Playing With Fire

Scoreboard-watching... And everything else... About the debate – and the Supreme Court... The end of the 'Chevron precedent'... A win for deregulation... Jobs data on deck... Claudia Sahm on the Fed 'playing with fire'... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Scoreboard-watching... And everything else... About the debate – and the Supreme Court... The end of the 'Chevron precedent'... A win for deregulation... Jobs data on deck... Claudia Sahm on the Fed 'playing with fire'... --------------------------------------------------------------- What the scoreboard says... The benchmark S&P 500 Index and tech-heavy Nasdaq Composite Index are trading near all-time highs... So is the Dow Jones Industrial Average, though it's a little further off record pace. And the small-cap Russell 2000 Index is more than 15% off an all-time high, though it is trending higher. That's the headline view... If you did nothing else but look at the performances of the major U.S. stock indexes, you'd say all looks well and that stocks of smaller companies may have some room to "catch up" in what has been a bullish year thus far. This is reasonable. And, in fact, without giving too much away, it's part of what our friend Marc Chaikin is telling people in [his new free presentation](. Marc is the founder of our corporate affiliate Chaikin Analytics, and we highlighted his research last week and over the weekend in our Masters Series. Then there's everything else... Where to begin? Those in the political class are still debriefing about – and we're trying to make sense of – last Thursday night's debate between President Joe Biden and former President Donald Trump. Ironically, the made-for-TV debate proved much harder to listen to than all the discussions we've heard from analysts afterward... And they've now been leap-frogged in the news cycle by today's Supreme Court ruling on presidential immunity. The court's decision likely kicks a potential election-interference criminal trial against Trump further down the road... to maybe after this year's election, if at all. The main takeaway: Since 8:59 p.m. Eastern on Thursday, just before Biden walked into public view in CNN's Atlanta studio and started whispering, market odds of a Trump victory have jumped. And folks have started to wonder about who the Democrat presidential nominee will even be. We don't blame anyone who feels this election is more important than previous ones you may have seen. But as we've shared before, history suggests that whoever is in the White House or Congress doesn't have as much sway over the market's performance as one might think. As Stansberry Research senior partner Dr. David "Doc" Eifrig wrote [in our June 18 edition](... The machinations of the Federal Reserve, the economy, and the thousands of businesses and millions of individuals wash out most of the effects a president might have on the stock market. Sometimes, something like a big tax cut can boost stocks, but that's a rarity. That "big tax cut" point came to mind as I (Corey McLaughlin) considered the fallout from Thursday's chat between the current and former presidents. The tax issue... You may recall the Tax Cuts and Jobs Act ("TCJA"), which some call the Trump administration's signature legislation. Under it, all corporate taxable income was converted to a flat 21% tax rate, down from rates as high as 35%. The act also lowered taxes for individuals and married couples by nearly doubling the standard deduction. Less taxes, of course, can help businesses' profit margins and boost economic activity. Yet as our colleague Mike Barrett wrote in an issue of his Select Value Opportunities service [earlier this year](... Most Americans don't realize that many of these changes – including lower tax rates and higher standard deductions – sunset on December 31, 2025. In other words, unless Congress permanently extends the tax cuts originally established by the TCJA seven years ago, they will expire at the end of 2025 (a year into the next president's four-year term). Trump has promised to extend the TCJA (or something like it) should he be elected in November and it pass a Republican-controlled Congress... Biden supports raising the corporate tax rate to 28% and would probably veto an extension of the current policy. Now, this isn't to say that less taxes would solve America's long-term debt problems. Nor does it mean the structural feature of inflation will disappear. But the point is, the prospect of a more business-friendly executive branch is more on the table than it was a few days ago. And about regulation... Separate from the election, on Friday, the Supreme Court handed down a landmark ruling, overturning the "Chevron doctrine." That's a 1980s ruling that allowed federal agencies to interpret a particular law when that law's intent wasn't entirely clear. For the past 40 years, the previous ruling had allowed the U.S. executive branch substantial authority on regulatory issues – ranging from environmental concerns to health care and technology... and moving ahead emerging sectors like cryptocurrency... As our colleague Sean Michael Cummings [wrote]( in the free DailyWealth newsletter as the case was being considered again in January... In 1984, the Supreme Court heard a case called Chevron USA v. Natural Resources Defense Council. This case dealt with some unclear language in an amendment to the Clean Air Act of 1963. According to the amendment, the U.S. Environmental Protection Agency ("EPA") was required to review any new air pollution "sources" before they could be built. Now, the Clean Air Act hadn't defined what a "source" of air pollution was. So at first, the EPA took "source" to mean any change at a factory or plant that could add to pollution. Then, in 1981, the EPA changed its definition. It said only factories and plants themselves could be considered "sources" of air pollution. This was good news for many companies... It greatly reduced the burden on businesses. But not everyone accepted the new definition so easily. A major advocacy group, the Natural Resources Defense Council, filed a lawsuit. It said that the EPA couldn't just change the interpretation of laws like that. The case went to the Supreme Court in 1984... And the EPA won a unanimous decision. The "Chevron precedent" had been cited in thousands of cases and affected a variety of industries. In January, the Supreme Court heard appeals on the case on the subject of regulations requiring fishermen to pay for environmental observers (people) on board their boats. The overturn announced on Friday, with a 6-3 majority, gives more power to the courts, giving businesses more chances to challenge rulings and potentially reducing the regulatory burden (and costs). Current regulations across various industries won't be challenged or unwind overnight, but the ruling does open the door for significant changes in the years ahead. This could be a bullish catalyst for the most heavily regulated industries. As Sean wrote back in January, "the most tightly regulated sectors are likely to benefit the most... like health care, energy, and financials, to name a few." Later this week, jobs data... The most significant economic data point comes out Friday, with the "nonfarm payrolls" report for June. As our colleague Greg Diamond told his Ten Stock Trader subscribers today, "All eyes will be on Friday's jobs number." The May numbers showed the unemployment rate ticking higher to 4%, up from 3.9% in April and 3.8% in March. If the unemployment rate moves higher for a fourth straight month, watch for expectations for a Fed rate cut or two later this year to rise. At the same time, though, that also means more people are unemployed. So we're getting to the part of this cycle where "bad news" for the economy can become "bad news" for the market... A signal to remember... You don't hear many people talking about it, but the "Sahm rule" – associated with the onset of recessions – is in play again. This indicator is named for Claudia Sahm, an economist and onetime employee at the Fed. Basically, 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. The rule says that whenever the government's unemployment rate rises 0.5 percentage points off a cycle low – the difference between the current three-month average and the past year's three-month-average low – we're in a recession. We're getting close – again. The unemployment rate has flirted with triggering this "rule" a few times over the past year or so... It would take a big surprise in the June jobs report on Friday to trigger it, but this is a signal of a trend worth watching. The 3.63% three-month average in the unemployment rate from June 2023 to August 2023 is the present trailing-12-month cycle low. The current three-month average unemployment rate is 3.9%. At this rate, unemployment would need to be reported at 4.4% in June to make for a 4.1% average. This would trigger the Sahm indicator in my book, though economists would argue over the second decimal point. An unemployment spike like that is unlikely given the labor-market data that we've already seen this month, but we have our eye on it. Straight from the horse's mouth... Sahm rule or not, the labor market continues to weaken... Unemployment has trended higher since a low of 3.4% in April 2023. Tack a few months onto the formal definition of the Sahm rule, and you could say it's warning of a recession already. If the trend continues, Sahm's indicator could trigger in the months ahead. It also could not, but the labor market could weaken more in a slow-burn style that never triggers the indicator but has the same effect on folks who lose their jobs. To this point, Claudia Sahm herself – now the chief economist at New Century Advisors – said during a recent CNBC interview that the Fed is "playing with fire" by not cutting interest rates... Fed Chair Jerome Powell talked about waiting for a "deterioration" in job gains at a press conference after the central bank's most recent meeting. Sahm said that's a big risk, and she doesn't see value in the Fed's "ceaseless tough talk on inflation." Sahm said... The recession indicator is based on changes for a reason. We've gone into recession with all different levels of unemployment. These dynamics feed on themselves. If people lose their jobs, they stop spending, [and] more people lose jobs... My baseline is not recession, but it's a real risk, and I do not understand why the Fed is pushing that risk. I'm not sure what they're waiting for... The worst possible outcome at this point is for the Fed to cause an unnecessary recession... About that: We know the Fed has caused many unnecessary problems throughout history and has proved to be the undisputed king of "fighting the last war" (in this case, inflation). Don't rule out the possibility of the "worst possible outcome" again. A Warning Sign to Watch From the Banks In this week's Diamond's Edge, Ten Stock Trader editor Greg Diamond examines bank and financial stocks, and he shares why they're an early warning sign of trouble to watch in the second half of 2024. As a Digest reader, you get the first look at Greg's new Diamond's Edge video each Monday. For more free videos, [check out our YouTube page](... And if you're interested in more research and analysis from Greg, [click here for information]( on how to get started with a subscription to his Ten Stock Trader advisory. --------------------------------------------------------------- Recommended Links: [Here's What You Missed Last Week]( There's a massive shift playing out in U.S. stocks – one we've only seen a dozen times before, going all the way back to 1943. Now, one Wall Street veteran is warning that it'll impact every major stock you can think of, especially Nvidia. Last week, he shared where the stock market is going next... what it could mean for your money this year... and the No. 1 investment strategy he's now recommending if you want to protect and [grow your wealth in 2024](. --------------------------------------------------------------- [A Big AI Secret in THIS Building Could Mean 1,000%-Plus Gains]( It might not look like much, but this building contains an AI secret that's quietly making ordinary folks in this town gains of up to 3,700%. At least 100 locals are poised to become millionaires. Former hedge-fund manager Whitney Tilson traveled 300 miles to investigate... [and to reveal how the secret in this building could potentially help you make 10 times your money in the years to come](. --------------------------------------------------------------- New 52-week highs (as of 6/28/24): Alpha Architect 1-3 Month Box Fund (BOXX), Coca-Cola Consolidated (COKE), Commvault Systems (CVLT), iShares MSCI Emerging Markets ex China Fund (EMXC), iShares iBonds December 2024 Term Treasury Fund (IBTE), KraneShares MSCI Emerging Markets ex China Index Fund (KEMX), Neuberger Berman Next Generation Connectivity Fund (NBXG), Roper Technologies (ROP), Sprouts Farmers Market (SFM), Tyler Technologies (TYL), and Vanguard Short-Term Inflation-Protected Securities (VTIP). In today's mailbag, feedback on [Dan Ferris' Friday essay](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Dan, HOME RUN!!! AMEN, BROTHER!!!!! Your sarcasm was wonderfully funny and true!!! The regulatory bureaucrats think they are helping our economy and our country. After all they are the most intelligent people on the planet! JUST ASK THEM." – Subscriber Larry N. All the best, Corey McLaughlin Baltimore, Maryland July 1, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 02/10/12 1,424.5% Stansberry's Investment Advisory Porter MSFT Microsoft 11/11/10 1,423.4% Retirement Millionaire Doc ADP Automatic Data Processing 10/09/08 873.4% Extreme Value Ferris WRB W.R. Berkley 03/16/12 721.9% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 621.3% Retirement Millionaire Doc HSY Hershey 12/07/07 454.5% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 434.2% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 426.6% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 414.8% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 374.5% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,504.9% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,158.7% Crypto Capital Wade MATIC/USD Polygon 02/25/21 768.0% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 349.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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