The 'Inflation Increase' Act... It's not a recession... It's a salamander wearing a top hat... We can handle the truth... It's definitely stagflation... Doc has a solution for you... Mailbag: The Fed Chair isn't an economist...
 Today in our 'This can't be real, but it is' segment...
We have a few items, unfortunately... The first is a simple proposal in Congress, not a new law yet. Its title would be laughable if it wasn't real. You might have heard about it already... It's called the Inflation Reduction Act... Here's a summary released yesterday by the sponsors, Senate Majority Leader Chuck Schumer and West Virginia Senator Joe Manchin... The Inflation Reduction Act of 2022 will make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030. The bill will also finally allow Medicare to negotiate for prescription drug prices and extend the expanded Affordable Care Act program for three years, through 2025. The new proposal for the [fiscal year] 2022 Budget Reconciliation bill will invest approximately $300 billion in Deficit Reduction and $369 billion in Energy Security and Climate Change programs over the next ten years. Additionally, the agreement calls for comprehensive Permitting reform legislation to be passed before the end of the fiscal year. Permitting reform is essential to unlocking domestic energy and transmission projects, which will lower costs for consumers and help us meet our long-term emissions goals. We don't want to get political here. But since we're talking about proposed legislation that claims it's going to cut inflation, we need to address it and gauge what it might actually mean to the economy and markets... First, I (Corey McLaughlin) can't think of a single worse way to start off an "inflation reduction" bill than with the line saying that it will "Make a historic down payment..." Anything short of a full payment, which is essentially impossible, will not reduce inflation. What the summary doesn't say is that "Deficit Reduction" means raising taxes on 200 corporations with more than $1 billion in profits to 15% and rebuilding the IRS to strengthen tax enforcement and compliance among the wealthiest Americans. But beyond that, as you can see for yourself, this is also basically a massive clean-energy spending bill (later reported to be $369 billion) combined with an expansion of Obamacare and laws to cut some prescription-drug costs. But wait, there's more... The bill would approve $80 billion in funding for the IRS over 10 years... Combined with the clean-energy part of the deal, that's a roughly $450 billion "down payment." And, according to the government's own projections, the tax changes would bring in roughly the same in revenue. The proposal claims the expanded health care programs will supposedly make the government more than $200 billion. Even if that turns out to be true, the total federal debt today is around $30 trillion. Does that all sound like it's going to "reduce" inflation to you? You can probably guess what we think... It's certainly not the solution to inflation. If anything, it's the opposite... And if anyone is expecting it to drop suddenly because of this legislation, they will be waiting for a long time. Let us know your thoughts with an e-mail to feedback@stansberryresearch.com. We know what Mr. Market thinks. He took the Inflation Reduction Act as a major tailwind for the green-energy industry. The Invesco Solar Fund (TAN) was up 7% today, and residential solar companies like Sunrun (RUN) and Sunnova Energy (NOVA) were up almost 30%. The reaction to today's GDP number is another unbelievable story... The long-awaited (at least by me) and about-to-be-debated second-quarter gross domestic product ("GDP") number from the U.S. Department of Commerce was published this morning... And as we've been expecting for months, it showed a 0.9% contraction of the U.S. economy. (I guess they didn't feel like rounding to negative 1%.) Given first-quarter GDP shrank by 1.6%, this means the U.S. economy has contracted for two consecutive quarters. That's been a commonly accepted definition of a "technical" recession for decades. And if you've prepared the right way, it's something that can be navigated. But apparently, the mainstream media would rather delay the truth... Last quarter, CNBC reported negative GDP was due to some inventory anomaly. Today, its website's main headline said two quarters of economic contraction is a "strong recession signal." And it wasn't alone. CNN's website said, "U.S. economy contracts again, fueling recession fears." And the Washington Post's said, "U.S. economy shrinks again in second quarter, reviving recession fears." Fears? Guys, it's already here... Somewhere in the White House, some people might be smiling that the "this isn't a recession" spin is working, but not here in Baltimore. Our colleague and Stansberry's Credit Opportunities editor Mike DiBiase sent this note to me this morning, with a clever analogy... People don't want to see what's right in front of their eyes anymore. This just in from the sports desk... The New York Mets outscored the New York Yankees 3 to 2 last night, fueling fears the Yankees lost the game. Major League Baseball is gathering and assessing more data to confirm the result. It's sadly funny and true. We're big boys. The Yankees lost last night, and it's a recession... It's hard enough to work with someone on something when dealing with the same set of facts, let alone when you're told your observations are "wrong" because the other party keeps changing the definition of what is "right." Lately, White House officials have done their best to say we're not in a recession, even though the economy is slowing. And we were told this week that it's not a recession even if negative GDP happens for two straight quarters. They can't fool us, though. If it's not a recession, then what is it? First, it's a joke... Even semi-retired comedians like Conan O'Brien have taken notice... Maybe I'm still too much of an optimist, but what the heck is the point of hashing out the labels? To get a few votes? Can't we just admit what is happening and try to come up with some good solutions (not more spending)? I hate to get too deep into political details (which we have already done today)... but I suspect more people will vote against the White House and a Democrat-controlled Congress in November if they don't admit we're in a recession. We can handle the truth. In fact, we'd all be better off with it, even if it hurts to hear... So here we go... The latest tactic from the D.C. crowd of President Joe Biden, Treasury Secretary Janet Yellen, and Federal Reserve Chair Jerome Powell is to say that the jobs market is still strong, so we can't be in a recession. Despite what I've said already today and my personal preference for the simple grade-school definition of a recession, I actually see their case for arguing that point. But the labels don't matter. As long-term investors, we're not just thinking about the present, but about what comes next... and how the future will compare to the present. That's all we can do. For about the past 80 years, a recession has always occurred when U.S. GDP has contracted for two quarters in a row. But forgetting that for a second, history suggests it's going to be even more undeniable soon... Will this time be different? I think you know the answer... When we look at relevant history, what we see today is this has happened before... Remember, that was the 1970s, the last time inflation was as high as it is today... and it's hard to see how this time is different. There were three recessions in the '70s... each preceded by a "strong" jobs market. The economy was adding hundreds of thousands of jobs per month, just like it has been in recent months... But before each of the three recessions in the '70s, the Fed was hiking interest rates to fight high inflation – just like it's doing right now. Significant job losses followed not long after, making the reality of a recession painfully obvious... Take a look at this chart and observation from market analyst Jim Bianco, who provides advice to institutional investors. He said Powell is saying the same thing that former Fed Chair Arthur Burns said decades ago, before being replaced by Paul Volcker (who famously raised rates to 20% in 1981 to finally kill inflation – and bring on another recession)... As I mentioned, before each of these three recessions, the Fed was hiking interest rates and inflation was on the rise. Here's the path of the Fed's benchmark interest rate during the same span (with some added years for context on the front end)... And here's inflation, as measured by the Consumer Price Index ("CPI"), in the same period... On a nominal basis, interest rates were higher back then. But the scale of today's rate hikes from near zero to 2.5% are actually already much larger than anything that happened in the '70s... but inflation is just as high, if not higher, depending on how you measure it. In other words, it's basically the same story in a new era... but maybe worse. You'll notice that in the '70s inflation crisis, rates were always above the inflation rate and it was a decadelong battle. Today, the fed funds rate is still far behind inflation by roughly 7%, using CPI as the inflation gauge. As Bianco says... It is not about negative nominal growth. It is about overtaking the inflation rate. This was the story of the 1970s recessions, positive nominal growth could not overtake inflation. And it could be the story now as well. Powell knows this but is spinning. The big question now is, how much higher will the Fed raise rates? If it's anything higher than today, the recession will deepen and last longer. If it doesn't, it risks letting high inflation stick around. It could also raise rates, but not by enough, and high inflation could stick around... and Powell could go the way of Arthur Burns in favor of a new Paul Volcker. None of these scenarios about the economy is especially helpful for businesses, which is not bullish for stocks... Yesterday, Powell said the Fed would keep raising rates as appropriate and that last month's CPI number was worse than the central bank expected. But he also sounded like he didn't want to make any promises on how high the Fed would go with rates. He said they're at a "neutral" rate now... and the central bank will reevaluate things in September at its next meeting. The market liked that message, for one day at least... but don't be fooled. If the Fed's really going to handle inflation, rates need to go much higher – closer to the inflation rate of at least 4.7% by the central bank's preferred core PCE inflation measure. And if that happens, no one will be arguing about the definition of a recession. If that doesn't happen, high prices are sticking around. Before we close out this part of the discussion, here's one more practical suggestion. Maybe someone at a press conference in D.C. can ask if we're experiencing "stagflation," since they say we're not in a recession... They haven't gotten around to arguing that definition just yet, so they couldn't deny it. Powell just said yesterday that the economy is slowing... and inflation is much too high. The takeaway is easy... Prepare and invest accordingly. One way you can prepare your portfolio today... Make sure at least part of your stock portfolio is geared toward beating inflation... We've shared a few ways to do this in the past. Own assets with real, tangible value that will become more valuable as dollars get cheaper... things like real estate or gold. Owning stocks in general is another great way, but in a bear market, you might want to be more choosy than usual. To this point, our colleague Dr. David "Doc" Eifrig recently offered up another terrific option in a new presentation... If you can find stocks that will compound your wealth over time simply by holding them, that's great. If you can do it in a sector that has famously beat inflation throughout history, that's even better... As Doc says in his presentation, a study of 49 industry groups dating back to 1926 found that this sector was the single best hedge against inflation anywhere in the markets... and twice as good as gold. Nothing else came close. That's great on its own, but if you can identify individual stocks that will outperform within that sector, you've really hit the jackpot. As Doc shared, he and his "dream team" composed of our colleagues Thomas Carroll and John Engel have picked 10 stocks that fit this bill. They've put together a portfolio of quality stocks from one of the biggest parts of the economy that could compound your wealth by 20% per year or more, with little risk... and have picked a handful of lesser-known names with the potential to return 1,000% in the years ahead... Listen to Doc's message for free... This is a sector that Doc says millions of Americans will have no choice but to patronize in the decade ahead and is part of a story that will amount to a retirement "shock" in the U.S. He says it will be bigger than inflation... or who gets elected to office in the next few years... or, we'll add, what makes a recession or not. Given his background in a previous life as a Goldman Sachs trader and board-eligible physician, Doc is well-versed in this area. In what we know is a confusing time to be in the markets, I think you'll find Doc's presentation reassuring... informative... and helpful beyond the ways I just described. As Doc says early in the video, what he's talking about is as much an opportunity as it is a warning... I know how ugly these last few months have been in the markets. I know you may be hurting. That you might be focused on just trying to weather out the storm. But what I'm about to show you is actually a big part of the answer to what's going on – and how you're probably feeling – today. Click here to watch Doc's message now. This presentation is totally free, but it won't be online much longer. And Stansberry Alliance members, feel free to give Doc's presentation a watch, too. It's chock-full of great information. But also know you have access to all the new research he talks about in the video. You can find it here. | | | | The Stansberry Conference Is Back Our biggest event of the year is headed to Boston... Get your ticket now to the 20th annual Stansberry Research conference, slated for October 24 to 26 at the Encore Boston Harbor resort... Our editors and analysts, a dynamic lineup of industry speakers, and you – our subscribers – will be there to talk in person with other smart, like-minded folks at a unique, business-mixed-with-pleasure event... This is your chance to be shoulder to shoulder with your favorite editors, including Dr. Steve Sjuggerud, Dr. David "Doc" Eifrig, Dan Ferris, and Eric Wade. And you'll have the chance to hear exclusive stock recommendations and get more guidance on navigating this volatile market. Tickets are going fast, so make sure to reserve your spot today... Click here for more details and to see our entire speaker lineup. If you act now, early tickets also come with a $1,000 free gift – for a limited time only. | | | | | New 52-week highs (as of 7/27/22): Option Care Health (OPCH) and Texas Pacific Land (TPL). In today's mailbag, feedback on our recap of Fed Chair Jerome Powell's press conference in yesterday's Digest... Do you have a comment, question, praise, or rage to share? Send your notes to feedback@stansberryresearch.com. "Corey, Listening to Powell's remarks popped a thought into my head. What kind of economist can't use an economy of words to answer a yes or no question?" – Paid-up subscriber David W. Corey McLaughlin comment: That's a great point, David, but you bring up another one that you might not even be thinking about... Many people might presume the Fed chair would be an economist, but he's not... Powell is a lawyer by training who ended up in investment banking in the 1980s and then started working at the Treasury Department in the early '90s, followed by a series of private investment firms. And he comes from a family of D.C. lawyers. No offense to the good lawyers out there, but Powell is experienced at talking his way around and through situations to try to meet his objective... which often means avoiding giving a firm yes or no answer. Way back in the day, he was the editor-in-chief of the Georgetown Law Journal. So, when you observe or analyze central bank decision-making, keep in mind that the current Fed chair isn't an economist. That isn't necessarily a bad thing on its own, but when inflation is higher than it has been in five decades, the world might be better served by having someone with at least some formal economic training (and believable with the right intentions) talking on behalf of the largest central bank in the world... In the end, some questionable things might start to make more sense (to both of us) when looking at Powell through this lens. All the best, Corey McLaughlin
Baltimore, Maryland
July 28, 2022
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 | 962.1% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 827.1% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data | 10/09/08 | 824.6% | Extreme Value | Ferris | ETH/USD
Ethereum | 02/21/20 | 577.8% | Stansberry Innovations Report | Wade | HSY
Hershey | 12/07/07 | 516.5% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/12/12 | 421.7% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 414.7% | Retirement Millionaire | Doc | WRB
W.R. Berkley | 03/16/12 | 352.8% | Stansberry's Investment Advisory | Porter | NTLA
Intellia Therapeutics | 12/19/19 | 320.3% | Stansberry Innovations Report | Engel | FSMEX
Fidelity Sel Med | 09/03/08 | 298.9% | 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 | | 3 | Retirement Millionaire | Doc | | 4 | Stansberry's Investment Advisory | Porter | | 1 | Extreme Value | Ferris | | 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 | ETH/USD
Ethereum | 12/07/18 | 1,325.4% | Crypto Capital | Wade | ONE-USD
Harmony | 12/16/19 | 1,167.9% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,066.4% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 863.8% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 511.2% | 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 | | 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 | | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | ^ 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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