When the Stars Align, Listen to the Message

Duty calls... When the stars align, listen to the message... An 'earnings recession' is on the horizon... Two methods lead to the same conclusion... The leading indicator nobody cares about... Some help finding the 'perfect stocks'... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] [SEPT 22: Prepare for the NEXT Big Stock Move – Details Here ➤]( Duty calls... When the stars align, listen to the message... An 'earnings recession' is on the horizon... Two methods lead to the same conclusion... The leading indicator nobody cares about... Some help finding the 'perfect stocks'... --------------------------------------------------------------- Our duty... again... I (Corey McLaughlin) love when our analysts and editors, or others we follow, arrive at the same conclusion using different methods. It's not quite as astonishing as when a Democrat and a Republican in Congress agree on something, but it's the same idea... There are a lot of ways to analyze the market... fundamental analysis, technical analysis, a macro analysis, or a "gut" feeling (we don't necessarily recommend that one). And we at Stansberry Research value different opinions. For one thing, it prevents "groupthink" from settling in. So when our analysts – or folks we listen to and trust – arrive at the same takeaway, using different methods especially, you want to pay attention to the message they're sending... The biggest recent example is several of our editors landing on the bullish case for energy stocks in late 2020 and early 2021, when many people didn't want to touch this "hated" sector. We highlighted the story [on June 2, 2021](... We're talking about when the stars align, so to speak... when, independent of one another, several of our editors' varying research styles all point to the same recommendation. When this happens, we know it's time to share the news... We want to make sure you don't miss the opportunity... While we never made a formal recommendation on energy stocks in the Digest, I think we've been clear in laying out the case for higher prices in these names (as well as higher oil prices and more inflation) over the past year-plus... and that's exactly what has played out. Since that Digest in early June 2021, the Energy Select Sector SPDR Fund (XLE) – which at the time was already up 42% in the previous six months – has gained another 40%. And that's despite a 15% drop since its highs this June amid increasing recession fears. Today, the 'stars are aligning' again... Now, this example doesn't come directly from Stansberry Research, but from a pair of folks close to us (and several of our editors have similar thoughts and concerns, too)... We've taken note lately that the founders of our corporate affiliates – Marc Chaikin of Chaikin Analytics and Joel Litman of Altimetry – are both warning of a coming "earnings recession." You'll want to note the reasons why... In plain English, an earnings recession is when businesses, on balance, report lower year-over-year revenues for two or more consecutive quarters. It's much like two straight quarters of declining gross domestic product is (or was) the definition of an economic recession in general. As you can imagine, a consistent decline in earnings gets Wall Street's attention... and Main Street's, too. If or when an earnings recession happens, it will make for a lot of mainstream headlines – and maybe even some panic. You'll know it when folks with a casual interest in the markets start talking more about their 401(k)s hurting... and thinking it's time to sell because things are so bad (when it's probably the time to buy the bottom instead). We can't say for sure it'll happen, but warning signs are flashing... We'll start with Joel's take... As some of you may know, he's a noted "forensic accountant," with a track record of exposing the truth about a company's books. For years, he worked as an accountant at big firms like Deloitte, Credit Suisse, and PricewaterhouseCoopers. But fed up with inconsistencies he saw in conventional financial reporting, he created his own system for determining the real value of a business... Today, clients pay up to $100,000 per month to use this system... Joel's well known on Wall Street and beyond, having advised billionaires, investment firms, the world's top money managers, and even the FBI and Pentagon, where he most recently briefed officials on China's threat to American security (proven by forensic accounting). In comparison, warning about an "earnings recession" today may seem like small potatoes. But as Joel wrote to you in [Saturday's edition of our free DailyWealth e-letter]( the Federal Reserve keeps raising interest rates to fight high inflation. And as a consequence, it's crushing demand for goods and services in the economy. In other words, expect slowing growth ahead, when compared with last year especially. As Joel wrote... Declining demand will lead to slower revenue growth for companies. Additionally, manufacturing costs will stay high even as demand falls. This hurts earnings since companies can't make the same profits they recorded in [the past]... Both Morgan Stanley (MS) and Goldman Sachs (GS) project corporate profit margins will decline in the second half of 2022 as a result of the Fed's actions. As Joel explained in that essay, he reached the same conclusion as these big-name firms using his brand of independent analysis... To be precise, Joel's system strips out more than 130 inconsistencies he has found in generally accepted accounting principles and international financial reporting standards to provide investors with a more accurate picture of a stock. At the same time, Marc's team at our affiliate Chaikin Analytics recently shared research suggesting an upcoming "earnings recession" as well, but for what might appear to be a completely different reason... 'The leading indicator nobody cares about'... That's how Chaikin Analytics Chief Market Strategist Pete Carmasino put it in an edition of [the free Chaikin Analytics' PowerFeed newsletter on September 9](. As Pete wrote... I bet you don't spend much time thinking about the Baltic Dry Index... After all, as its name suggests, the index measures the shipping costs for dry goods. Dry goods are raw materials that trade in bulk. They include things like iron ore, fertilizer, coal, cement, and grains. Altogether, they're lumped into the "commodities" category. Most days, folks just don't care about the costs to ship these commodities around the world. But when we're in a recessionary environment like today... this information is critical. I will admit, whenever I see something about the "Baltic Dry Index," I immediately think about spices like cinnamon or McCormick's Old Bay (given our place here in Maryland), or conjure images of the East India Company. (To my surprise, that's actually not off base... because the Baltic Dry Index evidently has origins dating to a 1700s London coffee house, Virginia and Baltick.) In any case, I want to chuckle every time I read the name... But after that's done, I try to see the point of what this index – an overlooked but great leading indicator for the global economy – is showing. Today, it's showing that shipping costs are plummeting. As Pete wrote... The downturn in the Baltic Dry Index began at the end of May. The index peaked at roughly 3,375. And it's around 1,175 today – a 65% decline in three-plus months. Take a look... Now, on the surface, you might take this as a good sign. Lower shipping costs mean less inflation, right? Which is what we want... It also means less demand, which is what the Fed and other central banks want. Well, yes, but cratering shipping costs also indicate something else: the "lower growth" end of the equation. As Pete explained... This plunge tells us that demand is falling. In other words, people are buying less. And in turn, companies are buying less... It could signal that we've passed "peak inflation." And while that might be true, there's a downside... In short, the sharp move down is now signaling an earnings recession. Companies are buying less goods, and severe slowdowns in orders are happening. In other words, companies are about to be making significantly less money, if they aren't already. And, at some point, this shift will hurt stock prices... The last time the Baltic Dry Index behaved this way was in 2007 and 2008... Oh boy, we're thinking about cinnamon again... From October 2007 to January 2008, the Baltic Dry Index plunged 50%... and the benchmark S&P 500 Index fell about 18% at the same time... Then, starting in May 2008, things got worse... The Baltic Dry Index dropped 94% in seven months... and through the second half of 2008 and into 2009, the S&P 500 sold off more than 50%, ultimately bottoming in March 2009. These are strong correlations. As Pete wrote... It's the leading indicator nobody cares about. But it gives us a "heads up" at how current orders impact the S&P 500. In fact, this shift is already showing up in the earnings reports... According to a FactSet research report last week, the decline in the earnings estimates in the first two months of the third quarter was significant. It eclipsed the five-, 10-, 15-, and 20-year averages. And it gets worse... Companies are also decreasing their estimates for the fourth quarter. FactSet's data showed that the average decrease was 3.5% over the same reporting period. Third-quarter earnings season is approaching quick... It may feel like we just got done talking about second-quarter earnings season, which we wrapped up analyzing last month. But the third-quarter round is coming up next month... and this one could be big. As [we wrote in the August 11 Digest]( second-quarter earnings season went down as largely uneventful, but that's because the profits of energy companies outweighed and overshadowed losses in many other sectors of the S&P 500. As we reported last month... The energy sector is reporting the highest earnings growth of all 11 major sectors at 299%... a year-over-year increase of $47.7 billion compared with the overall S&P 500's aggregate year-over-year earnings increase of $31.1 billion. If you strip out energy companies from this earnings season, the story's a lot different. As FactSet reported today... If the energy sector is excluded, the S&P 500 would be reporting a year-over-year decline in earnings of 3.7% rather than a year-over-year increase in earnings of 6.7%. Just something to think about, especially as gas prices have been taking a tumble down to somewhat palatable levels lately... This quarter, we might start to see more effects of the Fed's higher interest-rate policy. Borrowing costs are higher, oil prices are down, inflation is still high, and stock prices are still expensive by many historical measures. Plus, bond yields are rising... A potential 'canary in the coal mine'... An unexpected report late Thursday from global shipping company FedEx (FDX) could be a sign of things to come. As our Stansberry NewsWire editor C. Scott Garliss [reported Friday morning]( in his daily morning market preview, the company guided its fiscal first-quarter (the Roman calendar's third quarter) revenue below Wall Street's expectations and withdrew full-year guidance on slowing economic demand. FedEx shares crashed 20% on the news, as the company shared that it expects earnings per share to come in at $3.44, compared with Wall Street analysts' consensus estimates of $5.14 per share. Here are the details from industry publication FreightWaves... Adjusted operating income of $1.23 billion will be well below the $1.49 billion reported in the year-earlier period. Revenue of $23.2 billion will be slightly higher than fiscal 2022's first-quarter results. However, the combined revenue at FedEx Express, the company's air and international unit, and FedEx Ground, its U.S. ground delivery unit, will come in $800 million below the company's original forecasts. FedEx Express took the brunt of the damage. Operating income plummeted to $186 million from $660 million in the fiscal 2022 first quarter. As a result, FedEx said it will cancel projects aimed at boosting its network capacity. It did not specify what projects would be canceled. However, it was reported that it will involve the company's parking of an undetermined number of aircraft. FedEx blamed the unit's poor results on economic weakness in Asia and "service challenges" in Europe. As a result, the company said it plans to further reduce Sunday deliveries... pause hiring... and close more than 90 retail locations and five corporate office facilities. Oof. That's what an earnings recession can look like... Mind you, this was a "pre-announcement" from FedEx. The company doesn't officially share its quarterly financials until Thursday. It decided to share word ahead of time. Take it as a potential "canary in a coal mine," a sign of what could come through the end of the year. With all this in mind, you might be feeling pessimistic right about now... I wouldn't blame you. An earnings recession doesn't sound good for stocks. But all this said, some stocks have already crashed as much as 80% or 90% from their previous highs... while admittedly others have sold off by significantly less. How can you decide if some are worth buying, or if you should be selling others? Well, first, as always, know your goals and how owning stocks fits in with them, plus your time horizon for your investments. Beyond that, if you're wondering if your portfolio remains at risk for major losses, or if there are screaming buys in the market that are being overlooked, you're likely not alone. To help with the dilemma folks might be facing today, Joel and Marc have joined forces... As we mentioned yesterday, Marc is a Wall Street legend who has created stock-analysis tools that are part of every Bloomberg Terminal. And as we highlighted today, Joel has developed his own accounting system that clients pay top dollar to use. On Thursday, Joel and Marc are sharing more details about their work... their outlook on the markets... and how to find what they are calling the "perfect stocks" for today's environment. In a brand-new "Financial Lifeline Event," they'll discuss it all – for free... Just for signing up to watch the presentation, you'll get access to Joel and Marc's new "Perfect Stock Detector" report... and access to a lite version of Joel's forensic accounting system – for free – to see how hundreds of the largest stocks on Wall Street measure up. Plus, during the event, Joel and Marc will offer a combined four stock recommendations... and four other stocks to avoid completely. I can tell you one of these stocks that Marc says to sell is one of the most popular stocks in America today. It has delivered years of gains, but he says it could now be headed for a massive, bearish shift that can cost a lot of people a lot of money. [Click here to sign up]( for the Financial Lifeline Event right now to make sure you don't miss a minute. (Note, this is a corporate affiliate event, so Stansberry Alliance members will need to sign up to hear the research.) A 'Not-So-Secret Weapon' Joel Litman's uncanny intuition is well known in the world of finance... He called the 2008 crash and even accurately timed 2020's market bottom. And he starts the latest episode of the Stansberry Investor Hour by sharing one of his tools for success... [Click here]( to listen to this episode right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: # [SEPTEMBER 22: 'A New Financial Crisis Has Just Begun']( The next big threat to America isn't inflation, recession, or even another market crash. It's a crisis that could devastate millions of Americans' retirements. And this crisis ISN'T arriving next week or next month – according to these two insiders, [it's already here](. --------------------------------------------------------------- # [Energy Crisis: Think You're Safe?]( A top analyst says NOBODY is safe from the crazy-high energy bills he's forecasting in the weeks and months ahead. It doesn't matter where you live or how much money you have... If you're not ready to deal with what's coming, you could get absolutely blindsided. [See his full warning here](. --------------------------------------------------------------- New 52-week highs (as of 9/19/22): None. In today's mailbag, more feedback on [Sunday's Masters Series essay]( by Chaikin Analytics Chief Market Strategist Pete Carmasino... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. (One note for the record: We didn't receive any letters in the past 24 hours with evidence that the economy may get better before it gets worse, a claim we disputed in [yesterday's Digest](. So, it would appear most of you are on board with our analysis that it won't.) "The Digest article on Sunday missed one detail: Today we have much higher debt levels both in government and the private sector. This follows 10 years of ZIRP [zero interest rate policy]. As consequence, the coming recession will be more severe and perhaps longer than the 80s recessions. "Perhaps the same clock, but the amplitude, oh my." – Paid-up subscriber Opher L. All the best, Corey McLaughlin Baltimore, Maryland September 20, 2022 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 874.5% Retirement Millionaire Doc ADP Automatic Data 10/09/08 833.5% Extreme Value Ferris MSFT Microsoft 02/10/12 750.4% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 530.5% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 499.4% Stansberry Innovations Report Wade AFG American Financial 10/12/12 414.6% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 394.6% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 377.3% Stansberry's Investment Advisory Porter NTLA Intellia Therapeutics 12/19/19 307.2% Stansberry Innovations Report Engel FSMEX Fidelity Sel Med 09/03/08 295.3% Retirement Millionaire Doc 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 3 Retirement Millionaire Doc 1 Extreme Value Ferris 4 Stansberry's Investment Advisory Porter 2 Stansberry Innovations Report Engel/Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,181.7% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,155.2% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,063.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 827.2% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 420.1% 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 Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade 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 ^ 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%. 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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