This Is Real March Madness

This is real March Madness... It's up to us... Panic (and response) in the 'Age of Acceleration'... Stop and think... Don't get caught up in the mess... A 'Melt Up' update from Steve... Life in Italy and on a cruise... Still, a way to make money...

'Read and Send This to Everyone You Know'...

As Bernie Sanders might say, let me be clear...

Lives and money are at risk within the ongoing coronavirus panic.

After the New York Stock Exchange's ("NYSE") first "circuit breaker" moment earlier this week, we emphasized that in Monday's Digest.

The same goes today after the NYSE's second 15-minute break in four days... and the Federal Reserve's latest round of what is essentially "quantitative easing."

First, we assume you're taking the right steps to protect yourself from a virus that appears to be a particular threat to those older than age 60 and with pre-existing conditions...

If you're not, please heed the common-sense health advice of smart people like Health & Wealth Bulletin editor Dr. David "Doc" Eifrig. In today's must-read issue, he reminded readers that, unfortunately, most people are probably being stupid right now.

As an example, he told the story of a person who was admitted to a hospital twice before being diagnosed with COVID-19... and double pneumonia. The man was married to a flight attendant – a detail that doctors never asked about the first time he was admitted.

It's likely the husband picked up the virus from his wife, who got it from a passenger, Doc said. And he doesn't think this is a one-off story...

I'm predicting that with this kind of stupidity, this virus will quickly infect 50% of Americans in the next four weeks.

And that's going to be the hardest part... this will happen quickly. The bad news is that we trusted the government to properly prepare. I've read that there is only a one-day supply of the N95 masks needed for health care workers.

The speed of this virus's spread will overwhelm hospitals and ICU resources. Folks will die because there isn't room in the hospitals.

That's an alarming message, I know. But despite that... I don't want you to panic.

I (Corey McLaughlin) haven't seen Doc make this type of statement before, so we urge you to take it seriously. The piece he published today is headlined, "Start Staying Indoors: Read and Send This to Everyone You Know."

In addition to what he said in last Friday's Digest – wash your hands and cover your nose and mouth when you cough or sneeze to avoid spreading germs – Doc recommends changing your normal routines and take responsibility to help slow down the spread of the virus...

I've tried for decades to empower people to take control of their wealth and their health...

Do what I do and plan to not travel anywhere for a few weeks. I've slowly stocked up on staples like soups, beans, nuts, root vegetables, and cheeses.

I will probably not go out to public places for the next few weeks either. Researchers now call this "social distancing," and it makes a lot of sense from a scientific point of view.

In the coming days, Doc will be publishing more updates and health resources in his Health & Wealth Bulletin. If you're not already receiving his updates, you can subscribe for free right here. Stay tuned.

Of course, we're also here to talk about the markets and do what we always aim to do...

That's give you the best financial guidance and research that we can.

We'll start here... Whether the fear and hysteria appropriately matches the reality of the COVID-19 threat can be debated.

As we'll show in a few anecdotes today, in several places – including in Italy (a secondary epicenter of the virus after China) and on a cruise ship, where one of our editors reported to us – business is actually operating as normal...

After all, coronavirus is not the same as the Ebola virus.

But the markets don't care. Things are out of control...

In the U.S., a lot of people are in a full-fledged panicked state right now, as reported cases of a flu-like virus with no vaccine climb. As of last check, we're at 1,323 and counting in our country.

In an effort to slow the spread – be it bowing to legal, fear, or health reasons – large gatherings are being canceled or banned... and huge money-generating events like the 68-team NCAA men's basketball tournament have been wiped out.

Notably, professional sports leagues – the National Basketball Association, the National Hockey League, and Major League Baseball – have also suspended their seasons. Disney (DIS) parks in California are closing. Less notably, a school down the street from me has closed until further notice.

And the major U.S. indexes – the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite – have entered bear markets in Usain Bolt-like record time.

And for better and worse, the Fed is trying to cure all of the financial pain again.

This is real March Madness.

And it's going to be something we'll talk about for a while...

Panic (and response) in the 'Age of Acceleration'...

Never before have the major indexes dropped 20% from previous all-time highs so quickly... as measured in days.

We're not trying to start a political "third-rail" discussion thread today, but over the last few weeks, the phrase, "Age of Acceleration" – and an idea suggested by Pulitzer Prize-winning New York Times columnist Thomas Friedman, in his 2016 book, Thank You For Being Late – has come to mind.

It's one of the few pieces of writing I've read from him, and it was passed on by a friend...

In it, Friedman described the fast, super-connected pace of our modern world... and what it was doing to businesses, countries, and individuals – who did or did not adjust to the very real trends.

I think many of us know this dynamic innately from the screen-time app on our Apple (AAPL) iPhone, but the book painted the picture in great context. The title came from a meeting in which Friedman's interview subject showed up late, which he didn't mind...

Because it gave him time to think.

It's critical to think as clear as possible right now...

When you think about the bigger picture, a major sell-off due to a virus that's killing people and disrupting all sorts of economic activity – including travel and oil markets – seems entirely rational when taken on its own.

It would be weird if markets were rising during all this uncertainty. But it's the rapid pace of the fall that's hard for many to digest. Bloomberg columnist Matt Levine put it particularly well today...

In 20 years when you read the Wikipedia page for the crash of 2020 it'll be like "everyone got a virus so the market crashed."

Oh I mean it'll probably go on! "Once all the companies stopped making money due to everyone staying home," it might say, "they couldn't pay their debts, which was bad for them and also for the banks who loaned them money, and also for the non-bank lending operations that had grown in the previous decade's boom and never really been tested."

At its most basic level, this is what's happening.

It's reasonable to think that things will get back to "normal" at some point. We don't know when, but if you look at what has happened with China – which we did yesterday – it could be as soon as a few months...

In her press conference earlier today, European Central Bank President Christine Lagarde also laid out the facts as clearly as we've heard any government official do so far...

The spread of COVID-19 has been a major shock to the growth prospects of the global economy and the euro area economy. And it has heightened market volatility.

Even if ultimately temporary by nature, it will have a significant impact on economic activity.

In particular, it will slow down production as a result of disrupted supply-chains and reduce domestic and foreign demand, especially through the adverse impact of the necessary containment measures.

In addition, the heightened uncertainty negatively effects expenditure plans and financing.

As Stansberry NewsWire editor C. Scott Garliss noted today, Lagarde sounded like a "voice of reason amid a sea of turmoil."

But as we know, a lot of humans aren't rational, especially when it would help us the most...

And the broader markets don't necessarily care what we think, either. It's a complicated web of buyers and sellers.

In a swift move, the Fed stepped in and announced a new round of stimulus...

Near midday today, the central bank said it would inject more than $1.5 trillion of "temporary" liquidity into the U.S. economic system in an effort to keep the credit markets from freezing up.

We'll see if that pays off in the long term... In the short term, it didn't. The Dow – down about 9% at the time of the Fed's announcement – finished down 10% today... its largest one-day rout since the 1987 "Black Monday" crash.

This is showing the rest of the world just how sensitive our system is and how highly leveraged so many companies are.

That's why Porter and the Stansberry's Investment Advisory team have long put such an emphasis on companies with great cash flow... while placing strategic bets against many that are in bad shape.

But maybe the most challenging thing now is to confront all the associated emotions involved in the market's historic gyrations...

Investors have more opportunities than ever to succumb to emotion and hit the panic button... or alternatively find a false sense of calm.

A headline here... A news alert there... A press conference over there... All day long...

As our editors continue to preach today: Don't. Get. Caught. Up. In. It...

While our editors understand the short-term risks, they're in it for the long term.

That means making hard decisions sometimes...

True Wealth Systems editor Dr. Steve Sjuggerud addressed his subscribers this afternoon, urging them to sell when his recommended "Melt Up" stocks hit their trailing stops. As Steve wrote...

Earlier this year, I was pounding the table to buy, saying that the great Melt Up is in front of us... and that stocks would soar much higher.

Since then, the opposite has happened. Stocks have quickly fallen. They are now in a bear market. And it's hard to call this a Melt Up.

Regardless, there's one thing you need to know. As I write to you – early on Thursday afternoon – we will end up stopping out of many of our Melt Up stocks today. Please, please heed those trailing stops.

Steve referenced a similar lesson he learned when the dot-com bubble popped at the turn of the century.

He said he was frustrated at the time when his recommend stocks hit their stops. But in hindsight, selling at that moment was the right thing to do – and stocks went down even more...

We simply can't know how far down a bear market will go. Personally, I still believe that stocks will hit new record highs once this bear market is behind us. We will have an amazing buying opportunity.

But I don't want to give you any false hope, or any reason to ignore your stops when the trend is moving against us. Instead, I want you to do the right thing.

I believe most of my readers back in April 2000 ignored my advice to follow our trailing stops. And most of them got hammered for doing that. Don't let that be you today.

So please, do the right thing. Limit your downside risk. Follow the trailing stops we've set.

When the uptrend returns, we will get back in. But we can't know if that will be two weeks, two months, or two years away.

As painful as it sounds to contemplate, limiting our losses is the best thing we can do today.

Our DailyWealth Trader editors Ben Morris and Drew McDonnell delivered a similar message this morning...

Ben and Drew also reminded subscribers to stick to their stop losses in their positions. After all, you set them for a reason...

But be careful of the temptation to "sell everything," too, they wrote. Keep in mind that Ben and Drew recommend shorter-term trades than many of our offerings...

This is a spectacular sell-off...

Based on this morning's opening prices, the benchmark S&P 500 Index is now down 22.3% in three weeks.

During the entire October 2007 to March 2009 bear market, only three periods were comparable...

The S&P 500 fell 27.2% from September 30 to October 27, 2008. It fell 25.2% from November 4 to November 20, 2008. And it fell 21.4% from February 9 to March 6, 2009.

Chances are, you're seeing your portfolio drop each day, erasing gains from the past months, or maybe even years.

It's painful... And if you're human, you're probably thinking about selling some, if not all of your remaining stocks.

Don't do it.

After the three dramatic sell-offs they mentioned during the 2008 and 2009 bear market, the S&P 500 ripped higher every time...

After that first drop (-27.2%), the S&P 500 shot 18.5% higher in six trading days.

After the next drop (-25.2%), the S&P 500 rocketed 19% higher in one week and continued to rise to a 24.2% gain in six weeks.

After the final drop (-21.4%), the bear market ended. The S&P 500 jumped 23.1% in 13 trading days, 39.9% in three months, and 79.9% in 13 months.

As Ben and Drew wrote...

After massive drops, incredible rallies often follow... even when the world feels like it's falling apart, as it did in 2008 and early 2009.

We simply can't know how deep this decline will be. We can't know when, how, or why the market will turn higher. But at some point, it will.

Our Director of Research Austin Root echoed these comments in a special update to all subscribers on Monday, and he reiterated it in a video yesterday that's available to anyone.

We don't know exactly what will happen next...

But our editors are working hard and analyzing their indicators. And in some cases, they're urging serious caution...

Ten Stock Trader editor Greg Diamond told subscribers this morning that he is not entering any long positions. "Trade what you are given," Greg wrote, "not what you want."

And he wrote this morning about why he's concerned about the bond market in particular, as the Fed is...

A rush into this market has created the potential for a bubble to burst. Interest rates are near zero everywhere... The problem is that the banks are now pulling back on lending, credit is freezing up, and repo rates are rising.

This means that the Fed could lose control and rates start rising naturally. This would be a nightmare situation where bonds AND stocks fall together. Not there yet, but something to keep in mind.

On a related note, Greg recently closed out a 257% winning short trade on Monday.

Back to the panic at hand today, though...

I talked to my cousin, who is teaching school in Florence, Italy. The country has more than 12,400 infected people, and large portions of the country are on lockdown.

He told us that life is different. He was teaching via Google Meet video technology... And grocery stores are only letting in 10 people at a time.

He also told us that about 50 inmates, after they were told they weren't allowed to receive visitors anymore, decided to flee and managed to escape a local prison... That's not good.

At the same time, one of our Stansberry Research proofreaders made it back from Italy yesterday.

He flew out of Rome and said nothing was out of the ordinary during his time in the Roman suburbs and while driving to the airport Wednesday morning.

There were crowds in the airport and on the highways, with much more traffic on the highway to Rome than on the New Jersey Turnpike at 5 p.m. yesterday.

Meanwhile, Stansberry's Credit Opportunities editor Mike DiBiase is actually on a cruise right now. He's planning to file this month's issue – due out next week – from the boat, which he told us is operating as normal...

Everyone on board is doing the usual... eating and drinking and partying. The crew is taking extra precautions, sanitizing everything throughout the day. And there are hand sanitizer stations everywhere.

The crew likes to say "washy-washy." That's the line you hear over and over. It's a running joke. And they started not letting people take food from the buffet a few days ago.

Crew is handing out all food. But so far, there are no reported cases of COVID-19.

Mike said he's most concerned with not being let off the boat in Miami upon return.

We haven't seen many "this is fine" reports on the news. At the same time, this is purely anecdotal evidence and it goes both ways...

In New York, a friend of mine who sells life insurance says four people canceled in-person meetings with him this week.

The point is, it looks more likely that U.S. and global economy growth will be slow over the next few months...

That should be clear by now. And it could get worse – if we've learned anything from the past two weeks.

This is why we've preached to make sure your "financial house" was in order... that your portfolio allocations and position sizing aligned with your investing goals, your needs, and your timeline. Because everyone is different.

Doc gave his portfolio guidance again in yesterday's Health & Wealth Bulletin...

My advice is simple, and it's been the same for months now...

Hold plenty of cash. Own quality businesses. Own gold as a chaos hedge. Be conservative with your money... but stay in the game.

Now is the time to keep your money safe and only act if you have a favorable risk and reward setup.

If you do want in on the action and want to trade in this market, I urge you to be careful. You should use small position sizes. And diversification is key.

Yet through all of this, what if we said you could also make money right now?

We mentioned Greg's triple-digit win earlier as one example. And Stansberry's Big Trade editor Bill McGilton has closed three triple-digit winners in just eight trading days recently...

Now, Bill doesn't make recommendations that you would want to throw your entire portfolio into... far from it. His portfolio is more speculative in nature and, as we always say... Don't speculate with more than you can afford to lose.

But his recommended investments are more like portfolio "insurance." And they're sure proving to be that right now. In short, they tend to go up when most every other asset is going down...

Given what we've been seeing over the past several weeks – even before today's drop – Bill sat down with our video-production folks recently to share the details about his strategy.

The event goes live on Monday at 8 p.m. Eastern time. It's completely free, but we do ask that you sign up in advance to make sure you don't miss anything. Click here to do that right now.

New 52-week highs (as of 3/11/20): short position in Interpublic Group of Companies (IPG).

In today's mailbag, more of your "bullish or bearish" feedback... Do you have a comment or question? E-mail us at feedback@stansberryresearch.com.

"Watching the S&P drop 19% in two weeks flat has me – weirdly, perhaps – more optimistic than in months. And my portfolio about doubled during 2019. The Digest challenged me to think why that is.

"First, the stock prices seem more realistic now. Second, I've closed almost a dozen stink bids, and that's always fun. Mostly, though, I think I have been seeing my brokerage account numbers as UNREALIZED values.

"The big numbers looked nice, but they just didn't feel real. My portfolio is down, sure, but I'm convinced it will be higher in a month, so why sell low now? Color me an optimistic bull – not the worried bear cub I was last month." – Paid-up subscriber John M.

"I'm almost 75 years old. My stocks and bonds are producing income so haven't sold anything." – Paid-up subscriber Emery M.

"We have definitely begun a real nasty 1929 style Bear Market! Mind you, I have been wrong more than once in the past but I simply go by my innate 'Intuition,' similar to my favorite musician, John Lennon. 'Intuition, takes me there... Intuition, takes me everywhere!'" – Paid-up subscriber Les M.

"Earnings will be impacted and it will be extended past what the everything is fine crowd wants us to believe. Dip buying is how we are rolling." – Tim C.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 12, 2020