I had to shake my head. "If only they knew," I thought...
A few weeks ago, Stansberry Research's brightest minds got together to share their best ideas for 2020 and talk about everything in the markets.
The coronavirus was already in the news, but our meeting was right before all-out panic took the U.S. by storm.
My colleague, Steve Sjuggerud, and I were with a group of young investors, and we wanted to hear their thoughts on the state of the market.
You see, the market had just had its first big drop because of the virus outbreak. (We now know it was the first of many.) We asked this group of "youngins" – as I like to call them – if they bought the dip. We then asked who was bullish in the room.
Nine out of 10 hands shot up in the air.
The average age in that room was about 29. That means many of them haven't experienced anything but bull markets before. In their eyes, any dip in the market has been a buying opportunity.
And even if you did have money invested during the early 2000's or 2008, it has been easy to be a permabull. It has been an extraordinary bull run over the past decade.
But I've been in this investing game for a long time... And I know better than to be complacent.
I know that things can always get worse...
I was on the trading desk at Goldman Sachs during the historic crash known as "Black Monday." The Dow Jones Industrial Average dropped 23% in a single day. It's still the worst market day in history.
I was in medical school when all these physicians were telling me about the extraordinary gains they were making on any company that had a dot-com at the end of it. I knew there was no way this would have a happy ending.
I've seen many great bull markets in my career... and many devastating bear markets as well.
In this business, experience matters. Although I didn't know that a virus that originated from Wuhan, China would end this bull market, I've been cautious with my own money.
I've said before that the majority of my personal money has been in cash. To be specific, over 50% of my portfolio has been in cash. And my friends have been laughing at me for a year because of it...
But today isn't an "I told you so" moment. A lot of investors have lost a lot of money over the past couple weeks. I hope that you took my advice and held a good amount of cash as well.
Now, getting back to the bullish young investors... Is today a buying opportunity?
While many out there see this sudden collapse in stocks as a time to buy great companies at a discount... I'm not ready to put my money back in the markets yet.
Like many of you, I've worked hard for the money I have. And I hate to lose it because of a hunch or some market call that may or may not be true. I'm perfectly fine with holding a lot of cash while this plays out.
There is no doubt things could get much worse from here. Schools are closed... Restaurants are closed... Sports leagues have suspended their seasons...
The economy is going to take a hit... And no one is sure how long it will last.
Now is not the time to "bottom fish" – buying stocks that have fallen rapidly that you think are now undervalued. It's not the time because folks are too emotional right now. They're acting out of fear and panic. Logical decisions are rare when emotions are running high.
If you've taken my advice, you're holding a good amount of cash. My recommendation for right now is to sit tight and wait until the worst is behind us.
As I've told readers for years, always follow your stop losses. Stops are put in place to protect your capital. And I think that now more than ever you need to have a mindset of capital preservation.
But the fact is that you're likely not sitting in 100% cash. I don't think you should be either. Many investors are likely still holding their highest conviction stocks. And if there's a company you know well and love... by all means, you should continue holding. I don't think the world is going to end tomorrow...
But don't be surprised if there's more downside ahead. Again, things can always get worse.
A few of my colleagues are putting together an emergency briefing tomorrow night to discuss ways to protect yourself if there is more downside ahead. He'll reveal a strategy that could make you a lot of money if things do get worse from here.
The event takes place tomorrow night at 8 p.m. Eastern time. Click here to reserve your spot.
What We're Reading...
- Morgan Stanley says a global recession in 2020 is now the firm's 'base case'.
- Facebook announces $100 million program for small businesses impacted by coronavirus.
- Something different: Tom Brady's out of New England, but his kindness leaves lasting impression on this reporter.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
March 18, 2020