The Stock Market Still Doesn't Care
Unresolved questions about our democracy... The stock market still doesn't care... Is it worth it?... Are we too big not to fail?... A reminder to think about the long term... A view from abroad...
Around 3:30 a.m. this morning, it was settled...
Congress certified the 2020 presidential election results.
So that's it, right? Hardly...
Things generally come and go quickly in our 24-hour news cycle, but this one will be remembered for a while. And it leaves many of us with unresolved thoughts and questions about the lasting consequences on our democracy...
Four dead at the U.S. Capitol on the day that Electoral College votes were ultimately counted.
We wish we could say we're surprised about the homegrown chaos. But in reality, you could see it coming. And the images were broadcast around the world...
Sure, the realities of American real life – distrust, fear, anger, confusion, and anxiety – hit tone-deaf politicians at their workplace... but not in a way that we argue most of the record 159 million who voted in November's presidential election (or those who couldn't find anyone to support) approve of.
What a crazy time.
Yet, we manage to peel our eyes away from the TV, the Internet, and the opinions of family and friends in order to think outside of ourselves for a moment, remember our purpose here today, and see that...
The stock market still doesn't care...
It's back at new highs. And the tech-heavy Nasdaq Composite Index, the leader of the pack in the COVID-19 pandemic era, topped 13,000 for the first time today.
This part isn't new, of course. We said it back in July, when the major U.S. stock indexes continued to climb from March's bottom, while unemployment remained at record levels...
The disconnect between Main Street and Wall Street may never have been wider than it is right now.
The truth is, though, the "gap" is always there, at least as far as we've seen. The disconnect just becomes more obvious on days like yesterday, and in the reflection about it afterward...
We're reminded of what True Wealth editor Steve Sjuggerud often says. As he wrote in his free DailyWealth e-letter back in mid-May of last year, as stocks hit new highs while folks wrapped their heads around a socially distant world...
There's an important truth you need to understand. It's simple and perfectly explains what's happened in recent weeks...
The U.S. stock market operates on a different time cycle than the U.S. economy.
Stocks tend to move much faster than the economic environment. They anticipate what's coming. That means stocks are the first to fall during tough times... And they often rally before the economy even begins to recover.
That is as sound advice as you will find anywhere.
But today, we wrestle with this question...
Is it worth it?
The financial system – in the shape in which it has been contorted today – keeps making the rich richer and the poor poorer, for reasons they may or may not be aware of... meaning the crushing devaluation of any dollars they do have.
Our founder Porter Stansberry has called it the "rotten" economy...
The Federal Reserve keeps artificially propping up the market as the "saver of first resort"... And it ultimately keeps widening the gap on U.S. soil between the haves and have-nots, the sort-of happy and rich, but the definitely angry and poor.
As we wrote in the July 30 Digest, two things can be true...
Stocks can go up because of central bank money-printing and easy-money policies... and those same policies can erode the value of the U.S. dollar over time, causing all kinds of longer-term consequences – like higher taxes and a debt tab due to "we the people."
In the meantime, the benchmark Fed funds rate will probably remain near or at zero, if not negative, for at least the next few years... making it hard for everyday Americans to find a "safe" return on capital and pushing them into riskier stocks and asset classes.
Anyone with the ability to think longer than a quarter – individual investors like you and I, for example – can see that this is unsustainable for long-term "free market" economic growth... and at a minimum, this story can be dangerous for unprepared Americans' wealth.
At the same time, a decentralized concept of a currency like bitcoin has become the hottest thing of the moment, for good reason...
The U.S. Treasury just ended 2020 with a $3.1 trillion deficit. Preliminary year-end numbers put our federal debt at 136% of our gross domestic product... and that is projected to grow to 195% by 2050.
And in a practical sign of our state of affairs, today we saw first-hand as folks furiously hit refresh on their computer keyboards for a chance to sign up for a COVID-19 vaccine...
That's something more appropriate for people to do 24 hours before a Southwest Airlines (LUV) flight to get the best boarding letter and number they can... not a crack at a few doses of Moderna's (MRNA) treatment.
Said another way, let's get to the heart of it...
Are we now too big not to fail?
We're not going to reconcile the long-term consequences with the present today...
But we can invest accordingly in the moment. And we can take comfort in the information, research, and expert insights that our editors are here to provide.
For example, Stansberry NewsWire editor C. Scott Garliss put it well in his daily morning commentary to readers earlier today. As Scott wrote...
Yesterday was a reminder of why we're focused on the long term...
Investors should never let emotions get the better of them. Of course, that's much easier said than done in the middle of a pandemic, after a roller coaster year for the markets, and at the tail end of a contentious political campaign.
Scott expanded on what we shared from him in yesterday's Digest...
In his view, Wall Street institutional investors were "shooting first and asking questions later" yesterday, given the results of Georgia's runoff elections and misguided fears about possible increased regulation of Big Tech from a Democrat-controlled Congress.
And then, the chaos in Washington, D.C. happened.
But as Scott concluded in his note this morning, those moves are short-sighted... We may despise a lot of what we see on the news today, but it's always wise to consider looking past the headlines and detach ourselves from the emotional images of the day...
Instead, look at what you know will or will not move the markets in the long run...
Look beneath the hood, and you'll see that even bank stocks, which have lagged over the last year, are on the rise. As NewsWire analyst Nick Koziol reported yesterday...
The financial sector is the top performer in the S&P 500 today, with the SPDR S&P Bank Fund (KBE) up more than 7%. The key driver behind this is a rise in Treasury yields today. The yield on the 10-year Treasury rose above 1% today for the first time since March. This is a good thing for bank margins...
And we've been saying... the "Melt Up" is on. As we wrote yesterday, Steve is warning that the "Melt Down" is nearing, but we're not quite there yet. Scott explained why today...
Underlying economic data have been strong. The manufacturing numbers we've seen earlier this week are a testament to global and domestic economic strength. And individuals everywhere have COVID-19 fatigue...
From everything I see, read, and experience, households want to go back to "normal" daily lives. A prime example is the frustration we're already seeing with the slow uptake of COVID-19 inoculations. That tells me there's a lot of pent-up demand to travel and go to restaurants (aka spend).
Mass vaccinations are going to happen... It's just going to take time. And once this is in full force, economic growth is poised to explode higher. The Federal Reserve and the new administration are going to do all they can to support growth.
Longer term, this should bode well for the economic outlook, especially in the second half of this year. And that should help to underpin a steady rally in the S&P 500 and Nasdaq Composite indexes going forward.
This doesn't mean we don't have problems, of course...
Our nation's Capitol building was breached on the day that Electoral College votes for a presidential election were counted, after all... It still feels surreal to write that as fact.
But if anything is true, it's that the broader stock market doesn't necessarily care what we, any other individual, or even millions of people on Main Street, think about it. At the same time, though, that doesn't mean we can't consider the consequences...
Moving on, to a view from abroad...
Our international editor Kim Iskyan shared a few thoughts with us yesterday, while watching what was going on in the U.S. from his home in Ireland. As Kim wrote in a private e-mail...
In the bigger picture, all of this that's going on now makes me think...
This kind of thing happens in Belarus or Armenia or Thailand or Chile or Kyrgyzstan (if they're not smart with something as basic as security of the main parliamentary building). It has happened before – but in the U.S.?
"The Russians, the Chinese, etc., they're all laughing," a former colleague from Moscow texted me earlier.
And in a thought that's a fitting follow-up to Kim's analysis late last year about the state of America's "soft power" around the world, he told us...
There's no recovering from this; maybe things don't go completely to hell in a handbasket, but American credibility is blown for a very long time... even if the ship is somehow righted when President-elect Biden is sworn in on time.
Stay tuned for more in the Digest from Kim... He has been working on an essay about the "tyranny of the minority" that we plan to share soon.
And in the meantime, you'll hear from our colleague Dan Ferris tomorrow in his first Friday Digest of the year.
A Full-Fledged 'Income Crisis'
"If you thought 2020 was bad for income, 2021 will be worse," says Ryan Giannotto, Director of Research at GraniteShares, a provider of exchange-traded funds. As part of our Outlook 2021 series, our editor-at-large Daniela Cambone speaks with Giannotto about the challenge of finding "safe haven" income investments...
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 1/6/21): ABB (ABB), Analog Devices (ADI), Bunge (BG), Siren Nasdaq NexGen Economy Fund (BLCN), Cognex (CGNX), Cresco Labs (CRLBF), Corteva (CTVA), Curaleaf (CURLF), Dow (DOW), Enstar (ESGR), Eagle Materials (EXP), GrowGeneration (GRWG), Green Thumb Industries (GTBIF), Ingersoll Rand (IR), KraneShares Bosera MSCI China A Fund (KBA), KraneShares MSCI All China Health Care Index Fund (KURE), LCI Industries (LCII), MAG Silver (MAG), Maxar Technologies (MAXR), MSA Safety (MSA), MasTec (MTZ), NetEase (NTES), Intellia Therapeutics (NTLA), OptimizeRx (OPRX), Osisko Gold Royalties (OR), Flutter Entertainment (PDYPY), PowerFleet (PWFL), Radius Health (RDUS), Construction Partners (ROAD), Seabridge Gold (SA), Southern Copper (SCCO), Sabina Gold & Silver (SGSVF), Scotts Miracle-Gro (SMG), Constellation Brands (STZ), Trulieve Cannabis (TCNNF), U.S. Concrete (USCR), Vestas Wind Systems (VWDRY), and Zebra Technologies (ZBRA).
In today's mailbag, feedback on yesterday's Digest about an angry nation. What's on your mind today? As always, e-mail us at feedback@stansberryresearch.com.
"Sadly, Porter's prophecy is becoming so true, including the prediction that Harris would become President. Probably within the next 12 months.
"A very sad day for what was the most successful Republic on the face of the earth. Sorry we lost it for you Benjamin Franklin." – Paid-up subscriber Mike O.
"Let's get real. The fiat currency-unit-dollar faucet is wide open. It has been wide open for a very long time. We have a fake Fed, a not federal at all, privately owned 3rd central bank, misnamed the Federal Reserve. We have companies that are broke because they bought so much stock back. That went to their P/E bonuses. Now our fake Fed is buying their junk bonds.
"We have lobbyists bribing our elected misfits for favors that allow them to keep more of their currency. Most of the counterfeited currency is going straight into the market favoring those already wealthy. They are borrowing from the middle class's future to do it. The wealthy and those who bribed correctly, do not pay their share of the burden they created. We are living inside a giant debt Ponzi scheme/scam that will end the same as all Ponzi scheme/scams.
"Our misfits are about 50% short of collected revenues, and are creating the shortfall in debt. We already have a pile of debt interest to pay and have nothing to pay it with except more debt. We have treasuries expiring and must roll over and or replace the principal with more debt. There are no plans anywhere or ability to pay our debt down at all anymore. It must continually grow to maintain the scheme, just like any Ponzi.
"It is starting to grow exponentially now. Our Ponzi cannot consume every currency unit on the planet. Every nation in the history of human civilization that destroyed their currency failed. First their currency, then their civilization. None printed themselves rich. The millionaires become billionaires become trillionaires and so on. Eating the middle class and destroying themselves in the process. The poor have no money, and the middle class are being driven poor.
"No matter where you sit on our Titanic economic ship, you go down with it. But the 1% can jump on their private jet and not look back. Not their problem, no sir. They are innocent, innocent of caring about what they are doing. But they have a marvelous president on their side – screw the poor, they should work harder." – Paid-up subscriber Bernard B.
All the best,
Corey McLaughlin
Naples, Florida
January 7, 2021