Live and Let Die
Sixty times your money... A different way of thinking about your assets... The Schrödinger's Cat market... Was the value really there?... Realpolitik... Don't sell it all...
Fear can make you do rash things...
Back when life was primitive, fear kept us alive when there was a real danger of being killed by a large animal or other humans.
But most of us are in no such danger today, and we enjoy a higher standard of living than ever before.
So when the market drops suddenly like it did yesterday, reacting as though you're about to be killed by a bear is no help. It could even make things worse if you give into it and do something hasty, like sell every stock you own and hold nothing but cash.
The last few decades have shown that selling would have been a mistake. With a few exceptions, it didn't take long before every past dip, correction, bear market, and full-blown crisis in the stock market proved to be a buying opportunity.
The best way to play this has simply been to keep buying – no matter what. That's what many folks with 401(k)s and other retirement accounts have done, and what a ride it has been!
From its August 12, 1982 low close of 102.42 to its February 19, 2025 all-time high close of 6,144.15, the S&P 500 Index rose 60-fold.
This type of performance led to the acronym TINA: "There Is No Alternative" to buying and holding U.S. stocks.
The market's more recent performance has reinforced that idea. The S&P 500 rose about 175% from the March 2020 pandemic bottom to its February 2025 all-time high. It was up about 72% from its October 2022 bottom to its February high. Those are big numbers in just a few years.
Now, you shouldn't cherry-pick bottoms when you measure returns. But this is simply what most investors see when they look in the rearview mirror. So they conclude that U.S. stocks are an absolute no-brainer way to get rich without a lot of effort, if you just focus on buying all the dips or buying all the time and riding out the dips with patience – exactly what retirement accounts are designed to do.
In short, most folks have been content to sleep on alternatives to U.S. stock investments and "live and let live" by focusing entirely on the U.S. market without a care in the world. They don't hate other markets. They're just blissfully ignorant of them or they love the U.S. much more.
Now, in the context of its epic run, the S&P 500 currently being down around 15% below its February peak is barely noticeable – seemingly just another buyable dip.
But maybe it's finally time to look at U.S. stocks and say 'live and let die,' at least for a year or two...
I (Dan Ferris) admit I've been saying something like this since my June 24, 2022 Digest titled, "The End of the World as We've Known It." That's when I noted my friend, investor, and author Vitaliy Katsenelson's advice:
Whatever happened to you over the last 20 years, just invert it.
Back then, the Federal Reserve was three months into the steepest rate-hiking cycle in its history. Looking backward and forward from that moment, Vitaliy realized investors would likely face a different world in the coming years.
In a later Digest, I published this chart showing my interpretation of Vitaliy's idea:
Notice the third and fourth lines... For the past few decades, you could reliably buy the dip and embrace risk taking, even – for some folks, especially – during speculative frenzies.
But throughout the bear market of 2022, maintaining a risk-off mentality and selling the rallies instead of buying the dips was the right strategy.
Then, the bear market bottomed, and stocks soared to new highs – bringing back the risk-on mentality.
But as the market peaked on February 19, the risk-on, buy-the-dip mentality again changed to risk off, sell the rally.
It seems rational to expect more "risk off" episodes over the next decade – more than we had to deal with over the last few decades.
You see, markets are perverse. Right when everyone finally embraces the risk-on mentality... when the entire world concludes that you can't beat U.S. stocks and that they'll never, ever disappoint you... that's about when the market begins rewarding those in the risk-off, sell-the-rally mode. And given the market's action over the past few weeks, "risk off, sell the rally" is starting to feel like it'll be around longer than usual.
You don't have to try to sell short every rally, but you shouldn't carelessly buy every dip, either. Whenever one of your assets is doing especially well, think about the assets that haven't done so well and might be more attractively valued because they're neglected.
In the case of U.S. stocks – especially when it comes to mega tech and the Magnificent Seven – you need to learn a different way of thinking about the assets you've owned for years.
A way of thinking about the recent decline in U.S. stocks that you've likely never considered...
In a post on social platform X, a futures trader noted that $2.8 trillion in stock market value was wiped out yesterday.
I immediately asked, "Was it ever really there?"
In other words, was the $2.8 trillion that "disappeared" from stock prices on Thursday real business value... or was the stock market fantasizing that one day it would be?
I doubt any of it was there. And I suspect that far more of the market's remaining value is unsupported by business value than most folks would imagine.
To put it another, even scarier way: If the market were a single company and you tried to sell 5% of it at its current market valuation, I suspect you'd get a much lower price (5% lower? 10%?) than anybody would ever guess.
The situation reminds me of another bizarre world...
It might sound "out there," so stay with me, but I'm talking about quantum mechanics and the strange physical laws that govern the subatomic world.
We wrote about quantum mechanics and how it's at the center of the next technological revolution – quantum computing – in my Extreme Value newsletter released today. (Extreme Value subscribers, be sure to let us know how we did. You can find the issue here.)
In short, particles smaller than atoms behave so weirdly that there's no analogy you can really make with the world we all encounter each day.
German physicist Erwin Schrödinger pointed out the absurdity of quantum mechanics in his 1935 paper, "The Present Situation in Quantum Mechanics."
Schrödinger made up a story about a box containing a cat, a flask of poison, some radioactive material, and a monitor to detect radiation (like a Geiger counter). He wrote that if the monitor detects radioactivity after one hour, the flask will break, and the cat will die. If no radioactivity is detected during that time, the cat will live.
But Schrödinger said that some physicists were interpreting the laws of quantum mechanics to mean that the cat could be alive and dead at the same time – until the box was opened, at which time the cat's state of life or death would be resolved.
Schrödinger did the thought experiment to demonstrate the absurdity of that viewpoint, but as far as I can tell (and I'm not a physicist), he simply wound up describing the principle of "superposition," which says that a particle can be in two different states at the same time. (It means other things too, but we won't get into that.)
For us as investors, Schrödinger's Cat can describe the precarious state of an egregiously overvalued market. The market is in two states at once: The market value is there, but the business value is not. It's both dead and alive like the cat in the box. If you leave the market alone, the value remains. But if you try to sell it in a hurry, the value disappears. And you never know what will happen that will cause investors to want to sell a big chunk of that value in a hurry.
Today, the catalyst has been U.S. President Donald Trump's efforts to reset the global markets' monetary and economic order.
Usually, U.S. presidents try to avoid disrupting global markets much. In the January 2025 issue of The Ferris Report, I told the story of how the market's "bond vigilantes" scared President Bill Clinton into balancing the federal budget at the turn of the 21st century.
But Trump is showing us that he's okay with some disruption. It's more important to him that he makes big changes in America's trading position with the rest of the world. I suspect Trump wants to push stock prices down, knowing the Fed's typical reaction is to lower interest rates. He loves low rates and believes they'll stimulate economic activity. Low rates have failed to do that for a couple of decades now, but we haven't had Trump's radical policies in place during that time. So we'll see how it all turns out.
Now, Trump is only human, and sooner or later the financial markets make every politician cry uncle... but I believe he's showing us he's a long way from giving in. In other words, there could be a lot more downside potential ahead than most investors are prepared to handle.
Remember...
Trump is a realpolitik practitioner, not an idealogue...
You can make decent guesses about what an idealogue will do. They'll pay some lip service and try to behave in a way that won't get them in too much trouble – with the media, at least – relative to their alleged ideology.
On the other hand, Trump has an idea to "make America great again," with the relentless drive to make it happen, even without regard for legality sometimes.
As Meta Platforms founder Mark Zuckerberg said, businessmen "move fast and break things." They'd much rather apologize later than ask permission now. That's clearly how Trump is operating today.
In business, I thank heaven for this attitude. Entrepreneurs and other business operators should move fast and break things. They shouldn't ask permission, except when failing to do so would infringe on other persons or property.
The problem is that any public servant, by law, perpetually needs permission to do anything. The Constitution describes what the government is allowed to do. The Bill of Rights is not a permission slip for you and me. It's there to restrict the government's activities.
So we'll have to wait and see how much of Trump's economic plan survives legal challenges, and if it really makes life better for the Americans who have been left behind by the 60-fold stock market miracle. I recently heard that 94% of the stock market's wealth is in the hands of 1% of Americans. It looks to me like Trump is trying to transfer some of that wealth to the other 99%. I don't like politicians, but if that's what he's up to, I must admit it's somewhat noble.
Still, when markets sell off after a big announcement like Trump's tariffs, it's only natural to get anxious. And it's human nature to try to find a way to avoid these situations before they arise.
There's only one way to avoid such events...
And that is to refrain from investing and keep all your money in cash. That's a terrible idea, and it will never make you rich – unless you're earning millions of dollars per year some other way. Even then, you'll lose substantial purchasing power over the long term.
To grow wealth, you must invest... and to invest, you must take risk.
But there is a way to prepare for a wide variety of outcomes, including big, sudden sell-offs: hold a fully diversified portfolio.
The thing about preparing instead of predicting is that you must stick with your strategy, even when some of your assets aren't performing so great. I would never tell you to sell all your U.S. stocks, but if they haven't been doing so well over the past month and a half, it has probably been harder to hold onto them.
Likewise, it was probably hard to hold onto your gold during 2021, when inflation was rising month after month and gold was mired in a choppy sideways action, resulting in around a negative 3.5% return for the year. But if you sold it, you would have made a big mistake. Since the beginning of 2021, gold is up about 64%.
Though stocks frequently outperformed gold throughout the above period, as of yesterday's close, gold had outperformed stocks by almost exactly 20 percentage points since 2021.
This same argument applies to the past 25 years. Gold has outperformed stocks, but you could often outperform gold during this time by owning stocks – especially owning the businesses we favor at Stansberry Research.
However, if you tried to time the moments when one of these assets was about to outperform the other, you likely lost money. The only way to exploit stocks' and gold's performance was to own both at the same time and hold them for the longer term.
If you hold stocks, bonds, gold and silver, and cash – the core diversified portfolio I've often recommended – your stocks had a rough day yesterday... your gold fell less than 1%... your silver performed about the same as your stocks... and your cash held its value.
So live and let die – meaning let your hyperfocus on U.S. markets die. Hold a diversified portfolio, but be careful of simply buying every dip or buying all the time. Don't leave yourself too leveraged to the performance of the U.S. stock market.
New 52-week highs (as of 4/3/25): Agnico Eagle Mines (AEM), Alamos Gold (AGI), American Water Works (AWK), Brown & Brown (BRO), CME Group (CME), Cencora (COR), Enel (ENLAY), Franco-Nevada (FNV), Coca-Cola (KO), London Stock Exchange Group (LNSTY), Royal Gold (RGLD), Republic Services (RSG), Torex Gold Resources (TORXF), Tradeweb Markets (TW), Verisk Analytics (VRSK), Vanguard Short-Term Inflation-Protected Securities (VTIP), and Wheaton Precious Metals (WPM).
In today's mailbag, we've got a lot of feedback on "Liberation Day" and the market's reaction... Here is some, and we'll keep the conversation going next week. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Thanks for the clear explanation of how the [current] administration came up with its 'tariff' numbers.
"We are the third largest country in the world [by population and area] and buy/consume much more per capita than most countries in the world. Doesn't it make sense we would have a trade deficit with a lot of countries? How can any country possibly buy as much from us as we buy from them?
"I do realize that some countries limit the amount of US products they will allow in. But even if a country allowed 100% of US products, they simply could not buy that much based on their economics and population size. In comparison, depending on what that country produces, the US would buy much larger amounts of their products overall. This would be especially true for smaller nations." – Subscriber E.G.
"Reading in the Digest yesterday that the new Trump tariff rates are based on nominal trade deficits and not actual assigned tariff rates was shocking. This goes against any type of common sense or basic economic understanding I can imagine. Supply and demand usually dictates trade differentials, as does population differences. Given how much US policy decisions can affect the global economy, my confidence in this administration is low. Let's hope this is all just a negotiation tactic." – Subscriber Darren N.
"I hear those penguins have cornered the guano market and been ripping us off with high prices..." – Subscriber R.F.G.
"Hi Corey, You fell into the same trap as most of the media in your account of the China tariff numbers – you wrote:
"'Additional tariffs on China would be 34%, on top of the 20% previously announced – so 54% in all.'
"You're forgetting the 25% blanket tariffs on China imposed by Trump in 2018. And there were legacy tariffs from long before that, which have never gone away...
"If the 34% announced on April 2 is additional to the existing rates, which was irrefutably true of the two 10% hikes in January and February 2025, then the base rate for Chinese goods will be 45% + 34% = 79% (plus legacy rates). That would be the only interpretation based on how the last two increases have been implemented.
"However, there is speculation that the 34% replaces rather than adds onto the 25%. That would be the only way your 54% number would be correct. There's no support in the announcement for that scenario, but people are still speculating about it.
"Don't take my word for it, call the CBP [U.S. Customs and Border Protection]. My customs broker called their CBP rep today 4/3, and the CBP were scratching their heads about whether the new rate is 54% or 79% (plus legacy rates). THE GOVERNMENT'S OWN CUSTOMS OFFICERS can't tell what the hell he's talking about.
"Apparently this won't be cleared up til the actual numbers are published in the federal register, probably next week..." – Subscriber Dino V.
Corey McLaughlin comment: All true, as far as I see it. The 54% number on China is what the White House, including Secretary of the Treasury Scott Bessent, said was correct on Wednesday, after the Trump media event was over. I referred to those numbers because we were reporting on the new tariffs announced this year, but you're right if you want to count the previous tariffs from 2018 and on before that...
Maybe as importantly, though, China doesn't think the new 34% tariff announced on Wednesday replaces anything. Because today, it matched that number with its own taxes on U.S. imports. That's in addition to the retaliatory measures on the new 20% tariff already added in 2025.
In any case, please let us know what you hear from customs next week... I'd be curious to hear details from you and others who are dealing with this tariff rollout in their businesses.
"Why is everyone surprised at the market drop? The majority of Stansberry analysts, as I recall, have been calling for a recession for nearly 18 months or longer since the last time the 2yr/10yr yield inverted. I'm no expert, but to blame what is happening on one thing or person, given the political climate and recent market action when the word tariff is mentioned, just seems orchestrated to me..." – Stansberry Alliance member David E.
"Wow! The tariffs have barely gone into effect and the sky is falling. I want people to remember their 'feelings' 4 years from now when their portfolios are booming and they are gushing over Trump's decisions to help Make America Great Again. I've been diversified for years and have had a 6% drawdown since Trump was elected. Hardly a correction!" – Stansberry Alliance member Nick P.
Good investing,
Dan Ferris
Medford, Oregon
April 4, 2025