Company We'd Rather Not Keep
The latest market action... Company we'd rather not keep... Dave Lashmet on the road in Spain... Apple's new watch patent... The 'salvation' protein... Two new bonuses for Alliance members... Mike Barrett's new tool… Read Bill Bonner's latest work...
Treading water – almost...
That's what it looked like most of the U.S. stock market was doing today... The major indexes were in the red, then green, and back again a few times, not budging significantly until mid-afternoon, when things went south for good.
This has been the trend since Friday, when Mr. Market finally started believing Mr. Powell and company about their plans to keep raising interest rates indefinitely. We've covered those details and what that means over the long run enough the past two days.
Today, U.S. stocks saw losses for the fourth straight day. The declines have accumulated to roughly 4% in the past week for the benchmark S&P 500 Index and about 5% for the tech-heavy Nasdaq Composite Index...
These major indexes are now down double digits since their previous highs... As I (Corey McLaughlin) wrote yesterday, just two weeks ago, they rallied close to their 200-day moving averages – a simple technical measure of a long-term price trend.
But since then, the indexes have fallen like rocks kicked off a cliff... back closer to or just below their 50-day averages, a good short-term trend indicator...
It's whiplash, you could say, and another potential inflection point for stocks in 2022.
In any case, stocks are finally catching 'down' to bonds...
As we wrote earlier this month, the bond market hasn't been buying what the stock market has been selling...
As stocks rallied the past two months on expectations of a "Fed pivot" to easier policy and lower interest rates, the bond market – which you could argue is more directly influenced by such a potential – was telling a different story. Yields fell a little, but not significantly.
Today, the 10-year U.S. Treasury yield traded up again near 3.2%, and it's once again lower than what a 2-year Treasury is offering: closer to 3.4%. This widely followed "yield-curve inversion" has now been in place for two months, with no interruptions...
Historically, this has been a screaming warning sign of economic trouble ahead...
Specifically, it points to a recession within the next year or two...
When long-term yields trail short-term yields, it indicates that sophisticated investors are more concerned about the risks of locking up money in the shorter term than the long term.
This isn't a "healthy" market behavior... and is the opposite of the risk-reward dynamic you'd expect.
The last time the 10-year/2-year Treasury yield spread was negative for this long was at the start of an eight-month "inversion" bridging 2006 and 2007 ahead of the financial crisis... And before that, the longest stretch was a nearly year-long inversion that started just before the dot-com-bubble peak in 2000.
You could find us guilty of "recency bias" citing this history, but the recession of 2001 officially began about a year after the inversion in the bond market... and the deeper crisis (and recession) of 2008 and 2009 followed just under a year after its yield wackiness.
This is company we'd rather not keep. So, this opening soliloquy is all to say... be wary of more downside ahead.
Moving on, we have another 'on the road' report from our Dave Lashmet...
Our Stansberry Venture Technology editor Dave Lashmet is in Barcelona, Spain attending the European Society of Cardiology annual meeting.
If you're asking why, well, as we've said before... there's nothing like boots-on-the-ground research. It lets you see opportunities that most others in the investment community don't.
As Dave told us in a note from abroad earlier this week, he likes to attend this particular meeting every year because...
Drugs and medical devices are a global business – and the European meetings are four months ahead of the American Heart Association conference. This gives us a four-month head start on what to invest in, since Wall Street guys don't come here...
There were hundreds of presentations at this meeting...
Venture Technology subscribers will hear more details soon, but in the meantime, Dave wanted to share a taste of what he learned with Digest readers... And we're happy to pass it on.
This has been a tough year for the markets – the worst first half for U.S. stocks in 50 years and one of the worst first six months for the 60/40 stock-bond portfolio in the past 100 years. But there are still long-term opportunities to be had and developments worth tracking.
Three medical breakthroughs of note for investors stood out to Dave at this conference. He takes things over from here with the details...
The development of medical devices was striking...
In a session sponsored by medical-device company Medtronic (MDT), I (Dave Lashmet) saw implantable pacemakers that can reset heart rhythms and are now individually tailored to patients. And this technology is adaptive, with the device able to change its tune based on data collected per minute.
This saves battery life for the device – and it also greatly improves patient outcomes. Clinically, there's a 50% survival advantage with the new gear.
One amazing use for all the data coming from adaptive pacemakers is to send this information to your doctor via the Internet. Doctors in nearby Portugal do this, and an artificial-intelligence algorithm can rank patients into high-risk, moderate-risk, or low-risk groups – and reach out to the high-risk patients. The hospital can check your meds and even confirm whether you are actually taking them.
For folks who don't have implanted pacemakers, a hospital in Portugal is giving out gadgets – basically smartwatches that also record blood pressure, the steps you take, your activity level, your heart rate, and your oxygen saturation. Nurses review these data and call you if they need to – to keep you from being rushed to the hospital with heart failure.
I was equally impressed by the smartwatches from Apple and Google, which offer heart rate and activity data already, and which are at the cusp of adding oxygen-saturation rates.
They will eventually add blood-pressure monitoring, too.
Earlier this month, Apple filed a patent application to add a blood-pressure monitor to its watches. Here's an illustration from its application with the U.S. Patent and Trademark Office, filed on August 4. The monitor is in yellow...
We've seen early attempts at these kinds of devices already. But a watch taking your blood pressure hasn't yet gone mainstream.
In a few years, world-class heart monitoring will be available on your wrist. And no offense to Swiss watchmakers – or Swiss watch collectors – but fine-tuned mechanical devices don't do this.
Second, there's new data on heart pills that investors should know about...
Some pills designed to treat diabetes (so-called SGLT2 drugs) looked like they helped in heart failure, too, and some of the clinical data were first presented at the European Society of Cardiology meeting...
One trial for a pill called Farxiga, made by AstraZeneca (AZN), spent two years tracking more than 11,000 patients with less-severe heart failure. The study concluded that Farxiga reduced the risk of death by 10%.
For investors, note that Eli Lilly (LLY) and the privately held Boehringer Ingelheim make a competing drug, Jardiance. Both are already widely sold for treating Type 2 diabetes... In other words, there's competition.
For example, Farxiga generated $2 billion in topline revenue for AstraZeneca in the first half of 2022, up 67% year over year, while Jardiance made $880 million just for Eli Lilly so far this year – and Jardiance sales are up 32% year over year.
But there's upside for both, too. These drugs' use to treat heart failure is just winning regulatory approval. So sales of both these SGLT2 drugs could easily double from here.
Third, I saw a 'salvation' protein drug being used in heart patients for the first time...
The reason I call it the "salvation" protein is it turns up during times of starvation, so you survive. This natural human protein rips fat out of your liver and even your muscle beds, helping you get stronger even in extremely troubling times.
The formal name of this protein is Fibroblast Growth Factor 21 ("FGF 21"), but salvation protein is closer to its true function. A series of small and large drug companies are changing this natural human signal by adding polyethylene glycol ("PEG"), which lets it stay inside the human bloodstream for days rather than just hours. This allows once-per-week dosing.
As Venture Technology subscribers know, I've been tracking this drug to treat fatty liver disease – since it both removes fat and gets rid of scar tissue in your liver. (Existing subscribers should check out my latest update on this topic in our July issue here.)
In heart patients, the focus was on reducing triglycerides. In the trial data I saw, taking this drug for eight weeks saw triglyceride levels drop 57% – whereas the control group only saw a 12% drop. Thus, there was a 45% net drop compared to controls.
More to the point, 80% of people on treatment had their triglycerides return to normal, healthy levels, versus 2% of the control group... the one person who suddenly became an exercise freak. Mind you, these data are still early in the review process – but the salvation protein is in people for a reason, so exploiting this channel as a pathway for better health makes sense to me.
Bristol-Myers Squibb (BMY) is the most advanced in clinical trials for bringing a PEG-style salvation protein to the market and is the best play on it right now.
All in all, this conference showed me that the worlds of science and medicine are recovering from COVID-19 disruptions. All of us stand to gain from this – heart patients, their families... and investors. I'll have more to say in future issues of Venture Technology.
In the meantime, until I'm back in the States, good investing.
Finally, today, we want to highlight two new bonuses for Stansberry Alliance members...
Corey back here again to close things out with this bit of good news...
First, Alliance members are likely familiar with Stansberry Research analyst Mike Barrett. He has worked alongside editor Dan Ferris on Extreme Value for years and started the 10x Investor newsletter last year.
Now, Mike has launched a powerful new stock-research tool... designed to help folks make highly informed investment decisions based on a curated list of 100 market-leading stocks by focusing on what matters most: price and time.
We can't give away too many details here since the general public can't purchase this tool. But we want to make sure Alliance partners know it is now available, free of charge as part of your partnership with us.
If you're one of our Alliance partners, you can find this tool right here. Enjoy poking around with it and let us know what you think.
Beyond this new tool from Mike, we have more exciting news to share...
As our Director of Research Matt Weinschenk announced to Alliance members in an e-mail last week, we're now hosting Bill Bonner and his team's latest work on our Stansberry Research website and sharing it via our e-mails...
As longtime readers know, Bill is a legend in our industry... Bill created a billion-dollar global publishing empire, though you probably wouldn't know it if you met him.
He's as sharp of a thinker and writer as we've ever read, with a view of the world we think is valuable for anyone to hear (especially politicians)... I can imagine many folks who would be excited to have Bill and his team's research at their fingertips (including me).
In fact, we've received kind words from folks already who are happy to have access to Bill's latest work. Some of you even mentioned you found our company – and our founder Porter Stansberry's work – through Bill, so things have come full circle.
Indeed, Bill played a key role in the founding of Stansberry Research 20-plus years ago and has been a supporter ever since... Bill's lead collaborator now, Tom Dyson, worked for us for years. If you've been with us a long time, you might remember his 12% Letter.
So here's the skinny... As Matt explained last week and we'll reiterate here, as part of a recent arrangement we made with Bill and his team to publish their work on their behalf, Alliance members can read it free of charge on our website and via our e-mails.
I simply want to make sure Alliance members get the details...
In case you missed it, here's what Matt wrote to Alliance members last week...
At Stansberry Research, we've arranged to host a new publication from Bill Bonner called Bonner Private Research. And as part of that arrangement, Bill Bonner has agreed to provide a special monthly digest of his research to our Alliance members, free of charge.
Bill's team compiles the best content his team produces over the course of a month and puts it together in this monthly letter. If you would like to subscribe to Bonner Private Research's Premium suite of content, produced daily, weekly, and monthly, you can sign up here.
We'll also share with you two of Bill's special reports and 12 monthly issues sent on the fourth Thursday of every month. We shared the first – written by Bill, Tom, and their colleague Dan Denning – last week.
Why is this happening now?...
Well, as Matt explained, it comes down to the logistics of our business...
While the Internet has made it easier for writers with ideas to reach readers, managing a publication on the Internet has also gotten extraordinarily complicated in recent years.
Bill doesn't want to set up servers, manage e-mail lists, or deal with software vendors. He just wants his writing to get into people's hands.
So Stansberry Research has volunteered to host some of Bonner Private Research's content on our website. We've got all the infrastructure set up – and we're glad to use it to help get Bill's research to the folks who want to read it.
In a sense, the arrangement is nontraditional – hosting another business's research on our site.
But in another sense, it's an especially traditional relationship: doing a favor for a friend.
As a favor in return, we asked Bonner Private Research to share their ideas with our Alliance members, and they happily obliged.
Now, also know we have no influence over what Bill writes, of course, nor do we want to. If he takes a position contrary to one we've taken elsewhere at Stansberry Research, we'll let our analysis stand on its own and you'll need to decide which holds together better.
And, just to be crystal clear, we're not the exclusive publishers of Bonner Private Research and do not control the company's future... We hope to work with them for many years, but we can't guarantee this arrangement will always be a part of the Alliance membership.
That said, we're happy to help some of our favorite and most insightful writers reach their readers, and we thank the Bonner Private Research team for putting trust in Stansberry Research. Alliance members can find Bill and his team's work here.
They Always Come Back...
In a discussion with our editor-at-large Daniela Cambone, Nicholas Prouten – COO of global payments platform Lode – talks about the dips in the gold and silver market. As Prouten says, "Investor sentiment lies elsewhere right now, but it will return. It always does."
Click here to watch this video right now. And to catch more videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime.
New 52-week highs (as of 8/30/22): SPDR Bloomberg 1-3 Month T-Bill Fund (BIL).
In today's mailbag, feedback on yesterday's Digest... and more conversation about federal student loans, including a suggestion about how to handle them... Do you have a comment or question? As always, e-mail your notes to feedback@stansberryresearch.com.
"The problem is expected average returns on equities over the next 10 years are said to be very low based off of P/E ratios. Nothing else then matters. It's another lost decade for US stocks like the 1970s and 2000s." – Paid-up subscriber Mike M.
"Maybe more people of college age should consider not going to college. Right now, 40% of kids who begin college end up dropping out, after having spent thousands of dollars to feed the beast of billion-dollar college endowment funds, and those who dropout get virtually nothing out of the deal.
"Too many in our culture have decided jobs in the 'muscular class' are beneath their precious spoiled brat nitwit kids. So they send them out to spend money they don't have, learning things that mean nothing, chasing jobs that don't exist." – Paid-up subscriber Randall B.
"Wow, I could hardly believe what I was reading [in yesterday's mailbag]...
... but imagine being a Millennial (me) and going to college during or before the '07-'08 housing crisis... Crony capitalism, skyrocketing costs for higher education, and stagnant wages make it nearly impossible to achieve the same success our older generations had without working twice as hard...
"I had three jobs, a dead father and a mother to support and still managed to buy a vehicle, pay my tuition through university, and start my own business, buy property(ies) and prosper... I never made excuses about the 'easy life' the previous generations enjoyed!
"... and I never borrowed money, let alone expected someone else to pay off my loans...
"No wonder things are so messed up... can you imagine believing this sad story??...
"The opportunities available to today's youth are a magnitude greater than what was available in my era. Of course, you have to be prepared to work for it. The participation medals stop once you enter the real grown up world. I guess this is a tough transition for some." – Stansberry Alliance member G.M.
"Seems to me the colleges and universities that benefited from selling essentially worthless degrees should be the ones repaying the student loans. Politicians most likely will avoid that discussion however as those are the institutions preaching the socialist gospel.
"To parrot Porter... Country, meet heck and the handbasket." Paid-up subscriber B.N.
"I've no personal exposure to college student loans, and even less with debt forgiveness. But I do have suggestions...
"To qualify for government-backed student loans you must agree to have the first 10 years of your employment data entered to a nameless database. Pretax payroll deductions of a fixed percentage (or fixed amount) will be levied until the debt is repaid.
"Government-backed student loan amount maximums and repayment framing should be allocated on a weighted scale based on the moving 10-year average of Reported Gross Pay from previously funded graduates – regardless of their employment choices or lack of opportunities. If a borrower earned a degree and can't get a job doing it, or it doesn't pay as well as it used to, it should be reflected in future weighting. Taxpayer funding of nonproductive education is political theft.
"Maximum Loan Example:
"Math, Sciences, Medical, Agricultural and Engineering = 100%
"Trade skills and Manufacturing = 100%
"Business, Accounting and Economics = 80%
"Legal = 0 to 10%
"Political Science = 20-50%" – Stansberry Alliance member K.P.
All the best,
Corey McLaughlin with Dave Lashmet
Baltimore, Maryland and Barcelona, Spain
August 31, 2022