What Porter Thinks Today About Our National 'Reckoning'
A real gauge of economic health... More checks, more benefits... The 'wealth gap' has never been bigger... Our society is in chaos... Drugs and childcare... What Porter thinks today about our national 'reckoning'...
Imagine if we ignored the stock market...
We're not talking about not investing in stocks or using the stock market as a wealth-generating tool. After all, as our founder Porter Stansberry said earlier this year... "Make hay while the sun shines."
But we are talking about ignoring the Federal Reserve-juiced benchmark S&P 500, the Dow Jones Industrial Average, the Nasdaq – or whatever your preferred index is – when it comes to gauging the true story about our nation's economic health and the health of all our people.
If we do that – and ignore anything about "new highs" while more than half of Americans don't have jobs, people are rioting in the streets, and our leaders continue to fumble around Washington – the world suddenly looks, sounds, and feels a lot different.
Just like that, America's financial reality is not what it seems. And through this lens, we might want to consider alternatives to the traditional ways of making, protecting, and growing money in this country.
What if the financial media, the politicians, corporations from coast to coast, Wall Street asset managers, and I (Corey McLaughlin) used another number to make our livings... and passed that information on to the general public instead?
This number shows what's really going on for most Americans...
Call it the 'Net Worth Index'...
You could calculate a measurement like this in a lot of different ways. But today, let's take a page out of our Battle for America book – part of which we shared over the weekend in our latest Masters Series essays (here and here)...
The chart below shows the percentage of income owned by the richest 10% in this country since the start of the 20th century. And as you can see, it has never been higher in the past 120 years than it is today...
Now, this isn't precisely a "Net Worth Index" since it doesn't track what everyone is doing with their money once they get it...
But the point is, the richest people in this country have been increasingly getting a larger share of our wealth pie since the late 1970s... while most Americans have struggled with low wages and next to no savings.
As opposed to the continued new highs of the stock market indexes, this "income share of the richest 10%" chart is one that you don't want to see hit new all-time highs – if you're expecting a mostly peaceful, prosperous society.
At times like these in history, the frustrations of the American public have tended to boil over...
When the gap between the rich and the poor is large and continuing to grow, an unexpected, panic-inducing event – like say, a pandemic – can spark major age-old stories and trends of violence, political and financial upheaval, or even war.
For instance, it started with the creation of the Federal Reserve in 1913, in the wake of the panic of 1907... After that, most Americans saw their wages fall in half.
It happened in 1933 after newly elected President Franklin D. Roosevelt passed an executive order to restrict gold ownership... Almost every American saw the value of their savings and their wages fall immediately by around 30% – setting off the worst aspects of the Great Depression, and leading to violent insurrections in Washington.
And it happened most recently in 1971, when the U.S. dollar came off the gold standard... This began the financial crisis of the 1970s, which lasted a decade and spawned domestic terrorism all across the country.
Today, 'it's happening' with a pandemic and the government response to it...
The solution of the Federal Reserve, the Department of the Treasury, and Congress to our country's ills is massive money-printing.
These are literally digital dollars that we may never actually see... (In fact, we've recently seen stores around our headquarters in Baltimore that are short on actual currency.) And each round of stimulus "creation" has been more unprecedented than the previous one.
In 10 days in March, the Fed created trillions of dollars of free "fake money"... more than it had created in the previous 30 years before the financial crisis of 2008 and 2009.
As we write today, another huge round of "juice" – that is to say, debt kicked down the road to future generations, programs brainstormed by the economists of the Fed and approved by politically motivated members of Congress – is being introduced.
The price tag could be anywhere from $1 trillion proposed by Republicans in the Senate to $3 trillion suggested by Democrats in the House, and it very well could end up being in the middle at $2 trillion, as Stansberry NewsWire editor C. Scott Garliss wrote today.
More checks... More benefits...
Direct deposits and extended unemployment benefits might ease some panic in the short term. But do they really help "we the people" and the health of our country in the long term? The simple answer is "no"...
The U.S. dollar has lost 95% of its value since 1913, when Congress passed the Federal Reserve Act and "modern" central-bank policy began... and since then, the Fed has only increased its interventions over time.
It might sound counterintuitive, but unless someone takes their stimulus check and literally wins a state lottery, this means the "wealth gap" between the rich and poor will keep growing...
Those with fewer dollars to their name get relatively poorer every time a new one is created... and more frustrated whether they know it or not.
The 'wealth gap' in the U.S. has been growing astronomically over the years...
Even before we all started living in a pandemic economy, the gap between America's richest and poorest families had more than doubled from 1989 to 2016...
Middle-class incomes have grown at a slower rate than those of the rich for the past 50 years...
And the highest-earning 20% of families in the U.S. made more than half of all U.S. income in 2018.
This is just putting numbers to what many Digest readers likely already know.
All someone needs to do is drive around, or take public transportation, and look at what's happening on the streets in cities and towns all over this country.
Here in Baltimore, for just one example, the gap has been striking for decades...
You can drive down just a single street and be in front of the beautifully landscaped lawn of a million-dollar house one minute... then drive a few blocks down the road and be staring at rows of graffiti-covered, boarded-up rowhomes.
You can see rampant homelessness, and the challenges that come with financial insecurity.
Yet the stock market hits new highs...
If we're honest, our society is in chaos...
Trust in our institutions is broken.
America may still be "the best house in a bad neighborhood" in the context of the world, but that still doesn't mean everything is OK. "Good enough" should not be good enough for the U.S.
That's kind of like agreeing that, as we wrote last week, using "tolerated" should be an acceptable passing grade to describe the potential side effects of a COVID-19 vaccine.
And in fact, our perceptions about our place in the world might not even be true...
When it comes to the major industrialized Group of Seven (G7) nations, data from the Organization for Economic Cooperation and Development show that the wealth gap is greater here than in the United Kingdom, Italy, Japan, Canada, Germany, and France.
And as much as we can do without the sensationalism of the mainstream news and distortions of the facts, the broadcasts do show the live images of our frustrating, longstanding problems...
Back in the April 22 Digest, we used New York – the then-epicenter of the COVID-19 outbreak – as an example...
In New York City, there has been a significant correlation between the chances of dying from COVID-19 and income level.
These were the actual people behind the "numbers" shown on the cable TV news.
And today, protests stemming from the flashpoint of police brutality continue on our streets. Geared-up federal agents and protesters continue to clash in Portland, Oregon...
Amid a once-in-a-generation pandemic outbreak, the government decided – without any public debate – that shutting down the economy while creating $6 trillion (and counting) from nothing and mailing stimulus checks was the best thing to do...
Sure, $1,200... or another $1,200 apparently on the way should cover it, right?
Not even close. Real people are feeling real pain...
You can look at all kinds of examples...
We saw recently that nationwide drug overdoses – another relatively unreported indicator of health – have risen significantly over the past few months.
Neil Howe, co-author of The Fourth Turning and the demographer who coined the term "Millennials," wrote over the weekend...
According to [the Overdose Detection Mapping Application Program], a federally run program that collects data from local police and hospital records, overdoses nationwide increased year-over-year in March by 18%, in April by 29%, and in May by 42%.
In Chicago alone, the Cook County medical record shows 656 overdose deaths for May. In 2019, Chicago only reported 473 overdose deaths from the period of January to June.
Most of these new deaths have come from using fentanyl, a drug that can be up to 100 times stronger than heroin.
Cynthia Seivwright, the director of Vermont's Division of Alcohol and Drug Abuse Program, connected two dots and said preliminary data have shown a surge in overdoses the same week stimulus checks were received. As she told the Concord (N.H.) Monitor...
Getting those checks is a trigger for people.
To be clear, we're not saying everyone is taking their stimulus checks and buying drugs. But it's obvious that free "fake money" is not the end-all, be-all to our country's problems.
For others, there's simply not enough time in the day to make all ends meet...
Leaders who haven't been in a classroom in years are now debating whether to reopen schools around the country. And this decision has massive short- and long-term consequences on our economy and culture in general...
A generation of kids – if they haven't already been taking classes at home virtually, with their parents or guardians teaching the lessons, at least in part – are being asked to wear masks in school.
At the same time, millions of work-at-home parents – if they're fortunate to still have a job – are deciding how best to manage the responsibilities at home in order to stay sane and solvent.
If a family has two parents at home, the trend over the past few decades has been toward two-income households... The number of two-income working families in the U.S. increased from 25% to 60% from 1960 to 2012.
When you pair that trend with a pandemic that has caused those "two incomes" to take care of children – or even teach them – during the day, too... or forces one person to do the same... working mothers and fathers are faced with important decisions to make...
You can be a parent, teach school part-time at home, or work in a broader economy that has mostly encouraged an "everybody must work" life and could experience inflation in the years ahead. As this article from Politico published over the weekend said...
The Bureau of Labor Statistics estimates that both parents work in two-thirds of families where married parents have children – as do the majority of America's 13.6 million single parents. For all of them, there are major long-term financial repercussions of dropping out of the labor market, even temporarily.
"When you talk about upward mobility," [economist Betsey Stevenson, a labor economist at the University of Michigan] says, "this puts families on just a completely different trajectory that's not about losing two or three years of income; it's about being on a lower earnings trajectory for the rest of your life."
This is a big underreported reason why only a little more than half of Americans of working age have a job right now (which is different from our unemployment benefits number).
Yet stocks go higher...
In other words, the rich get richer and the poor get poorer...
As Porter and many of our editors have said for years, while this may be good for the portfolios of folks with access to Wall Street – and in the short term in stocks, that's exactly what we've seen – this American economy is largely unsustainable...
The problems that Porter has described over the years and we've touched on today will catch up with everyone's wealth eventually, no matter how well-off or where you live, rich or poor...
Porter has said for years that 2020 would mark a pivotal time for America...
Before knowing any of the specific players or events involved today, like the COVID-19 spark, he said this was the year when the country would truly face its problems and consequences of decades of debt creation and misplaced government interventions.
He has written books on this idea, noting these periods of crisis and converging financial, societal, and political factors have happened roughly every 30 to 40 years – with the last one coming the 1970s. In the book America 2020, Porter wrote about this year...
America is in for some major changes to our economy, our country and our very way of life over the next few years, the way you live, the way you work, travel, retire, invest; everything is going to change, some of it in ways most people would never expect.
And specifically, Porter said a "debt jubilee" – wiping the slate clean of Americans' debts – is our only way out of this collective mess. A national "reset" in our financial system would happen then.
Today, Porter says we've reached a tipping point for a 'reckoning'...
And he's warning subscribers and individual investors how best to prepare for it.
As we know, the COVID-19 pandemic has exposed a lot about our economy and markets...
As Porter predicted, calls for a "jubilee" have only grown. And the government has obliged with endless money-printing, socialist policies, and creating growing debt... future generations be damned. As we wrote in the June 3 Digest...
We have societal and economic upheaval happening at the same time...
The rich get richer... and the poorest citizens, like broke and debt-saddled millennials, are again calling for a radical solution.
Millennials will be the country's largest generation of voters for the first time this November. They largely blame capitalism for the world's problems and could usher in a new era of socialist policies, including a Jubilee.
But this Jubilee will be different from the ones in 1933 and 1971, according to Porter.
This time, the Federal Reserve has "unlimited QE" at its disposal and has said several times that it will print digital dollars until its computers break to take care of every stakeholder of the financial system. But the only way that private debt of everyday Americans can be resolved is if it's paid, defaulted, or forgiven...
And you can bet politicians, no matter the affiliation, will never allow tens of millions of our poorest citizens to go bankrupt...
But throughout history... almost on a schedule... times of 0% interest rates, seemingly endless money-printing, and populist pushes for change have eventually had unintended second-order economic consequences.
Erasing things like Millennials' student debt and instituting a universal basic income – which have been on the table this presidential election cycle – sounds great to those who need it. But how do we reconcile socialist policies with a democratic system?
Somebody has to pay, and don't think for a second that a massive amount of wealth won't be lost or gained. That's why it's so critical and wise to prepare for the inevitable fallout of what we're talking about today.
Porter has been urging subscribers to do that for years, just like he did in advance of the financial crisis in 2008 and 2009... including the blowups of Fannie Mae, Freddie Mac, and General Motors.
Then, in March, as stocks were cratering, Porter on March 26 called the bottom in the stock market almost to the day. As we wrote in the June 5 Digest, he also predicted we'd reach new highs by the end of the year, which the tech-heavy Nasdaq already has.
And today – as this wild year continues and the Fed continues to create money out of thin air – Porter is now warning of a "reckoning" and telling subscribers how best to prepare for it.
Yes, Porter's back again... He will sit down for a special video event at 10 a.m. Eastern time on Thursday at his farm just outside of Baltimore.
He plans to talk about all these issues we've discussed today, and much more.
What does the future of our country and the financial system look like?
Which direction do stocks head? And looking out to the even bigger picture, will common investments like stocks even be worth investing in anymore?
These are all questions that Porter plans to address in his latest must-see event on Thursday.
We urge you to tune in and hear his latest ideas on how to protect and grow your wealth... and the smartest bet to make with your money today. As Porter says...
No matter what our government does next, no matter what stocks do, things will never get hard for anyone who is watching and takes this advice, at least not financially.
In fact, the crazier things get the more money I think that you'll make. What I'm talking about today is the ultimate asymmetric bet.
Through all the rising uncertainty of this pandemic and impending election, you will always be able to find ways to make money if you understand how markets work and see the next big trends coming, like our founder Porter does.
Don't miss Porter's next big event this Thursday at 10 a.m. Eastern time. It's 100% free. All we ask is that you sign up in advance. You can do that right here.
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In today's mailbag, feedback on last Thursday's Digest about vaccine side effects... Dan Ferris' latest Friday Digest... and our Masters Series essays over the weekend. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Many thanks for the solid article on the likely timeline on a vaccine or vaccines. Way too many supposedly smart people early on gave back-of-the-envelope predictions on the course of the pandemic that subsequent information has shown to be seriously lacking. I sent a few of these predictions to a respected epidemiologist in my family, and asked him his views. His answer: It's too early to say. I think we'd all be better off with a little humility when expressing opinions on a subject as complex and impactful as this. Your article does very nicely in this regard. Again, Thanks!" – Paid-up subscriber Dave H.
"Dan, Love your podcasts as well as Digests.
"Regarding markets and government intervention before 1929, if you haven't I would encourage you to read Jeff Chernov's book The House of Morgan.
"The shenanigans being foisted by bankers on investors at that time are astonishing and as is usual, the sheeple were consumed by the bankers and their friends. Woah to anyone with capital [who is] not a member of 'the club.'
"Today I fear it's the Political class doing the feasting. Keep up the good work." – Paid-up subscriber Brian E.
"Who cares what [Barstool Sports founder Dave] Portnoy or anyone else says? Just stay long your winners with a 20 or 25 percent trailing stop loss and there's really nothin' to worry about. That includes gold, silver, bonds, stocks. It's not that difficult." – Paid-up subscriber Richard L.
"I just read Scott S.'s letter in Friday's Digest describing his tragic – and infuriating – hospital experience. I would just like to tell Scott that with regards to what he is thinking – it's not just you. In fact, Dan referred to it in his essay – he put it in parentheses." – Paid-up subscriber Gary S.
"In the 7/24/2020 Digest, Dan Ferris wrote:
"> It's suspicious that depressions and wars are so exploitable by the ruling class.
"> It's almost like they bring them about on purpose.
"Remember the slogan, War is Peace, from the book 1984? Winston Smith learns what that means in Part Two, Chapter 9, about 60% into the book. The explanation made me see the behavior of national leaders in a new way. There are so many good quotes from that section, here are some of the best:
'the consciousness of being at war, and therefore in danger, makes the handing-over of all power to a small caste seem the natural, unavoidable condition of survival.'
'... so long as they [the countries at war] remain in conflict they prop one another up, like three sheaves of corn.'
'... they [the ruling groups] also know that it is necessary that the war should continue everlastingly and without victory.'
'The war is waged by each ruling group against its own subjects, and the object of the war is not to make or prevent conquests of territory, but to keep the structure of society intact.'
"According to the above ideas, if I were in charge of the US, I need an outside enemy to bolster my power. Who will that be? It's convenient to have several to choose from: Russia, Iran, China, North Korea, ...
"Surely I left out a few candidates. If I pick a fight with Mr. Putin, for example, he ought to thank me because the conflict will boost his power as well as mine." – Paid-up subscriber Richard C.
"Dan, I have to tell you that you have been one of my Stansberry favorites. Clear back when you were doing Retirement Millionaire. This newsletter I completely agree with and I know there are other Stansberry writers that agree. Porter caught me years ago with End of America 2000. It was a commercial on while I was watching the Speed Channel. I agreed completely with what he was saying about money. I had told my wife that same thing awhile before my listening to End of America.
"But you are saying what I completely agree with too. It is why I started buying gold and silver a couple of years ago. Last year I became an Alliance member. Thanks to all of you at Stansberry I was able to do that. But the bottom line always seems to be the same for me. We see eye to eye and I am thankful for that." – Stansberry Alliance member Jeff S.
"'The government essentially steals money from one group and hands it to another.'
"Maybe this happens since the government helped move the money in the other way for 30-40 years. I am very less 'well off' now than I was 20 years ago and it seems that all my money went to those that did not need it." – Paid-up subscriber Steve O.
"Regardless of what your political alignments are, November will be an historic election. It will be the first major election where Millennials outnumber Boomers. It will be a repeat of our history from the 70s. The political capital will be transferred to a different generation.
"Boomers have been making policy for almost 50 years and now Millennials will be making policy for the foreseeable future. This is how democracy works, like it or not. As investors, it is better to make adjustments to our holdings than to be like the Greatest Generation in the 70s, who regularly complained that 'America was going to Hell in a Handbasket.'
"We didn't go to Hell back then, and we're not going to Hell now. Investing wisely with unbiased information will be the only way to succeed going forward." – Paid-up subscriber Ted B.
All the best,
Corey McLaughlin
Baltimore, Maryland
July 27, 2020