coronavirus and stock market

“Reality is something you pick up like a signal. Most people just don’t have their radio on.”
— Anonymous

Survival is the name of the game. Survival of health and survival of wealth. The virus is spreading rapidly, and one has to assume the sickness might exceed earlier projections. Estimates have the entire country in lockdown shortly and expect the lockdown to last 4 to 8 weeks. And, the economic fallout is already guaranteed to be massive. Goldman Sachs is projecting 2nd quarter GDP at -24%. Fed’s Bullard says we could see unemployment at 30%. There is no doubt we are heading quickly into a severe recession. Worse yet, a depression. The easy days of watching your 401K rising daily are over. Yes, the chaos is happening at lightning speed, and yes, change is difficult, but if you don’t change with the times, you will be left behind.

Have a plan. If you have taken no action to date, maybe sell some stock now or very soon and hope the market can muster up one decent rally so you can sell some more. (For better perspective, take a look at the chart below. Number one, in 1929 there was one decent rally after the initial onslaught. Number two, the 1929 crash lasted 2.5 years and dropped 90%. Currently, the DOW is “only” down 30% or so). It now appears the 2007-2008 crash was just a dress rehearsal. The Fed was able to repair that carnage by printing trillions of dollars and ratcheting down interest rates. This time around, however, the Fed doesn’t have that luxury. The current bubble, which had captivated investor psychology (and the psychology of Trump), and was achieved through share buybacks and increased leverage, cannot be fixed this time around. Why? Because so much money has ALREADY gone into the system, the fear is we are at a point of “diminishing returns”. And, with interest rates already at zero, where do you go from there?

Given the massive volatility and panic, predicting anything in the very short term is sheer folly. But, with the policy of “helicopter money” firmly in place, certain things seem MOST probable: the US dollar will decline dramatically in time and the metals, gold and silver, will rise in price for many years to come. For anyone new to metals, the gold and silver prices have been artificially held down for many years. Plus, margin call selling is now driving down the paper prices as well. But, don’t be dismayed because the physical gold and silver markets are quite strong. In fact, some of the silver premiums are as high as 50% to 100% over spot. Strong physical demand will translate into higher paper price.

I think Egon von Greyerz of Matterhorn Investment says it best,

“So, real money, that is physical gold and silver, is going to be revalued much higher. Technically, gold and silver will soon start the next leg up. . . . What is happening right now is every single government is printing more and more money. You have one rescue package after another, and that’s just the beginning. So, now, central banks are your best friend if you want to own precious metals because they are going to do everything they can to debase the currency.”


Dow Jones - Now and Then


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