Intro –

I’m a little hopeful these days about the coronavirus.  Yes, we are in the midst of a pandemic.  I’m not going to just blow smoke up your ass here.  I’m going to tell you why I’ve been alarmed about all kinds of things going back to November, and why I now feel more hopeful.

In November, I started to look into the inverted yield curve and research the overnight repo actions taken in September.  I started buying physical silver and selling anything not nailed down and putting that into investments.  My wife thought I was ridiculous.

In December, I wrote more about it.  I even told people to prepare and build their own preps with my posts.  The picture above I used in one of my December posts, and now you can’t find toilet paper on Amazon.  I started to show some people pictures of the preps I made and I got some fun laughs.  I figured if shit really went downhill for whatever reason, that people can have an idea of how to plan for it.  I wrote a whole series on how to prepare for this.  It was mostly for fun, but part of me wanted to reach out to family and friends and urge them to prepare a little.  Right now, it’s the flu – but next year, it could be a Carrington event which fries all of our electrical grid.

What I have found is there is no easy way to tell friends and loved ones that bad things are coming without looking like a tin foil hat whack job.  But you take up that mantle at the risk of ridicule.

The coronavirus popped the bubble, but what a lot of people don’t realize is that it could have been anything.  There’s more on this I’ll cover below, but for now – this virus was a catalyst and reason for sell off.

 

The virus –

For the past 7 weeks, I’ve been watching Peak Prosperity on YouTube.  He’s been covering this since Wuhan got locked down.  He was scouring the internet for newspaper stories and compiled numbers.  He has a PhD in this stuff as well as an MBA from Cornell.  Smart guy.  So I’ve been trying to warn people that we are about to have school closings, shit’s about to change here, and URGING people to get preps.  Again – met with scoffs.  Some did listen.

I had been shouting from the rafters to my friends – and I’ve been met with things like “kick Nate in the balls”, “you’re depressing”, and “stop writing this or I’ll punch you in the throat”.  Ok – I may have exaggerated the last one, but the point is that I’ve been delivering factual information to people and it seems that people aren’t prepared to deal with this.  Rather than dispute my facts, they would try and tear the messenger down.  It was pretty clear I was causing emotional distress to people – but my pleas, and the pleas of others like me finally got the message out.  And here is where hope starts.

A few weeks ago, my brother sent me a clip of Dr. Drew and in this clip (dated 2/3) and I just about lost my shit on him.  Sorry bro!  He said something like, “see, I’ve been thinking this all along, this is just the flu”.  Bare in mind, this was now like 2/28 and I’ve been following the play by play on Peak Prosperity where they were outlining exactly what was going on.  And let me tell you what happened in this country.

Our news outlets, to me, are now more or less entertainment outlets.  Long gone are the days of “breaking news” where you watched horrible stories that kicked you in the jimmies just to get through.  The Walter Kronkites of the world who delivered you the news, straight up.  What happened was this.

  1. Setup – News outlets now are giant corporations with stock prices
  2. Follow the money – They get their income from advertisers, who also have stock prices.
  3. Journalism – “Fringe” news outlets and obscure papers now deliver what the fuck is really happening.  People like myself are seeing these reports on YouTube channels and wondering why these reports are not on mainstream media channels.
  4. Mocking – “real news” people mock said reports
  5. Discovery – over 2-4 weeks, overwhelming evidence comes in against initial mainstream media reports
  6. Acceptance/re-messaging – items are now plainly obvious to even the most casual observer and mainstream media then does 24/7 coverage on it until the next event.

So with the Dr. Drew thing, he was doing the “it’s just the flu”, and “you people are idiots, I’m a doctor”.  He clearly was not following ANYTHING going on with Wuhan.

With my text conversation with my brother, after watching that video, I was about to throw my phone out the window, I was that pissed at Dr. Drew.

I’ve been battling friends who have gone toe to toe with me on facebook stating “this is the flu, idiot”.  It’s tough because I’m getting 3 hours of global news daily on my commute, and these guys work hard – 10-13 hour days, commutes, kids – and they get the headlines for 5 minutes.  The headlines for a month were things like, “this is the flu”.

Then, it all changed.

The peak prosperity channel was telling us all the lessons of what was working in South Korea, Singapore, and Hong Kong.  Even China was a success story, but it was a lesson learned in waiting too long to address it.  All of us watching the channel got a shotgun education on R0 (R naught), exponential spreading, incubation periods, etc.

Here are some of the lessons learned:

  1. Stop any new cases from coming in.  This was Hong Kong shutting its borders.  We also did this in early February with China, and I thought I saw a politician calling it xenophobic and racist.  No names.  You need to stop new cases from coming in.
  2. TEST, TEST, TEST – South Korea is the testing capital, and had drive through testing.  This was running rampant in China since mid January, and we didn’t even have any testing capabilities.  Our policy seemed to be, “it’s the economy, stupid”, and “don’t test, don’t tell”.
  3. Isolation, quarantine, social distancing – China went to the extreme and quarantined 750 million people for a month.  But all indications are that because of this, they could have saved millions of lives.  It seemed Draconian.  People getting pulled out of their houses.  Doors getting welded shut.
  4. Stay the fuck home – this was a hashtag recently.  Because the R0 is so high (some have this at 4, which would be 3 times faster than the flu), and this is 20-40 times more lethal than the flu.  The only way to really beat this thing is to reduce the R0.  This is done by restricting movement.  If you do not do this, everyone gets sick at once and overruns your hospitals.
  5. Flatten the curve – this was a big lesson to learn.  This builds on the above.  With exponential outbreaks, at some point this levels off – called an inflection point.  This is when the R0 goes below 1.  Since this is a novel virus, none of us have immunity to it.  It is estimated that 40-70 percent of the world will experience this.  Our chances improve when this is spread out over many months, and not in a 1-2 week window.

I saw a great quote.  “Our grandfathers were asked to sacrifice all for the better of mankind in World War 2.  You’re asked to sit on the couch.  Stay the fuck home”.

With this – THESE lessons are now spread out to everyone.  The mocking of me finally started to subside when the WHO declared it a pandemic.  Here’s the problem:

A pandemic is an epidemic on more than one continent.  Pan.  Like in “Pan American games”.  Epidemic is when this stuff spreads throughout a country on its own.  Someone flies in sick, gets someone sick – then THAT person starts community outbreaks.  At issue, it’s been a pandemic for over a month and the WHO has been asleep behind the wheel.  Earlier quotes and memos discussed protecting economies of countries over the health of them.

In this country, the stock market started going to shit as more people started waking up the fuck show this had become.  That was last week’s economy taking a shit.  This past week’s fuck show was mostly the oil war between Saudi and Russia that dropped oil to $30 a barrel.  This rattled everything.  Then, the WHO finally declared this a pandemic and there goes another 2,000 points.

But the good news and hope is here.

I’m starting to see a lot of posts on facebook about Corona.  Lots of people grasping what “flatten the curve” means now.  EVERYTHING seems to be cancelled.  Within a week, most of us who can will be teleworking.  Let me tell you, that this has the makings of severely reducing the new numbers infected.  We will still see large numbers sick over the next 8 weeks, but if we can dull the number of new cases, that is good for all.

And THAT is the hope here.

I had been seeing that “wash your hands” was the way to go.  It’s part of it.  Not going to crowds is big.  Staying 3-6 feet away from people is big.  No one at work is touching door handles anymore without paper towels.  Those that are sick are now being told not to come in and being sent home.

China waited a little too long to quarantine.  Hong Kong had everyone wearing face masks.  you’d see videos here where “facemasks don’t work, they can make it worse”.  Ehhhhhhh….unfortunately, that’s not true.  In Hong Kong, everyone was wearing them.  This is because apparently you can be a carrier of it and not really show symptoms.  Just breathing on people close by could give them the virus.  So the facemasks were mostly meant to keep those that have it from spreading it – even if you didn’t show symptoms.  THAT is what our news media screwed up, to the point where I’m getting lectured by people that “they don’t work”.   Hong Kong.  Yes they do.  It helped reduce the R0.

Singapore had SARS documents from way back and dusted them off and educated their population IMMEDIATELY with brochures on how to prevent the spread.  That was a month ago.  As early as 4 days ago, our president was like, “we got this”.  I support my president, but I was strongly disagreeing with him on this one.

Our main issue seemed to be testing.  It still is.  Some of my friends were like, “Nate, you’re an idiot.  There’s only 100 cases here but the flu kills 30,000.  You’re an idiot.  Did I mention you’re an idiot?”  As of last night, I saw we now have 1700 cases, but we have only tested something like 6,000 people.  Compare this with South Korea, who has been testing 15,000 per day for a month now.  If you have it, you can self quarantine to help with that R0.  Right now, people feel sick and think it’s just allergies, a cold, or the flu and continue to go to work, visit their 80 year old grandmother, and shop.

With testing, we might then be able to see where we are in this mess.  How far along are we, actually?

If I can use Italy as a comparison, and a 4 day incubation period – we are about 7-10 days behind them.  Maybe 14.  What this is telling me is about a week from now we will start to see a lot of cases in the hospitals.  Numbers will explode.  However – all of the people right now who are now practicing social distancing and not going to events – YOU are helping to keep this number from spiking even higher.

I feel that a one month distancing initiative will dull this a lot – and with May/June right behind this, it looks like we will have about 2 months more of this before it really kind of dies down in the summer.  That could be several hundred thousand cases, if not more.  But they will be staggered over those 2 months instead of all happening 14 days from now.  With these staggered, this can drive down the case fatality rate because people can get the care they need.

I think this is about to be a trying time for healthcare professionals.

However – the good news I feel is that a lot of lives are now going to be saved because the mainstream media finally picked up the ball and ran with it.  About a month too late, but I get it.  They had shareholders.  And this is what happens to stocks when this kind of news happens.

 

Concern

I’m going to use the word concern here and not panic, because there’s a lot of distance between “panic” and “not giving a shit”.  Concern is what I have for people and businesses.

One finance professor I had once told me, “you need to always have 3-6 months of bills stored away in case bad things happen”.  He called it the FU fund.  If an employer tells you to do something immoral, “FU”, and leave.  If a shady boss advances on you, “FU”, and leave.  If the zombie apocalypse happens, you have time you can hunker in and say “FU” to the world.

What I’ve seen at Best Buy disgusted me, and I wrote about it.  I read somewhere that most Americans are paycheck to paycheck – about 48%.  I saw another study that had that number much higher, but the point is – most people don’t have any extra money in the bank.  And guess what – I’m seeing 23 year olds buy $300 headphones at Best Buy.  Pink computers.  84″ big screens lined up all over the floor.  Best buy begging you to put this on credit and not pay cash.

At the exact same time our frenzied population has their eyes glaze over at buying shit they don’t need with money they don’t have to impress people they don’t care about, they are going further and further in debt.  And when bad shit happens – they expect the US government to somehow make it right.  Payroll tax cuts.  Free money.  Delay paying taxes.

I’m hoping that while this pandemic runs its course and does minimal damage, the hope is that Americans will learn the lessons of our grandparents (one of mine is 92 and still kicking) who lived during the great depression.  spend thrifty and be strong with savings.

My concern is for a LOT of people right now who got mad at me for hyping this virus – that they are going to fall on hard times.  I get it.  I really do.  What good is it to have $80,000 cars in your driveways if you don’t have 6 months of bills in case times get tough?  Does your kid need to be on the $3,000 travel team if that money is better spent paying down your mortgage or putting into his college fund?  Do you need those $1,000 drapes when you only have $1,000 in the bank?  Do you need those $300 headphones when you have 4 days worth of food/supplies in your house?

There is about to be a lot of helicopter money dropped.  Monetary policy is used to lower interest rates – but that shit doesn’t matter when no one wants to fly or go on a cruise.  Fiscal policy is now where we’re at.  They will start printing money even more than they were before.

In 2000, it was the dotcom bubble.  In 2008, it was the mortgage bubble.  In 2020, it was the “everything” bubble, where everything was overvalued due to cheap money and companies buying their own stocks to prop prices up and get into corporate debt at cheap rates.  By printing money now and giving money out, essentially, all of the world’s economies right now are inflating the fiat bubble.  This is the major concern I have now.  And this is why I’m all in on metals.

A few weeks ago, gold got up to $1700 and silver touched $19.  And when the bubble popped, metals also deflated – but for a different reason.  Investors were leveraged out the ass, and when the stocks broke downward, and rapidly, margin calls happened.  Investors had to sell off everything not nailed down to pay these.  This is what was seen in 2008 with gold as well.

But now, it is loading the spring coil.  Gold is about the ONLY thing up for the year.  Yeah.  It’s up.  Everything else is down.  10 year is in the shitter.  Gold is a “safe haven” asset.  Gold has recently dipped down to the low $1500s.  I ditched at $1670 last week.

What you will see now is what is called “currency debasement”.  This is how metals play a part.  Please read below, as the next 1-2 years, there may be a LOT of inflation.

Going to give you a “big picture” of how this works using some pieces of silver.

In 1964, dimes were made of 90% silver.  In 1965, they changed our dimes, quarters, half dollars, and dollars to no longer be silver – they are now copper with some zinc and “worthless” junk metal.  There’s some 40% items in there for few years, but I don’t want to get into that here.  The 1964 dimes have silver in them.

So I’m going to put two 1964 silver dimes on the table.  In 1964, these two silver dimes bought a loaf of bread or a gallon of gas.  Today, if I take those two 1964 silver dimes to a coin shop or sell online, I get “melt” silver price for each of them, or about $1.20 or so, depending on the day.  I would exchange those pieces of silver today and get $2.40.  I could therefore, today, take two 1964 silver dimes and exchange them for a loaf of bread or a gallon of gas.

If I did the same thing with 1965 dimes, the 1965 dimes are worth…$.20.

So in 1965, those two dimes had the spending power of a loaf of bread or a gallon of gas. Today, they are worth about 1/10th the spending power.  Meaning – over the last 45 years, the currency (not silver) has lost 90% of its value.

This is how a fiat monetary system works.

If you have $5 in cash in your safe, that $5 today can buy a good jar of tomato sauce.  Perhaps 40 years from now, that tomato sauce jar may cost $50, and your fiat currency in 40 years is worth…90% less.

However – if you take those two 1964 silver dimes, in 40 years, you will still be able to buy a loaf of bread or a gallon of gas.

THIS is the power of metals in the face of inflation.

Right now, inflation is about to run rampant.  Everyone knows this.  Gold is about to go fucking crazy upward.  In 2011, it hit $1900.  Maybe it’s 2 weeks out, maybe it’s 2 years out, but the writing is now on the wall for big money to move to gold.  This is after a price discovery period with the markets.  I feel the next 2-4 weeks there will be some volatility.  Investors sell, then the government throws more money, stocks go up, then sell, then more money and they go up.

In about a month, we will start to see the light at the end of the tunnel with coronavirus.  New cases will start to decline, and we will be in the home stretch.

But the lessons will be painfully clear now to Americans.  They will realize how unprepared they were.  I believe strongly that this might be a wake up call for those with $300 headphones, no toilet paper, and 2 days of food in the house and no money in their bank account.

The springboard ahead….

With all of that being said, I do see $2000 gold in the next few weeks/months.  It might pull back another $100-$200 like it did in 2008 before launching on a bull market.  But it’s going.  Silver lags behind about 6 months or so when gold moves.

The silver market globally is tiny.  Therefore, moderate moves in silver move the dial – a LOT.  With silver prices going down, you think “oh my god, everyone is selling”.  Far, far, far from the case.  Try going to any bullion dealer right now and find silver.  Significant delays now in ordering.  Apmex, monument metals, SD bullion, JM bullion.  Go to any site now and try and find silver bullion.  Good luck!!!  This is your demand side shouting back.  The “paper silver” with the futures have sold off on margin calls, but the physical silver demand is there.

A long call I have is uranium.  I listen to EVERYTHING on the internet.  The uranium market has been beaten down over the years.  Right now, like 98% of American uranium is imported.  Please re-read that sentence.

With the pandemic today, we are realizing that important items in our supply chain like medicine, rare earth metals (I own stock in this too), and uranium are national security types of things that we outsource from other countries.  Just last week, the Trump admin signed legislation to produce $1.5 billion in uranium in this country over 10 years.  The thing is, there’s only a handful of uranium companies in this country.  Cha ching.

The thing is, uranium spot price is now $24.60 or so.  It costs $50 to produce.  It has driven most uranium producers to close mines and suspend operations.  The available supply is being used up, and uranium contracts are 3 years out.  So as a bunch of people come off of existing contracts, coupled with all of the Japanese/Chinese nuclear plants are coming online – there is a MAJOR supply crunch coming.  These plants might need a million pounds of uranium a year to produce energy.  You can’t just shut these things down.  Nor can you just simply mine uranium and enrich it in a week.

Right now, you can get in on the ground floor with uranium stocks at bargain prices – UEC and Cameco.  I also have stocks in a uranium exploration company called Iso Energy, but that stock is really shitting the bed.  These might be a long play, but they might yield a 10 bagger or more.  Especially UEC – if the US is spending $150 million on US uranium production, they aren’t doing it at spot or else these companies would lose $25 per pound to do it.  Looks like these contracts might be with a profit built in, so look for these to start making power moves in the next 2-12 months.

Lastly, I threw a decent chunk of change at BNO for speculative purposes.  Shale oil is $56 to produce.  Oil just dropped to $30 per barrel, which is the fuck show from Monday that was errantly blamed on corona.  Get this…

Oil has floated in the $54 range as recently as a few weeks back.  There was an OPEC meeting where Saudi proposed to cut back oil production due to reduced travel.  The cut in production would keep the prices at $54 or so.  Russia comes in and basically says, “we don’t want to cut supply, we want “free market””.  This kind of was a means of going after the American shale oil share of the market.  Saudi said, “I think we should cut production to make some bank”.  Russia saw an opportunity to hurt the United States who was reeling with the stock market drops and continued to say, “let’s just produce what we can”.

Saudis said “fuck off”.  And then decided to drop their prices to $30 to flood the market and teach everyone a lesson as to why they cut supply.  Russia right now is loving the idea of hurting the American energy companies.  They can withstand low prices for some time.

But guess who can’t.  Us.  And we are allies with Saudi.  We sell them weapons.  Get this.  Trump is going to bitch slap them in the next few weeks and withhold any future weapons, forever, due to the oil people calling up Trump daily bitching at him.

Saudi will bend the knee to the US because they want weapons.  They just wanted to teach everyone a lesson, and remember, they wanted to cut supply.  Russia may have known they would do this and played chicken with them to have them hurt their American allies.  Putin is a chess grandmaster with shit like this, and this was apparently what he wrote his PhD in – with the energy sector and how to hurt the US.

So I’m expecting in the next few weeks that oil will be back up to at least $45-$50 per barrel with makes BNO a VERY lucrative short term speculative buy.  There is a chance that this is prolonged and they take oil down to $10 a barrel.  Doesn’t matter.  Long term, this will go back to $50-$60 per barrel.  Right now, BNO is $11 per share and I see this back up to $15-$18-$20 per share within 2 months.  Possible 80% return in short term.  Not bad for the collapse of the economy to find nuggets like this that might jump out at you.

My longer holds are with the silver and gold miners.  AG (first majestic) has an all in sustaining costs (AISC) of $13 per ounce to produce.  They produce 25 million silver ounce equivalents per year.  60% of that is silver, the rest are metals like gold.  Silvercrest metals and MAG are also in my silver bucket.  More on that below.  For gold, I have Barricks, Newmont, and Equinox gold.  I have some smaller miners and explorations, but these are too speculative to really go into.

With silver – we now have a dual purpose metal.  Some of the youtube people are thinking that this might now be seen more as an industrial metal.  I don’t think so.  I think it now has an equal value of industrial AND money.

Here’s the thing.  Almost all of silver is produced as a byproduct of other mining.  Think industrial metals like copper and iron – a side benefit is silver.  Silver producers are almost extinct these days.  Well – there will be a global recession after this.  Not BECAUSE of corona, but it was the pin that popped the bubble.  There will be a slow down and pull back in consumerism.  Unemployment will jump.  Less cars will be sold.

Overall, while there will be less silver with industrial needs, the supply will be FAR FAR less.  The last 5 years there has been a 100 million ounce+ deficit each year.  Re-read that.

Now, let’s assume silver demand goes down 100 million ounces due to less people buying electric cars and solar panels.  But let’s also assume now the supply goes DOWN 500 million ounces due to less production of base metals.

At the exact same time, you have investors flocking to the metals and the silver miners because that supply crunch will shoot up prices quickly.  This, on TOP of people seeing silver as a monetary hedge on inflation.  Combining the hedging WITH the future supply crunch will make for a nice skyrocket.

As of this writing, silver hit $14.70 and may go down to $13s until the sell off of margin calls is complete.  Within a few weeks, it will be back up to $18 and have a LOT of forward momentum.  At the SAME time, fiat currency of the big money people will start to move towards gold and silver due to the inflation aspects coming of more currency hitting the market.

I’m figuring by end of summer we could see $26 silver.  If a true crunch of supply happens, it could take it over 30-40 by the end of the year.  By next summer, we could see $50 silver again, and may go up to $75.

Remember, silver only comes out of the ground 8 times as much as gold.  However, right now, gold is valued at 103 times what silver is.  And gold’s only functions these days are in bullion in bank vaults and jewelry.  with a major recession coming, expect less jewelry, higher gold prices and then followed by a swift move upward of silver.

If you are one of only a handful of silver miners in the world, like AG, this is making you salivate right now.  For every $1 silver goes up means another $20 million or so profit.  If I’m right, and silver does hit $50 by next summer, that is….$600 or so million profit per year on a company with a $1.2 billion market cap.  Right now, with the sell offs, AG hit $5.00 per share.  I would back the goddamn truck up on this. Why?

If you buy 100 ounces of physical silver at $15 an ounce, that’s a nice $1500 in metals you have on you for safe keeping.  If it goes up to $50 per ounce, you then have $3500 profit if you sell.  Not a bad return!!

Let’s just take that same $1500 and buy 300 shares of AG at $5 each.  If silver hits $50 per ounce, those share prices could hit $25-35 each – or 5-7 times your investment.

So – with the miners, your investments CAN be amplified, if you pick the right companies.  a company like AG has been around for 17 years, has a strong CEO that built the company, and is still profitable with low silver prices.  With industrial miners going to be cutting back their mining, look towards a supply crunch and the true silver miners making bank in the next 12-18 months.

I heard this….

Big money on big companies

Moderate money on medium sized companies

small money on smaller companies.

 

So don’t go out and spend thousands on some speculative small miner stock.  You will lose your ass.