Rick Rule on the Stansberry Investor Hour... A crash course on commodities... From nickel to uranium and more... Why Rick is putting together a shopping list... This morning's jobs report... The 'Fed is going to cut' trade is on...
Editor's note: I (Corey McLaughlin) am writing the Friday Digest today. My friend and regular Friday essayist Dan Ferris is taking some well-deserved time off over the next week or so.
You see, Dan has been busy putting the finishing touches on a lot of new research for The Ferris Report and Extreme Value subscribers. If you want to learn more about some of this research, right now you can check out this free, brief presentation from Dan. But hurry, you only have until tonight.
Today, we're serving more of our "usual" weekday fare... starting with some details on our recent interview with commodities expert Rick Rule...
'I recently flew over those nickel operations in southern Sulawesi...'
Dan and I were about 25 minutes into our most recent Stansberry Investor Hour interview with Rick Rule when he casually dropped this anecdote about nickel mines in a mountainous region of Indonesia...
While I'm not best described as a bleeding heart, the environmental degradation that's occurring in southern Sulawesi is breathtaking, and it is not sustainable. So, my suspicion is that the rate of increase of [nickel] production in the [nearby] Philippines declines...
I wonder how many other people are flying over mines in southern Sulawesi... or even know where it is? And then can they tell you what developments in the region mean for possible investments?
Rick can. He is an expert on natural resources with decades of experience in the industry.
He's the former president and CEO of Sprott U.S., a money-management firm focused on precious metals. Now, he's a self-described "loan shark," or debt investor. He has deep connections in the natural resources industry and can seemingly effortlessly see and explain the trends in the sector.
From nickel to uranium, natural gas, and more...
During our talk, Rick spoke about the global supply of nickel – used to make batteries, among other things – and other commodities that he feels are "roundly hated" and could be "priced well below the cost of production" over the next year, like platinum and palladium.
But he also talked about trends in commodities like uranium and natural gas, which one way or another will play a critical role in how the world is powered in the decades ahead...
Rick also shared a few ticker symbols of companies that he likes... why he's putting together a "shopping list" right now... and tips for investing and trading in what can be a volatile sector – but one that can deliver tremendous gains and bolster a well-diversified portfolio.
You can listen to or watch the whole interview here – for free...
Dan, who has known Rick for decades, is also particularly excited about the commodities sector right now. If you want to hear Dan's take on the commodity "hypercycle," check out his free new presentation.
It's not long, less than 15 minutes.
Plus, you'll learn how you can access a brand-new special report from Dan... how to claim $11,000 worth of free bonuses... and details on an investment approach that tripled the gains of the benchmark S&P 500 Index and recently delivered its first triple-digit gain in one year.
You can learn more here. But again, you only have until tonight. And Extreme Value subscribers and Alliance members can find Dan's latest research here.
Now, closer to home...
This morning's jobs report from Uncle Sam was notable...
The unemployment rate rose to 3.9% in February, up from 3.7% in January, to hit its highest mark since January 2022, when the rate was trending lower from a pandemic peak. The labor-force participation rate also remained the same at 62.5%.
The unemployment rate has incrementally moved higher in the past year from a low of 3.4% in January 2023 and April 2023. The headline numbers, at least, suggest a labor market cooling down more than it already has.
All of sudden, we're back on "Sahm rule watch"...
As we said in the middle of 2023 – when the unemployment rate was beginning to inch higher – the Sahm rule is a highly reliable recession indicator. It's a measure of the change in the unemployment rate, and it has a perfect record of signaling recessions over the past 50 years.
This indicator is named for Claudia Sahm, an economist and onetime employee at the Federal Reserve. Basically, the rule says that whenever the government's unemployment rate rises 0.5 percentage points off a cycle low, we're in a recession.
Specifically, when the unemployment rate's three-month average measures 0.5 percentage points higher than the previous three-month average low of the past year, we're in a recession.
I would consider the present cycle low to be the 3.5% three-month average from February 2023 to April 2023.
So, with a few more months of a slightly higher unemployment rate (4% and 4.1% or more), you'll start to hear more people talking about the idea of a recession again – right when "everyone" thought we were past it.
The latest Fed read...
Perhaps this is why the Fed has been signaling that it's preparing to cut the federal-funds rate... well, in addition to the gigantic cost of financing Uncle Sam's $35 trillion debt and the debt wall that corporations and businesses are facing.
The fed-funds rate is the Fed's suggested bank-lending rate range that filters through interest-rate-sensitive parts of the economy.
As we mentioned this week, on Wednesday and Thursday, Fed Chair Jerome Powell took questions from Congress for a good five hours in required semiannual testimony.
On Wednesday, he essentially said the same things we've been hearing for months – that the fed-funds rate is likely at its peak.
But on Thursday, Powell also told the Senate committee the Fed "can and will begin" to lower rates this year. It sounded to me like he might have been sent a copy of today's jobs report a day early.
Cutting rates tends to juice economic activity... meaning high inflation isn't the primary concern for the Fed anymore in its "stable prices and maximum employment" congressional dual-mandate balance.
A majority of fed-funds futures traders are betting on a first cut happening at the Fed's June meeting. It seems off the table for its meeting in March, but there's also a meeting in May.
The 'Fed is going to cut' trade has been gaining steam...
Bond yields have been slightly lower recently. The 10-year Treasury yield has drifted lower, closer to 4%, from its February highs around 4.3%.
Meanwhile, the major U.S. indexes have been churning higher lately, though today the benchmark S&P 500 was slightly lower, and the tech-heavy Nasdaq Composite Index was off 1%. (The behavior could be an early preview of more lethargy to come if the economy shows more weakness in the weeks or months ahead.)
The gold price is also moving up. As we said on Wednesday, inflation protection is "in" again. The spot price in dollars continued to climb as high as $2,180 today, a gain of 6% since the start of the month.
And the relative value of the dollar is down. Notably, the U.S. Dollar Index ("DXY") broke below its 200-day moving average on Wednesday, for the first time since January.
Lastly, the union...
Our presumption in yesterday's edition about how the State of the Union would be described in last night's address was correct. "Strong and getting stronger," President Joe Biden said.
On the economic policy front, as we expected, he talked about taxing the wealthy... and raising the minimum corporate income-tax rate to "at least 21%."
Meanwhile, former President Donald Trump's promised live "play by play" of the speech didn't materialize as he hoped. His Truth Social platform crashed around the start of Biden's speech, and posts slowly began showing closer to the end of the address. So it goes.
New 52-week highs (as of 3/7/24): ABB (ABBNY), Abbott Laboratories (ABT), Applied Materials (AMAT), Advanced Micro Devices (AMD), A.O. Smith (AOS), Arhaus (ARHS), ASML (ASML), Broadcom (AVGO), American Express (AXP), AutoZone (AZO), Builders FirstSource (BLDR), Brown & Brown (BRO), Colgate-Palmolive (CL), Costco Wholesale (COST), Pacer U.S. Cash Cows 100 Fund (COWZ), Copart (CPRT), Commvault Systems (CVLT), Dimensional International Small Cap Value Fund (DISV), iShares MSCI Emerging Markets ex China Fund (EMXC), Enterprise Products Partners (EPD), Franklin FTSE Japan Fund (FLJP), SPDR Gold Shares (GLD), W.W. Grainger (GWW), ICON (ICLR), IQVIA (IQV), iShares U.S. Aerospace & Defense Fund (ITA), KraneShares MSCI Emerging Markets ex China Index Fund (KEMX), Lennar (LEN), Linde (LIN), VanEck Morningstar Wide Moat Fund (MOAT), Micron Technology (MU), Neuberger Berman Next Generation Connectivity Fund (NBXG), Novo Nordisk (NVO), Parker-Hannifin (PH), PulteGroup (PHM), Sprott Physical Gold Trust (PHYS), Phillips 66 (PSX), Construction Partners (ROAD), Invesco S&P 500 Equal Weight Technology Fund (RSPT), Sherwin-Williams (SHW), VanEck Semiconductor Fund (SMH), Spotify Technology (SPOT), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra S&P 500 (SSO), Stellantis (STLA), Stryker (SYK), Cambria Shareholder Yield Fund (SYLD), TFI International (TFII), Thermo Fisher Scientific (TMO), Tenaris (TS), ProShares Ultra Gold (UGL), ProShares Ultra Semiconductors (USD), Veeva Systems (VEEV), Veralto (VLTO), and Vanguard S&P 500 Fund (VOO).
In today's mailbag, a thought about how economic data – and economists' thoughts about it – doesn't square with how people feel about it... and another answer to the question about what constitutes a sandwich... Do you have a comment or question? As always, email us at feedback@stansberryresearch.com.
"Corey, I am perplexed when otherwise smart people equate inflation with a 'hot' or 'robust' economy. Just because it takes more dollars to buy a loaf of bread (inflation) does not mean that the economy is strong. Does it? People need bread. They eat it. They prefer not to starve. The same could be said for a gallon of gasoline which people must buy in order to get to work or go to the store to buy expensive bread.
"The fact people must pay more for these essential things does not automatically mean that they have extra money to spend – due to a hot economy. My homeowner's insurance went up 40% this year. I'll have to pay it because I have a mortgage. That's inflation [and] my economy is no better than it was a year ago when my insurance was cheaper and, in fact, my discretionary spending will be forced to go down because my mandatory spending was forced up. I think we're headed for stagflation." – Stansberry Alliance member Darrell W.
"Corey,
"In response to Marthe C, and my 2 cents:
EVERY THING ON IT
Poem by Shel SilversteinI asked for a hot dog
With everything on it,
And that was my big mistake,
'Cause it came with a parrot,
A bee in a bonnet,
A wristwatch, a wrench, and a rake.
It came with a goldfish,
A flag, and a fiddle,
A frog, and a front porch swing,
And a mouse in a mask —
That's the last time I ask
For a hot dog with everything.
"If there's anything on or between bread, or anything (lettuce, for low carbers, for example) that you (can) hold with your hands, then, it is a sandwich... to me!" – Subscriber Rich S.
Corey McLaughlin comment: Thanks, Rich. That's a nice way to end the week. Bon appétit.
All the best,
Corey McLaughlin
Baltimore, Maryland
March 8, 2024
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