200414 May you live in interesting times

Market Bulls are correct! They are! There has been in the past no time when the overall stock market has bounced 50% from a low and later reversed lower. It hasn’t happened in the past. So, the TV pundits are now pushing stocks, loudly. That is their job. I think they are nothing but shills for virtually worthless Fiat investments. They may be right, in the short term. I suspect they are wrong in both the short, intermediate and long term.

COVID-19 is a game changer. Stay at Home orders (SAHO) implemented on a virtual Planet wide basis has destroyed industries. Its changed lives. There may be a tremendous relief rally in a few weeks as SAHO’s get lifted and people become irrationally exuberant about returning to their pre- COVID lives.

I applaud anyone that can make money in an uptrend- as long as they put at least part of their profits into physical gold and silver. There is no cure for COVID-19 at this time. No cure or vaccine coming soon- regardless of what politicians or “cheerleaders” say. China is once again locking down entire regions due to new outbreaks. As I’ve said before- I will say again- this isn’t over!

The battle for COVID-19 isn’t over. This isn’t the beginning of the end. It just the end of the beginning. The pundits are saying that only 2nd quarter earnings are going to be awful…. they promote the idea that sometime in the summer normalcy will return. They have no basis for the prediction since a situation like this has never happened when so many Average Joe’s have had exposure to the stock & debt markets.

What does “normal” look like? Right now, in the States, millions of husbands and wives are looking at all their expenses with suspicion. Three weeks locked up at home, with limited income and they are wondering about why they wasted so much money in the past. Starbucks? Really?

The longer the lock-down lasts- the more they realize how much wasteful spending was in their budgets. The US Consumer has long been hailed as the 70% driver of the economy. Now, that consumer, isn’t. That consumer is learning that he/ she has under- saved for emergencies and over- consumed on dumb stuff. The longer this lasts, the more self realization will occur. Why pay $6 for a coffee one can make at home for 25 cents?

The game has changed. But most (the dumbest people really) won’t accept that at first. First will be a post lock- down splurge. That will happen globally. Happened after the first year of the Bubonic Plague in Europe. Then, COVID returns and panic returns. People are going to get busy congregating and it will propagate the problem.

What to do:

  1. Self isolate yourselves and your family long after this seems “over”. It only make sense. Polite excuses might save the life of your or your loved one.
  2. If you have savings, buy some Silver and Bitcoin. Don’t drain your accounts- but it is prudent based on wildly out of control money printing by governments- the USG in particular. The debt markets are at a virtual crisis point.
  3. Take advantage of the “Splurge” time to restock your shelves. Clearly basic goods are far more valuable than cash. For the kids down the block that were selling rolls of TP at $5 each- kuddos!
  4. If you have a sewing machine, make masks! Not that you need them… but you can sell them on a street corner to those to dumb or lazy to make their own. $1 in material can net you a 600 to 1000% profit. Too amazing an opportunity to ignore! The modern Lemonade Stand!
  5. Look at all the positions you held in your 401, 403, IRAs and other investment accounts with a clear eye. Is this rally a chance to cut losses?
  6. For all the positions you keep- set Stop Losses on them. Take the emotion out of the equation.

I could very well be wrong. Maybe its all sunshine and roses from here on out. If so, I will never be happier to be wrong! But keep your bright, optimistic eyes focused. My projection of S&P 1750 may be right. Hope not! Keep your options on the table. Embrace your inner Entrepreneur. This disease is a tragedy for so many 10s of thousands of families. Don’t add your name to that list. Move forward proactively!

200311 Newsletter holdings

This is a birthday present, of sorts! These are subject to change in the event the market turns markedly bullish. On Monday, with the market down a notable 7%, some didnt realize that a +3% bounce the next day was almost a certainty. Bull markets die quickly, but not easily. Expect more downside moves with rally attempts along the way by the perma- bulls. Drunks are the last one to accept the party is over. Once they do realize its over, expect a significant culmination draw down.

PositionTargetCurrent Stop LossComment
Cash$1.00$1.00NAAll retirement plan accounts
TECS- 3x short Tech$12.00$7.82$6.50Today I’ve adjusted SL higher than purchase price.
EDZ- 3x Short Emerging Markets$90.00$50.74$35.90Emerging markets are in more jeopardy than US is at this point
SQQQ- Ultrashort QQQ$45.00$25.20$17.90 
FNGD- Inverse Fang$15.00$8.90$7.50Play on the overvaluation of Facebook, Amazon, Google & Netflix
YANG- 3x short China$95.00$50.64$38.90China may have COVID contained- but economic shock may just be getting felt
Carnival Cruise Line Put $8.00$6.40$3.50April 3 $26 puts. If hits $8, will move to a Jun/Jul timeframe in money put
Carnival Cruise Line Put $20.00$11.50$6.50Jan 15 2021 $27.5 put. Holding until bleeding stops in travel
SW Air Put$24.00$8.50$6.24Jan 15 2021 $42.50 puts. Holding.
Disney Puts$28.00$14.10$10.50Oct 16 $105 put. Holding

20200229 Fearing Fear itself

My thesis is that COVID-19 is an awful flu that is feared more for its unknown impact to the economy and everyday life than the actual disease impact itself. My approach to investing in this chaotic period is towards the bottom of post.

Markets hate uncertainty, and there is no historical model available to attempt to model the potential impact of this form of Coronavirus. Latest data suggests that container ships arriving in China was down 30% compared to same month last year. China is the worlds builder of “stuff”, and the US its best customer. The movement of that ‘stuff’ is clearly dwindling rapidly- which portends a significant global slowdown.

Lets look at rough numbers:

MarketChange from latest high:Why?
Dow Jones Industrial Average-13.80%Fear of unknown
Nasdaq Composite-12.50%Fear of unknown
Asia DOW Index-10%Fear of unknown
Nasdaq Europe-12.80%Fear of unknown
   
Gold-5.30%I don’t know
Silver-12.20%Fear of industrial demand drop
   
Bitcoin-19%Declines started before COVID Panic hit full force. Unknown why it hasn’t reversed. Seems to be a “sell anything with a Ask/Bid mentality”
Ethereum-23%
XRP-36%
LINK-15%

In theory, as the global markets turned south, Precious Metals and ‘Digital Gold’ should have appreciated in value. What we are seeing in all markets currently is a flight to liquid fiat. Concurrently, markets are expecting a Central Bank global intervention reducing interest rates. The world is already awash in paper money and its derivatives! No form of currency has ever cured a disease! This is a nonsensical, “lets do something to look like we are doing something” self distructive trap.

As indicated in Para 2, the world might be facing a Supply Shock of goods. Last one I remember was the 1973 Oil Embargo, the 1979 Oil Crisis and then the impacts of the Hunt Brothers trying to corner the Silver market in the late 1970s. Supply shock brings panic and reckless behaviors out in the most rationale of people. A supply shock in tandem with a flood of paper money is a recipe for an inflationary spiral. If inflation gets out of hand, most of the governments of the world to include the US will face an existential crisis. A huge portion of the US debt is in short term notes, so inflation will significantly alter its ‘refinancing rates’. A spike in inflation may become an existential crisis to fiat currencies on a global basis.

My ST investment Equity Market Strategy is to maintain my SQQQ and TECS (inverse ETF) positions. The market should bounce up before falling further and setting a bottom. This is not a time to be hoping for a “V” shaped bottom. It won’t happen. If you are not currently Inverse, its prudent to wait for a move up before betting on further drops. Assume that this weekend that all the global financiers and bankers are trying to plan a market intervention intent on pushing indexes up in order to soothe fears. I expect a move higher in equities starting Monday. Due to the never ending stream of bad news / COVID-19 Panic, that may not work.

My ST Precious Metals Strategy: (not physical here- market related assets like SLV, GLD, PAAS, JNUG, NUGT). I was stopped out of all of my PM positions in last 2 trading days. Gold: Anticipate continued weakness. Silver: Expect heavy short selling. Remember that in 2008, $SILVER futures were pushed down to $8. If silver gets anywhere near that level, I am backing up the truck & going all in.

Crypto: Wait and see from the sidelines. Will do a BTC, ETH and LINK update this weekend. Crypto is a hopeful asset, in that these assets are not fully established as legit and for the average Joe to put hard earned money in this seems a gamble. Since average Joe is getting more fearful by the day- lets assume that new money will be unlikely to enter this space in the short term and what we will be seeing is mostly current participants trading in and out of fiat in a zero sum game against each other.