The Next Rate-Cut Cycle Is Now Underway

Thanks – and kudos – to Dan... The next rate-cut cycle is now underway... Or is it?... The bottom line on today's Fed announcement... Last call for tonight's 10X Summit...

We'll begin today's Digest with a quick 'thank you'...

Extreme Value editor Dan Ferris graciously agreed to cover for me (Justin) while I was on vacation. And as several readers have noted in the mailbag this week, Dan produced a fantastic six-part series on the absurd excesses in today's markets. Last Friday's Digest in particular is a "must read," and in my opinion, among the best we've ever published.

It's clear why he's one of the most-respected editors in our business. He's not only a highly skilled equity analyst, he's a brilliant writer and historian.

If you missed any of Dan's Digests over the past two weeks, be sure to go back and read them in the Digest archive here. And if you enjoyed what you read, I urge you to learn more about a subscription to his excellent Extreme Value advisory right here.

Thank you, Dan. You're a tough act to follow.

For my part, I hoped to fully 'unplug' from the markets while away...

And I'm pleased to report that after a few days of unsuccessful attempts, I was finally able to do so for the first time in years.

Instead, I spent much of my time chasing a small white ball – or more correctly, many small white balls – up and down the southwestern coast of Ireland.

I won't burden you with the details of my trip. (Though, if you're an avid golfer, I cannot recommend a visit enough... the "old" courses at Ballybunion and Lahinch were particular highlights.) However, if you'll indulge me for a moment, I would like to share one brief personal note...

We hear a lot the importance of 'work-life balance' these days...

But if you're anything like me, achieving it is easier said than done.

Make no mistake, I'm not complaining. I've been passionate about the financial markets for the better part of 20 years now. And I'm incredibly grateful to be able to make a living writing to you about them.

However, this passion isn't always healthy. Longtime Digest readers may recall I've taken relatively little time off since I took over the "reins" more than four years ago. But the reality is I've often found it difficult to step back from the markets even when I am away from work.

I also take my job quite seriously. (Probably too seriously, if you ask my publisher.) Like Porter, I feel a great responsibility to give you the information I would want if our roles were reversed. And frankly, I tend to judge myself harshly when I feel I fall short of that goal.

Add in the usual daily stressors we all deal with – and an unfortunate string of family health crises – and you have a recipe for significant burnout... or worse.

This is where I suddenly found myself this spring.

I won't profess to have gained any life-altering insights while away...

But I can tell you that even a couple of weeks of focused effort on the "basics" – being mindful, getting plenty of sleep and activity, and simply enjoying the moment – made a tremendous difference in my wellbeing.

And like Porter explained earlier this year, I hope to make this type of "work" a significant part of my life going forward.

Switching to the markets, all eyes were on the Federal Reserve today...

The Fed wrapped up its July policy meeting this afternoon. And as expected, the central bank announced a cut to its short-term federal-funds rate for the first time in over a decade. As the Wall Street Journal reported...

The Federal Reserve cut interest rates by a quarter-percentage point – the first reduction since 2008 – in a pre-emptive strike to cushion the economy from a global slowdown and escalating trade tensions...

Eight of 10 Fed officials voted in favor of lowering the short-term benchmark rate to a range between 2% and 2.25%, while two officials dissented from the decision in favor of holding rates steady...

The policy statement released after Wednesday's meeting left open the door for the Fed to cut rates again in the months ahead.

However, in a surprise move, the Fed also announced it was ending it's "quantitative tightening" program earlier than expected.

As you may recall, the bank was originally planning to end the runoff of its nearly $4 trillion bond portfolio at the end of September. This program will now end tomorrow – August 1 – a full two months earlier than originally planned.

On the whole, the move initially appeared to be even more 'dovish' than the market had expected...

But then Fed Chairman Jerome Powell spoke.

As regular readers know, Powell's post-meeting press conferences haven't gone well. In fact, in all but two of his 11 conferences since taking over the Fed last spring, the market has sold off sharply following his remarks. And today was no exception. More from the Journal...

Fed Chairman Jerome Powell, at a news conference after the decision was released, called the rate cut a "mid-cycle adjustment" and didn't rule out more reductions.

But he also said it was "not the beginning of a long series of rate cuts" because that path is only followed at times of more severe economic distress.

"That's not our perspective now, or outlook," he said.

In short, as we've discussed, the markets had already been pricing in additional rate cuts later this year. But Powell's speech created significant uncertainty about that view.

Count us as skeptical about Powell's supposedly 'hawkish' remarks...

We've heard similarly conservative statements in recent months, yet the Fed's policy decisions have been decidedly dovish since its sudden "change of heart" early this year. We suspect that will continue to be the case.

However, we'll also remind you that should the Fed continue to cut rates, it may not be the bullish signal many folks apparently believe. As Dan noted in the July 19 Digest...

Extended rounds of interest-rate cuts have generally correlated with recessions... and equity bear markets. Look at the last few U.S. recessions compared with the upper bound of the federal-funds rate targets established by the Federal Reserve. It's pretty clear that falling fed-funds rates have gone hand-in-hand with recessions.

You don't need a visual to know how poorly stocks perform during a recession. Just look at the above chart, and think about it. You probably remember those last two recessions and the corresponding bear markets quite well.

The upshot of this chart is that, when the Fed starts cutting rates, watch out. It means the Fed smells trouble.

Of course, as Dan also noted many times during his series, this doesn't mean you need to sell all your stocks today.

Yes, be conservative with most of your money. Hold plenty of cash. And own some gold and silver.

But there's no reason you can't still keep a portion of your portfolio in high-quality stocks and even a few speculations. If Steve Sjuggerud is correct – and we see a full-blown "Melt Up" before this bull market finally ends – you'll be glad you did.

One last thing...

If you're looking for legitimate speculative opportunities – stocks with real potential to rise 1,000% or more in coming years – we urge you to tune in for a special broadcast tonight...

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During this event, renowned growth investor Matt McCall will detail the absolute best ways to make 10 times your money over the coming years... and he'll mention over A DOZEN stocks that are set to soar in value, including his No. 1 stock to own over the next five years. (He believes it will go up 1,000%.)

Over the past decade, Matt has recommended 16 different stocks that have gone up 1,000% or more. Tonight, he will reveal the common DNA his "10X" winners share and the strategy he uses to uncover them before they go up.

Again, this event kicks off promptly at 8 p.m. Eastern time... and it will be packed with actionable ideas you can put to work immediately. Click here to reserve your seat now. (And be sure to have a pen and paper handy so you can write down all the stock ideas, including the ticker symbol of Matt's next potential 1,000% winner.)

New 52-week highs (as of 7/30/19): CBRE Group (CBRE), Sprott Physical Gold and Silver Trust (CEF), iShares U.S. Home Construction Fund (ITB), MAG Silver (MAG), Medtronic (MDT), Nestlé (NSRGY), Nuveen Municipal Value Fund (NUV), New York Times (NYT), Osisko Gold Royalties (OR), Procter & Gamble (PG), Royal Gold (RGLD), ResMed (RMD), Service Corporation International (SCI), and W.R. Berkley (WRB).

High praise and misplaced vitriol... Today's mailbag has it all. As always, send your notes to feedback@stansberryresearch.com. Good, bad, or ugly, we'll read them all.

"Hello Dan, I have followed your postings for some time and enjoyed the common sense approaches you espouse. I was driven to write in to Stansberry feedback concerning your July 26th posting 'The Freedom in Knowing the Market Doesn't Owe You a Thing.' WOW! You knocked it out of the park on this one. You summed up the foundation of true life and how prosperity should work. Loved it, believe it, and I hope I operate accordingly. I am going to be quoting your piece to whomever will listen." – Paid-up subscriber Richard B.

"Good afternoon! Just had to comment on Dan's work [last] week. His Digests were outstanding! Friday's was particularly intelligent, insightful, and educational. There is no teaching, only learning, and I am forever grateful to Dan and all the rest of the folks at Stansberry for all I've learned as an Alliance member. I feel prepared for the 'meltdown'!" – Paid-up Stansberry Alliance member Nancy V.

"Bravo Dan! Excellent Friday Digest. You hit the nail on the head when you quoted Harry Browne that 'Nobody owes you a thing.' If you invested half of your portfolio in the latest hot IPO and it blows up in your face it's your own fault for believing the hype. Deal with it, live with it, and learn from it.

"Dan asked the question about Elizabeth Warren, is she ignorant or downright evil for saying she will forgive student debt if elected. Oh she's downright evil Dan, she knows exactly what she's doing and saying, she'll say anything to get elected.

"She's not alone though, all the politicians are doing the same thing. If you watched any of the Democratic Debate awhile back everyone was trying to 'Out Santa Claus' the other with giveaways and promises they'll never be able to keep... which brings me to another point. They used to say, 'Free.' Free Healthcare, Free College Tuition, etc. But they got called on it when people questioned, well nothing's free, somebody has to pay for it.

"Their only answer was 'The Rich.' So [they] came up with the words "For All." Medicare For All, College For All, Jobs For All, Tissue Paper For All, so you can wipe your snotty noses, but I digress. The point is, 'Nobody owes you a thing' and after decades of ALL politicians making these outlandish promises they can never keep you would think the masses would wise up. But no, every time there's an outlandish promise made, they go for it like a ham sandwich." – Paid-up subscriber K.S.

"Mr Brill, regarding your Stansberry Digest letter from [Monday]. Seriously. Do you really think anyone is paying attention to anything that pig of a man in the white house is saying?

"The moment you pulled up yet another 'tweet' from that coward trump (lower case on purpose) I immediately knew that you have no real grasp of what is really going on in this country. Your credibility is seriously suspect as I can see now that you're just another shill for the liar in charge.

"Good luck supporting someone who is a failed businessman, former TV game show host, misogynistic liar, borderline pedophile, admitted racist and narcissistic fascist who has no character and cannot be trusted. I'm sure you wouldn't let your wife or daughter alone with him for 5 minutes. You've got to come up with something a lot better than referencing anything 'the idiot' would have to say in any discussion.

"Sorry – I'm not buying any of what you or the idiot are saying. My personal fortunes have decreased since the idiot took office. I have not had a pay raise since 2011 and my taxes have gone up. Not sure how all this stock market progress is helping me. Hoping for a 2008 style stock market crash." – Paid-up subscriber Mathew B.

Brill comment: Mathew, it seems you're no great fan of the president. However, if you had made even the smallest effort to put your political biases aside, you might have noticed that Monday's Digest was anything but an endorsement of the president's views on the Fed.

More important, you might also have noticed that this essay wasn't authored by yours truly at all. Rather it was by my colleague Vic Lederman, analyst for several of Steve Sjuggerud's publications.

Of course, I don't expect either of those facts will change your mind.

Ah... It's great to be back.

Regards,

Justin Brill
Baltimore, Maryland
July 31, 2019