It's a bull market in fear...

It's a bull market in fear... Gun sales are still booming... Another bear market 'omen'... Where to buy gold and silver... What to do about our bear market warnings...

At the bottom of each Digest, we post a list of Stansberry Research recommendations that hit new 52-week highs in the previous day's trading.

Regular readers may have noticed gun maker Sturm, Ruger (RGR) has been a fixture on the list in recent weeks.

Our colleagues Dan Ferris and Mike Barrett originally recommended shares to Extreme Value subscribers in December to take advantage of one of the most powerful forces in America today: fear. From that issue...

Americans are scared. They've been watching live TV coverage of mass shootings and terrorist attacks all year. The most recent high-profile event on December 2 in San Bernardino, California was the worst terrorist attack on U.S. soil since 9/11.

Scared people feel they need to do something, anything. In this case, they're buying guns. TV news stories show people waiting for hours in line to shop for guns. A man waiting to enter a San Bernardino gun store told a reporter, "If it can happen to them, it can happen to me."

He's not alone... A recent Gallup poll showed 70% of respondents believed violent crime is higher now than a year ago. It's a longstanding fear. Since 2002, a majority of Gallup respondents – between 53% and 74% – have expressed the same view in the annual crime poll.

But it isn't only fear of violence that has been driving more and more Americans to buy guns. It's also fear that it could soon become much harder to legally buy a gun in this country. More from the December issue...

Every time a mass shooting happens, gun sales surge... like the horrific December 14, 2012 massacre of 20 children and six adults at Sandy Hook Elementary School in Newtown, Connecticut. That year, the surge coincided with the holiday season, when gun sales traditionally rise. Four of the 10 busiest days for gun-related FBI background checks – since those checks began in 1998 – were December 19 through December 22, 2012.

Since buying a gun is unlikely to help Americans protect their children from a deranged school shooter, it's likely many folks were convinced the horror would inspire new, more stringent gun laws. So they bought guns out of fear they'd soon be prohibited from buying them.

They're doing the same thing today, with the San Bernardino County Sheriff reporting seven times the normal volume of applications for concealed weapons permits last weekend.

As Dan explained, this fear is unlikely to subside until after the 2016 presidential elections this fall, at the earliest. And should an "anti-gun" candidate like Hillary Clinton win, that fear could turn into an all-out panic...

A recent poll showed Hillary Clinton is ahead of all Republican contenders in the race to become the next U.S. president.

According to her website, if elected, she'll pursue a comprehensive overhaul of U.S. gun laws. She says she'll use executive power to do it if Congress won't support her. So it's reasonable to expect Americans to stay scared and shop for new guns every time there's another shooting or terrorist attack in the U.S., possibly for more than a year.

But while shares of Sturm, Ruger had rallied along with the surge in gun sales in recent years, its shares were still cheap. The company also met all the other criteria Dan looks for in an Extreme Value recommendation: a great brand, gushing free cash flow, a history of treating shareholders well, a rock-solid balance sheet, and consistent profit margins.

Extreme Value subscribers were already up 20% in a little more than three months as of yesterday's close. And if the latest data are any indication, more gains are likely to come...

Because a background check is run nearly every time someone buys a gun, this measure is a reliable indicator of gun demand. And from November through February, background checks were up an incredible 29% over the same period a year before.

Don't be surprised if this trend accelerates as the election draws near.

While fear is hitting new highs, it has been a long time since the stock market has done the same...

It has now been more than 10 months since the benchmark S&P 500 Index set a new 52-week high. This kind of lapse hasn't happened since 2009... and according to Jonathan Krinsky, chief market technician at research firm MKM Partners, that's a bad omen for stocks.

In an interview with financial-news network CNBC last night, Krinsky said this has only happened 11 times in the past 50 years... and in eight of those instances, it marked the beginning or middle of a true bear market.

New 52-week highs (as of 3/29/16): Johnson & Johnson (JNJ), Coca-Cola (KO), Nuveen AMT-Free Municipal Income Fund (NEA), Nuveen Premium Income Municipal Fund 2 (NPM), Public Storage (PSA), Reservoir Minerals (RMC.V), short position in Santander Consumer USA (SC), AT&T (T), and Travelers (TRV).

A busy day in the mailbag... Comments on Steve Sjuggerud's musical prowess, thoughts on P.J. O'Rourke's latest column, and questions on gold, position sizing, and market timing. Send your letters to feedback@stansberryresearch.com.

"The second picture of Steve looked like he was in great pain. What was the title of the song? LOL. Glad to hear you folks have fun as well as working hard." – Paid-up subscriber A. Rutherford

"You might be interested to know that I was a professional musician for many years and travelled far and wide to learn new skills and perform in many different groups – orchestras, bands, military bands, chamber and solo performances in New York and Switzerland. I suspect you have other clients with talent as well. You might want to post a survey to find out the background of some of them. I'm happy to share my talents when possible." – Paid-up subscriber D.G.

"Excellent piece from P.J. O'Rourke on the Annual Jerk Detector!" – Paid-up subscriber M.M.

"I believe most people's issues with 'the rich' are regarding the crony capitalists who are enriched by government largesse. Can P.J. deny that there are way too many wealthy folks who did not earn their money, but simply had a friend(s) in government that padded their bank accounts by getting favor upon favor, most often on the back of the taxpayer?

"Everyone needs to watch 'The Big Short' to get a better understanding of how the 'banksters' operate – with the taxpayer bailing out their poor decisions time and time again. And as Porter and other Baltimore publishers warn – there is another major crash just around the corner. Who gets stuck with the tab for this one? I think we all know it won't be the ones who caused the crash, just like last time. And then it will happen again and again – wash, rinse, repeat.

"Regarding Buffett – didn't he use his influence w/ Obama to shut down the pipeline, all because he wanted the oil transported on his railroads? I don't believe most people have a problem with the wealthy, they have an issue with the ones who got that way dishonestly.

"Bernie's message resonates with the youth today because the school system, mostly controlled by communists these days, has failed to educate the students on the difference between capitalism vs. crony capitalism. It is crony capitalism that has been in play for way too long, so it's no surprise they feel this way as they have nothing to compare it to and only see the failure that this type of 'capitalism' results in." – Paid-up subscriber Bill H.

"I know you have published this numerous times, but can you provide the 'trusted' list of gold and silver sellers again? I can't seem to find it in the prior emails and am looking to purchase some physical gold and silver in the coming weeks. Thank you." – Paid-up subscriber Marty V.

Brill comment: We recommend contacting Van Simmons at David Hall Rare Coins and Rich Checkan at Asset Strategies International. As always, we receive no compensation for recommending their services. But they have a long track record of taking care of Stansberry Research subscribers.

"I am a long time subscriber to Stansberry services but a newbie to options and I have purchased a trial subscription to the Stansberry Short Report after 20 months of active management in stock investing and no investing in options or short trading. So far, so good, having beaten the indexes in fluttering markets (polite adjective). I am a well-behaved student following your specific instructions based on my childhood training and warnings that 'Options Are Crazy Dangerous.'

"Accordingly, I pay attention to cautions about sizing trades conservatively. Thus, here is my first question: Twice in my first 6 hours of reading I have read this caution: 'To figure out your proper position size, it's important to note that each option contract represents 100 shares. So if your normal position size is 1,000 shares, you would want to buy 10 options contracts. If your normal position size is 100 shares, you would want to buy just one option contract.'

"My question: I don't have a 'normal position size' in shares. My limits are in dollars. How does the number of shares restrict risk? Some trades are worth thousands and others hundreds based on share price or option price, not shares. I think. Where am I going wrong? Thanks for your help." – Paid-up subscriber David T.

Brill comment: Unfortunately, we're prohibited from offering individual investment advice.

But in general, you can calculate a "normal position size" by dividing your position limit in dollars by the share price of the stock in question.

For example, if you would normally invest $2,000 in a position, and the share price of the stock you want to buy is $20, your position size would be 100 shares. If you were buying options on that stock instead, you would divide that number by 100 (since one options contract controls 100 shares) and buy just one options contract. We hope that clears up any confusion.

"Hello Porter, you are often right about your predictions albeit off on the timing re: the market moves. But as a long term investor, do you really think I should try and time the market? How can one best use this information?" – Paid-up subscriber John Y.

Brill comment: We're not quite sure what you're referring to.

Yes, Porter believes a serious bear market is approaching (if it hasn't already started). But as we've explained many times, these warnings aren't a reason to sell all your stocks and move 100% to cash. No one knows for certain where the market is headed next... And timing the market consistently over any significant period of time is virtually impossible.

Instead, we recommend taking some simple precautions today... Hold a little more cash than usual, steer clear of obvious risks like high-yield bond funds and overpriced stocks, "hedge" your portfolio with some short sales, and limit new purchases to only high-quality stocks and "no-brainer" opportunities.

This is exactly what we laid out – step-by-step – in our Bear Market Survival Program. Unlike moving entirely to cash – or worse, betting heavily on a crash – this is a way to take a balanced approach to today's market. It will protect you when the bear market arrives and ensure that you have plenty of cash available to pick up the bargains that are sure to arise. It will also allow you to benefit if we're early and stocks move higher in the short term.

Even the strategies in our new Bear Market Trading Program don't require "timing" the market... They're simply designed to take advantage of volatile periods in the markets to collect consistent short-term profits. Click here to learn more.

Regards,

Justin Brill
Baltimore, Maryland
March 30, 2016