A Supreme Jolt to Reindustriale America

…and the stocks to profit… [Morning Reckoning] August 08, 2024 [WEBSITE]( | [UNSUBSCRIBE]( A Supreme Jolt to Reindustriale America [Byron King] BYRON KING Hi Reader, We have to talk about the Supreme Court. The court’s June 28 decision in Loper Bright Enterprises v. Raimondo, overturned the forty-year-old Chevron Doctrine. In essence, the new law of the land, per the Supremes, is that federal courts need no longer defer to determinations by government agencies when interpreting ambiguous statutes. All of this may seem like arcane legalism, but it matters to investors as I’ll explain. In fact, it’s fair to say that the Supreme Court just pulled a big rug out from under the feet of our modern bureaucratic state. So, let’s dissect this… What Was the Chevron Doctrine? Chevron and the EPA agreed to regulate emissions from major operations like refineries as a single source. This result gave Chevron much more flexibility to run its facilities; for example, to make alterations to a refinery that might, say, increase emissions from one area while reducing emissions from another, without having to go to the EPA for approval for each and every change in conditions. And in this sense, it was a good result for Chevron. Regulators Rule (but Chevron Came Away Happy, Too) In essence, the Supreme Court held that the trial court should have deferred to the EPA’s approach to regulating Chevron’s facilities. Presumptively, per the court, the EPA is home to an organizational body of knowledge and expertise that comes from working within its regulatory mandate. And this insight and clarity should be determinative to regulatory outcomes. You’ve probably heard the old expression, “You can’t beat city hall,” right? It means that the government has ample resources to string you along, fight you in court, drag things out, and get your way. Well, the Chevron Doctrine presumption in favor of agency expertise and insight is much the same thing. Since 1984, that decision has just rolled on and on, all in support of the modern bureaucratic state. Or one might say, “be careful what you wish for,” even if you are the Chevron oil company. [“Black Pattern” Forecasting Major Market Crash]( The world’s most accurate crash indicator is flashing its most critical warning in decades. I call it "The Black Pattern". [And it is the only one that is 100% accurate at predicting a market crash.]( Ever since the 1950s… Whenever this Black Pattern has appeared, stocks have crashed – sometimes by 50% or more. And now… It’s telling us that 2024 could be the worst year you and I have ever seen for the stock market. For full details, [click inside.]( [LEARN MORE]( Now, That Chevron Doctrine Is No More With the decision of June 28 in Loper Bright Enterprises v. Raimondo, the Chevron Doctrine is overruled. Chief Justice Roberts wrote the majority opinion and based his ruling on a technical review of underlying agency law, namely the Administrative Procedure Act (APA), a federal law that defines how regulatory organizations are supposed to work within the U.S. system of governance. The Chevron Doctrine was inconsistent not only with the APA but also with the Constitution’s division of powers among the three branches of government. The Chevron doctrine, he wrote, requires judges to give up their constitutional power to exercise independent judgment, and it allows the executive branch to “exercise powers not given to it.” Reindustrializing a Deindustrialized America What happened to America’s shipbuilding industry? Or its consumer electronics industry? Or textiles and clothing? Or furniture? Or what happened to large swaths of the country’s mines, mills and metal smelting and refining industries? Again, every industrial story is different, but neither is it difficult to find tales of mine, mill or factory closings, or plant shutdowns based on, say, EPA regulations under that above-noted Clean Air Act, or a myriad of other regulations pertinent to clean water, solid waste disposal and much more. The American industrial decline is not a recent phenomenon; it’s been ongoing for forty years, about since the days of the Chevron Doctrine. One might say that it takes a while to strangle a vast industrial economy via bureaucratic action. But with regulatory bureaucrats as with life, and like that proverbial “little train that could,” persistence pays off. Where Do We Go from Here? Looking ahead, what should happen? It gets back to a point I’ve made before, in one form or another and in many articles; that if the U.S. wishes to remain a wealthy, wealth-creating, value-adding industrial power, and not backslide into global second-rate status, the country must rebuild vast amounts of infrastructure and basic industry, and do it on a massive, continental scale. And the country must do this while protecting old and new firms against being smothered by low-cost imports. Previously, I’ve named several ideas that should do well in the coming years, one way or the other. First, look at Energy Fuels Inc. (UUUU), a metals producer in Utah. Energy fuels produces uranium yellowcake from ore, and thus is a key player in domestic energy. Also, it produces vanadium metal, an important steel alloying agent, and also used in battery systems. And finally, Energy Fuels just announced successful completion of a system to recover REs from ore, right now the only American company with that capability. Next, look at a name we’ve previously seen, Contango Ore Inc. (CTGO), a gold miner in Alaska. Contango has been mining ore all winter and spring, and sending it to stockpile at the Fort Knox Mine, near Fairbanks and owned by Kinross. This summer, Kinross began to process this ore, and recently (July 8, to be exact) poured the first gold bar. So Contango is actually in the gold production business, which generates cash flow. I expect a market upgrade as the summer unfolds and larger investors begin to move in. Finally, look at offshore drilling plays, certainly in the event that Donald Trump wins the presidential election and changes the bureaucratic and regulatory approach to development on federal offshore acreage. I like Transocean (RIG), which has a large fleet of drill-ships and crews. And I’ve long been impressed with Oceaneering International (OII), a service provider to offshore developers. Share prices of both companies are already moving up, as investors realize how these firms will benefit from a more petroleum-friendly administration. Note that these names are not official recommendations and will not be tracked in the portfolio. But I watch the companies and expect them to do well in the years ahead. If you buy shares, be sure to follow the charts, wait for down days in the market, use limit orders, and never chase momentum. To wrap up, the recent Loper decision gives cause to believe that industrial redevelopment in the U.S. will benefit from a new “jolt,” to borrow from Justice Kagan. Looking ahead, and absent the Chevron Doctrine, many industries can expect to encounter less red tape. And now, industrious people are back to playing on a more level field, versus the administrative state. That’s all for now. Thank you for subscribing and reading. All the best, [Byron King] Byron W. King [Elon Musk’s Final Masterpiece: X-9840]( After revolutionizing the payment processing industry with Paypal…The space exploration industry with SpaceX…And the auto industry with self-driving Teslas… Elon Musk is now set to revolutionize MONEY with his [“Project X-9840...”]( A project he said could change “Your entire financial life.” [Click here to see the details because there’s not much time to prepare](. Elon has said he could flip the switch “as early as mid 2024.” [LEARN MORE]( In Case You Missed It… Before You Buy the Dip, Read This... Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, I was enjoying a cocktail on my neighbor's porch early Saturday night when the skies suddenly changed. Thunder rolled in as the horizon turned an ominous shade of purple and the wind began bending the treetops. We retreated inside just a few moments later as the first raindrops fell and watched the storm unfold from the safety of the kitchen. It was gone almost as quickly as it appeared – but the powerful storm left plenty of damage in its wake. Residents reported power outages, more than 400 downed trees, and 170 blocked roadways throughout the city. Aside from a few short power outages, my neighborhood was spared. The only evidence in the yard were a few stray sticks and branches, which we cleaned up on Sunday afternoon before I sat down at my desk to survey the markets and prepare for the new trading week… As you might imagine, I couldn’t help but think the universe was toying with me when I saw the market begin to unravel in Japan and spread through crypto and the futures market. Stocks were in freefall – no doubt about that. But how long would the storm last? Before we attempt to answer this question, let’s take a minute to review how it all went down… Japan found itself in meltdown mode as the Yen carry trade imploded and global recession fears spread. The Nikkei fell more than 12% on Monday, which the WSJ notes is its biggest drop since the 1987 crash [Editor’s note: If you’re interested in learning more about the Yen carry trade, check out Sean’s Monday writeup]. Of course, the selling didn’t stop there. The bloodshed in the Asian markets spread into crypto, which spilled over to US equities by the early morning hours. We were already seeing some small pockets of worry crop up late last week, which began to snowball early Monday morning. You always know the market is making waves when non-financial types are posting about the carnage on social media – and the panic was certainly palpable Monday morning. The market was dumping and the VIX spiked to levels not seen since the Covid crash. The bell rang – and investors started selling. These are the days that put traders and investors to the test. How you react to major selloffs can affect your portfolio for months to come. If you aren’t prepared and you begin to make panicked decisions, you can cause serious damage to your returns. In “meltdown” situations, the survivors will be those who can remain calm and focused when everyone else is running around with their hair on fire. While I can’t yet tell you how the averages will look at the end of the week, we can discuss what to expect in a higher volatility environment like the one we’re entering right now – and how you should adjust your trading strategy as stocks sail into rough waters. 1. When Investors are Scared, Cash is King Even in bullish conditions, the market rarely cares about any of the amazing stories about your favorite investments. You can’t argue fundamentals or growth stories in a crashing market. If panic conditions emerge, investors only want cash. They crave safety above everything else. Crypto is the perfect example of this phenomenon. I know there are plenty of folks who argue that Bitcoin is a safe haven investment. But the market says otherwise! Crypto actually trades like a risk asset. That’s why we watched Bitcoin get smashed into the low $50K range late Sunday as more than a few crypto traders were liquidated. When the margin call comes, the only way to pay is cold, hard cash! If investors are raising cash, they will sell anything and everything, even gold. You might remember that gold even dropped a staggering 25% during the throes of the Aug. - Oct. 2008 meltdown. Keep in mind, this was in the middle of a huge bull cycle for gold, which was unceremoniously interrupted by the Lehman Brothers bankruptcy and the ensuing financial crisis. Investors will also sell their big winners during these times of distress. The VanEck Semiconductor ETF (SMH) has tumbled nearly 30% from its July highs. The Nasdaq 100 is down 15% over the same timeframe. Yes, even the bulletproof Magnificent Seven stocks are collectively more than 20% off their all-time highs. 2. Stocks “Hold Hands” During Down Markets The market becomes highly correlated during drawdowns and panic events. What does this mean? Simply put, on the big, sweeping down days and crashes, most groups and asset classes react with similar moves. Correlations are lower during bull markets. You’ll have big winners, middling names, and laggards. Think about how the market was acting earlier this year. We have semiconductor stocks leading the market by a mile, many tech names also cruising higher (just not as much), while other sectors lagged. That doesn’t happen during sustained drawdowns. When everyone is fighting for the exits, very few areas are safe from the sellers. And I’d venture to guess that most of the visible stocks will be down about the same as the averages during these dumps, with some of the higher-flying names from the past few months taking some bigger hits. When sentiment sours and investors become more cautious and defensive, it’s that much more difficult for individual groups to outperform. 3. Respect the Swings When markets suddenly get squirrely, you probably experience a strong urge to do something, anything, to right the ship. But part of investing or trading is simply surviving. After all, you have to preserve your capital if you want to stay in the game! And since we just experienced a severe volatility spike, it’s important to remember that we’re probably going to see strong moves both higher and lower in this new environment. Volatility can be your best friend or your worst enemy. If you’re a longer-term investor, you have a great opportunity to start nibbling at some of your favorite companies (If you liked it at $70, you’ll love it at $50, right?) If you’re a trader, you’ll want to look to compress your timeframes. Yes, you can take advantage of the bigger swings. But you’ll want to take profits when you can, because the market’s more likely to experience back-and-forth action. Take what you can get, then move on! As for finding the absolute bottom following a market downturn, don’t forget what legendary technician Walter Deemer says: “When the time comes to buy, you won’t want to.” Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox by [whitelisting The Daily Reckoning.](