The 'Messaging Meter' Isn't Showing Maximum Fear Yet

A warning as the scary times continue... How you'll know when to buy... The 'messaging meter' isn't showing maximum fear yet... Two critical indicators prove we're getting closer... Tonight's FREE event goes live at 8 p.m. Eastern time...

The coronavirus pandemic is dominating all the headlines right now...

The Dow Jones Industrial Average fell 2,997 points on Monday – its biggest one-day drop in 33 years. And we've experienced three trading halts after tripping the "circuit breakers" over the past two weeks. The spread of the coronavirus is wreaking havoc on U.S. markets.

We just surpassed 10,000 confirmed U.S. cases and counting... And reports show more than 150 Americans have died. We know daily life is different nowadays for pretty much everyone reading today's Digest...

Businesses have started closing. And many of the companies staying open – including Stansberry Research – are operating with employees working from home. Bars, restaurants, gyms, and movie theaters have been forced to shut their doors in many locations, too.

Here in Florida, I (Chris Igou) have seen this firsthand... My local Publix grocery store can't keep up with all the panic-buying. The store has tried restocking the shelves overnight. But by midday the next day, most of the food and other essentials – like hand sanitizer – are gone.

The nearby credit union started serving members exclusively at its drive-thru lane.

I'm sure you can all share similar stories about what's happening in your neighborhoods. These are scary times... And nobody can really know how long it will all last.

But unfortunately, I must warn you...

The recent pain we've experienced in the markets likely isn't over yet.

You see, we haven't yet reached the extreme fear we normally see at market bottoms. And as a result, we can expect to experience more downside before things start getting better.

I've worked with True Wealth editor Dr. Steve Sjuggerud since 2016...

Regular Digest readers know Steve has followed the markets for more than 25 years. And through his career, he has made incredible predictions that have turned out to be spot-on...

For example, Steve called the impressive gold rally that started in early 2001. He pounded the table, telling his subscribers to buy gold when it was trading for around $300 per ounce.

The precious metal went on a decadelong run starting that year... Gold prices soared more than 600% before peaking at an all-time high of roughly $1,900 per ounce in 2011.

Steve had another incredible call during the last financial crisis... He recommended buying U.S. stocks in early March 2009. And he personally bought U.S. stocks in a big way back then.

As you know, that turned out to be the start of the longest bull market in history... The benchmark S&P 500 Index soared 400% from its March 2009 low to its peak last month.

Steve's incredible calls had one thing in common... They came during times of extreme fear.

Each instance felt like the worst time to put money to work. Investors were terrified... Almost no one wanted to buy gold in 2001. And the same goes for U.S. stocks in 2009.

But as it turned out, those were some of the best times to buy those assets in decades.

After all the devastation and uncertainty of the past month, we're seeing fear show up in a big way today. However, we're still not at a maximum fear point yet. Folks are still greedy...

You can see what I mean through the 'messaging meter'...

Constantly following the latest twists and turns in the market can take a toll on your emotions. As a result, daily market watchers are usually the first to fall victim to the fears...

String a few big "down" days in stocks together and folks start to get scared. And with the S&P 500 Index deep into bear market territory, it's getting bad for many of these folks.

But people who don't keep a close eye on the daily swings aren't feeling the same fear yet...

Some casual observers don't see any need to worry at all. In fact, they're feeling quite the opposite... They believe the recent downturn feels like an opportunity to "buy the dip."

One of my favorite ways to check this sentiment is through the "messaging meter"...

I'm talking about my friends who don't follow the markets closely and only tune in during extreme times. Other than those brief moments, they hardly ever talk about investing.

(Steve mentioned this indicator around the 16-minute mark of our first-ever "Town Hall" this week. If you missed it, you can still watch the free replay at StansberryTownHall.com.)

Take late 2017, for example...

Bitcoin started that year at around $1,000. But by the beginning of December, its value had soared to about $10,000. This furious rally didn't just grab the attention of those folks who follow the markets closely... It also reached some of my friends outside the finance world.

My friends all wanted to know if it was time to buy bitcoin. This was a sign of extreme optimism. And at the time, it told me that we were getting close to a peak in the crypto.

Sure enough, bitcoin peaked at around $20,000 in late December 2017. And of course, the crypto quickly fell back to earth. Take a look...

If you bought bitcoin in December 2017, it would've been a disaster. The price of the crypto fell for an entire year after that... It ultimately lost more than 80% of its value in that span.

When friends outside of the financial world catch wind of an extreme event, I know the event has likely run its course. But the thing is, I'm not seeing that with stocks right now...

Today, you might think I'm receiving text messages about how terrible the market is...

That's not the case at all. In fact, it's just the opposite...

I've gotten several text messages from my friends. But instead of worrying about what's going on, they're asking if I'm "taking advantage of today's drop" in one form or another.

That's not fear.

One of my friends recently stumbled upon day trading. And as the market kept falling in recent weeks, he bought call options (betting that stocks will rally higher).

Again... that's not fear.

Several of my friends are still in "greed" mode. They're not fearful of what's happening. They want to know what to buy. And they sure aren't feeling the pain of the recent drop.

Here's the thing, though...

When stocks bottom, I expect these guys will want nothing to do with stocks. I expect to get text messages saying, "It looks like the only thing I should buy is gold."

That will be the big, red, flashing banner signaling that "maximum fear" has arrived.

We aren't seeing that just yet. But don't get me wrong... The S&P 500 is down nearly 30% over the past month. And fear is definitely starting to show up in the markets...

First, the market's so-called 'fear gauge' sits near its highest levels ever...

My colleague Corey McLaughlin discussed this briefly in Tuesday's Digest. As he wrote...

And major U.S. stock market volatility is at record levels. The Chicago Board Options Exchange's Volatility Index ("VIX") closed at 82.69 yesterday – its highest mark ever, even topping its levels during the 2008 financial crisis.

As regular readers know, when investors panic in the markets, like what we're seeing today... the VIX soars higher. And when the market is relatively calm... the VIX falls.

We often see major spikes in the VIX during times of extreme fear. We saw spikes in volatility in 2009, 2011, 2016, and 2018. Each case occurred during times of market fear.

Today, we're seeing the highest VIX reading in history. Take a look...

Folks are downright terrified of what's coming next in the markets. But here's the thing... Looking back at 20 years of data, this fear often signals fantastic buying opportunities.

Check out the following table. It shows the S&P 500's return after the VIX is at extreme highs like today...

The S&P 500 has returned 3.6% per year since 2000 (not including dividends) – a pretty mediocre return. But buying when fear in the market is at new highs crushes that return...

Similar fear extremes have led to 11% gains in a typical six-month period. And they've generally led to a 27% return over the next year. That's significant outperformance.

And the VIX isn't the only indicator showing investors' elevated fears right now...

Active money managers are darn scared right now, too. To see this concept in action, we can look at the National Association of Active Investment Managers ("NAAIM")...

The NAAIM Exposure Index is a weekly survey that gives us a glimpse into what active managers are thinking at any given time. It's a great indicator to show everyday investors like us the bullishness or bearishness of the folks who manage hedge funds or mutual funds.

Essentially, the survey asks what percentage of respondents' portfolios are in stocks. A zero indicates they don't own any stocks. And a reading of 100 means they're fully invested.

Today, these fund managers are the most bearish on stocks in several years. Check it out...

We've seen seven other cases when these investment professionals turned fearful since 2010. And in each case, it ended up being a great buying opportunity.

Even better, five of the past seven cases led to roughly 20% gains or more over the next year. Check it out...

Fund managers are the most bearish on U.S. stocks since late 2014. And by looking at the previous table, it looks like a great buying opportunity for investors.

Each of these instances would've been a scary time to buy... whether it was the trade war in 2018, the oil market collapsing in 2014, or Greece's financial crisis in 2011.

There's always a time to be fearful. And as you can see with the VIX and the NAAIM's weekly survey, we're certainly seeing fear pop up in several parts of today's market.

But again, maximum fear isn't here yet...

If you follow the markets closely, you know it's bad out there.

That's still not true for people outside of the financial world, though. Testing the sentiment from my friends through my "messaging meter," there's more greed than anything else.

That's not how markets bottom.

The greed from these casual observers will turn to fear before an ultimate bottom arrives. And when it does, it will be an incredible buying opportunity like we haven't seen in years... You can see that from the returns after extremes in the VIX and the NAAIM weekly survey.

But for now, be patient... Go back over your investment plan to make sure your portfolios are in order. Step away from the coronavirus headlines for a bit and get some fresh air.

Most important, put some cash aside so you can buy when the real opportunity arrives.

One last thing...

If you want to expand your investing toolkit, I hope you'll tune in for tonight's big event.

In less than two hours, my colleague and Stansberry's Big Trade editor Bill McGilton will join Stansberry Portfolio Solutions manager Austin Root for an urgent market briefing.

The markets are a rollercoaster right now... And it's risky to buy stocks. But Bill has used his radical investment strategy to produce several triple-digit winners in recent weeks...

As regular Digest readers know, subscribers who followed Bill's advice could have doubled their money on bearish positions in cruise line Royal Caribbean (RCL), restaurant chain Cheesecake Factory (CAKE), and subprime lender and retailer Conn's (CONN).

And tonight at 8 p.m. Eastern time, Bill will share all the details about this strategy. He'll even share three stocks to target... to make as much as 10 times your money as the crash unfolds. If you haven't registered yet, time is running out... Reserve your spot right here.

New 52-week highs (as of 3/18/20): short position in HCA Healthcare (HCA) and short position in Interpublic Group of Companies (IPG).

In today's mailbag, an astute note about the "Debt Jubilee"... some math on Boeing's (BA) problems... and a potential solution to help "average" Americans get through the coronavirus crisis. As always, send your comments and questions to feedback@stansberryresearch.com.

"On CNBC at around 8:14 on 3/19, Ray Dalio almost spilled the beans. 'The Fed will have to do a debt...'

"I guess he hasn't finished upping his physical gold position. Needs the price to remain stable until he's finished buying it. Then he'll admit to calling for a Debt Jubilee." – Paid-up subscriber Bret R.

"I noted $60 billion is the current bailout advance requested by Boeing... I had done in early March my own estimate for the Boeing 737 Max debacle, and I came up with current costs of $32 Billion (largely assisted by the Royal Aeronautical Society), then doubled it to $64 billion after cancellations, write-offs, and legal fees are fully covered.

"You have to include in the calculations not only airline orders, but suppliers, and costs and write-offs of very, very, expensive jigs for all the sub-assemblies, and components. There may also be massive damages on the table. Is this a coincidence I ask myself?" – Paid-up subscriber Gordon C.

"I have been a mortgage broker for 30+ years. Every day, I see the 'average' American's financial profile. Under the current coronavirus shut-down, it has been proposed that each American be given money. That is NOT going to help. $1,000 is gone in a second, to purchase necessary goods.

"What the Average American needs is a temporary, two- to three-month DEBT MORATORIUM. Simply place a moratorium on the payment of ALL personal debts of ALL kinds, including revolving and installment loans, and mortgage loans, and then by legislation re-set the life of the loan to term out three months past its current termination point.

"With this, the average American's credit does not get slammed (making it impossible to buy or refinance their house), they won't be trying to recover by catching up on three months' missed payments (which would take most Americans years to do), and they can survive the forced quarantine that we are under.

"Lenders have not lost their profits, they have just deferred their income for three months. Give them a tax write-off this year for that. SOMEONE needs to introduce this concept. Debt Moratorium. Three months. We'll rebound like you won't believe." – Paid-up subscriber Mark W.

Good investing,

Chris Igou
Jacksonville, Florida
March 19, 2020