The Pitchforks Give Silver a Surprise Lift

The rest of the investing world... The Fed, vaccines, and earnings... Wall Street upended... Robinhood bans buying the 'short' stocks... The pitchforks give silver a surprise lift... Your feedback...

Today, we're taking a step away from the 'WallStreetBets' saga for just a moment...

Don't worry... we'll get back to it later in today's Digest. But first, I (Corey McLaughlin) want to do our due diligence and get caught up on the still-important things happening in the rest of the investing world...

As usual, our Stansberry NewsWire team has been all over the latest developments this week... They've been reporting on the heart of corporate earnings season, COVID-19 vaccine production and distribution news, the latest Federal Reserve speak, jobs numbers, cryptocurrencies, and more.

Here are a few of the highlights...

On the Fed front, it's more of the same...

Yesterday, Fed Chair Jerome Powell said the central bank is leaving interest rates unchanged and that it would keep buying $120 billion of assets each month (ho-hum).

During a regular media briefing, Powell was asked indirectly about the "rise of the short squeezes" and directly about the eye-popping valuations of U.S. stocks across the board... And he kicked the responsibility over to Congress and the rest of the government.

NewsWire editor C. Scott Garliss reported that Powell said fiscal policy and vaccination expectations are the drivers behind current asset-price rallies. As Scott explained...

The central bank is watching asset prices and leverage. It feels financial stability and vulnerability is moderate.

In the U.S., vaccine rollouts are happening – slowly but somewhat surely...

It depends on where you are, what store you go to, or who the governor is, in many cases.

But importantly, on a global scale, new strains of the virus that causes COVID-19 don't appear to be as high-risk as they could be...

On Monday, biotech company Moderna (MRNA) said that in recent studies, its vaccine has shown an ability to fight against emerging strains of COVID-19. From Scott in the NewsWire...

The results showed the vaccine produced neutralizing agents against "all key emerging variants tested," including the U.K. and Republic of South Africa strains.

That's important, considering the current global coronavirus-vaccination effort. It implies the process can move forward and drug companies don't have to go back to the drawing board and begin the process all over again. Moderna said it's also proactively creating new vaccine versions to address possible future strains.

The more we hear about "the vaccine" – which, of course, is being developed by many companies – the more it sounds like it could end up being used how the world uses the flu vaccine...

With the flu vaccine, different formulas are often given to different parts of the world. People in the Northern Hemisphere get a different shot than those in the Southern Hemisphere, for instance, according to the World Health Organization ("WHO"). Doctors then get together about every six months to review the formulas and perhaps change them, as well as the distribution plans.

It's not unimaginable that the COVID-19 vaccine will end up being used the same way.

And on the earnings front, there's a lot to report...

Be sure to check out our free NewsWire service for many more details on companies like Apple (AAPL), Facebook (FB), Tesla (TSLA), Comcast (CMCSA), Northrop Grumman (NOC), and McCormick (MKC).

But today, we wanted to take a closer look at coffee retailer Starbucks (SBUX)...

The company has weathered the pandemic very well, as we've noted a few times in the Digest. And that continued in the most recent quarter... Starbucks reported earlier this week that demand for its products continued to rise in its first fiscal quarter of 2021 and made about $6.8 billion in revenue.

While comparable-store sales largely declined across the board versus the previous quarter, we were intrigued that Starbucks' comparable-store sales in China jumped 5% for the period... It's also interesting that the company said it could see 100% comparable-store sales growth in the second quarter of 2021 in China.

This is notable because we've been tracking the company's handling of the COVID-19 pandemic as a kind of "ahead of the curve" bellwether for the entire story... and how great, capital-efficient companies can make it through trying times like what we've experienced.

For example, on February 20, 2020, we wrote a Digest headlined, "You Can Go to Starbucks in China... Just Take Your Temperature First." And we noted the "contactless" drink and food ordering options that Starbucks and McDonald's (MCD) were expanding at the time.

The point is, it was a sign of things to come... and an even bigger one than we imagined.

And then, in December, we noted how Starbucks – while dealing with the present challenges of the pandemic – was looking ahead to the future... because it could, given its strong balance sheet.

The company raised workers' wages by 10% and boosted its dividend by the same number in 2020.

Starbucks has decided in the years ahead to close in-person stores in favor of more drive-thru locations... It will close 1,050 Starbucks branches and open 2,150 new shops in different places to make this pivot in its business plan.

The company wants to reach 55,000 locations by 2030, up from about 33,000 today... And it said a lot of that expansion will be coming in China.

Our colleague and Extreme Value editor Dan Ferris put this all in good perspective in comments to NewsWire analyst Daniel Smoot earlier this week...

The COVID-19 pandemic over the last 12 months is what Warren Buffett might call a huge, one-time serious, but solvable, problem...

[Starbucks] can't really solve it, but it can certainly take action to mitigate its effects. In fact, it might prove anti-fragile, outlasting weaker, less well-financed competitors, strengthening its position in various markets.

So today, we want to get this point across... Starbucks is seeing a recovery happen where we first saw COVID-19 emerge a year ago – in China.

You could take that as a sign that more of the same could come as other parts of the world "catch up." By that, we mean getting to the point where more folks feel like they can roam freely again... and have more control of their lives.

It might take longer than most people hope or expect, but the blueprint is there.

Now, back to the story that has captured Wall Street's attention...

Things have been moving quick in the saga of GameStop (GME) and other short squeezes, so quick that we're getting into the fallout stage already...

Today, no-fee brokerage Robinhood and several other major brokerages either banned users from buying new shares of GME, movie-theater chain AMC Entertainment (AMC), and a few of the other stocks that have been "short squeeze" targets of the Reddit WallStreetBets crowd... or restricted how much they could trade "on margin."

As is commonplace in the investing world (and life), there are many tentacles and angles to this story... So if you missed our reports from the past two days, catch up here and here.

The move of stopping people from buying shares (the brokerages that did are still letting people sell shares) raises an entirely new set of questions. And it puts a spotlight on just how "connected" the market really is...

As NewsWire analyst Nick Koziol pointed out to us today, more folks are now talking about how Robinhood gets a large portion of revenue from selling "order flow" to hedge funds... That includes $40 million from Citadel, the same firm that helps fund Melvin Capital Management, an investment-management company that was short GME.

A class-action lawsuit has already been filed in New York against Robinhood today in response...

However that shakes out, this move to ban people from buying shares of specific stocks, but still allowing them to sell – having the rules changed in the middle of the game essentially – does two things...

First, it shows you why it can be wiser not to play with this leveraged fire, and instead, be entertained from the sidelines. And second, it will probably add more aggression to the Redditors' "taking it to the 1%" sentiment that we believe is fueling the madness, as we wrote in yesterday's Digest.

What's more, the story has gotten so big that it looks like regulators are suspicious about "who started it."

As Scott told us in a message earlier today, there's talk on Wall Street that the Financial Industry Regulatory Authority ("FINRA") and the U.S. Securities and Exchange Commission ("SEC") are looking into who's behind all of this stuff in the chat rooms... FINRA and the SEC want to see if it's other professional investors who are driving the "squeeze" activity.

We'll see what comes of that, too. In the meantime, it's still happening...

Silver Stock Analyst editor Garrett Goggin alerted subscribers today that the Reddit mob has shifted gears...

As we did yesterday, Garrett noted that decades of "easy money" monetary policy has a lot to do with what's going on here... that "the 99% are tired of losing due to easy-money policies and they are fighting back."

And today, Garrett said these traders turned their pitchforks to silver shorts in their latest attempt to fight the "establishment"...

He told subscribers in a special update this evening about what he was seeing on the Reddit message boards... Thousands of people were learning about the nuances of the silver industry for the first time...

They have realized that the biggest con game in town has been the rigging of silver prices. Banks have been heavily "net short" silver for years. If the price of silver stays low, the perceived value of the U.S. dollar remains relatively intact. When silver rises a great deal, people become worried as they see their dollar savings lose value. Inflation will spike, and the Fed will lose control.

Increased buying of silver – which we saw today – might actually force some folks on Wall Street to consider where they would find a place to buy and store more physical silver themselves. As Garrett explained in his update...

If everyone buys some silver, the iShares Silver Trust (SLV) and Sprott Physical Silver Trust (PSLV) exchange-traded funds will be forced to go into the market and buy physical silver.

Unlike stocks, physical silver supply is finite. The overwhelming demand will spike silver prices higher. The large banks use futures contracts and other derivatives to short the silver price. Right now, they are short hundreds of millions of silver ounces and stand to lose billions of dollars with every $1 rise in the price of silver.

This morning, silver traded up more than 5% to around $26.30 per ounce... And one of the stocks in Garrett's Silver Stock Analyst portfolio – which is heavily shorted by Wall Street – was up more than 20% today.

In a practical matter, Garrett says as a result of all this, the target prices of his Silver Stock Analyst "Fave 5" model portfolio may be blown through... which is far from a bad thing for subscribers.

And as it all plays out, Garrett notes that there's money to be made... So he plans to revise his price targets, if needed, once the dust settles. As he wrote in his update to subscribers today...

This is good upside volatility where you can make bucketloads of money. We will still issue target prices, but we will not sell if stocks surge past those prices. We will update them higher when we can catch up.

Things might be pretty unusual, and this might all sound startling – and maybe even scary...

But do not fret...

If you've followed our guidance the past two days – and before all this even hit the mainstream – you've hopefully stayed away from this unfolding situation, other than watching it and learning from it.

As we've said, for longer-term investors, the bigger point is that this is the type of "froth" that happens during what our colleague Dr. Steve Sjuggerud calls the "Melt Up"... It's when investors get more and more excited before it all comes crumbling down.

Vic Lederman, an analyst on Steve's team, put it nicely in this morning's edition of Steve's free DailyWealth e-letter. He said these events have all the markings of retail euphoria...

That's the whole idea of the Melt Up thesis. So don't let it scare you off.

Instead, remember these key Melt Up characteristics in 2021...

• Retail-trading fervor is to be expected. And it can last longer than you think.

• Volatility is normal. You should expect the market to move erratically. And don't be surprised by wild swings in retail favorite hot stocks.

• Lastly, corrections are normal too. The Nasdaq fell by roughly 10% five separate times before the ultimate peak of the dot-com boom.

From here on out, Vic said, we should expect to spot these Melt Up characteristics regularly.

We'll keep you posted on what we see here in the Digest... along with what it all means for the recommendations and advice you get every day, week, and month from our editors.

The Endgame of All the Unrest

In this exclusive interview with our colleague Daniela Cambone, Cornell University Professor Dave Collum – a popular figure on social media – chimes in on the political unrest we've seen and warns that he is fearful of civil war breaking out...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

New 52-week highs (as of 1/27/21): Autohome (ATHM), Cango (CANG), Cerner (CERN), Lumen Technologies (LUMN), 3M (MMM), Microsoft (MSFT), Seagate Technology (STX), and Vir Biotechnology (VIR).

In today's mailbag, insight on WallStreetBets, the topic of yesterday's Digest, from someone who has been there before... and more thoughts on Dan's latest Friday Digest, including one subscriber's investing strategy. Do you have a comment or question? As always, send your notes to feedback@stansberryresearch.com.

"I was on [WallStreetBets] for well over a year. For the most part, childish memes are the norm. But, every so often, something crazy happens, such as the Robinhood "infinite money" loophole. Regardless, it was plenty of entertainment for me.

"One thing you may have missed: the majority of the millennials on WSB have the attention span of [Squirrel!] the dog from the movie Up. They will move on after they are done with BB and GME. Thinking that they are going to keep holding as the stock starts coming back to real valuation is wrong. In all likelihood, they could start buying puts as that happens.

"They also know how to go short. And they pile into puts just as quickly as they do calls. If you go back through the various messages on the [page], you will see many examples of people buying SPY puts in March – and making just as much money, if not more, than they did with GME.

"You will also see tons of examples with people losing money. Threads starting with 'got my beer flu money from the government and lost it all' abound. Generally the original poster (OP) is also asking for advice on what options chain to pile into next.

"Unsophisticated? Yes, generally speaking. Although there are some rare instances where actual traders who post real strategies, usually they don't get much attention. This [page] is for people who want to gamble and make a big score. Or lose it all with a couple of clicks.

"Mob mentality? Absolutely.

"Fun to watch from the sidelines? 100%." – Paid-up subscriber Stephen B.

"To Dan Ferris: Great piece on volatility. While I tend to be a bit less cautious than you, I do recognize the potential for big surprises. I hope your readers take to heart what you said about surprises.

"On Oct. 19, 1987, I spent the whole day sitting with a broker friend. I was long very few stocks and had gone long T-Bond futures the prior week. It was very interesting to sit there and watch. Few brokers did much. It was a day of panic selling but not in that office. People just watched and talked about the magnitude of the declines.

"I am not much of a market timer. Currently 81 years old, I am now lightening up as I have been leveraged on the upside with stocks and leaps that have done very well. (I don't usually brag but this has been a great year.) I don't like stop loss orders but use discipline in selling. I buy options in multiples of 3, selling one when it triples, selling the second at 6X my cost and holding the third until expiration (or as long as I can). Of course, I lose 100% on some, but the winners have been great recently.

"I developed the idea of 3s and selling 1/3 when it triples after my experience with Winnebago stock in the early 1970s. I sold half when it doubled, sold half after it doubled again and then sold half of what was left. I learned to let my winners run a bit more. (Then I did see Winnebago go back down to my original purchase price.)

"So I am at an age where I am paying off my mortgage and Home Equity Line after some spectacular gains. Again, I try to be disciplined and systematic. When my portfolio goes up 100, I take out 30. I am taking some off the top while watching the portfolio grow. I know that I will not recognize the very top of the market (unless it is a real vertical blow-off) so I want to be in a position where I can live with another 50% decline. I consume 4% of my net worth and have been a 'total return' investor all my life, not caring about 'income.' If the market keeps going up, I will have enough reserves to carry me through the next decline without having to think of selling anything. I am currently out of debt except I am still short some 30-year T-Bonds.

"While you and I may have some differences in philosophies of investing, I enjoy your writing. And I appreciate that various Stansberry people have different viewpoints. That is what makes markets.

"I have no idea why I poured out all of the above to you. I do feel some kinship as I live in Seattle and have to put up with the same crazy people that you have been observing in the Portland area." – Paid-up subscriber Bill H.

"Good morning, Dan! As an Alliance member, I am inundated with great advice from the marvelous folks at Stansberry, but your Friday Digest has become a highlight of my week! I really appreciate you taking the time to write it. Please don't stop!" – Stansberry Alliance member Nancy V.

All the best,

Corey McLaughlin
Naples, Florida
January 28, 2021