Members,
I believe the (most) material update over the last few days is the fact
that the coronavirus is showing no signs of being able to mutate
quickly. My greatest fear was that – over the next year to 18 months a
vaccine is created but the virus mutated to a point where that the
vaccine does not assist us and we are back to step one again with a new
pandemic and a much deadlier mutation.
All viruses evolve over time, mutating as they replicate (imperfectly)
inside a host’s cell in tremendous numbers and then they spread through a
population, with some of these mutations persisting through natural
selection. More good news is that the virus appears to be the same as
when it started in China. Therefore, it appears a developed vaccine
would be a single vaccine, rather than a new vaccine every year like the
flu vaccine. However, we are (according to all scientists) at least a
year – before a vaccine is developed.
It is likely the high number of deaths in Italy is because of
situational factors, such as an older population, hospitals being
overwhelmed, shortages of ventilators etc. rather than a
mutation. This is heartening news, especially given that other viruses
can be quick to mutate – such as the common flu – which is why a new
vaccine is required every year.
This information was not available during the last economic guidance I released and therefore I would like to update:
– due to the fact that the virus will not mutate I am confident we
will not enter into a Depression. If the virus could mutate, I believe
the economic system would shut down again and all the economic stimulus
(by the Feds) would have been to no effect and we would have an economic
collapse without the Feds in a position to assist. With no liquidity we
would see a Depression that no one alive has experienced unless you are
approximately 95 years old / plus.
– I did say hold 50% in cash a few days ago and that is still a
conservative approach but now with the confirmation that the virus is
not mutating it is ok to lower the cash holding but at the very least I
would hold 25% in cash and remember “US DOLLARS” are a prudent holding
at this time. I believe we are definitely going to see a Recession and
the big question is how long will it last?
– I still believe members should hold 5% in gold and silver. Physical
gold and silver are very difficult to buy and I have now verified this
with a few people in the industry – so you are stuck with
buying stock. To keep it simple – buy sliver and gold ETFs. Again, if
the economy rebounds and we don’t see another business lockdown in the
coming months it is likely gold and silver will “go nowhere” but at this
point you are only buying it as an insurance hedge for your entire
portfolio.
I believe eventually we will see a positive turn around due to the fact that the Fed is throwing unlimited stimulus at the economy. The big question will be the impact of massive unemployment and huge numbers of corporate bankruptcies. For sure we will see a Recession even with all the Federal stimulus and if you did not capture the huge gains over the last 3 days be wary to jump in thinking we will quickly move up to the stock market highs of a month ago. I think it was obvious that Boeing and the airlines would skyrocket with a bailout and told many people this; however, right now the risk reward scenario is too high to “jump in” without having more economic data.
Remember most of the economy is still shut down (India has 1.3 billion people under lockdown). All of this will have huge consequences on the earnings of large corporations especially those who have a large export segment to their revenue.
P.S. I am having difficulty understanding social distancing. Today I drove to my local grocery store on Farm and Durango in Northwest Las Vegas. Along the way Loews was packed (more packed then I have ever seen it – is everyone doing home improvement projects?) and the daycare center which is exempted from lockdown had at least 30 young children playing outside with several adults watching them. Then last night I went to the park with my son Conrad and the park was closed until further notice. A park is an area where you CAN maintain social distancing. Where is the logic to all of this? You can’t go to an open air park but you can go to a packed Loews Home Improvement store?
P.P.S. As well – I am not sure how the virus will be contained in the months ahead when many poorer nations have still taken no steps to contain the virus and don’t have the financial resources to do so. America, over the months ahead, will get control of the virus but how will they deal with international direct and indirect flights from countries where there are no safeguards in place. Again I think it is far to early too think we are through this – but the stock market sure is behaving like the “party is back on”.