An 'Inflation Game Plan' We Want You to Hear
A time of 'extreme danger'... An 'inflation game plan' we want you to hear... This time is not different... Why 'real' negative interest rates are here to stay... How to protect and grow your money...
Picking up where our colleague Dan Ferris left off in yesterday's Digest...
If you've read Dan's last two Digests (here and here), you know he has begun to share the details of his "inflation game plan" to anyone who is wise enough to listen...
Over the last two weeks in this space, Dan has been tracking five cyclical trends that are at or near major inflection points – all at the same time.
These include big, long-term trends in U.S. stocks, emerging markets, commodities... and perhaps the biggest one of all, inflation, which is currently at levels not seen in decades.
In short, Dan believes right now is a critical time in the markets... The confluence of these trends could, at a minimum, result in 10 years of stock market gains being wiped out from most people's portfolios without them even noticing.
It's a time of "extreme danger," Dan says, for anyone with money in stocks today or simply concerned about protecting their nest egg...
What's more, though, Dan has got an actionable solution for folks... and he feels it's his moral obligation to share it with readers before the worst happens... be it a stock market crash or runaway inflation or both.
As he wrote yesterday...
I have found a much better way to prepare you for inflation, help you outperform the S&P 500 and Nasdaq Composite indexes in a bear market, and exploit the commodities/stocks and value/growth inflection points...
Starting today, Dan is giving everyone the chance to hear more important details...
If you are an Extreme Value subscriber, or Stansberry Alliance partner, and haven't checked your inbox or the issue page yet, I (Corey McLaughlin) suggest you make some time to do so and take a look at Dan's latest research... I'll be sharing more details about his important plan in today's Digest.
It's can't-miss stuff...
We can't give away everything here, but I can tell you that, as Dan shared yesterday, he created "The 10-Stock Inflation-Protection Portfolio" that could safeguard your savings and likely outperform any other group of stocks in the next decade...
As Dan says, allocating part of your portfolio to this 10 pack of stocks could prevent inflation from eating away at your nest egg and could protect your wealth against having higher prices shrink your hard-earned savings.
And that's just the start of the guidance he's offering...
If you don't already receive Dan's Extreme Value newsletter and want to hear it all, check out Dan's latest message. To tell it, he has gone on camera in an interview with our editor-at-large Daniela Cambone. Listen and watch here...
Just for tuning in, you'll get a free stock pick from Dan... more information about the two most valuable assets to own in a time of crisis... and at the very least, you'll get to put a face to the name of our regular Friday Digest author.
Don't miss it.
On a related note, Daniela recently sat down with another of our favorites...
And she too is concerned about inflation, maybe as much as Dan is... She is Lyn Alden, founder of Lyn Alden Investment Strategy. I'm a regular reader of Lyn's work on the U.S. and global economy...
To have Lyn and Daniela sit down to talk "macro" is a treat for us – and, frankly, should be for anyone who's concerned about inflation and interest rates. They talked about a lot of ideas that are important to us...
Like the possibility for "stagflation"... what's going on with bitcoin... and what the Federal Reserve really can do, if anything, to fight inflation.
In short, Lyn says government debt is so high that if the Fed raised interest rates to where "real" rates – yields minus inflation – were positive, it would be too much for the government to bear. As Lyn told Daniela...
The macro backdrop to this whole thing is that with federal debt to GDP well over 100% and private debt to GDP even larger, if [the Fed] were to normalize to structurally positive real yields, the interest burden would be massive on that debt.
This is an idea that can't be talked about enough...
In the third quarter of 2021, the most recent data available, the U.S. government's debt was 122% of gross domestic product ("GDP"), meaning our debt load is greater than our current economic output...
As Lyn pointed out, the last time the U.S. had so much debt relative to economic production was in the 1940s, which included World War II... and two recessions. U.S. debt-to-GDP was 119% in 1946, the year after the war ended.
Back then, the government artificially held interest rates low despite inflation running hot because it had no other way to finance its war debts... which led to a string of consequences we're still feeling today.
In 1942, the Fed and U.S. Treasury agreed to keep interest rates on government bonds at rock-bottom levels... and the policy continued throughout the duration of the war, while inflation was volatile and often in double digits.
In any case, the government maintained long-term rates below 2.5% for eight years until 1950, when tensions between President Harry Truman, the Treasury Department, and Fed officials boiled over...
The Fed wanted to lift the rate cap given new Korean War-related inflation concerns... The president didn't want to do that, to protect the value of war bonds.
This conflict eventually led to the Treasury-Federal Reserve Accord in 1951 that resulted in the "liberation of monetary policy" and gave the Fed "independence," in the form it has now, from direct political direction.
Only then did the Fed end the "yield curve control" of the WWII era...
It looks a lot like postwar policy today...
Today, with a former Fed chair, Janet Yellen, leading the Treasury Department, we're back to the situation the Fed and Treasury had 80 years ago.
Real interest rates were negative for years back then... dropping to lower than negative 5%... Real rates now have been mostly negative, even on 30-year bonds, since March 2020.
It took until the mid-1950s, about a decade after World War II ended, for "real" long-term rates to crawl back above zero for more than a brief period... and enter a long uptrend that peaked when President Richard Nixon unpegged the U.S. dollar from the price of gold.
Our Gold Stock Analyst editor John Doody considers that the "day the U.S. dollar was murdered"... If we're comparing time periods directly, we're a long way from a tectonic world reserve currency regime change, but we are at the start of something...
Whether a geopolitical conflict blossoms into World War III soon... or possibly the pandemic is the "war" this time... doesn't really matter. Negative "real" interest-rate policy has already been going on for nearly two years, and there will be consequences now as there were then...
Are we to think 'this time is different'?...
No, says Lyn...
My base case is that we're going to have negative real yields for most of this decade.
This means that a traditional 60/40 stock-bond portfolio isn't going to cut it in the decade ahead... Lyn says we may see brief periods of deflation tied to short-term events. But over the next 10 years, she expects inflation to be the biggest theme of the global economy...
Given how high government and private debt is, she says it's going to be hard for central banks to meaningfully raise interest rates and that we'll see a long "devaluation period" of U.S. currency. That probably doesn't sound good ‒ particularly if you are interested in growing your money.
To combat inflationary pressure in the years to come, she suggests owning "hard assets" like precious metals that will rise in relative value in this environment while also keeping cash on hand to pounce on buying opportunities in areas like emerging markets.
Lyn told Daniela...
You can avoid some of the more severe scenarios while still participating in some of the markets that are pretty cheap and then have some growth.
If these ideas sound familiar to you, they should... They align with Dan's thinking right now about how to protect your portfolio from inflation.
If you're trying to make sense of all this...
You might be well-advised to check out Dan's latest presentation...
Nobody can tell you exactly what is going to happen with the course of inflation in the months or years ahead... but what you can do is make bets on the possibilities of various events unfolding...
Ultimately you just want to be prepared for whatever it is that does happen.
Inflation "being a thing" for a while is a pretty good bet... and it's one that is the most dangerous of the five key cyclical trends Dan is watching right now, including a sharp drop in stocks.
As Dan wrote in yesterday's Digest...
Bear markets are painful, but they don't last forever... And they'll wind up being the greatest buying opportunities of your investing career.
Inflation is more of a problem... It can inflict severe damage on stocks and bonds, and it can last much longer than the average bear market...
Your dollars lose a little bit of value every year, even when inflation is low...
As regular readers know, Dan says that owning gold, silver, and a little bitcoin will protect you against inflation over time... and while the value of your cash will suffer, higher prices still won't stop a cash pile from doing its job ‒ that is, allowing you to scoop up bargains in a bear market.
But he says...
The tricky part is preparing your equity portfolio for inflation.
Check out Dan's solution... It's a mix of 10 stocks from several sectors that are likely to not only hold up against inflation, but profit from it, either directly or indirectly. If you want to protect yourself, take a look...
It's a simple, yet very specific plan – one that does not mean "selling everything" or trying to time the market or short the market... This is an allocation you can put into place now and know that you've done what you can to ward off the inflation monster from your portfolio.
If you want to learn more, click here to hear directly from Dan... Existing Extreme Value subscribers and Alliance members, you can find the latest research we are talking about right here. Enjoy.
ARK Invest's Big Trends for 2022
ARK Invest founder Cathie Wood has been in the headlines for the wrong reasons lately... as her headline-grabbing, tech-heavy funds have gotten pounded in the recent stock market sell-off...
But Stansberry Research senior analyst Matt McCall is looking past the short-term news and instead focusing on the long-term growth power of the innovations that ARK Invest is known for investing in.
The firm recently published its annual report – "Big Ideas 2022" – and Matt has pored over the details and is now sharing his insight in this edition of Making Money With Matt McCall.
Matt talks sectors that ARK expects to grow the most, like gene sequencing, robotics, and battery technology, he shares what he agrees and disagrees with, and he discusses much more about the current state of tech stocks.
Click here to watch or listen to this episode right now. And to catch all of Matt's shows and more videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime.
New 52-week highs (as of 2/7/22): AbbVie (ABBV), American Express (AXP), CVS Health (CVS), Freehold Royalties (FRU.TO), Hershey (HSY), Mosaic (MOS), Raytheon Technologies (RTX), Shell (SHEL), W.R. Berkley (WRB), and Zeta Global (ZETA).
In today's mailbag, more feedback on Part I of our annual Report Card... Let us know your comments, questions, and concerns with an e-mail to feedback@stansberryresearch.com.
"I just wanted to drop a note to say how much I appreciate the report cards that you do for each investment newsletter. I think that this is very important as everyone should be interested in how their recommendations have done over time and compared to the overall stock market.
"It helps Alliance members like me think about who I want to pay most attention to and not just focus on sectors that I prefer myself.
"I am looking forward to the next installments coming up. I also think I am going to adopt at least one of your Portfolio Solutions. They look really good to me." – Stansberry Alliance member Brendan S.
All the best,
Corey McLaughlin
Baltimore, Maryland
February 8, 2022