Mother Nature Is Still Undefeated

The dynamics in the air... A COVID-19 vaccine starts shipping... It's largely the same story... Mother Nature is still undefeated... What to do now with your money?...

Bet on airplanes delivering packages, not people...

This idea struck us this morning, as we read a couple of news items from our Stansberry NewsWire team.

First, our colleague Nick Koziol reported on a weekend development from major airline United Airlines (UAL). In short, because of the COVID-19 pandemic, United now expects to lose more money than previously expected...

United expects to burn through as much as $26 million per day in the fourth quarter. That's $780 million per month and more than $2 billion in total for the quarter. That's higher than its previous forecast of $15 million to $20 million in daily cash burn. As Nick wrote...

UAL cited a deceleration in bookings as the key reason for the increased cash-burn rate. And it's not the only company seeing this...

Earlier this month, Delta Air Lines (DAL) increased its projected cash-burn rate for the same reason. DAL CEO Ed Bastian cited the recent rise in coronavirus cases, which has brought on travel advisories from many state leaders.

As Stansberry's Big Trade editor Bill McGilton wrote back in July in the Digest, the airlines can't keep losing billions of dollars forever... They will go bankrupt.

Meanwhile, United and fellow passenger airline American Airlines (AAL) – along with product shippers FedEx (FDX) and United Parcel Service (UPS) – have started delivering 2.9 million doses of the freshly approved COVID-19 vaccine from Pfizer (PFE) to 636 different locations nationwide. As NewsWire analyst Daniel Smoot reported...

[These companies] are tasked with delivering doses to every state and territory of the U.S. Federal officials said vaccinations will arrive at 145 distribution sites on Monday. By Tuesday, 425 sites will have doses delivered to them. Wednesday will see the remaining 66 sites receive vaccines.

For the Pfizer vaccine to remain effective, it must be kept cold enough as it's delivered and stored across the country... So a network of temperature-controlled facilities and abilities shared by both the passenger and product-shipping airlines is key.

Yet it's also key that for a vaccine to work, the American public must buy into the idea of taking it. On that note, Daniel explained that Operation Warp Speed Chief Adviser Dr. Moncef Slaoui (who we've noted has some conflicts of interest in the whole thing as a former Moderna board member) recently discussed the rollout of the vaccine...

Health care workers, as well as those living in long-term care facilities, will be the first to receive vaccinations. For the U.S. to achieve "herd immunity," Slaoui said the nation would need to immunize 75% to 80% of the population. He highlighted this could be possible at some point between May and June.

"It is, however, critical that most of the American people decide and accept to take the vaccine," he said. "We are very concerned by the hesitancy that we see."

We've mentioned this many times before. We haven't met anyone yet who is begging to be at the head of the COVID-19 vaccine line. Trust has been shattered in our institutions...

As front-line workers start to take this Pfizer vaccine or others that will come, and stories about the side effects are shared, we suspect that people will have an easier time deciding if they want to take a Warp Speed vaccine.

Of course, the vaccines won't even be widely available to most Americans until sometime in 2021... And we won't know any long-term effects, until, well, the long term.

In any case, it's a personal choice. The point is, though...

Here we are nearing the end of 2020, and it's largely the same story as in March...

When it comes to the economy and markets, there are a few foundational parts of the current environment still at work, as far as we're concerned...

As we wrote back in the March 17 Digest, as we longed for the days of open bars on St. Patrick's Day...

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.

Today, it's not all that different...

Passenger airlines are shipping vaccines instead of the usual ticketed passengers... and burning through millions of dollars per day because of it. And they still face the stiff headwinds that Bill predicted back in July. Even if a vaccine were to arrive, it would not be a "silver bullet" for the industry, he wrote back then...

According to A4A CEO Nicholas Calio, "Air transport demand has never experienced a V-shaped recovery from a downturn." It took passenger volume three years to recover from the September 11 terrorist attacks... and more than seven years from the 2008 financial crisis.

COVID-19 is the worst crisis ever for the airline industry. The industry has never experienced anything so drastic. We're still in the early innings of this ordeal, too... It will take several years before passenger traffic gets anywhere close to 2019 levels.

Lockdowns are coming back for bars, restaurants, and small businesses in different parts of the country...

We're also still working at home...

And the companies shipping everything to people's front doors – like doer of everything Amazon (AMZN), FedEx, and UPS – are hiring tens of thousands of new workers...

FedEx is up more than 200% since its March low, and UPS is up roughly 100% from its low. (Demand for packages is so high nowadays that we even saw someone working for one of the major carriers get out of an Enterprise rental van the other night to complete a delivery.)

Sadly, reported COVID-19 deaths are at new highs... And the track of the pandemic is looking suspiciously like the course of the 1918 Spanish flu here in the U.S. – notably the deadlier "second wave" to which most deaths from that pandemic are attributed today.

Whether you think this all got started by a guy eating a bat in Wuhan, or that COVID-19 was cooked up with a recipe in a Chinese lab, one thing is clear...

Mother Nature is still undefeated.

That's a well-used saying in the sports world... It simply means the weather – snow, rain, wind, or whatever – always wins over any opponent playing outdoors. In this case, we're referring to the fact that the virus spreads naturally... no matter how much artificial money, rock-bottom interest rates, and debt is thrown at the problem.

But we say we're living 'largely' the same story because of some important new details about the plot...

While we certainly don't know everything about the virus, we do know more about it than we did in March. For better or worse, pharmaceutical companies and researchers have developed formulas for an RNA vaccine (an unthinkable thing of science fiction just a few years ago).

And to carry through our citation about March above...

Oil is a bit more expensive. Today, a barrel of West Texas Intermediate crude oil – the U.S. benchmark – trades for around $46. That's up roughly 150% from its April low (not counting that crazy day when it traded as low as negative $37 per barrel).

Sports are back, too... But they're only possible thanks to an arrangement of expensive testing and protocols that aren't foolproof. And of course, these protocols aren't available to most people who don't work for multibillion-dollar professional leagues.

When it comes to the U.S. stock market, back on March 17, we wrote that the day before the Chicago Board Options Exchange's Volatility Index ("VIX") closed above 82. That was the VIX's highest mark ever, even topping its levels during the 2008 financial crisis.

This was historic stuff. The Federal Reserve was stepping in to save the credit markets and the stock market from a massive collapse.

But today, the markets are less on edge. As our colleague Dr. David "Doc" Eifrig noted in his latest issue of Retirement Trader on December 4...

Investors are optimistic about a COVID-19 vaccine and the possibility of a return to normal later next year.

They're less afraid now than any time since before the pandemic began...

Still, as Doc explained, it's important to point out that even though the VIX is down compared with the past few months, it's still high when you compare it with 2019... and where it was during most of the record-long bull market of the previous decade.

Stocks have continued to chug higher, too, but it's wise to be cautious...

As we've said repeatedly over the past several months, we're in full-fledged "Melt Up" territory, as our colleague Dr. Steve Sjuggerud calls it... Previously unimaginable amounts of stimulus from the Fed and Congress have gotten us here.

That means stocks can go higher, and we still see trillions of dollars' worth of fuel sitting on the sideline that has slowly made its way back in the game.

But investors can quickly get skittish...

As you can see in the VIX chart above, when we've experienced volatility over the past several months, it has spiked high and fast... And stocks have sold off in turn.

In September, the benchmark S&P 500 Index fell 9.6% – just short of a 10% drop that would officially qualify the move as a correction. The index flirted with another correction on October 30, when it fell 8.7% from the high.

As Steve points out all the time, this is typical behavior of a Melt Up... It's normal to see a number of 10% (or more) corrections along the way to a final blow-off top.

Yet at the same time, interest rates are being held artificially low by the Fed, making bonds unattractive (and doing other things, like creating a booming housing market, as we wrote last week).

So what should you do now?

We could tell you the outlook has drastically changed over the past few weeks as it became clearer that a vaccine would be moving about the country soon and that COVID-19 cases have risen again. But as our Director of Research Austin Root wrote at the start of the month to his Stansberry Portfolio Solutions subscribers...

The only real differences between [the] future normal and where we were before COVID-19 are that...

1. The economy and stock market will be supported by even more stimulus going forward.

The U.S. Federal Reserve and Treasury have made it clear that they plan to continue stimulating the economy for much longer than we previously expected.

2. The case for investing in majority bonds instead of majority stocks is even weaker now than it was pre-pandemic.

The U.S. government 10-year note now yields less than 1%, down from 1.9% at the beginning of the year. This means that after inflation of roughly 1.5%, bonds offer the prospect of less purchasing power in a decade than right now.

As Austin said, for long-term investors, given the certainty of greater stimulus for longer and weaker investment alternatives, you can make the case that stocks are even more attractive now than they were a year ago, even though they're expensive.

So he suggests folks stay invested mostly in stocks over bonds, assuming of course you're invested in the right companies... He says you want to look for "well-run, capital-efficient businesses with enduring franchises, sturdy balance sheets, and outsized growth opportunities."

These are the kind of stocks that will do well for you in and out of a recession...

Austin gets into much more detail in his excellent Portfolio Solutions products, but he says it's also smart to have some "dry powder" on hand – in cash, gold, or maybe even bitcoin – to put to use when inevitable buying opportunities come up.

That's a recipe for success in any market environment, including one that we've seen before.

Power to the Far Middle

Political humorist, best-selling author, and American Consequences Editor in Chief P.J. O'Rourke joins our colleague Daniela Cambone to talk about his latest book, A Cry From the Far Middle.

O'Rourke makes the case for why the U.S. would be better off without so many people holding unwavering opinions. He also talks about the dire need in this country for the rise of moderates... "We need a political system that isn't so darn sure of itself. It's time for the rise of the Extreme Moderate," he says.

Click here to watch this video 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 Twitter.

New 52-week highs (as of 12/11/20): ARK Fintech Innovation Fund (ARKF), Bunge (BG), BlackLine (BL), Disney (DIS), Eagle Materials (EXP), Fortescue Metals (FMG.AX), Green Thumb Industries (GTBIF), Maxar Technologies (MAXR), MongoDB (MDB), Match Group (MTCH), OptimizeRx (OPRX), First Trust Cloud Computing Fund (SKYY), Scotts Miracle-Gro (SMG), Trulieve Cannabis (TCNNF), The Trade Desk (TTD), Take-Two Interactive Software (TTWO), Vanguard Inflation-Protected Securities Fund (VIPSX), Vestas Wind Systems (VWDRY), and Zendesk (ZEN).

In today's mailbag, feedback on Dan Ferris' latest Friday Digest and more thoughts on the "green wave"... What say you? As always, e-mail us at feedback@stansberryresearch.com.

"Dan, another good Digest. Time is our most valuable commodity and yet many (most) people never see it that way... until someone close dies, then they stop to think about time... maybe for just a few days. At 73 I've seen a few close people die including my mother. My dad at 95 is still going strong, good genes.

"Like many, I see this year as a complete upside down year and yet I've been lucky enough to have been an Alliance subscriber since the beginning so I have the benefit of being able to read from good writers like you, Doc, Steve and Porter. As a result, I've made back all my expenses for the year plus a little more. I consider this a GOOD year without taking any big risks. If I finish a year covering all my expenses plus a little extra I think that's a good year. Yes, I would like to make a big killing like everyone else but being too greedy can lead to major mistakes.

"As you are much younger than I, I hope to be reading your thoughts as long as I am around on this earth." – Stansberry Alliance member Jim M.

"How can marijuana be legalized medicinally in numerous states but also be categorized as a Schedule 1 drug? I'm really trying to understand the rationale but cannot make ANY sense of this. The government fear mongering all these years really stifled innovation and innovation in the industry. Looking forward to a more lax regulatory environment in years ahead." – Paid-up subscriber Vincent P.

All the best,

Corey McLaughlin
Baltimore, Maryland
December 14, 2020