Get Ready for Pain

A double whammy for real people... Student-loan repayments restarting and child care centers facing higher costs... A tidal wave of debt is coming... Joel Litman on the market's 'dangerous illusion'... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] A double whammy for real people... Student-loan repayments restarting and child care centers facing higher costs... A tidal wave of debt is coming... [Joel Litman on the market's 'dangerous illusion'](... --------------------------------------------------------------- The 'pain' is about to get worse for a lot of people... Remember when Federal Reserve Chair Jerome Powell said [in August 2022]( that Americans should expect "some pain" as the central bank continued to embark on its fight against inflation by raising interest rates and trimming its balance sheet? We may be about to find out what that really means. After a three-and-a-half-year hiatus, chalked up to the pandemic response, the roughly $1.75 trillion of outstanding student loans in the U.S. started accruing interest again this month. For the 44 million Americans with student debt, payments are due to resume in just a few days at the start of October. A recent survey from U.S. News & World Report found that it has been so long since folks had to make student-loan payments, only about half of all borrowers even know how much they'll owe each month. Ignorance can be bliss – for just a little while longer. Those people will figure out what the rest already know – and, further, new borrowers will be hit in the face with the highest interest rates in 15 years. Once this happens, I (Corey McLaughlin) bet spending habits will change among enough Americans for it to matter for the economy. Sure, the bank crisis in March was a consequence of the higher-rate era. It hurt some poorly managed regional banks and some early-stage technology companies with balances there. But all in all, the economy still hasn't experienced dreadful pain. This could be changing. Remember, roughly 70% of the U.S. economy is tied in one way or another to consumer spending. Any significant slowdown – or even change – in Americans' spending habits could change the game for a variety of industries. For instance, check out these details in a recent survey and analysis from the investment bank Jefferies, which is warning of a "significant risk to consumer spending ahead" from the resumption of student-loan payments. According to MarketWatch... They surveyed U.S. consumers with outstanding student loan debt, and found that 90% are "at least somewhat concerned about being able to meet all of their monthly expenses, while apparel, footwear, accessories, restaurants, and big-ticket items are likely to see the biggest pullbacks in spending." This is nine out of every 10 people in this survey. A third of those surveyed plan to start paying between $250 and $500 per month toward student loans, 20% figure between $500 and $1,000, another third less than $250, and the rest more than $1,000. Also, roughly 20% of borrowers – those who graduated from college during the pandemic and were fortunate to know life without paying back their mounds of debt – will face their first time paying anything at all. The possible impacts... If even some of this survey can be extrapolated to all Americans who owe payments, I'll conservatively say we'll have 22 million borrowers averaging $400 less to spend per month than they have in the past three-plus years. That's $8.8 billion each month, or roughly $105 billion per year. Moody's Analytics says the resuming of student-loan payments will pull $70 billion a year out of the economy. This is a minuscule slice of the total U.S. economic pie. But on an individual level, it matters a lot and could change behavior that adds up to even more money... And certain industries will feel the pinch right away. With student loans joining the list of folks' existing monthly expenses – things like food, housing, car payments, and credit-card bills – many folks will find their lifestyles becoming unsustainable. If they can't meet all these costs anymore, delinquencies on credit cards or car loans can rise. As [I wrote last month]( the first businesses to take a hit from bad loans would likely be subprime lenders, such as Capital One Financial (COF) and other banks that were "downgraded" in August by Moody's ratings agency... These banks have large exposure to subprime borrowers, who are likely the first to stop paying back their loans in a recession when times get toughest (which is still possibly ahead). And that spells bad news for these banks' profits ahead... And when subprime lenders struggle, that means possibly choking off debt-fueled growth in wide swaths of the economy (you know, what the U.S. has known and loved for decades). If enough banks give up collecting on enough bad loans, or if more loans go bad than expected, the party could be over. This is the kind of thing we mean when we say to prepare for the next "credit crisis" ahead. Pressure in the real estate market could build, too, and people with less money to spend will also likely make fewer discretionary retail purchases and economize on essentials like food. The backdrop... As inflation has remained high, it has crushed Americans' disposable personal income. This part of the economy already did not grow at all in July, the most recent month with government data available. And savings have dwindled while credit-card balances are skyrocketing. We wrote [earlier this month]( about the divergence between "real" GDP and income. Income hasn't been keeping up with economic growth since early 2022. It's not a coincidence that as our friend Joel Litman, founder of our corporate affiliate Altimetry, shared [on Saturday in our Masters Series](... Since the start of 2022, personal savings rates have been falling again. They're close to levels we saw from 2005 to 2007, before the Great Recession. And credit-card debt is once again sinking its claws into the U.S. consumer. Balances are now at all-time highs. Take a look... When folks have less money saved up, they're not able to spend as much on non-necessities. We're starting to see the effects of falling savings rates. Joel mentioned on Saturday that the retail industry seems to be one of the first to be feeling the pressure, with slumping sales at furniture retailer Wayfair (W) and La-Z-Boy (LZB), for instance. To this similar point, the same survey from Jefferies found... Apparel/accessories, restaurants and footwear are the most at-risk categories for reduced spending, but 52% of respondents plan to buy cheaper alternatives for groceries and 39% for apparel/accessories. Seventy percent of respondents said they plan to shop more often at discount retailers, with three-quarters of those saying they'd shop more often at Walmart (WMT) or its Sam's Club affiliate, followed by 51% for Target (TGT) and 46% for Dollar Tree (DLTR). In other words, value will be in again... all while pressure on individuals' budgets continues to gradually build. Life at home may change, too... Another lingering pandemic stimulus program is coming to an end as well... $24 billion in federal child care funding that will expire on Saturday. This is another temporary Band-Aid that's about to be ripped off the economy. As part of the American Rescue Plan of October 2022, the government gave grants to more than 220,000 child care providers to help them stay open. When this program ends, as many as 70,000 child care providers, looking after 3.2 million children, may close, according to estimates from the Century Foundation. You might hear this referred to as the "child care cliff" in the mainstream media. The indirect impact of this may be on the labor market. As Axios reported recently... The cliff is approaching just as women, particularly mothers, are hitting their stride in the U.S. labor market – with workforce participation at new highs and the employment gap between men and women at record lows. - If the dire forecasts prove true, millions of parents – particularly mothers – are going to be left with some hard choices. - Their child care provider could shut down or raise prices past affordable levels, which is widely expected – and many parents could exit the job market entirely. What this means exactly for the economy remains to be seen... There are a few different consequences as I see it, which could add up significantly over the long run... Should enough child care facilities shutter, it could lead to more people applying for unemployment benefits in the short term, for one, and a higher unemployment rate for those who work in child care – and possibly for women in general. But in the longer run, it could also contribute to a tighter labor market and higher inflation story, too. If women have to leave the labor market to care for their children, employers will have to pay more as they compete for the people who remain in the workforce. That could ultimately lead to even higher interest rates or a tighter monetary environment for even longer than people expect now. At the same time, if child care facilities simply raise prices (which they have by 6% over the past year already, outpacing the official inflation rate), it puts even more financial pressure on American families with parents who actually work. That would trim folks' discretionary budgets much like the impact of student-loan payments restarting. Child care is essential for many working parents, and the cost of everything is higher than a few years ago. Soon enough, there's no more money left for people to spend and for companies to make. In sum, the pandemic stimulus era is only now finally coming to an end – and at a time when the cost of money (debt) is the most expensive it has been in 15 years. Pay attention. We're starting to see why our friend Joel Litman is so concerned about the market... I wrote to you last week about Joel's brand-new urgent message that he'll broadcast this Wednesday night. And you heard from him over the weekend in a pair of Masters Series essays [here]( and [here](. In short, Joel says the performance of the stock market this year is a "dangerous illusion." And he has many reasons. One of them is what we talked about today – the ending of major pandemic stimulus programs. As Joel wrote in Saturday's Masters Series... More than 75% of Americans think consumption will turn negative by early 2024. Considering that consumer spending is the engine that powers the U.S. economy, this is a huge warning sign. And yet, you wouldn't know it if you just followed the stock market. The S&P 500 Index is up 13% this year. Such strong returns make it seem like nothing's going wrong. Economists at financial institutions like Goldman Sachs are even lowering their odds of a recession. With student-loan payments starting back up, we don't think the economy can avoid a downturn. The U.S. consumer can't keep up the past year-plus of spending habits. Consumer balance sheets could take an even bigger hit soon. Brace yourself for fear to reenter the stock market. And as he wrote today [in his free Altimetry Daily Authority newsletter](... If you've relied on debt in any way... life is about to get much harder and more expensive. Add it all up. Companies don't have the money to grow. Consumers don't have the money to spend. I've seen Joel, a world-renowned finance professor and accountant, speak at our annual Stansberry Conference before and have read his work for years. In short, he has developed a form of "forensic analysis" that neither Wall Street firms nor the U.S. government have been able to duplicate – instead, they need to hire him for his expertise. So when Joel makes a warning like he is today, we listen... Even more so when [he's sharing free access to an investment tool]( that can screen thousands of tickers and help folks navigate the volatility he expects ahead in the markets. Ultimately, Joel says companies are staring down a 'tidal wave of debt'... The worst companies already can't afford to pay their debts and won't be able to afford to refinance at today's high interest rates. You see, much like pandemic stimulus efforts put a Band-Aid on Main Street's problems, they helped Wall Street. As Joel says... During the pandemic, there was a huge surge in borrowing at near-zero rates. It was an even bigger surge than you'd usually expect, because we wanted to keep companies in business. Now, that money is running out. Worse, companies can't do what they've always done in the past... which is refinance for next to nothing. Interest rates are sky-high and banks don't want to lend. They're going to default on their debts. Many will go bankrupt. A huge number of those that do survive will see their profits wiped out by interest expenses. Their stocks will crater. This scenario, Joel says, is going to set off a 2008-like panic. But it's also going to create an opportunity, he says. And, importantly, he has a plan to navigate what's ahead. At 8 p.m. Eastern time on Wednesday, in a totally free event, he's going to share exactly what he sees coming... the losses he expects to hit hundreds of stocks... and the lopsided opportunity this panic will create. He's also going to let viewers in on a strategy he has used with some of his biggest institutional clients on Wall Street for more than 20 years, and he'll share precisely how he used it to make incredible returns when the market crashed in 2008. He's not talking about stocks or real estate investments, or anything else you may typically hear in the mainstream. Instead, it's a way some of Wall Street's most successful investors have made money over and over again, especially when the rest of the market is in turmoil. [Click here for all the details about his free event coming up on Wednesday night](. As I mentioned, just for signing up, you'll get access to a free investing tool, plus a report that will show you how to use it to your advantage... and why Joel thinks it's critical to do so today. 'Financial World War III' Is Here Willem Middelkoop, founder of the Commodity Discovery Fund, says the U.S. is in a "financial World War III" as the "BRICS" nations seek to dominate the energy market and freeze us out of global trade... [Click here]( to watch this episode of The Daniela Cambone Show 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 [X, the platform formerly known as Twitter](. --------------------------------------------------------------- Recommended Links: [This Signal Triggered in 2008 – Now It's Flashing AGAIN]( The analyst who called the 2008 and 2020 financial crashes says the market optimism today is a dangerous illusion. The same ironclad "law" of finance that predicted 2008 tells us the next two to three years will be dangerous and painful. But there's a "backdoor" strategy that could show you high-double-digit income and triple-digit gains right through this crisis (with extra benefits that will astound you). [Click here to learn more](. --------------------------------------------------------------- [The Top Five AI Stocks to Buy in 2023]( Investors are getting very rich in AI stocks right now. And according to 50-year Wall Street veteran Marc Chaikin, there are FIVE AI companies Wall Street is buying hand over fist that need to be on your radar immediately. [Click here for the names and tickers](. --------------------------------------------------------------- New 52-week highs (as of 9/22/23): Activision Blizzard (ATVI), CBOE Global Markets (CBOE), Enterprise Products Partners (EPD), Sprouts Farmers Market (SFM), Sprott Physical Uranium Trust (U-U.TO), Global X Uranium Fund (URA), and Sprott Uranium Miners Fund (URNM). In today's mailbag, feedback on [Dan Ferris' latest Friday Digest](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "What do you think the AMC investors expected? Do you really think they were looking for a quality investment? I doubt it. Let's not feel sorry for them. Some won some lost." – Subscriber Pete S. All the best, Corey McLaughlin Baltimore, Maryland September 25, 2023 --------------------------------------------------------------- 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 1,175.7% Retirement Millionaire Doc MSFT Microsoft 02/10/12 994.9% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 861.8% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 604.3% Stansberry Innovations Report Wade WRB W.R. Berkley 03/16/12 580.6% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 538.6% Retirement Millionaire Doc HSY Hershey 12/07/07 504.3% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 392.6% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 321.6% Stansberry Innovations Report Engel ALS-T Altius Minerals 02/16/09 305.9% Extreme Value Ferris 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 4 Stansberry's Investment Advisory Porter 2 Extreme Value Ferris 2 Retirement Millionaire Doc 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 wstETH Wrapped Staked Ethereum 12/07/18 1,456.3% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,044.5% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,024.9% Crypto Capital Wade MATIC/USD Polygon 02/25/21 759.7% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 608.1% 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 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 ^ 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. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.