Thursday, March 26, 2020

Porter Stansberry webinar this afternoon; My three new reports on the coronavirus crisis and its implications for investors; A caution; Finding the 'Common Good' in a Pandemic; One-question survey; 13 Deaths in a Day: An 'Apocalyptic' Coronavirus Surge at an N.Y.C. Hospital

By Whitney Tilson

1) In yesterday's e-mail, I wrote: "Most investors are cowering under their desks right now, but many of the ones I respect the most share my bullishness," and highlighted Seth Klarman of Baupost Group and Bill Ackman of Pershing Square Capital Management.

Well, I'll add another person to the list: my friend Porter Stansberry, with whom I partnered to create Empire Financial Research last year.

Porter started Stansberry Research 20 years ago on a "borrowed laptop," as he likes to say, in a rundown Baltimore neighborhood. Since then, he's built an incredible business – rooted in providing average folks with accurate predictions, sound investment advice, and great stock ideas.

In 2000, he predicted the dot-com bust (and which companies would survive). In 2008, he predicted the collapse of Fannie Mae and Freddie Mac. And in 2015, he predicted that within five years we'd see a "new crisis of epic proportions" that would change the way we live, work, travel, retire, and invest. That prediction wasn't looking good for a long while, but it sure looks prescient now.

In recent months, Porter has taken a step back from day-to-day operations. But these are unprecedented times... so this afternoon at 3 p.m. Eastern time, he'll sit down with Stansberry's Director of Research Austin Root to talk about what he sees right now as we endure the coronavirus crisis and the resulting economic fallout... what the Federal Reserve is doing... and the once-in-a-generation opportunity he sees from the 30%-plus drop in the major U.S. stock indexes.

He'll also share what he's doing with $1 million of his own money right now... and why he recommends subscribers do something similar to grow and preserve their wealth. This approach represents the epitome of everything Porter has worked on for two decades.

Click here to sign up to make sure you don't miss it – it's free to attend.

Also, I'm sure there will be some element of marketing as part of Porter's webinar. If so, don't complain to me. As Porter wrote to me yesterday after reading my exchange with one of my readers in yesterday's Empire Financial Daily:

Like you, I don't apologize for our approach to sales and marketing.

I've used the same logic for decades.

We tax you with our marketing – true. But without that marketing there would be no product, no independence, and no benefit to the reader.

Selling very high-quality research for a pittance only works with scale – tens of thousands of subscribers. Getting that many subscribers requires marketing and sales copy – and soft pitches to "please subscribe" won't get it done.

2) I've been working 24/7 following and analyzing the coronavirus crisis and the resulting turmoil in the markets. (I only cover a fraction of it here, so if you wish to subscribe to my coronavirus email list, simply send a blank e-mail to: [email protected])

I just completed a report series on it that I think is the best work I've ever done.

It's broken into three parts:

  1. Why I'm Optimistic That We'll Soon Stop the Coronavirus
  2. The Five Reasons We're Bullish on Stocks Right Now
  3. 10 Stocks to Buy to Profit from the Coming Market Upturn 

In part one, I share my in-depth analysis of why I'm cautiously optimistic that the measures we've ramped up over the past couple of weeks to fight the spread of the coronavirus are having their desired effect, sharply reducing its replication rate.

At this point, in the absence of sufficient testing, there can be no certainty... But my educated guess is that the growth in the number of newly infected Americans is already slowing dramatically, and will soon plateau and then decline.

As it becomes clear that we've controlled the spread of the virus and know exactly where the outbreaks are – which could happen as soon as a couple of weeks from now – we can start bringing our economy back to life.

The second part explains why the huge decline in the stock markets, which happened with unprecedented speed, has created a unique and perhaps fleeting opportunity: I'm convinced that it's the best time to buy stocks since the major indices fell more than 50% during the global financial crisis of 2008 to 2009.

To borrow a phrase from one of my friends, I'm "trembling with greed" right now.

It's precisely during times like these that the best investment opportunities present themselves – the type that can quickly make you back the money you've lost and, in the long run, give you the financial security you desire.

Finally, I share my specific investment advice in the third part – including my 10 favorite stocks. Five are lower-risk stalwarts and five are higher-risk, beaten-down stocks.

If you're interested in learning more, you can watch the replay of the Empire Crisis Summit webinar I hosted with my colleagues Jared Kelly and Enrique Abeyta on Tuesday night. In it, we outlined the thinking reflected in our three reports and took questions for more than two hours. You can watch it here.

Empire Investment Report subscribers have access to all three reports. So if you'd like to subscribe and take advantage of the best deal we've ever offered, click here.

3) For the many reasons outlined in my report series, I'm incredibly bullish on stocks right now – but not because I think the coronavirus is some sort of hoax that we should all ignore. In fact, it's for precisely the opposite reason: I think the American people have recognized how dangerous this virus is and are doing what they need to do to stop it. If so, then we'll get through these terrible times more quickly than almost anyone thinks and with less damage than most investors fear... which will almost certainly lead to a big surge in stock prices.

But let's be clear: the economic damage will be serious. Millions of businesses have seen their revenues plunge. But their costs didn't – they're still paying rent, interest on debt, salaries, and so forth. This will bankrupt many of them. As for the survivors, even if we're lucky and see a V-shaped recovery, movie theaters can't make up for lost Friday and Saturday nights. Retailers are going to miss the big Easter shopping period. All the spring break travel is lost for hotels and related companies. Analysts think that the economy could contract by 20% to 30% in the second quarter.

And governments at all levels will be strained as well, with lower tax revenue and higher costs for things like cash payments to every American, bailouts of major industries like airlines, and surging unemployment claims.

Even in the best-case scenario, we'll be in a recession for a good chunk of this year, and we will be feeling the effects for many years to come.

In light of all of this grim news, it's very natural to feel demoralized and afraid.

But again, it's during times like these you can find some of the best investment opportunities.

4) Here's New York Times columnist Thomas Friedman with a smart interview with Harvard political philosopher Michael Sandel (who was my professor there 30 years ago!): Finding the 'Common Good' in a Pandemic. I think he's likely right here, especially his point about the need for widespread testing:

... The [public health experts] I have been writing about or following are actually proposing a phased strategy: 1) Practice social distancing and sheltering in place across the country for at least two weeks, so whoever has the disease would likely manifest symptoms in that period. Those who can recover at home would do so, sequestered from healthy living partners, and those who needed hospitalization would seek it. 2) Alongside this we would do much more testing, to actually get a grasp on which regions and age cohorts – how many young people, how many in their 40s – are most affected. 3) Once we have enough of that data, we can then begin phasing healthy and immune workers back into the workplace, or back to school, while still sequestering those who are elderly or immune-compromised until the "all-clear."

It seems to me that their argument is also grounded in the common good. They're arguing that "work" and the overall health of the economy is also a health issue. If we have millions of people who have lost businesses that they have spent a lifetime building or savings that they have spent a lifetime accruing, we will have an epidemic of suicide, despair and addiction that will dwarf the COVID-19 epidemic.

President Trump said today that he "would love to have the country opened up, and just raring to go, by Easter," April 12, less than three weeks away. I appreciate the president's eagerness to get as many people as possible back to work. I want to as well, but we need this kind of national three-part plan – with real health care metrics established by experts and confirmed by data – to get there.

5) There's a raging debate about whether the coronavirus is much more widespread than what's currently reported (for more on this, see this article in yesterday's Wall Street Journal: Is the Coronavirus as Deadly as They Say?).

If this is the case, it would be great news that this terrible virus is much less deadly than we think. Right now, 68,905 Americans have tested positive and 1,037 have died, for a "case fatality rate" of 1.5% (or 1 in 66).

This is more than 10 times the 0.13% "infection fatality rate" (1 in 763) for the seasonal flu (based on the cumulative numbers over the nine flu seasons from 2010 to 2011 through 2018 to 2019... See this article for more on the nuances of calculating fatality rates).

There are many reasons why our mortality will hopefully decline over time:

  • More testing of the broader population, not just those with the worst symptoms, which would shift the mix of those who test positive to include less sick people
  • Discovery/development/widespread usage of drugs like hydroxychloroquine and azithromycin (and someday, a vaccine)
  • Hospitals developing better treatment protocols 

The mortality rate could rise, however, if our hospitals become overwhelmed or a different, more lethal strain of the virus develops.

What do you think?

I'd be grateful if you'd take 10 seconds to fill out this one-question survey that asks: "By the end of 2020, what do you think the mortality rate will be for the full year (this will presumably be closer to the infection fatality rate)?" To do so, just click here. Thank you!

6) New York City is ground zero of the coronavirus crisis worldwide. As of this morning, 20,011 of my fellow New Yorkers have tested positive, which is 4.1% of the entire worldwide total (and the rest of New York state is another 2.6%)!

In one way, the sharp rise in the number of cases is good news because it mirrors the jump in the number of people being tested. As I discussed in yesterday's e-mail, widespread testing is a critical step to winning the battle against this scourge.

But the surge in sick patients threatens to overwhelm our hospitals, as this article in today's New York Times highlights: 13 Deaths in a Day: An 'Apocalyptic' Coronavirus Surge at an N.Y.C. Hospital. Excerpt:

In several hours on Tuesday, Dr. Ashley Bray performed chest compressions at Elmhurst Hospital Center on a woman in her 80s, a man in his 60s and a 38-year-old who reminded the doctor of her fiancé. All had tested positive for the coronavirus and had gone into cardiac arrest. All eventually died.

Elmhurst, a 545-bed public hospital in Queens, has begun transferring patients not suffering from coronavirus to other hospitals as it moves toward becoming dedicated entirely to the outbreak. Doctors and nurses have struggled to make do with a few dozen ventilators. Calls over a loudspeaker of "Team 700," the code for when a patient is on the verge of death, come several times a shift. Some have died inside the emergency room while waiting for a bed.

A refrigerated truck has been stationed outside to hold the bodies of the dead. Over the past 24 hours, New York City's public hospital system said in a statement, 13 people at Elmhurst had died.

"It's apocalyptic," said Dr. Bray, 27, a general medicine resident at the hospital.

Across the city, which has become the epicenter of the coronavirus outbreak in the United States, hospitals are beginning to confront the kind of harrowing surge in cases that has overwhelmed health care systems in China, Italy and other countries. On Wednesday evening, New York City reported 20,011 confirmed cases and 280 deaths.

In light of this, it's remarkable that the fatality rate in the city so far is only 1.4%, which speaks to the heroic work doctors, nurses, and others are doing.

Shockingly, however, we're not providing them with personal protective equipment ("PPE"), so two of my closest friends have set up a charity to address this. Here's an e-mail from them:

As you may be aware, many of our hospitals, especially in hard-hit areas like New York City, are now at capacity and about to collapse for lack of personal protective equipment (PPE) and ventilators. The state is working to increase hospital beds, but in the meantime this is a FULL-BLOWN EMERGENCY!

We are working with the medical and business leaders to raise money to immediately buy PPE for those of us on the front line, who are working without protection at almost every hospital.

Please help us raise money by donating what you can at, and send this to everyone you know.

I realize we all have awesome causes we support, but this is an immediate crisis, and every one of us needs the hospitals to work.

Best regards,