It's Strange Living in a Pandemic Economy
The bars are empty on St. Patrick's Day... It's strange living in a pandemic economy... What if Amazon employees don't want to work anymore?... Airlines want a bailout... The history of U.S. bear and bull markets... Don't miss our 'Town Hall' replay...
The bars are empty on St. Patrick's Day...
That's the scene here in Maryland, where Gov. Larry Hogan ordered all bars, restaurants, gyms, and movie theaters to close at 5 p.m. yesterday.
Over the weekend, a bunch of images of college kids drinking together on social media seemed to have sealed the deal. Hogan said of the decision at a press conference...
The good news is that most people who get COVID-19 aren't going to get really ill...
It's just that vulnerable population of older adults and people with compromised systems or underlying health conditions, that the mortality rate is very high.
We're trying to keep those people from getting infected by all the other people, like the ones who were crowded into bars all weekend.
For a person with some Irish blood, it's tough... Drinking Guinness at home out of the bottle doesn't bring the same joy as it does sipping it fresh from a draft.
But of course, we have greater concerns today...
Take "flattening the curve," for example. Spreading out the number of sick people over a long period of time is critical to not overwhelming our broken health care system. Health & Wealth Bulletin editor Dr. David "Doc" Eifrig wrote more about that topic in today's issue.
In the meantime, grocery stores have empty shelves. No milk. No bananas. It's eerie. Small and large businesses are getting hurt. Regular people are worried about losing paychecks.
As U.S. Treasury Secretary Steven Mnuchin said today, "Americans need cash now."
It's like a dystopian society.
It's strange living in a pandemic economy...
Amazon (AMZN) usually doesn't change its business for anyone. So when the ubiquitous e-commerce giant announced big logistical adjustments this morning, it became one of those "woah" moments.
As Stansberry NewsWire analyst Daniel Smoot reported this morning, Amazon is now prioritizing "essential" products...
In an e-mail note to independent sellers this morning, Amazon said it was suspending "shipment creation" to its U.S. and U.K. warehouse facilities for all categories besides baby products, health and household, beauty and personal care, grocery, industrial and scientific, and pet supplies. The company said this policy will run through at least April 5.
As officials have told people to stay home to slow down the spread of the virus, demand has surged for purchases online. And now, Amazon – the industry leader – is making moves to adjust to the stress put on its business.
On Monday, the company said it was hiring 100,000 new warehouse workers and delivery drivers to keep up with demand.
It feels like there's two different economies running at the same time right now...
There's the one that can function with limited human interaction... and the one that can't.
The airline industry has ground to a halt. Restaurants are getting killed. A barrel of oil is cheaper than a quality bottle of wine. The entire sports industry is doing nothing right now.
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.
At the same time, certain companies – such as those that make cleaning products – are benefiting on "up" days in the market... For example, Clorox (CLX) shares surged 13% and closed at a new 52-week high today.
But more common in this market, even in sectors with high demand, is that "less bad" might be as good as it gets. Take members-only retailer Costco Wholesale (COST), for example...
As DailyWealth Trader editors Ben Morris and Drew McConnell alerted their subscribers today, shares of Costco – which sells us the "basics" like toilet paper, groceries, and soap – are down 12% since February 19.
But as Ben and Drew noted, Costco is "outperforming the broad stock market by leaps and bounds" and still trades above its 200-day moving average. As Ben and Drew wrote in this morning's issue, while recommending a potential two-month trade on the company...
The numbers show that Costco is a strong, healthy business. And its shares are performing well during the recent market decline...
Similarly, companies like Costco that sell staple items tend to recover quicker during market panics, too.
The fear, of course, with an event that dramatically shocks supply and demand like a pandemic, is that the creation of products and supply chains – for cleaning products and everything else – could be entirely stopped...
Just today, for instance, the United Auto Workers union called for the Big Three automakers to shut down for two weeks. General Motors (GM) is already offering 0% financing for seven months to encourage buying.
What if Amazon employees decide they don't want to go to work anymore for their own health?
At the same time, the airlines are looking for a record bailout...
NewsWire analyst Nick Koziol reported yesterday that companies in the industry are in talks with the U.S. government over an aid package that could be worth as much as $50 billion.
The package could include government-backed loans, cash grants, or temporary tax relief. And if passed in its current form, the package would be three times the size of the federal assistance the industry got after the September 11 terrorist attacks.
It's crazy in a way... The major airlines have spent the past decade buying back billions of dollars of stock to boost their share prices. In fact, they've used 96% of their free cash flow ("FCF") over the past 10 years to do so... and now, they're asking Uncle Sam for cash.
And airports are seeking $10 billion in assistance, too. As regular Digest readers know, a lot of us at Stansberry Research were on flights to Florida just two weeks ago for our annual Spring Editors' Conference.
You don't know what you've got 'til it's gone.
Pandemics aren't common, but bear and bull market cycles are...
The following chart shows the history of U.S. bear and bull markets in the benchmark S&P 500 Index, along with recessions...
(Click image to enlarge)
If you're a believer in the idea that history repeats itself to a point, it's important to note that in the above chart, a bear market typically doesn't just start and immediately stop.
Historically, bear markets take months to find their bottoms. According to the data above, compiled by First Trust Portfolios, the average length of the 11 bear market periods since 1926 has been 1.3 years... with an average cumulative loss of 38%.
Now, this bear market was the fastest to arrive in history. The major U.S. indexes fell 20% from all-time highs in just 20 trading days. So you might be thinking, "Won't it rebound in record time?"
Maybe... But nobody knows for sure. The coronavirus has yet to run its course. We don't know how long "normal" life will be disrupted.
In the near term, Ten Stock Trader editor Greg Diamond says there's room to go lower...
Greg, a Chartered Market Technician ("CMT"), told his subscribers this morning that 2,300 on the S&P 500 remains a critical level to pay attention to over the next few days...
A move to and below 2,300 into the end of this week or the March 23/24 dates can mark at least a short-term low. If there's a secondary rally however, it will be like last Friday – down we go.
So... what's an investor to do now?
Let's revisit our 'Town Hall' discussion from yesterday...
First off, every investor is different. You have to determine your own goals and risk tolerance... and allocate and make trading decisions accordingly. And we here at Stansberry Research can't provide individual investment advice, anyway.
But in our first-ever "Town Hall" event yesterday, editors such as Greg, Doc, Dr. Steve Sjuggerud, Dan Ferris, and Mike DiBiase joined our publisher Brett Aitken and director of research Austin Root to share their perspectives on a lot of what has been happening in the markets over the past few weeks... and what to watch in the future.
If you missed it, we urge you to catch the replay at StansberryTownHall.com.
A few big consensus takeaways...
For individual investors, there will be big opportunities to grow your wealth in stocks in the long term. But now is not that time... You'll hear Steve and others explain why that is, when you'll know when to get "back in," and why it's important to protect your nest egg right now.
Plus, Dan describes what's going on with gold and says it could perform similarly to how it did during the 2008 crisis... Mike gives his view on the current setup in the bond market... Doc talks about some of the science involved with the coronavirus... and Brett gives a taste of what attendees can expect from our colleague Bill McGilton's "crash event" this week.
Speaking of that...
At 8 p.m. Eastern time on Thursday, Bill will detail an investing strategy that can actually help you make money during a bear market.
It might not fit everybody's risk profile. But given these wild times, we can say it's worth your time to at least tune in and learn about it.
If you haven't already signed up for Bill's free event, be sure to do so right here. We want to make sure you don't miss anything.
New 52-week highs (as of 3/16/20): short position in HCA Healthcare (HCA) and short position in Interpublic Group of Companies (IPG).
In today's mailbag, a few subscribers share their thanks for our Town Hall event... As always, if you have a comment or question, send it to feedback@stansberryresearch.com.
"Thanks so much for the emergency briefing yesterday and the valuable perspectives you always share. It has been hard for me to bite the bullet and sell stocks at a diminished price, especially those I have had for some time.
"I had gotten so used to them going up, up, up, I wanted to believe it would never end. I have had trailing stops on all my positions for some time thanks to your advice.
"Now having cut further potential downside by liquidating so many positions, my remorse has turned into relief and I am ready to face what comes next. Keep the valuable insights coming. – Paid-up subscriber Teresa S.
"I have read a lot from the Stansberry team of late, and would like to say the following:
"Steve's call on China has been nothing short of visionary genius. I created a 'special situations fund' from some key recommendations made by Steve's True Wealth Opportunities: China newsletter. It's the ONLY thing in town up by more than 20% after NASDAQ, S&P, and Dow annihilation this past couple of weeks. Happy to share the make-up of the fund I created. My message to all of the western world is sobering, the sun has set on you already, it's risen in the east. The time has come to invest in Asia with Steve.
"Dan and his investment hour work, 'bearish' nature has been a great counterbalance to keep us all honest. His guest Raoul Pal recently made one of the most intelligent statements I've ever heard related to shorting the market being vanity, while the optimal risk reward play was short term bonds. (This was said pre the interest rate collapse, where commentators were saying the interest rate would not go lower).
"Doc has made sensible comments re: coronavirus and his health and wealth approach is the definition of intelligence. He was recently slated for saying America's infection rate could be 50%... Well, I listened to a physicist who specializes in chaos theory and his take makes Doc's caution look tame in comparison. So well done Doc for calling it. I do not pay Stansberry researchers to tickle my ears, after all.
"Greg thanks for sharing your technical charting and analysis work, it was great to see confirmation of the down-side support. I like technicals myself, and note the 100% Fibonacci retracement is going to be tested today or tomorrow. If this happens it's crystal clear the bottom is not in yet.
"Austin, don't feel bad about MGM Resorts, I think that around the current $10 share price I'd be building up a position. (Not saying it can't drop another 15%, but I think there's now an entry level, based on both technical and fundamental analysis I recently did.)
"In general, Porter's ethos of doing for readers/customers what he and the team would want done for them, is EXACTLY what differentiates Stansberry Research from the crowd.
"Folks, thank you for your tireless efforts to educate, inform, encourage, mentor and keep me sane through the good and bad times. I recently lost a lot in my portfolios (except Sjugg's China recommendations that I used in my special situations fund!! Unbelievable call Steve! Legendary actually!
"Thanks to you, my fund performance destroyed Ray Dalio's, albeit it's nowhere near the size of his juggernaut, YET 😉 No doubt if I didn't stick to my stops and have an exit strategy in place when I entered my positions, I would have faced a lot worse.
"Keep up the quality work Stansberry team, I'm proud to be associated with a company who has demonstrated integrity in not only the good times, but also the bad! Thank you Porter, Steve, and team at Stansberry. Keep safe, be courageous." – Paid-up subscriber Dimitri S.
"After watching the Town Hall video today, I realized that I am remarkably calm about this downtrend. I did panic two Mondays ago, but didn't do anything stupid with my portfolio. Yet [I] still caved and cancelled a day of work. I HAD to panic somehow!
"I have missed a few trailing and hard stops, so I don't really want to sell at market. I have started using Limit orders priced at 7% to 10% above market prices to attempt to sell assets in a somewhat sensible fashion.
"So far, on intra-day bounces, I've managed to sell about 65% of my stopped out positions for way better than at market. I also started leaving one share in my portfolio to remind me to get back in, eventually. I know why I bought the stock, and still want it in the future.
"I just keep remembering the 'Coffee Can Portfolio' approach. Prices aren't real, either up or down, until you sell. Still, it's hard to look at nearly all red, the few greens really cheer me up! Thanks for teaching me how to invest on my own terms!" – Stansberry Alliance subscriber Jerry F.
All the best,
Corey McLaughlin
Baltimore, Maryland
March 17, 2020