This Is a Rare Market With an Inevitable End
Another $550 billion in the pot... Following the Delta variant... It's still a bull market... The elevator keeps going up... This is a rare market with an inevitable end... The five 'must haves' if you're buying today...
Another $550 billion of spending is on the brink of entering the game...
The numbers just keep getting bigger and bigger...
Yesterday, the Senate agreed on a bipartisan $1 trillion infrastructure bill, which approves $550 billion in new infrastructure spending (on top of the $450 billion that has already been approved).
As Stansberry NewsWire analyst Nick Koziol reported yesterday, the bill passed the Senate in a 69-30 vote...
All 50 Democrats voted for the infrastructure package, with 19 Republicans joining in. The bill provides investment for roads and bridges, expanding broadband access, upgrading America's electrical grid, among other things.
As Nick also noted, though, this bill is far from a done deal. Markets moved higher yesterday after the news, but the response was muted, and the bill's uncertain path through the House of Representatives is why...
The House is on recess until September 20. And House Speaker Nancy Pelosi (D-CA) has said that she will not take up the bill in the House until the Senate passes the Democrat-proposed $3.5 trillion spending bill.
And that bill will likely have to be passed through the reconciliation process, as it's unlikely that any Republicans will go for the spending package.
Neither bill may be passed for weeks, or even months...
But it does show that at least $550 billion of spending is very much on the table – either in reality or as a negotiating chip in greater spending discussions (the debt ceiling is one of them) – in the near term...
Generally, people feel the nation is due for an infrastructure upgrade. U.S. infrastructure received a grade of C- in 2020 from the American Society of Civil Engineers.
But still, let's bold-face the price tag... since we know many people in Washington, D.C. have become numb to big numbers and think they are the single answer to our problems. We're talking about $550 billion – in addition to the $450 billion already out there – to be spent over the next five years.
This all just means more government spending thrown into an already-juiced-up market, more fuel for inflation, and another brick added to our long-term pile of debt.
Even without this spending factored in, the federal government is projected to spend $28.1 trillion in the next five years, according to the Congressional Budget Office.
Further into today's Digest, I (Corey McLaughlin) will share some wise ways to prepare accordingly...
In the meantime, we want to catch up on what's been worrying folks lately...
That's the COVID Delta variant, which everyone now seems to be talking about... As we mentioned in the July 19 Digest, this was part of our "winter storm" idea, and it arrived just a few months early...
Mask restrictions are back in different states and industries... companies are changing their back-to-the-office plans... and this latest strain of the virus is infecting people who are filling up ICU beds... just like in spring 2020.
Our team covered the story in the latest issue of our flagship Stansberry's Investment Advisory, published on Friday...
The Delta coronavirus variant is spreading fast across the U.S. It's twice as contagious as earlier strains. Worse, it comes at a time when the U.S. and Europe have relaxed nearly all of the public health measures – not only extreme steps like lockdowns and business closures, but also mandatory social distancing and mask-wearing.
It's this one-two punch that has led to an exponential rise in U.S. cases and hospitalizations.
Fortunately, deaths haven't been following at the same rate, though they are picking up...
More on this point from analyst Alan Gula in the August edition of our Stansberry Portfolio Solutions service...
As you can see, hospitalizations are rising quickly from their trough in June and are nearly back to April 2021 levels. However, the number of deaths is not rising nearly as fast.
Since we originally published the above chart on August 3, daily COVID hospitalizations in the U.S. have risen to more than 60,000 on average per day over the last week (a number not seen since mid-February)...
And, unfortunately, daily COVID deaths in the U.S. have increased to just over 800 deaths per day, as of August 10, though that's significantly lower than the number during this past winter's "second wave." Each life lost is tragic, but the "divergence," so to speak, in hospitalizations and deaths is an encouraging sign.
It shows that, fortunately, the COVID-19 vaccines are working. Globally, folks have received more than 4 billion vaccine doses, representing 2.5 billion people who've received at least partial protection so far. More from Friday's issue of the Investment Advisory...
More important, this protection works. The best of these vaccines are more than 90% effective in preventing infection once you've received the typical two-dose regimen – and 99.9% protective in preventing deaths.
Still, while 70% of U.S. adults have received at least one vaccine dose, 30% have not. In all, less than half of the U.S. population is fully vaccinated – so even with nearly all COVID-19 hospitalizations being among the unvaccinated, that's still a lot of people who can get sick.
Vaccination rates have also risen, since Delta cases have emerged... New vaccinations have doubled since last month to roughly 441,000 per day, as of August 5, according to the Centers for Disease Control and Prevention.
At the same time, there's been an alarming rise in "breakthrough" infections among the fully vaccinated... and kids under 12 also aren't yet eligible to get a jab, creating an entirely new set of questions and concerns when schools and day cares reopen nationwide in the next few weeks.
We also don't really know the full picture of the long-term consequences of getting COVID, which could cost money, health, and production down the road, apart from the short-term hospitalization crunch.
The long and the short of it...
According to our Investment Advisory team...
As investors, we're not predicting another major global lockdown... We're confident Starbucks coffee will be poured. Big Macs will be eaten. All the tech firms that did well during the COVID-19 epidemic should continue to outperform. Travel will continue. And while some businesses like dine-in restaurants, bars, and large indoor venues will founder, the economy as a whole will drive forward.
But there will be at least runs of volatility moving ahead...
Still, there's a lot we don't know about the Delta variant and its effects. Investors can easily fear the worst when they see rising cases or isolated economic effects. And even if more folks start getting vaccines, it would likely take two to three months for vaccinations alone to reverse the rising rate of infections.
That's why we expect more volatility in all corners of the markets in the coming months. And we wouldn't be surprised to see a broad market sell-off.
Moreover, if the death rate rises higher, that could lead to the return of more travel restrictions and other safety protocols, which would threaten the economic recovery... If that does happen, we'll be ready to take advantage of any opportunities in the market.
Thinking even longer...
This time last year, investors were expecting a full-fledged recovery once vaccines were made available. Now we sense a new reality sinking in – that COVID will likely be around in some form for years ahead...
As a few of our editors, including health care sector expert Thomas Carroll, said way back last spring, "COVID" could end up being a word like the "flu" and be treated as such, with different strains emerging in different parts of the world over time... and potentially different vaccines shipped accordingly...
There will also be a need for more widely available COVID treatments for unvaccinated people. Stansberry Venture Technology editor Dave Lashmet recently issued a special buy alert for a company that has just that. As he wrote on August 4...
This firm has developed an antibody drug that can treat the Delta variant before patients reach the hospital. It has no current competition. And Wall Street hasn't caught on yet.
Existing Venture Technology subscribers can find Dave's buy recommendation on this company here and can expect a full write-up in their next issue, due out August 24.
And if you don't subscribe already and are interested in learning more, click here for more information on how to get started with Dave's excellent Venture Technology newsletter today.
Despite all this, we're still in a bull market...
Despite all the negative fiscal and COVID news, the benchmark S&P 500 Index and the good ol' Dow Jones Industrial Average continue to trade at all-time highs...
The S&P 500 is now up 20% in 2021... the Dow is up 18%... and the tech-heavy Nasdaq Composite Index is up 16%, including a 13% gain since its most recent mid-May lows...
Based on the technical picture, there's no reason to think this slow churn higher in the broad U.S. stock indexes – with spates of short-lived volatility – will not continue, according to Ten Stock Trader editor Greg Diamond...
Breadth (for instance, the number of stocks listed on the New York Stock Exchange trading above their long-term, 200-day moving average) continues to decline from record highs, but that doesn't mean the indexes can't run higher, powered by certain hot sectors or individual stocks...
Greg shared just one chart with his subscribers on Monday in his regular Weekly Market Outlook to illustrate this point, and it was all about one word – momentum...
You see, back in June, Greg outlined an important fund to watch in the iShares MSCI USA Momentum Factor Fund (MTUM).
It is a blend of many of the top stocks within different major U.S. sectors, such as electric-car maker Tesla (TSLA), bank JPMorgan Chase (JPM), entertainment icon Disney (DIS), digital-payments company PayPal (PYPL), and biotech and COVID vaccine maker Moderna (MRNA).
Tracking this fund and the trends they represent is important because, as Greg said, it filters the daily noise, and it shows that there is still bullish "momentum" in enough pockets of the markets to move things higher overall...
I've noted for much of this year how the rotation in various sectors was causing some confusion if you only looked at the major indexes most investors follow.
Greg says this fund is starting to follow one of the two bullish scenarios he outlined two months ago...
The blue lines mark a big consolidation phase that started earlier this year. The convergence of the upper and lower blue lines usually marks a big move out of this phase, and as of last week, you can see that the fund is starting to break higher.
On the other hand, perhaps there is another pullback into this consolidation pattern, Greg says. In short, that tells him that it's another opportunity to buy. Why?...
Look how the lower trend line of this pattern is nearly perfectly lined up with the 200-day moving average ("200-DMA") in red. This is what following trends and understanding support is all about – and it's quite simple analysis. Unless the lower level and the 200-DMA are broken, you must remain with this trend higher...
I've kept it simple this week. But the point is quite clear: Stick with this momentum until the market tells you to stop.
Admittedly, though, Greg says this is a 'rare market'...
As a technical trader, he likes to follow the numbers and trends to take costly emotion out of investing. But he's well aware of the unprecedented macroeconomic environment we're living in today...
As Greg said...
There are unlimited easy money policies with government subsidies as far as the eye can see... combined with low interest rates in a global pandemic that seemingly has no end.
We've seen nothing like this before – and we may never see anything like it again...
I view this market environment like an elevator ride – smooth on the way up with just a few stops here and there, and everyone for the most part is happy.
He continued...
This is a rare market, and one day it will cease to be an elevator ride and return to a more volatile environment... And when we think about the current leverage accumulating in this environment, it is unprecedented to say the least.
He left subscribers with a thought and a passage from legendary trader Paul Tudor Jones from his interview in Market Wizards about the 1987 crash, and it's too good not to share with you here in the Digest, too...
Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken 10 years to build. If the economy starts to go with the kind of leverage that is in it, it will deteriorate so fast that people's heads will spin... I know from studying history that credit eventually kills all great societies. We borrowed against the future, and soon we will have to pay.
We're talking about unlimited money supply, low interest rates, and governments and central banks throwing more money (credit) into the world economy than at any time in the history of civilization...
Greg says he doesn't think that this time is different. He says, "Mr. Jones' words will one day prove correct," but for now, it's not time to get off the elevator just yet.
You want to know what floors to avoid though...
Like that floor where you always have to spend money, or where you could get off at and be guaranteed to lose money. To that point, our colleague Dan Ferris is issuing a new warning (and an opportunity)...
You'll hear more about it from Dan directly this week, but here's a heads up. If you're an inexperienced investor putting money in "meme stocks," non-fungible tokens, and cryptos and get the sense that trouble is ahead, he's with you.
In fact, Dan is urging people not to – under any circumstance – buy anything in this rare market unless it checks off his five "must haves" that have resulted in his readers having the chance to bank gains of 406% and 629%, among his 68 other winning trades.
I've heard Dan say it plenty of times. Over the last few years, the markets... the media... and really the entire world... have been filled with irrational and overreactive displays of human behavior.
And he believes it's going to end up with a lot of people losing a lot of money – very soon.
That's why he went on camera recently to explain why this overexuberance isn't going to last forever... and he shared the best way to find investments today that will provide triple-digit returns with much less risk than found in the latest "hot" trend.
He's found one stock that his research indicated could return 200% or more over the next couple of years. And this opportunity is rooted in real research that he's confident will stand the tests of the market ahead.
It's One Giant, Controlled System
The Federal Reserve will try everything possible to not raise rates, says E.B. Tucker, author of Why Gold? Why Now? Their recent action in the repo market is another defense mechanism to keep the U.S. dollar as the reserve currency. "This is a severe drug addiction, they have 'financialized' the economy," Tucker told our editor-at-large Daniela Cambone.
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 8/10/21): Automatic Data Processing (ADP), Brown & Brown (BRO), Dollar General (DG), Quest Diagnostics (DGX), James Hardie Industries (JHX), Markel (MKL), Motorola Solutions (MSI), Cloudflare (NET), Invesco S&P 500 BuyWrite Fund (PBP), ProShares Ultra S&P 500 Fund (SSO), Vanguard S&P 500 Fund (VOO), and Consumer Staples Select Sector SPDR Fund (XLP).
In today's mailbag, the feedback is rolling in on Kim Iskyan's Tuesday Digest, and he responds... Do you have a question or comment? As always, e-mail us at feedback@stansberryresearch.com.
I feel your pain! We recently had the same experience buying a property: jumping through hoops with paperwork to support underwriting questions, and almost missing the deadline by lack of appraisers. Fortunately, it worked out for us, and we didn't have to pay cash." – Paid-up subscriber Jeff C.
"I read with interest Kim Iskyan's mortgage experience with Chase. My wife and I had several large accounts at Chase and have been with them for over 50 years. Their ineffective service, a change in local branch managers five times in three years, over-the-top COVID restrictions, and other kinds of similar issues caused us to reluctantly move all of our accounts to our local community bank with deposits of $1 billion, a fraction of Chase deposits. But at the community bank I have met the president of the bank and have someone inside the bank I can reliably call and get questions and problems sorted out. What a difference!" – Paid-up subscriber Mike P.
"Unfortunately, big banks are just too bureaucratic. But you can still get a mortgage and put the money back into your IRA if you do it quickly. Find a local credit union. They are offering great rates. They will do a refinance and it will be less expensive. They do not treat their depositors as customers, but as members. Try it." – Paid-up subscriber Franklin P.
"Always use an independent mortgage broker or mortgage company. They are much better able to deal with unusual circumstances (such as moving back to the U.S. from overseas). [Many large banks] are basically inept at the mortgage business except for standard bread-and-butter deals that they can sell to FNMA, Freddie, FHA, or USD. I'm sorry you had to go through the hassle and be forced to liquidate a portion of your retirement funds due to their incompetence." – Paid-up subscriber Jeff B.
"I agree completely with Kim's comments on complaining: by all means, complain when you feel justified. Sometimes, merely posting a critical review on a social media 'review' site is enough to satisfy one's anger in an easy way. As Kim notes, if you want to pursue a formal complaint with the company involved, it doesn't make much sense to go to all the effort required unless you can identify what you want to gain: a refund of some type; free night(s) at a hotel or better treatment; or some other perk. My advice, though, is to start with writing a letter to the company CEO – it has worked every time for me, with some of the largest companies: American Express; T. Rowe Price investment company; and others. Cuts out all of the frustrations and delays in trying to deal with 'customer service' people, and always (in my experience) brings a beneficial response – not necessarily from the CEO personally, but from someone with instructions from the CEO to 'fix' the problem." – Paid-up subscriber Jim B.
"Mr. Iskyan, There is a bank regulatory organization in the United States that accepts complaints on banks. I believe it is called FINRA. They have an online form for entering complaints and once you enter the complaint the bank has 30 days to respond and must respond formerly. Once you get into the regulatory complaint resolution side of the bank you get treated differently. Still not well, but much better than the customer service people who as you correctly identified are motivated by getting you out of their inbox and not by resolving any problems.
"I had my identity stolen by someone aided and abetted by a [multinational bank]. It took me over one year and many, many forms to submit notarized, and documented. It was thoroughly painful, but without the intercession from the bank regulatory agency, it would have taken longer and been more painful.
"I have had to use FINRA twice to resolve disputes with banks. It works." – Paid-up subscriber Gary H.
Kim Iskyan comment: Many thanks for the kind words – and great advice – of everyone who wrote in (note to self: consult the wisdom of the Digest community before wandering into the wilds of American personal finance next time around!).
In hindsight, it would have been much smarter for me to avoid the big, bureaucratic bank and use an independent mortgage broker instead... and I intend to find a community bank where my business (however small it is, in the bigger scheme of things) means something more than it does to a big bank. I haven't pursued my complaint with the regulatory authorities (I intend to, though – thanks for the nudge). And good idea re: posting a review as a way to scratch the complaint itch... that's a satisfying and relatively low-commitment way to get it out of your system.
And Gary H., your stolen identity story is cautionary... and an apt reminder that, well, things could always be worse... I can only imagine how unpleasant and frustrating that must have been.
All the best,
Corey McLaughlin
Long Island, New York
August 11, 2021