt. The Fed so badly wants to cut rates... Remember that in their latest round of economic projections a month ago, 15 of the 19 Fed officials expected one or two rate cuts by the end of the year. Powell said yesterday the central bank's almighty data since then has strengthened the outlook for cuts. The chair isn't ready to pull the trigger quite yet... But it sounds like it will happen as soon as data-dependently possible. Asked if the Fed's suggested bank-lending range could go lower at its September meeting, he laughed and said, "I'm not going to be landing on any specific dates here today." But he shared what factors the Fed is allegedly considering... The last [inflation] reading and the one before it, to a lesser extent, do suggest that we are getting back on a disinflationary path... We'd like to see more data like we've been seeing recently... We're well aware if we go too soon, we could undo the good work we've done [on inflation]... and if we go too late, we could undermine the recovery and the expansion. We're aware that we have two-sided risks now. To that point, he said the Fed is continuing to balance its dual mandate of stable prices and maximum employment – and that a rise in the unemployment rate could trigger a rate cut, too... We'd also like to see the labor market continue to remain strong. We've said that if we saw the labor market unexpectedly weaken, that is something that could call for a reaction. On Friday, we'll see the next "nonfarm payrolls" monthly report, which will include June's unemployment rate. As we wrote earlier this week, unemployment has been ticking up slightly in the past three months, at 4% as of May. Today, private-payrolls data from payment processing company ADP showed less growth (150,000 new jobs) than Wall Street was expecting, and weekly jobless claims (238,000) were higher than mainstream economists forecast. Those are more signs of a weakening labor market. Should the unemployment rate keep going higher, that'll push the Fed closer to lowering its suggested bank-lending rate. And if it rises more than expected, I'd be willing to bet the central bank will pull the trigger by the end of the year. Either that, or Powell will string everyone along into this time next year. But in either event, the market is expecting cuts sooner. The Fed has meetings on July 30 to 31, September 17 to 18, November 6 to 7, and December 17 to 18. Futures traders are betting with nearly 70% probability on a 25-basis-point cut to the federal-funds rate in September, with another cut in December looking most likely to them. Powell also talked about politics... Well, he mostly talked about how he's trying to avoid getting caught up in them, particularly ahead of a presidential election. Asked specifically if he's concerned about the Fed's "independence," he answered in part he's focused on the numbers only... We have 4% unemployment, [the economy is] growing at 2%, inflation is at 2.6%. Let's keep that going, let's do our jobs. History will judge. If we can keep things on that path... that's the only thing I'm focused on. And last but not least, Uncle Sam's debt came up... At last check, it's at $34.87 trillion and growing with each interest payment the Treasury doles out... This is 120% of U.S. GDP, more debt than production, and it's growing. This is a concern. You may recall Powell telling TV program 60 Minutes earlier this year that it's time for Congress to have an "adult conversation" about the national deficit in the past. As he said at that time... I think the pandemic was a very special event, and it caused the government to really spend to ward off what looked like very severe downside risks. It's probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path... We're borrowing from future generations. And every generation really should pay for the things that it needs... and not hand the bills to our children and grandchildren. Powell reiterated this point yesterday... in response to a question about potentially less demand for U.S. Treasury bonds (and higher rates, and more, compounded debt). He acknowledged that the government running a "very large deficit at a time when we're at full employment" concerns him deeply... The path that we're on is unsustainable. That's completely noncontroversial... This is something that should be a top-level issue... How do we get back to a sustainable path?... You can't run these kinds of deficits in good economic times for very long... In the longer run, we'll have to do something sooner or later, and sooner would be better than later. You could say that about a lot of things. Quote of the week (from the late Walter Schloss)... Our offices are closed tomorrow and Friday in observance of the Independence Day holiday, so we'll bring you the quote of the week a day early... (Following this weekend's Masters Series, we'll pick up with our regular Digest fare on Monday.) This week's quote comes from the late Walter Schloss, a value investor who – like Warren Buffett – was a disciple of Benjamin Graham. Schloss never went to college but went to work on Wall Street at age 18 and took classes from Graham at the New York Stock Exchange Institute. He later served four years in the Army during World War II and eventually started his own fund in 1955. It never got too large, but it averaged a roughly 15% compound return over four and a half decades, including a 21% rate between 1956 and 1984. Investing tips for not getting an ulcer... Today's quote is from Schloss's lecture in 1996 at the Behavioral Economics Forum at Harvard. I'd seen it before and saw it again recently via the Finding Compounders account on the social platform X, which frequently shares valuable long-term investing wisdom... Schloss started the speech by sharing an anecdote about a visit to a mental institution in New York many years earlier to talk about investing: "Shut up, you idiot, and sit down," one of the patients said... "The therapy is working," a doctor replied, and Schloss continued. Then he went on to describe his value-investing approach, and he spoke, indirectly, about an important point we've shared before... That's the freedom and advantage that individual investors have, especially compared with giant investment firms that are beholden to clients, short-term benchmarks, and greater outside influence in general. Schloss said about this idea in 1996... We are not handling large sums of money and, therefore, we don't have the pressure that the big money managers have. We try to do what is comfortable for us so that we don't develop ulcers. It is important to know what you like and what you are good at and not worry that someone else can do better. If you are honest, hardworking, reasonably intelligent and have good common sense, you can do well in the investment field as long as you are not too greedy and don't get too emotional when things go against you. This is what we mean when we often say things like "have a plan and know your goals." If you do this, not worrying about what other people are doing – a feature or bug of human nature that can lead to a variety of costly mistakes – becomes much easier. So does focusing on the long term and resting at night. I wrote about this most recently in April, after current money manager David Daglio – a past speaker at our annual Stansberry Research conference – made the point during an interview with Dan and me on the Stansberry Investor Hour. David is the former chief investment officer at BNY Mellon, where he helped lead a team that oversaw $500 billion of investments. He now manages a much smaller amount of money and is quite happy about it... I think the advantage a retail investor has and, frankly, I have in my personal account as well, is I don't have a boss. The biggest problem with being a portfolio manager – I was for 20 years running small-cap hedge funds, etc. – I used to say I didn't have a boss, but the practical reality is my top 100 clients were my bosses. Every quarter, they asked me the same question, "How did you do last quarter?" And I would say, "I'm going to tell you how I did last quarter, but we're investing in ideas that we think are great ideas for the next three to five." It took me 15 years and probably 15,000 meetings to get the majority of my clients to stop asking about the next 90 days. I was in a privileged position. Most, if not all, people at good firms have an enormous amount of pressure to perform in the short run, and we can see that in the market today... That is an advantage that individual investors like you and I have. If you can manage to look past the next 90 days, you're doing more than you might think. For instance, if you can see around the next corner that the Fed is looking to juice the economy once more when inflation is still relatively high, you might be able to glean an insight that others miss. Connect a few dots... or find the conviction to make a decision. And, unlike massive firms, you can act on this outlook without worrying about a phone call or e-mail from a client (boss) about your three-month return. Maybe I keep repeating this point because I need the reminder myself. But I don't think it can be said enough. In this investing game, nobody looks out for you more than yourself. New 52-week highs (as of 7/2/24): Apple (AAPL), Amazon (AMZN), Commvault Systems (CVLT), iShares MSCI Emerging Markets ex China Fund (EMXC), Enstar (ESGR), Intercontinental Exchange (ICE), JPMorgan Chase (JPM), KraneShares MSCI Emerging Markets ex China Index Fund (KEMX), Microsoft (MSFT), Pembina Pipeline (PBA), ProShares Ultra QQQ (QLD), ProShares Ultra S&P 500 (SSO), Tyler Technologies (TYL), Vanguard S&P 500 Fund (VOO), Verisk Analytics (VRSK), and the short position in Cracker Barrel (CBRL). In today's mailbag, feedback on part of a piece of mail from yesterday... and thoughts on our discussion last week about the artificial intelligence boom and market bubbles... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Michelle C. claims Trump wants a business-killing oligarchy like Putin, and that the Republican's platform 'seems to wobble and change and shift with the tides', which, also, is bad for business. "During Trump's term, he cut thousands of regulations, and cut taxes for citizens and businesses of all sizes. (Big corporations like regulations). These policies spurred job growth and business growth, reshoring a good deal of manufacturing (which creates more jobs). The lower taxes also led to greater government revenue (funny how that always works)..." – Subscriber Gary S. "With AI and other capabilities, the ability to develop/refine programs with added/improved capabilities is growing exponentially. "From a corporation perspective, the challenge is that they want to invest in something/roll it out with rules/training/data prep, etc., and then recoup value through use. As such, at least in larger corporations, there is a reluctance to have constant change. "From a computer programmer perspective (I am not one), they generally want to work with the latest and greatest (be it language, etc.). Historically they have not been shy about changing companies to get that opportunity. Over time, this generally means that outside of the group managing the system performance, user companies usually have high turnover in any staff they hire – which results in focusing on groups such as Accenture, etc., who will hire and deploy people to projects (but results in a general loss of capabilities within the company itself and more dependence ongoing on consultants). "I worked for a large multi-national with their enterprise resource planning process. We were aware that there were newer designs/capabilities, but internal reviews essentially always indicated that the cost of conversion (including a very extended timeline) was always substantially higher than the benefits we could project, so it was only after the owner of the programming decided it would no longer be supported that a change was initiated. This was multiple years. "Perhaps if there are ways that updates could be released in small packages (as Microsoft does with a constant stream of updates to things such as Excel) AND there are good capabilities to assess the impacts of updates (think of backtesting the models advertised for predicting stock picks) this could work (not easy as this backtesting often would have to accommodate multiple programs from different sources). "Until this kind of capability exists, I suspect uptake of software will be slower than many project." – Subscriber Bill H. All the best, Corey McLaughlin
Baltimore, Maryland
July 3, 2024
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios | Investment | Buy Date | Return | Publication | Analyst | MSFT
Microsoft | 02/10/12 | 1,464.5% | Stansberry's Investment Advisory | Porter | MSFT
Microsoft | 11/11/10 | 1,446.5% | Retirement Millionaire | Doc | ADP
Automatic Data Processing | 10/09/08 | 866.7% | Extreme Value | Ferris | WRB
W.R. Berkley | 03/16/12 | 727.9% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 621.8% | Retirement Millionaire | Doc | HSY
Hershey | 12/07/07 | 456.5% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/12/12 | 434.2% | Stansberry's Investment Advisory | Porter | TT
Trane Technologies | 04/12/18 | 420.3% | Retirement Millionaire | Doc | NVO
Novo Nordisk | 12/05/19 | 415.6% | Stansberry's Investment Advisory | Gula | TTD
The Trade Desk | 10/17/19 | 376.2% | 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/Gula | | 3 | Retirement Millionaire | Doc | | 1 | Extreme Value | Ferris | | 1 | Stansberry Innovations Report | Engel |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Investment | Buy Date | Return | Publication | Analyst | wstETH
Wrapped Staked Ethereum | 12/07/18 | 2,291.8% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 1,550.8% | Crypto Capital | Wade | ONE/USD
Harmony | 12/16/19 | 1,156.7% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 773.1% | Crypto Capital | Wade | AGI/USD
Delysium AI | 01/16/24 | 351.4% | 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 | | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | | 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 | | PNC Warrants | PNC-WS | 6.16 years | 706% | True Wealth Systems | Sjuggerud | | Maxar Technologies^ | MAXR | 1.90 years | 691% | Venture Tech. | Lashmet | | Silvergate Capital | SI | 1.95 years | 681% | 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%.
Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio | Investment | Symbol | Duration | Gain | Publication | Analyst | | Band Protocol | BAND/USD | 0.31 years | 1,169% | Crypto Capital | Wade | | Terra | LUNA/USD | 0.41 years | 1,166% | Crypto Capital | Wade | | Polymesh | POLYX/USD | 3.84 years | 1,157% | Crypto Capital | Wade | | Frontier | FRONT/USD | 0.09 years | 979% | Crypto Capital | Wade | | Binance Coin | BNB/USD | 1.78 years | 963% | Crypto Capital | Wade | | 
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