Panic mounts in Singapore... They've cleaned out the local pharmacy... A 'transformational' discovery... Why Google is playing catch-up with one small tech firm... Elizabeth Warren's plan to force a 'debt jubilee'...
We'll start today's Digest with an e-mail from Singapore...
It's an update from our international editor Kim Iskyan on the mounting panic surrounding the outbreak of a mysterious coronavirus in China and other parts of Asia. As he wrote...
The local mall – everyone in Singapore lives within walking distance of a mall, and there's a mall attached to most subway stations – was deserted...
A lot of shops had already closed down for the long Lunar New Year weekend, but earlier in the day, a guy who had gone to a medical clinic at the mall was showing the symptoms of the virus. He was taken away by an ambulance, likely for the two-week quarantine that they're imposing here on possible cases.
So the local mall was off limits during what would otherwise be a huge shopping period, just before the Lunar New Year celebrations kick off.
Kim, who lives in Singapore, noted that the island city has only seen three cases of the virus... but the whole place is on high alert today. Singapore is one of the most densely populated countries in the world. It's roughly one-quarter the size of Rhode Island – with five times the people.
It's also a popular destination for tourists from China. "Three-quarters of Singaporeans are ethnically Chinese," Kim wrote, "but many of them can't stand 'mainlanders.'" The outbreak, which started in the Chinese city of Wuhan, gives them one more reason for that disdain.
Also, Singapore was hit hard by the 2002 outbreak of severe acute respiratory syndrome ("SARS") – "both the economy, as well as in terms of cases and fatalities," Kim wrote. "So they're taking it all very seriously."
Residents cleaned out the pharmacy near Kim's home...
Nervous Singaporeans bought up almost all the store's surgical masks and bottles of hand sanitizer, he reported. Kim attached these two photos to his e-mail...
Of course, we can't blame anyone for taking common-sense steps to protect their health if they live or work in places where the virus may have spread. (As we explained in Wednesday's Digest, one case was reported this week in Washington state. And today, another case was reported here in the U.S. involving a Chicago woman in her 60s.)
But as we wrote Wednesday... even if this outbreak turns out to be as severe as the SARS one, we expect this to be a short-term blip for the relevant markets.
More negative headlines may spook some investors and create short-term volatility... but it's unlikely to trip up China's surging stock market.
Switching gears...
Google is playing catch-up with one small tech stock...
Last September, Stansberry Innovations Report editor John Engel told his subscribers about how new 3D mammograms were making huge improvements in doctors' ability to catch and treat breast cancer. And he identified the small company driving the new technology forward. As John wrote in that month's issue...
3D mammography has the ability to flag minute changes in breast tissue – changes that traditional 2D mammography often fails to capture.
How? Well, 2D mammograms produce just one image. 3D mammography... is a series of low-dose X-rays from different angles that compiles individual "slices" of the breast. This allows radiologists to reduce the amount of "background noise" often seen in 2D images. And it leads to faster, more accurate diagnoses.
Imagine trying to find a bruise inside an apple using only a flashlight. It's much easier to find that bruise once you cut the apple into slices and shine a light through each one...
Several highly regarded medical equipment manufacturers are jockeying for market share – firms like Siemens, General Electric, and Philips, to name a few. But none of them have been as successful at selling their machines as industry dominator Hologic (Nasdaq: HOLX).
About 33 million patients get mammograms every year. But John predicted that new technology like Hologic's would drive that number higher.
While many doctors begin suggesting mammograms for patients at age 50, studies show that women as young as age 40 could benefit from screening. As more information on the benefits of 3D technology reaches the public, the demand from patients for better testing at younger ages would be difficult to ignore.
Hologic already controls around 50% of the global market for mammography equipment. So it stands to benefit the most from rising demand for screenings.
And thanks to Google, breast-cancer screening made headlines in recent days...
Many mainstream media outlets jumped on the news when Google parent Alphabet (GOOGL) published a study earlier this month showing it developed artificial-intelligence ("AI") technology to help doctors detect the disease. Google said it had developed an algorithm that could help doctors identify tumors more accurately... with fewer false positives and false negatives than traditional diagnoses by doctors.
CNN quoted one of the researchers who studied Google's technology... As Ara Darzi, director of the Cancer Research UK Imperial Centre, explained to the news outlet, "This is one of those transformational discoveries you have in your hand, which could disrupt the way we deliver screening in terms of improving accuracy and productivity."
But as John told his Innovations Report subscribers in this month's issue (published last Friday), for once, the tech behemoth is playing catch-up...
It's remarkable that the mainstream media found this so amazing because Hologic has used AI-based software for diagnosis for years. In fact, as we mentioned in November, the FDA recently approved its more advanced AI software...
Hologic isn't Google, so it doesn't get the same level of exposure. But lucky for us, we have more insight on the subject than most. Long before Google's headline news, we knew the value of AI-based diagnosis. That's why we own the company that cleared the use of AI software with its market-leading mammography equipment.
Shares of Hologic have been volatile since John recommended them in September. But the stock is up since the start of the year and Google's announcement...
John's subscribers are up 8% on his recommendation as of yesterday's close. And more important, the stock remains in "buy" range and is positioned to ride surging demand to much greater gains. To follow John's coverage in the Stansberry Innovations Report, click here.
Finally, did you hear the latest call for a 'debt jubilee'?...
This is a new one...
Sen. Elizabeth Warren, who is seeking the Democratic nomination for November's presidential election, recently announced that if she were to win the presidency, she would take executive action to make the majority of Americans' student debt disappear – without Congress.
Warren said that by using a little-known provision under the 1965 Higher Education Act, which governs federal student loans, she would wipe away up to $50,000 in debt for those with household incomes of less than $100,000.
That means she would forgive 95% of student-loan borrowers in the U.S. – roughly 42 million people, who carry $1.5 trillion in student-loan debt.
Warren, in an argument sure to be parsed by lawyers and already opposed by several Republicans, claims that the Higher Education Act gave broad power to the secretary of education to manage the federal student-loan program...
Warren points to a line on page 372 of the 848-page document (we went back and read it) that gives the secretary of education the ability "to enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand" when it comes to federal student loans.
Today, the provision is sometimes used on a one-off basis to erase debt in instances of death, disability, or schools closing. It's hard to imagine the 1965 law's original writers intended to let the president erase more than $1 trillion in debt with a swipe of the pen...
To be sure, we checked with the trained lawyer on our staff – Stansberry's Big Trade editor Bill McGilton. We suggested to Bill that the act appears to be littered with language indicating the "powers" are intended to be applied on a case-by-case basis. He replied to us in an e-mail yesterday...
I don't think you're crazy for saying that. But I'm sure if we looked through this document long enough we will find multiple ways why the authority exists and reasons why it doesn't.
Bill also pointed out that a lot of debt forgiveness has been happening quietly under U.S. law for more than a decade to relieve debt through income-, job- or location-based programs...
It's already being done and most people don't know about it. Warren wants to take it up a notch... But ultimately, Congress is the lawmaker and they can change the law if they don't like Warren's interpretation – assuming she controlled the executive branch.
As it is in Washington, partisanship is at new all-time highs...
We can't really blame anyone for trying to figure out how to circumvent Congress in pursuit of getting something meaningful done. But this particular idea should be concerning to those on Main Street. More from Bill...
The way these things work is the people who can't pay, won't... and everyone else will end up paying for them. Their student loans get socialized.
Warren is the first presidential candidate to propose wiping away the majority of student debt on Day 1 without Congressional approval. But the details of her proposal might be part of a moot point...
She ranks third in many of the polls projecting the Democratic nominee for the presidential general election... So for now, she doesn't appear a likely contender for the White House come November.
And plenty of signs suggest the election is Trump's to win or lose...
But whoever emerges as a nominee for president isn't our primary concern today...
As longtime Digest readers know – and as we've warned in our book, The American Jubilee – we can't imagine Warren will be the last person to make this kind of call for a "debt jubilee"...
In fact, we know she won't. And regardless of the winner this November, it would be smart to prepare now for the inevitable fallout from our national debt crisis. Because you can bet someone has to pay for it.
As we detail in The American Jubilee, the more than $1 trillion in student-loan debt is just a part of the bigger problem that will lead to a market "reset." We covered the consequences of a massive debt forgiveness and how you can protect your investments from what's coming in detail.
Subscribers to Stansberry's Investment Advisory have access to the e-book version of The American Jubilee. To subscribe, click here.
New 52-week highs (as of 1/23/20): AllianceBernstein (AB), Blackstone (BX), Electronic Arts (EA), Alphabet (GOOGL), Intuitive Surgical (ISRG), iShares U.S. Home Construction Fund (ITB), Kinder Morgan (KMI), Coca-Cola (KO), Lennar (LEN), Lockheed Martin (LMT), Lundin Gold (LUG.TO), Masco (MAS), NovaGold Resources (NG), Nvidia (NVDA), NVR (NVR), PepsiCo (PEP), ProShares Ultra Technology Fund (ROM), Sea Limited (SE), ProShares Ultra Utilities Fund (UPW), ProShares Ultra Semiconductors Fund (USD), Vanguard Real Estate Index Fund (VNQ), and Aqua America (WTR).
In today's mailbag, a pair of subscribers write in to thank Dan Ferris for yesterday's Digest and helping them understand the markets a little bit better... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Dan, I don't know whether it's my denseness, but a couple qualities about volatility finally make sense now. Sure, I hear often that low volatility is associated with higher prices and vice versa. But I also keep hearing that volatility itself just means rate of change. So why can't they go the same direction sometimes?
"While talking with my wife and trying to explain the need for hedging against sudden market drops, I explained that when any stocks (or sectors, etc.) go up, they work their way up. But sudden, big changes are usually drops, so it's better to prepare ahead of time since there won't usually be enough time to respond. Now I get it. Excepting IPOs and biotechs, one nearly never sees sudden, explosive moves upward. But stomach-churning drops abound.
"And your rant against ETNs like VIX or TVIX helped me understand a contributing factor I'd completely missed – that lead time in the futures market you described only exacerbates my own inability to respond quickly enough to a market drop. I think it's the same thing Doc (and Jeff Clark) warn about options: You have to be right about both the direction of the equity as well as the timing. Way too easy to be wrong about both, too.
"The last few months (and 2018, of course) have seen irrational, inexorable, consistent inching higher and higher. (How can the fear gauge be so low when I am so terrified of such unsustainable altitudes?)
"I so appreciate the way you (and Porter, for that matter) present things. It's not just that I follow what you explain and learn something new. It is really exciting when your poking, stirring, and shaking make me bubble over. It reminds me of 'naba,' Hebrew for 'bubble over' and translated 'prophesy.'" – Paid-up subscriber John M.
"I will admit, I have not taken the time to read all of [yesterday's] Digest, but I can say that the article you wrote yesterday hit on so many things I've been suspecting for years. It was coherent, articulate, and in my opinion spot on.
"All of the points you made regarding reasoning behind different investments helped me realize that as an individual investor is so damn hard.
"If you're trying to use common sense to play the markets you're screwed from day one. I look forward to reading more of these Digests and here's a shout out to Mr. Dan Ferris." – Paid-up subscriber John O.
Regards,
Carli Flippen and Corey McLaughlin
Baltimore, Maryland
January 24, 2020