Hope for the Best, Prepare for the Worst

Hot-mic truths... Inflation is not a 'great asset'... More record numbers... When does it end?... Hope for the best, prepare for the worst... Is 10% upside worth 90% downside?... Dan Ferris' inflation-protection plan...

'It's a great asset – more inflation. What a stupid son of a...'

You might have heard the above line a few weeks ago...

President Joe Biden uttered it, while he thought no one was listening, as White House reporters were being herded out of a presidential press conference...

You see, one of the reporters, Fox News' Peter Doocy, yelled out a question he wanted answered before saying goodbye. According to the Associated Press' report of the event...

[Doocy] called out, "Do you think inflation is a political liability ahead of the midterms?"

Biden responded with sarcasm, "It's a great asset ‒ more inflation." Then he shook his head and added, "What a stupid son of a bi**h."

What Biden wasn't aware of... or didn't care about... was that cameras and microphones were still recording... The "hot mic" moment quickly made the rounds in the media... mainly because a sitting president cursing under his breath about a reporter is entertaining.

But as I (Corey McLaughlin) will explain today, there are some important nuggets of financial and cultural truth buried in this sound bite... and there's much more to say about it than has been said elsewhere.

The one-off comment actually tells us a lot about the topic that was mentioned – inflation.

We've been talking about it in the Digest for more than a year... High inflation still matters for most people buying things at the store, and now it might matter to voters in November's elections ‒ the "midterms" Doocy was referring to... and for your portfolio today and for the foreseeable future.

Before he cursed at the reporter...

Biden had just met with various federal leaders on the topic of "increasing competition among corporations" as a tool to lowering prices on everything from health care, to meat, to shipping, to Internet access.

To anyone with a decent PR detector, given the timing, the impression being sold was that corporate America is the primary reason for the decades-high inflation the country has been experiencing lately...

Not the pandemic, giant gobs of money being pumped into the economy, central bank monetary policy, the fiat-currency system, or anything else... No, low competition is the problem.

To which we say... Sure, more competition in corporate America won't hurt and is central to the spirit of capitalism. But any policy changes that occur will likely take years to make a difference... and that would just be at the margins or in specific industries.

What about the widespread inflation and high prices millions of people are dealing with right now?

A lot of political polls have been showing that inflation is the top thing on a lot of people's minds when they think about who they're going to vote for in this November's midterm elections...

As you might be aware, these elections will be key in whether Democrats or Republicans have control of Congress... Polls like these get politicians' attention.

And therein lies the first truth buried in Biden's hot-mic one-liner... The president's staff knows (finally) that inflation is out of control... and they still don't know what to do about it... or if they do, they are not sharing their plans.

Today, key inflation data came in and did not scream 'peak inflation'...

As our Stansberry NewsWire editor C. Scott Garliss reported, year-over-year inflation growth hit the highest level in four decades in January...

The U.S. Bureau of Labor Statistics' Consumer Price Index ("CPI") for January jumped 7.5% year over year ("YOY") compared with Wall Street's expectation for a 7.3% bump and the prior month's 7% gain. On a month-over-month ("MOM") basis, those same numbers rose 0.6% compared with the expectation for a 0.4% increase...

Coming into the release, Wall Street expectations were building that inflation metrics will peak between now and March before moving lower once more. Analysts have questioned how much more costs can rise on top of the metrics we've seen over the last year. As a result, many institutional investors thought today's figures would underwhelm expectations.

In other words, an in-line number would have been a disappointment. So, the shift in sentiment makes today's higher-than-expected result worse than feared...

The CPI measures the prices of dozens of everyday consumer goods, like gas, groceries, rent, and cars and trucks... Rents are up 4.4% over the past year and food is up 7%.

And as our DailyWealth Trader editors Ben Morris and Drew McConnell wrote to their subscribers today, the market reacted in a typical "higher inflation" fashion...

U.S. Treasurys are down a lot (their yields are up a lot). The U.S. dollar is flat. Most stocks are down, but the energy, materials, and financial sectors are up. Tech stocks are down the most. Bitcoin is up. Commodities are mostly up. And precious metals like gold and silver are up.

Today, the market is rewriting the inflation script. We simply want to observe what happens and take notes... We suggest you do the same.

To that point, we did and fell on another "hot mic" truth...

'They' can't do much about inflation...

If the president could do something about inflation, he would have done it by now – if for no other reason than that it's a midterm election year.

It's likely the case that Biden's sarcasm stemmed from the fact that the reporter's comment struck a chord and his instinct was to deflect it.

But here's the thing... Nobody has a Harry Potter-like magic wand and can make inflation go away with a spell... other than maybe a bunch of CEOs who are willing to lose money by lowering prices and not make a profit...

Once inflation gets entrenched, it's hard to suck it out of the economy.

As our colleague and Stansberry Research partner Dr. David "Doc" Eifrig has long said, inflation is a mysterious force...

To carry through the Harry Potter analogy, inflation is a complicated, mysterious, evil force, like the villain Lord Voldemort in the famous J.K. Rowling thrillers.

But there are a few hallmarks of inflation, as Doc has written. From the February 23, 2021 Digest and Doc's January 2021 issue of Income Intelligence, where he warned extensively about high inflation...

If you wanted to point to three sources of inflation, you'd look to accommodative monetary policy, expansionary fiscal policy, and a strong economy. There's no question that we have the first two ingredients – and we think the third is about to kick in as well.

We still have a relatively strong economy and accommodative monetary policy, though that should become less so soon... And, of course, we have a debt-based fiscal policy, which we could see more of if additional spending plans are passed by Congress this year...

This inflation cat is out of the bag...

For better or worse, the acute inflation today was unleashed the moment that central banks printed trillions of dollars into existence during the "COVID crash" in March 2020... with the backdrop of record-low interest rates and wild supply-and-demand imbalances that may not be resolved for years.

At the time, all that stimulus looked like the right thing to do – a lot of people needed help, and being a money-printing country, the U.S. had the means to do it.

For the stock market, the sentiment that the "government has our back" no doubt fueled a record-fast rebound to new highs.

But like we said when all of this was happening, there would be consequences... Sure, we could print money, but we'd pay for it down the road...

Now we are down the road... And persistent inflation is one of these consequences.

Just like we've said so often here in the Digest, the time to prepare for inflation, or any other threat, is before it becomes a reality... Because by the time anybody who could influence it realizes it's a problem, the value of your money and portfolio will have already taken a hit.

It's happening right now, every time someone buys, sells, makes, or ships something...

It's why last summer we said not to believe the word the central bank was using to describe inflation: "transitory."

At nearly the same time that many companies were talking about how they would need to raise prices to combat labor, materials, and supply shortages, the Fed was still saying all these issues would go away sometime soon... Of course, they haven't gone away.

Now it's saying, "We don't know when they'll go away"... and will be making policy moves according to what happens over the next several months.

It's still not too late to prepare for the worst – or the best – or more of the same...

The inflation optimists believe it has already peaked...

It might have, but I am not so sure... You could parse the nitty-gritty of the latest inflation data and find arguments for and against the idea. But being "right" about this doesn't really matter anyway...

If you have money in stocks and bonds, what matters is what Mr. Market thinks...

And, to that point, Mr. Market has been listening to the Fed, since the Fed is the biggest string-puller in the inflation game. With interest-rate hikes and other policy, it ‒ and it alone ‒ can take juice out of the financial system... or put it back in.

But one of its two mandates from Congress is to maintain stable prices in the U.S... We don't have those right now... and it's now becoming a political liability.

The concern on Wall Street – and a big reason why so many stocks have been falling in price the last several months – is that the Fed might do too much to try to ease inflation, with multiple, relatively large rate hikes... and while economic growth in general is slowing.

To us, this fear is warranted... A bad and entirely plausible scenario is that the Fed could hike rates, trim its balance sheet, and we could still have high inflation... Even Fed Chair Jerome Powell admitted this recently, though not in so few words.

As we reported last month, in his then most recent testimony before Congress, Powell admitted the central bank itself is not sure what will happen with the course of inflation over the next six months...

He also said the pandemic and supply-and-demand imbalances are the biggest drivers of inflation, not policy, and that things like the semiconductor shortage could extend well into 2023... So we ask, why then would policy changes help now?

They probably won't... And if they do, they won't make any significant difference for months. On balance, then we are just looking at a world with above-average inflation and higher interest rates.

In other words, things could still get worse before they get better. If I've learned anything working at Stansberry Research, it's that trends can go on longer than you might think... and right now the inflation trend is in full force.

Even if what we're saying is wrong, at the very least this is one of those times where you want to hope for the best... but prepare for the worst.

Let's step back a moment...

Even if inflation does slow down somewhat, the numbers the Fed looks at are still rising at historically high levels, as revealed in today's CPI figure.

Things are not going to go "back to normal" overnight, or even anytime soon... and certainly not any faster than the trillions of dollars that have been printed into existence over the last two years will disappear from the system.

In other words, this is going to take a while... As we wrote on Tuesday, some people like keen market observer Lyn Alden think we're in for a decade of high inflation.

It's wise to prepare for inflation – and higher inflation than the country has seen in decades. That's the unfortunate truth that the powers that be won't tell you... unless you catch them on a hot mic.

So, like this time last year, when we told you to prepare for inflation in 2021, we'll say the same for 2022...

At least part of your portfolio should specifically protect you from inflation...

If not, at the very least it's wise to spend a little time thinking about how inflation could influence your portfolio holdings... Companies that can afford to raise prices and keep making wads of profits are well positioned in this environment.

I hope that shares of these companies make up the core of your stock portfolio, via our recommendations in our flagship Stansberry's Investment Advisory newsletter and in many of our other newsletters.

You could own gold, silver, real estate... or even a little bitcoin.

Additionally, Doc offered a complete portfolio allocation solution to protect against inflation last year. You could use that, too... Or you could follow one of our Portfolio Solutions products, which each account for inflation's influence in one way or another.

But if you want to "do more" right now... or simply feel you want more guidance on how to fight inflation... we have another option for you... One that you could apply to a portion of your portfolio in less than 30 minutes.

If this sounds interesting, our colleague Dan Ferris has the plan for the next step you should take...

As we've been mentioning lately, Dan has devised "The 10-Stock Inflation-Protection Portfolio." He talks about it in a new interview with our editor-at-large, Daniela Cambone.

You can watch it here to get more details.

Dan's newly created model portfolio is designed specifically to protect any investor's holdings against the nasty effects of inflation eating away at your nest egg or shrinking your hard-earned savings.

He is warning that if you are expecting the "same old" stock market returns over the next decade, think again... Right now, stock valuations are so high that Dan says the math doesn't add up for taking on more risk... especially with the scourge of inflation on the table.

As Dan told Daniela in the interview, he's seeing a 10% upside in stocks in general right now... and as much as a 90% downside.

With this in mind, Dan came up with a hand-picked group of 10 stocks that will not only help protect your portfolio in a massive stock market crash, but will benefit from inflation sticking around in the months or years ahead...

Some are traditional inflation plays like gold stocks, including Dan's No. 1 recommendation of the last four years, but many of these recommendations are new... or are ideas that other financial analysts are not writing about.

As Dan wrote in Monday's Digest about the 10 pack of stocks...

I've included four infrastructure-related stocks that serve industries like power generation, road construction, energy, and homebuilding... They're also essential pieces of modern life, without which we simply cannot maintain a high standard of living.

Finally, I've included a business that is like a royalty on the commercial-insurance industry... Most people don't think of insurance stocks when they think of inflation protection, but it makes sense.

Hard assets like real estate, factories, and product inventories all have to be insured. As their replacement cost rises, so do the premiums required to keep them covered... Whether there's a bear market or not, this company's clients still need insurance... Once again, it's selling an essential component of modern living.

Even if Dan is off the mark about the situation we're in, at worst, you can be found guilty of being too conservative in your risk-taking, protecting your portfolio from rising prices, and investing in "essential" companies that will likely reward shareholders.

There are worse things you could do...

Once you see and understand this plan, it shouldn't take more than a few minutes to put into action.

Stansberry Alliance members and Dan's Extreme Value subscribers, good news, you already have access to all the details right here...

And for everyone else, if you are interested in learning more and getting access to Dan's exclusive inflation-protection plan, click here to listen to or watch his interview with Daniela right now.

Just for tuning in, you'll hear the name of one stock Dan is recommending right now – for free.

A Better Way to Use Our Work

Stay tuned: An all-new Stansberry Research website is coming February 16 (sneak peek below)...

In short, we've totally reimagined the way you see and use our work. Don't worry, all the "old" stuff will still be here... Things are simply getting better.

To learn about all the new benefits you'll have access to as a subscriber, click here.

New 52-week highs (as of 2/9/22): Alcoa (AA), Altius Minerals (ALS.TO), Atkore (ATKR), American Express (AXP), Centene (CNC), Expedia (EXPE), PLDT (PHI), Raytheon Technologies (RTX), Travelers (TRV), United States Commodity Index Fund (USCI), Virtu Financial (VIRT), and Zeta Global (ZETA).

In today's mailbag, feedback on our publisher Brett Aitken's announcement that our new Stansberry Research Investor Platform – a complete ecosystem for the individual investor – will be available to subscribers on our website, StansberryResearch.com, beginning Wednesday, February 16. If you missed the announcement, you can find it here.

"I have used Stansberry products since 2011. I started with one newsletter. I went to three or four. Then I decided I just didn't get enough information. At the end of 2018, I knew it was time for an Alliance membership. I want to thank everyone for what you all have provided to me over the years. Certainly, I have my favorites. But I still read the free ones and always look at others that interest me.

"There is no such thing as too much information. Thanks to Doc, I paid my original Alliance membership with profit I made on one of his recommendations. Thanks to Jeff Clark, I started trading options. Doc had his hand in it too. Those were the beginnings.

"Today my wife and I live comfortably thanks to the variety of investments we make. We are grateful to all of you for all of the time you and your teams put forth. Granted, investing has been my passion since high school. Now that my family is grown, and I am retired from my real job, I am able to live my passion every day. I humbly thank each of you for making our lives better." – Stansberry Alliance member Jeff S.

"As a long-time subscriber to several of your newsletters over the years, I'm excited to see what you've developed for us to be able to gain quicker and easier access to the financial research you do on our behalf." – Paid-up subscriber Ron B.

"Thank you, Brett, Porter, and all those who make Stansberry a first-class investment information center. Been a subscriber since 2001 and couldn't be happier. Thank you for your outstanding service." – Paid-up subscriber Randy B.

All the best,

Corey McLaughlin
Baltimore, Maryland
February 10, 2022