The Best Inflation Hedge Anywhere in the Markets
More on Doc's presentation... A handful of stocks deliver most of the returns... The best inflation hedge anywhere in the markets... Watch a replay of Doc's event now... Sniffing around for a bottom... Video: The changing of the world's reserve currency...
We're still digesting all the great information Doc shared yesterday...
As paid-up subscriber Neil S. wrote to us about our colleague Dr. David "Doc" Eifrig's new on-camera presentation, which debuted yesterday...
As always, very interesting information and Doc always overdelivers. Thank you.
I (Corey McLaughlin) agree with that succinct summary. I think anyone who tuned in to hear Doc's message – about the retirement "shock" coming to America... and what to do about it – would also feel this way.
If you missed the presentation, you can watch a replay here, for free.
As I wrote last week, Doc never hesitates to educate us...
It could be the time he was the first to notice retailers issuing refunds without requiring a return...
Or it could be an insight into how his wine business relates to our business at Stansberry Research... I remember this lesson while sitting near Doc during a ride to an airport a few years ago, in which he compared wine tastings to free newsletters.
Yesterday, viewers were treated to what I mean...
Among the fascinating observations and advice Doc shared was this analysis of the markets that indicates stock-picking is a worthwhile pursuit...
In a study of more than 25,000 stocks, researchers found that just 1,000 of them – a mere 4% of the total – accounted for all of the $32 trillion in stock market gains over a 90-year period.
Just 30 of those – the top one-tenth of 1% – were responsible for $11 trillion. A third of the total gains over nearly a century.
And of those 30 stocks, five were from a single sector.
Of course, Doc then named this sector... and he explained why this is the perfect moment to invest in it...
The best inflation hedge in the markets...
These are some of the most defensive stocks on the planet, he said... But they can deliver massive returns with relatively low risk. And they outpace inflation because they have almost unlimited pricing power.
In fact, Doc said 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. Twice as good as gold. Nothing else came anywhere close.
Without giving away all the details, I can tell you this is a group of stocks that makes a ton of sense to consider buying today. And while beating inflation is one important factor, it's far from the only reason...
What he's talking about is a much bigger story, Doc says, and one that most people don't understand.
And keep in mind... this is from the same guy who warned last year about this year's massive rout in stocks and bonds because of inflation – another story most people didn't understand.
So, if you're interested at all in what I'm saying, it's worth giving Doc's entire presentation a listen to hear the message directly from him. You can do so here.
And Stansberry Alliance members, feel free to watch... I think you'll find the video enlightening. But also know that you have instant access to the new research Doc is talking about right here as well.
Moving on, we continue to sniff around for signs of a bottom...
This latest whiff comes courtesy of Bank of America's latest Global Fund Manager Survey.
We've mentioned this survey before... It shows the positioning and outlook of hundreds of professional money managers. This month's survey includes responses from 293 pros who manage roughly $800 billion of assets.
Today, this group continues to go to cash. We've only seen this much selling near the bottom of most (but not all) big market sell-offs of the past two decades.
As our colleague and Stansberry NewsWire editor C. Scott Garliss told us today, the average cash balance of these money managers rose from 5.6% in June to 6.1% this month. That's the highest level since October 2001, following the 9/11 terrorist attacks...
This has typically been a contrarian, leading bullish indicator for stocks in the past...
Whenever these money managers have unusually high levels of cash (above the top end of the historical average range indicated by the top red line in the chart), it has signaled a market turnaround.
In the 12 months after each of the cash "peaks" circled above, Scott found that the S&P 500 Index has returned nearly 20% on average (including dividends). Only the peak period after July 2000 – the wake of the dot-com bubble – saw negative returns (with stocks falling 14.3%).
This doesn't mean we're calling a bottom today...
It would be irresponsible to do that based off one set of data. For one thing, you can see that the average cash balance of surveyed money managers reached near 8% after the dot-com bubble started to burst in 2000... But that didn't stop stocks from crashing from there.
The tech-heavy Nasdaq Composite Index didn't hit a bottom until it fell 78% from its peak more than two years later in October 2002... and folks were burned by many bear market relief rallies along the way.
This is an exception we're not prepared to ignore...
Given the record-high valuations we started this sell-off with, pro money managers might have more risk to take off the table yet (the path of inflation is still a big unknown, for example)... sending their average cash balance higher.
But the point is, Wall Street has already gotten defensive lately.
And maybe these money managers are right, though late... We'd argue the time to get most defensive would have been in January and February, not in July after the major indexes are down 20% and many individual stocks are down much more.
Similarly, today is the time to think about when to get bullish again...
All in all, the takeaway is that pro money managers aren't behaving the way we normally see at a top... On the contrary, this is a sign we could be getting closer to a bottom.
Now, it's far from the sign, but it means we'll keep sniffing around for more.
The Changing of the World's Reserve Currency
Will the U.S. dollar remain the world's reserve currency? What happens if it doesn't? Here's a compilation of what our editor-at-large Daniela Cambone's interview guests are saying...
Click here to watch this episode right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime.
New 52-week highs (as of 7/19/22): Centene (CNC).
In today's mailbag, feedback on the note in yesterday's Digest about the House speaker's husband trading shares of chipmaker Nvidia... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Paul Pelosi and Nvidia... Yeah, it stinks to high heaven. Still, how do you prove corruption? This email is being written on a recently new Dell laptop. It has relatively high-end Intel chips and a relatively high-end graphic chip made by (ta da) Nvidia. They're ubiquitous, and so reasonable as a long-term investment.
"And, with the long-term fate of Taiwan questionable, there is no question that we need to ramp up chip production in the U.S.
"So, I'm with you. The only good takeaway is that a bill that I think important for our long-term national security will probably pass." – Paid-up subscriber Edward S.
"Dear Folks at Stansberry Research, Keep up the good work with these Digests! It's one of the few things I look forward to everyday.
"I understand y'all are finance people and not lawyers, but do y'all think Nancy Pelosi is committing insider trading via Paul's investments? Or is it still perfectly legal since Nancy is not doing the investments herself? It seems like to me that there's still a conflict of interest since Nancy is telling her husband what's going to (POSSIBLY) happen in the near future, and pardon my French, that's not f****** fair!" – Paid-up subscriber Jose T.
Corey McLaughlin comment: There's nothing, as far as I can tell, illegal about Paul Pelosi's trading under the letter of the law. I wasn't suggesting that. But I agree with you that it stinks in spirit, raises a lot of questions, and sows mistrust... which we have enough of in life these days.
I do want to clarify an important point about this story, though...
According to public filings compiled by the great site Capitol Trades, which tracks the stock trading activity of Congress, what the House speaker's husband actually did was exercise 200 Nvidia call options (20,000 shares) with a strike price of $100 expiring June 17.
He bought these options on June 3, 2021. So, our main point about this trading behavior raising questions still stands. If we infer Mr. Pelosi was "buying the rumor" of the semiconductor bill last year, he is "selling the news" of it likely passing now.
To that point, we learned last night that the bill – the Chips for America Act – is moving toward a final vote in the Senate later this week or next. And today House Speaker Nancy Pelosi said she would back the bill in the House, which will likely hold a vote next week.
Our colleague Matt McCall had more about this story in his Daily Insight newsletter today, in part noting about Mr. Pelosi's activity...
Coincidence? Doesn't seem like one to me. If you needed a flashing green light to tell you that the bill was likely to pass, this was it.
Now, don't go thinking this is a political statement. It's not. But it is fishy behavior generally.
Most people wouldn't put that kind of capital to work ahead of a major news announcement... unless they were confident about the outcome. I'll just leave it at that.
But here is another part of the story that is also interesting – and telling... When we look at the open and close dates of Mr. Pelosi's Nvidia trade, shares traded higher when he bought the options than when he exercised them last month.
So he actually likely lost money on this trade.
Now, this doesn't mean the House speaker's husband should be trading a stock with a direct link to a $52 billion congressional bill that would boost the chipmaking industry. There are thousands of other stocks he could trade options on instead.
And, barring a sell order that we might not know about yet, he still owns 20,000 shares of Nvidia, which are up 18% in the past week.
We don't know for sure if Mr. Pelosi had any knowledge that "we the people" didn't... But if he did, this shows that even if you think you have an information edge, you could still get the timing wrong if you're not careful and trade the news.
He would have been better off buying Nvidia shares back in 2016 when it was a much lesser-known company and selling them over the past few years – like our Venture Technology editor Dave Lashmet recommended for a combined gain of around 600%.
All the best,
Corey McLaughlin
Baltimore, Maryland
July 20, 2022