What Goes Down Must Come Up?

We're holding an urgent 'Town Hall' meeting Monday... Everyone is working from home... What goes down must come up?... A sick bat or two started all of this?... Health care winners and losers... What's up with gold?... Appointment viewing...

A Note From Stansberry Research Publisher Brett Aitken

It's safe to say we're in the midst of the most tumultuous market since we emerged from the Great Recession...

The economic disruptions caused by the ongoing coronavirus pandemic combined with the Saudi Arabia-Russia oil-price war has sent waves coursing through the markets.

Despite rallying into the close today, the stock market is still down 20% from its February highs... And earlier this week, we fell into a full-fledged bear market.

Here at Stansberry Research, we're proud of our efforts to keep you informed about how the news and events may be influencing your investments. We hope you've been reading our updates here in the Digest... on the Stansberry Newswire... and across all of our publications.

But we know with all the volatility in the market, investors' nerves are high. We know you have lots of questions. And to answer as many as we can...

We have scheduled a special "Town Hall" webinar on Monday afternoon.

We've called in nearly a dozen of our editors and analysts to talk about what's going on in the markets... what's driving the ongoing volatility... what may happen next... and most important, the critical strategies and steps that individual investors should take to protect themselves.

Please watch for upcoming e-mails from Stansberry Research with details about how to log in to view the Town Hall. (Look for messages with the subject line "Urgent Town Hall Update.")

And if you have specific questions you would like answered, please e-mail them to feedback@stansberryresearch.com with the subject line "Town Hall Question." We'll answer all of those that we think will help the most subscribers. (Please no questions about individual stocks.)

And please know... this Town Hall is purely informational for the benefit of you, the subscriber. We won't ask you to buy a thing. We just want to help you navigate the rocky market.

Also, be aware, we're postponing the previously scheduled Emergency Briefing event with Bill McGilton until Thursday night, March 19. If you signed up to participate, we will send you a reminder about the schedule change. (And if you'd still like to register, you can do so right here.)

Again, we will broadcast details about how to participate in Monday's Town Hall as they become available.

We remain grateful for your business and your trust. We hope you will find this Town Hall in keeping with our mission to provide you with... the information we would want if our roles were reversed.

These are unbelievably unusual times...

If someone had been on a sabbatical in the woods without technology, they likely would have no idea about what has happened in the world over the past few weeks.

Of course, they wouldn't know an actual pandemic has broken out, either.

To that point, our Dr. David "Doc" Eifrig's urgent "don't be stupid" message yesterday should serve as a wake-up call for everyone... If you missed it, be sure to check it out here.

While a lot of our editors already work remotely from various locales, Stansberry Research operates with a big team of folks behind the scenes at our headquarters in Baltimore. And like a lot of the country right now, everyone will be working from home as of Monday.

We sort of saw this coming, but not to the extent – or speed – that it has happened...

Last month, we wrote about the "contactless" delivery options from Starbucks (SBUX) and McDonald's (MCD) in China and the massive quarantine measures there. But it's still hard to believe what's happening on U.S. soil and the hysteria that has ensued.

The markets have been predictably unpredictable... And they're running wild, finishing up more than 9% today after yesterday's historic March Madness 10% sell-off. That was the worst dive since "Black Monday" in 1987... followed by the biggest one-day rip higher since the financial crisis lows in 2008.

Most of today's gains occurred in the final 25 minutes of trading as President Donald Trump spoke at the White House and declared a national emergency.

Volatility remains at historic levels. The Chicago Board Options Exchange Volatility Index – the market's "fear gauge" – hovered just a touch below its 2008 financial crisis peak for much of the day. It surged to higher than 75 before pulling back to around 60 to close the day.

Our editors have updated subscribers with their perspectives and trade alerts throughout the week. But we know a lot of Digest readers may be looking for even more guidance... some on if they should sell, others on whether to buy, or something in between.

That's why we're holding the special "Town Hall" event for paid-up subscribers on Monday afternoon.

And if you are to believe the mainstream media...

People have been panic-buying toilet paper and panic-selling stocks...

That sounds like it should all wash out at breakeven when this is all over, but who knows. For sure, the rhetoric and the reality out there is a bit chaotic today...

One of my (Corey McLaughlin) wife's co-workers here in Baltimore tested positive for COVID-19. We suspect these stories will become more common over the next few weeks...

My wife spoke with our pediatrician today... The doctor was so frustrated over the lack of coordination from officials who could actually arrange for widespread and fast virus testing kits to help ease the nation's collective anxiety.

We're young... thankfully, relatively healthy... and not too worried. But maybe we should be. This is the stuff of science fiction turned reality. Yet I'm sarcastically keeping notes in a file titled, "Quarantine: A Memoir."

But we're also heeding the common-sense advice we've heard from Doc and other doctors. It's pretty simple, but it can go a long way from spreading the virus to someone else...

Limit your exposure to other people, and limit your travel. If you're sick, especially if you have underlying medical conditions and are having difficulty breathing, go see a doctor.

Wash your hands, don't put them in your mouth, and cover your face if you're coughing or sneezing. It feels surreal just to type this, but it's the reality we're living in right now.

I can't help but keep thinking, 'A sick bat or two really started this whole thing?'...

Or so they say.

We're not going to get into the conspiracy theories... We bring up this idea only to keep the big picture in mind.

As the current story goes, the outbreak started at a food market in Wuhan, China – somehow making the leap from sick bats to humans – late last year...

Now $2 trillion in market cap in the S&P 500 has been wiped out since the start of 2020... And lots of everyday Americans are wondering if they should see a physician or not.

A real virus, of course, puts the U.S. health care sector and all its warts in the spotlight...

Stansberry Research editor Thomas Carroll, a longtime health care sector analyst, has written several times over the past few months about what's going on in the industry... especially as it relates to proposed reforms and the presidential race.

We haven't met many people who can explain the complexities of our health care system in an easy-to-understand way like Thomas often does. And today, we want to share his thoughts on the sector as it relates to the coronavirus spread.

Thomas began by explaining that as bad as the coronavirus is, it's only a glimpse of what could go wrong within the U.S. health care apparatus in general...

As the numbers of confirmed cases ramp over the next 10 days, health care providers will be overrun. New positive cases will measure in the millions as test kits become readily available.

We've talked many times about the problems in our health care system. All of these problems will be amplified as millions seek care. These millions will be over and above the "normal" amount of people using hospitals and physician services.

Fortunately, the coronavirus is not Ebola. Or the mysterious illness in Michael Crichton's techno thriller The Andromeda Strain. No one will be bleeding from their eyes or suffering a horrendous painful death in a matter of hours.

But guess what? The next one could be much more fatal. And it's not a matter of if, but when.

The coronavirus should be looked at as a fire drill. We need to get plans in place for the next time.

As for today, Thomas wanted to share more of his insights on the areas of the industry that are being impacted as we write... He says there will be winners and losers as the story unfolds.

We'll let Thomas take over from here...

Who are the losers?

Unfortunately, providers (hospitals, doctors, urgent-care centers, etc.) will likely struggle.

Companies like HCA Healthcare (HCA) will see a lot more business as people seek care to get tested by doctors and be admitted to hospitals. However, the providers will be reimbursed at the low end of the spectrum.

For most people, the coronavirus will be like the flu. This mostly requires palliative care (for their symptoms, not the cause) that doesn't rack up huge costs.

If people are admitted to a hospital and quarantined for 14 days to be monitored and receive hydration, this will hurt hospital revenue and margins. The average length of stay at a U.S. hospital is six days.

Coronavirus will limit the amount of patient turnover that we usually see. It will also change the mix – or different kinds of services – a hospital provides.

For example, hospitals need surgeries to drive their profit margins. Pre-op, surgeries, and post-op drive the most revenue at hospitals. Elective surgeries will likely fall as a result of coronavirus.

Moreover, everyone should heed my view on hospitals... Stay away at all costs. If you attended the first-ever Stansberry Research Immersion Week at Canyon Ranch in late February, you likely heard my talk and research on the topic.

Only go if you believe your life is in immediate danger. Medical errors directly linked to a provider are the third-leading cause of death in the U.S. That view is even stronger today, given the virus. The mainstream media is even telling people to stay away as well.

Related to fewer surgeries... medical-devices companies could suffer. If there are fewer surgeries, there will be slower sales at these companies, such as Medtronic (MDT).

Conversely, some devices – like ventilators – could see a spike in demand. With that said, we believe the coronavirus may have a neutral to negative impact on device manufacturers.

Now, for the positive side...

Managed-care organizations ("MCOs"), or the health insurance companies, may see earnings upside as a result of the coronavirus. I'm talking about companies such as Centene (CNC) and Anthem (ANTM).

This may sound counterintuitive. If doctors and hospitals are overrun with patients, they will collectively have to pay for that, right?

Yes, but that payment, as I mentioned, will be on the lower end of the stuff they pay for. And for the most part, people will be staying home and hunkering down to avoid becoming ill. I expect medical costs to be lower than planned.

We've seen this before...

In 2004, when three hurricanes hit Florida, a state dominated by a certain Medicaid MCO, health care expenses plummeted. People simply didn't go to the doctor or the hospital. That resulted in fewer medical bills being paid by MCOs.

"Life science" companies could also be winners.

These pharmaceutical and biotech companies – like Gilead Sciences (GILD) and GlaxoSmithKline (GSK) – are making the screening tests. They're searching for current medications that could work against coronavirus. And they will be developing a vaccine to prevent future mass outbreaks. This will lead to more sales.

Other winners could be the companies that process those tests. There are large, publicly traded laboratory companies that will begin to see a huge volume of coronavirus tests.

The tests will soon be much more widely distributed throughout all 50 states. As Corey mentioned in Monday's Digest, that started to happen this week.

Lastly, there are a batch of new health care technology companies that facilitate communications between doctors and patients. This is called "telemedicine. And this fledgling way to see your doctor is going to get overrun in the coming days.

There aren't many publicly traded companies in this space, but you can find them... Cerner (CERN) is one of the notable names. And more are coming. In the last nine years, about $40 billion in investor money has flowed into these mostly small, disruptive digital health care companies.

MCOs also have telemedicine capabilities. That's another reason we like them.

If videos are your thing, you can hear more from Thomas on these topics that way, too...

He sat down this week with our new colleague Jessica Stone for an interview at our headquarters in Baltimore to talk more about what he sees going on right now. Click here to watch it now, all for free on Stansberry Research's YouTube page...

Elsewhere today, Dan Ferris sent his Extreme Value subscribers his latest big-picture outlook...

In the latest issue of Extreme Value, sent earlier this evening, Dan reiterated the scope of what the U.S. and the world in general is facing right now...

My best guess as to how the COVID-19 crisis will play out in the U.S. is that in two weeks, the U.S. will look how Italy looks today...

If the world's governments act quickly and decisively enough, we'll likely be able to slow and stop the spread of COVID-19... and we'll see a global recession.

If they don't, the outcome will be many preventable deaths and societal chaos in some locations, followed by a somewhat worse recession as more draconian measures will be needed to get back on track.

Dan also pointed out in a separate e-mail to us today that he has been among the most bearish of Stansberry Research editors over the past few years. And he hates that he's finally right...

So you can have sickness and economic pain... or more sickness and economic pain. I hate to make it sound so awful, but I truly believe that's what we're looking at.

I've been wrong about the bear market coming for three years. Now I'm right and I really not very happy about it at all.

What to do about it now, posits Dan?

If the Federal Reserve's most recent behavior is any indication, Dan said interest rates could go all the way to zero next week when the central bank holds its next regularly scheduled meeting.

And that's why it's a good time to own gold. As Dan told us...

The basic move of central banks in a crisis is to lower the value of the currency they manage.

The U.S. dollar is very strong right now. As the Fed cuts interest rates to try to goose markets to life, the dollar should weaken... and gold will shine.

Longtime Digest readers know that several of our editors refer to gold as a 'chaos hedge'...

If that's the case, as we've heard recently from a few readers, why isn't the price of gold popping right now?

Well, there's not always an instant and direct correlation between the chaos in stocks and a rise in gold. As Dr. Steve Sjuggerud wrote in True Wealth Opportunities: Commodities yesterday...

Most folks believe gold is a crisis hedge that immediately goes up when stocks crash. But it isn't always that simple.

The Great Recession of 2008 is the perfect example. Take a look at how this major gold fund performed compared with U.S. stocks...

This isn't what you'd expect. As the housing crisis unfolded, gold chopped sideways, largely falling alongside the S&P 500. It looked like investors had no safe haven... But that wasn't the case.

According to Steve, the lesson here is... if you hold gold, be patient. As he continued...

Investors who got into gold as the crisis was unfolding did incredibly well... eventually. It just took a little time. But just about any investment in gold – whether during or after the crisis began – led to outperformance over stocks...

Look at how gold did compared with stocks if you'd bought in early 2008 as the crisis hit...

Investors who got into gold as the crisis unfolded saw returns of more than 100%. Had they stuck it out with stocks over the same four years, they would have lost 5%.

Steve says we're just now seeing the same trend start to play out, and he agrees with Dan that the Fed's next move could send gold shooting higher.

One more chart...

Back in January, early on in the coronavirus crisis, we compared the S&P 500 Index's performance today versus how it went during the epidemic of severe acute respiratory syndrome ("SARS") in 2002 and 2003... At the time, we felt it was the closest comparison we could make.

But now, it's clear that this dive will go down as at least two times worse than that one. Stansberry NewsWire analyst Nick Koziol put together this updated chart earlier today...

Finally, a programming note...

If you're self-quarantining this weekend... or even if you're just looking for something to do... we've got a recommendation...

Editor-in-chief P.J. O'Rourke and our colleagues over at the American Consequences magazine will broadcast their new, feature-length documentary this weekend on One America News Network.

Socialism Rising: American Consequences 2020 will air at 10 p.m. Eastern time (7 p.m. Pacific time) on Saturday and Sunday. It features interviews with P.J., as well as Dr. Ron Paul, Fed insider and author Danielle DiMartino Booth, and our founder Porter Stansberry.

You can also get a link to the film so you can watch on your computer at any time by signing up for the magazine today for free at AmericanConsequences2020.com.

On a related note... our roving international editor, Kim Iskyan, has recently been contributing regularly to the magazine from his post in Singapore. You can find Kim's takes in the free daily American Consequences e-letter as well.

That does it for this wild week.

New 52-week highs (as of 3/12/20): short position in HCA Healthcare (HCA) and short position in Interpublic Group of Companies (IPG).

In today's mailbag, a pair of subscribers share their appreciation for our guidance this week... Also, don't forget to send in your questions for Monday's special Town Hall event to feedback@stansberryresearch.com. Be sure to put "Town Hall Question" in the subject line.

We'll answer the questions that we think will help the most subscribers. And please note, as always, we can't provide advice on individual stocks.

"I want to thank everyone on the Stansberry team for guiding your subscribers through this volatile time in the markets. Being a novice investor and Stansberry subscriber since October 2018, I rely heavily on Stansberry's guidance. And while analyst opinions may differ at times, it's clear everyone is on the same page at Stansberry to deliver their best possible advice to their subscribers.

"This week, however, I am particularly grateful for the following (in no particular order):

- Newswire's commentary throughout the day

- Austin Root's email on Monday

- Digest that summarized several different analysts on March 9th (It was very helpful having several different Stansberry's analyst opinions & analysis summarized in one place!)

- Doc refraining from providing a recommendation for Advanced Options (because it wasn't safe to do so – so much respect how he handled that!)

- Daily morning briefings from DailyWealth

"Please keep all of this coming... particularly summarizing different analyst's opinions & telling us when it's safe to buy back into the markets.

"This week I feel like Stansberry has really 'had our backs' and provided another example of the Stansberry mantra of providing subscribers with the advice / guidance that you would want in our place.

"So, in short, thank you for the countless extra hours and commitment that the entire Stansberry team has demonstrated this week and every other week – it shows and is appreciated!" – Paid-up subscriber Kami B.

"To Doc, Porter, Dan, and Steve, I know you guys often say that your subscribers don't take your advice on position sizing, trailing stops, and capital efficient companies. I'm here to let you know that some of us take you very seriously indeed.

"At [Thursday's] close, I went through every position, recalculating trailing stops. On 20 positions, I hit 25% on nine of them. But then, since I have long been following Doc's past urgings to reinvest dividends, I factored these in, and only had to sell three of these nine positions. But then, one of these three only has a 2% position size, and carries a 35% stop loss, so I did not have to sell that one either. Sooo, on 20 positions, I had to sell only two, since they hit their trailing stops. Thanks Doc...

"As a hat-tip to Porter, I own capital efficient companies including P&C insurance firms, and my portfolio beta is about half that of the S&P 500. It's comforting to hold great companies through a panic of the type we are presently seeing.

"The selling has raised some cash, and I'm waiting for Steve to deploy some of that dry powder.

"The only advice I have not followed are shorts, and that is my failing alone. However, the entire portfolio is hedged with physical gold and silver as well as a few of Dan Ferris' gold/royalty companies.

"So thanks to all of you. Some of us do follow your advice, and it has proven to be comforting amidst the general panic. I am an Alliance member and a SAM investor as well, and feel prepared for whatever comes, short of a nuclear exchange. Losses are never easy, but you guys make them manageable." – Stansberry Alliance member Stephen K.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 13, 2020