Forgive the length below – it’s an in-depth analysis how I see this playing out in the US over the next 3-24 months.  I have been writing about the looming financial crisis for 4 months now, and the above picture was taken from a prep article I wrote several months ago.  I’m not a “prepper” or an “end of times” person, but I pay attention to world news and have been keenly aware of some shit storms coming.  Below is a continuation of everything that I’ve been seeing, and how this can play out for the United States.

We’ve all been taught about “survival of the fittest” in school.  “Natural selection”. This not only applies to people and their health, but families and even companies as well.  I’ve had some friends who really are just living their life as normal.  Perhaps they are trying to be bold and demonstrate they have no fear to anyone.  Maybe they feel if it’s their time, their number will be punched.  Maybe they just can’t process what’s going on in the big picture and just are going hour by hour to keep the wheels of their lives moving.  I see others having great fear and wearing trash bags to the supermarket.

Darwin’s observations in this setting are profound when applying to different segments of society.  We are hard wired to sense danger. If you see a snake, you most likely fear it because you know it’s possible its poisonous.   Now, if someone TELLS you it’s poisonous, you have confirmation and will avoid it at all costs.  If you don’t know, you err on the side of caution.

And then you have people who just try and pet the goddamn thing because it’s funny.  Statistically, they may be right and it may be harmless.  But occasionally, they run across a viper and meet their maker.  Metaphorically speaking, of course.

Right now, we have some competing camps going on because there’s a lot of unknown.  We can’t SEE the virus.  Very little have been tested.  I feel several over the last month in my workplace had it, but no one is being tested.  There are practical responses we can have to this information, like keeping your distance.  Telework is also a good idea to keep people away from each other.

So – we are getting practical advice to avoid the poisonous snake.

  1. Social distancing
  2. Stay at home, when possible
  3. Wash your hands
  4. Keep your meat paws away from your talk holes, nose holes, and eye holes.

 

Those who heed this advice, statistically have the ability to delay getting this.  Everyone will most likely get this over the course of a year, but the idea is to not have everyone get it in the same week.  Apparently, when 80% of the community have had the virus, “herd” immunity happens.  Yesterday, with over 600 people in Italy dying from this, they are now at .8% of their population with herd immunity.  Meaning, there potentially is a lot more deaths to come.  They also suggest we are 10-14 days behind Italy (if we keep current trajectory), so this is our future in a crystal ball.

Still, people want to carry on with their lives as if nothing happened.  There’s danger with that.  Not only could that person get the virus and add to our upcoming hospital woes, but there’s a 5 day possible incubation period where that person can now infect others they come into contact with unknowingly – thus while this single person may only get a mild flu, he or she could pass this on to hundreds of people and cripple our medical establishment.

This is why we are urging everyone to sort of hunker in as much as possible.

When people and businesses come out of the other side of this, I’d ask them to:

  1. Store 1-2 weeks of food at home at all times.  Maybe this is as simple as a 20 pound bag of rice and some canned chicken.
  2. Store $500 per person in your home in cash.  When natural disasters like hurricanes hit and take out power, electronic purchases may not work.
  3. Store 3-6 months worth of bills in savings or something that can be easily liquidated.   This may not be easy for many people, but this country is so driven on consumerism and debt.  They need to protect their families with security, not big screen TVs
  4. If you’re a business – try storing 1-2 months worth of operating costs to assist during some lean times.

I feel like there’s a lot of unhealthy businesses out there already and many may not come back after this.  Some will absolutely thrive.  And while it’s sad that some businesses will go away, in time, others who are more efficient, safe, and innovative may replace them.  For example, I heard JC Penney is now a penny stock.  Amazon looks to gain even more market share after this.

 

How this could play out 

I’m going to end with my pick on how this will play out, but let’s start with some possible alternatives.

Scenario 1 – Wuhan.  (do nothing and WHAM) This is the most grim, but if you look at Chinese numbers, it seems their numbers are in severe decline.  This is – “no one did shit.  Now we’re screwed and must enforce martial law”.  This is the band aid getting ripped off.  One month of SEVERE economic disruption followed by a path of restoration where things start re-opening.  In a communist regime, they can get away with this.  They were welding peoples’ doors shut.

Scenario 2 – Italy.  (Late to the game and oh shit!) In this case, you are seeing lots of young people partying on beaches, going to concerts until recently.  They are passing the virus around and don’t even know it.  Some have gotten this 24 days after contact, it just took that long for symptoms to show.  While the 14 day quarantine worked for most, some got symptoms after this.  Italy is now suffering terribly, with 40,000 cases reported and 400-600 people dying per day (this will only increase until peak).  Italy went on lockdown and their hospitals are overrun.  Now that they are lockdown, the hope is that it will slow the rates of infection.  Problem is – with the 40,000 cases you have confirmed, there’s possibly 10 times that in the environment not diagnosed that could have passed it to another 4 times as many people.  This would take 2-4 weeks to play out in the health systems.

Scenario 3South Korea (way ahead of the game).  These guys have had “drive thru testing” of 15,000 per day for quite some time.  Aggressive testing, quarantine, and investigation into contacts have severely stunted their curve of new cases and has kept their death tolls low and not rising exponentially.  Unfortunately, I believe we are past this precipice.  Our biggest problem here so far has been lack of testing and lack of adopting realistic non-pharmaceutical interventions (NPIs) due to….”Murica”.

Scenario 4 – “Murica” (Darwinism).   We will get our own category here because we are the unique snowflakes of the world.  A mix of urban NY elites and backwoods redneck diabetes “people of Walmart”, our country has a “don’t tread of me” attitude of….”fuck off”.  For my international readers here, many of my countrymen intentionally don’t listen to the government because it gives them a sense of freedom to do as they please.  I think it’s some DNA shit from our revolution 250 years ago.  Dunno.

How we will play out is going to be a mix of many things above.  While our federal government here is quite powerful, our governors have a lot of state-focused powers.  Many outside of this country have no clue how big it is.  Many in Europe will drive from country to country.  France is about the size of Texas, to put it into perspective for you.  We have a governor of Texas, and 49 other governors of their states.  Some states may adopt “better” practices than others, earlier on, and other states that are later to the game may shift focus and adopt best practices.  Most of our big states here are built like this:

  1. Major cities in many states.  Some have no major cities at all. For example, where I am we have Philly and Pittsburgh 5 hours apart, but I live closer to Baltimore in MD (600,000 people and 45 mins away and DC metro area 2 hours away)
  2. Minor cities.  These range from 35,000-250,000.  We might have 200-400 of these, if not more.
  3. Suburbs.  These are surrounding our minor and major cities.  Anywhere you have a small or large city, they have an abundant amount of suburban areas with housing developments and shopping centers.
  4. Rural.  These surround the outsides of our suburbs and make up a majority of the land usage in this country.  Most rural people may not come into contact with others quite easily.  They might have to drive 15-30 minutes to the nearest suburb or small city, if not more.

So the land size of the United States is roughly the entire the land size of all of Europe.  Let that sink in, where Italy for you is like Florida for us in size.  Your countries may be far more populated per square mile or kilometer than us.  And – with this, different tactics may be used.

As I’m writing this, we now have 4 of our more populous states on recent lockdown.  One of them is California.  However, this “lockdown” is not enforced like Wuhan with police out in force.  In San Francisco, they can’t keep people from shitting on the streets, I’m not entirely sure how they think they can keep 40 million people in their homes.  In NY, they are also pretty much on lockdown, but many of them still haven’t gotten the memo.

In our largest cities, people don’t really have weeks or months of supplies in their apartments.  They don’t have grocery stores as much as corner bodegas where they get a few days of supplies at a time.  Then there’s a lot of mass transit, which presents issues for mobility.

I see the national guard being mobilized for large cities for significant lock down for 2-4 weeks.  Right now, as I am writing this, the Maryland National Guard is setting up at Fed Ex field in MD to do testing.  I can see this happening everywhere, shortly.  Major cities I can see having medical fields set up for testing and treatment.  You can’t have everyone tested seeing $30,000-$50,000 bills from hospitals on this.  I can see lots of military grade hospital facilities being set up to triage and take care of people outside of the regular medical environment.  The national guard here I can presume will also be in charge of distributing food and supplies as people cannot leave their homes to go to stores that are closed.

When it comes to small cities, I could see some levels of panic brewing.  In my state, many of our small cities 50-100 years ago were major factory settings.  These jobs over decades left, and our smaller cities are HQ to things like packaging companies, small distribution centers, some manufacturing like Harley Davidson.  Lots of these inner cities almost immediate will suffer from massive unemployment.  Car dealerships, small restaurants, corner stores – everyone instantly is no longer having money come in.  I do see some national guard units helping out here, but mass transit in these cities aren’t used as much, and the high rise buildings are not nearly as large.  Meaning – there is some food scarcity, but these people have more ready access to cars and can get to supermarkets.  Here, you’re looking at where the $1000-$2000 checks can be helpful for them to get supplies.

When it comes to suburban and rural areas – most of these people will see this as a stay at home adventure to work from home, where possible.  My life will not be greatly impacted by a 30-45 day quarantine event, as long as my source of employment continues.  That being said, many of us in the suburbs and rural areas have some stocks of supplies and some savings to continue on.  Our biggest threat is NOT the virus as much as it is economic.

So depending on where you live in this country, you have different concerns.  There’s immediate concerns of health, food, and safety – and then longer concerns with economic aspects.

I feel that in this country – by mid week, most of us will be in a “shelter” in place with only essential businesses open.  The national guard will be out and about testing vigorously.  Those tested positive will most likely be directed to be self quarantined and monitored, and those they have been in close contact with will be as well.  Testing is the first step of getting this thing slowed down.

By 10 days out, many hospitals may have tents in front of them with the military to assist in triage and isolation.  Certain university dorms that are owned by the state may become makeshift hospital rooms for those with COVID.

I feel estimates that May 8th will be the peak day are relatively accurate, with less and less infections starting from around there due to aggressive testing and isolation.  Early June I start to see more businesses allowed to re-open and people wildly supporting local businesses to get them back in the black.

Social distancing will be a thing for the next 1-2 years until “herd” immunity is in place.

Side effects:

  1. Weaker businesses will not come back.  Ma and Pa restaurants owned by those who were elderly will not come back.  Credit will be easy and cheap, and businesses will have been able to borrow several months worth of items to float their bills and pay their people.  Stronger businesses will come back.  Demand will be there.
  2. Everyone who told they couldn’t telework because it’s not possible to do their jobs like that will be made to look like fools.  In my experience, those who are told they can’t telework is due to a lack of organizational understanding of how to do it.  You have controlling managers who must micromanage and see you slaving away in your seat in order for you to be a “productive” employee.  Businesses will have a light bulb moment.  “If we can have 90% of our staff telework, we can reduce $83 million per year in facilities costs, parking lots, and rents”.  Look for this to usher in a new way of doing things.  Businesses that can offer telework will now be more of a differentiator to job seekers.  If two companies are offering $81,000 for a position, but one offers telework 2-5 days a week, and the other requires you to drive 1 hour and be in your seat for 9 hours a day with a 1 hour lunch (at your seat), who would you work for?
  3. Social distancing will be with us for awhile.
  4. This malaria drug I believe will be a difference maker in how this disease is viewed.  IF we can significantly reduce the case fatality rate of this, it is more likely the world will get back to normal, and faster.  I just read a factcheck article trying to roast the president over the ability for this drug to be used.  It was yet another article out there meant to lambast the president.  Love him or hate him, he has zero patience for red tape.  On his watch, he will not allow millions to die while he waits months for approval.  This drug has been used since the 1950s and has a low toxicity.  Their tests now are just trying to ensure that in the scope of this illness, that it doesn’t have side effects that may be worse.
  5. Online colleges suddenly aren’t “fringe” institutions.  I think online colleges get a knock – some fair, some not fair.  Now that every college in the country is going online, you must ask yourself – do they really need $100 million per year for brick and mortar anymore?  I did 2.5 years of an MBA at brick and mortar institutions.  Long commutes and having to move forced me out of these schools.  Loved them.  I did my MS and finished my MBA online which was more conducive to my hectic professional life.  At a fraction of the cost of the “brick and mortar” schools, many of these might now be more attractive.  Mine was tied to the University of Maryland collegiate system, which is a non-profit.  The “for profit” schools were the predatory ones that got a lot of the headlines.  Point is, I believe online colleges and for that matter, online high schools may be a new way ahead to save money.  I wrote about this years ago.  If you could have one history teacher recording a lecture for 20-200 high schools, and have some Teachers Assistants working to support the teacher, you could significantly reduce the costs of your education system.  Want stimulus?  Lower taxes.  My local high school is a world marvel.  Taxpayer money.  Why couldn’t I have a teenager do this from home?  They are now.  If you are a full time teleworker and have the option of having your child do this from home and reduce your taxes to do so, why not?

 

Overall outlook:

Short term (4-6 weeks) – grim, with an asterisk.  The unemployment numbers will come out and rock the stock market more, but it’s possible those numbers are already baked in.  Everyone knew the stock market was overbought at 29,000.  However, at 19,000 it’s also way undersold.  I’d look for equilibrium back in the 24,000-26,000 range by end of summer.  This means any 401k or stock you have now could go down another 10-20% in the short term.  You actually don’t LOSE the money until you SELL at a loss.  Hold.  Watch the dip.  If you have funds liquid to you, this is a GREAT buying time if you feel the market will recover back to 24,000.  If you feel we are in a sustained global crisis, maybe you sell everything now.  I think it’s prudent to stand your ground where you are and not risk too much in investments.  However, if you were a gambler and every month spent $500-$2000 at the casinos, this has a far greater upside than a goddamn slot machine.  Unemployment numbers will SPIKE – but, it’s going to be a short term spike for 1-2 months until people start getting back to work.  Unemployment insurance and the $2000 stimulus should help in the 4-8 week range.  I believe more measures will have to be put in place such as “freezing eviction orders” from banks and property owners.  There’s a LOT of people out there paycheck to paycheck.  This type of thing could murder the court system immediately.

Medium term (6-12 weeks) – not bad.  I feel that the worst of this is coming in the next 10-40 days here.  Those of us in the suburbs who are now able to telework get hours back a day from the commute.  We might be able to have home cooked dinners every night.  Grill some burgers up with the kids over your lunch break.  Walk the dog at the end of your shift.  Inner city might still be bad off because of their close proximity, health systems could still be reeling.  In the suburbs and rural areas, we will be watching a lot of negative shit on TV.  Kids aren’t going back to school this year.

Long term (3-24 months) – good. in the middle of summer, I can see barbecues happening.  Pool parties.  Outdoor events where kids are playing baseball.  You will see more awareness with social distancing, but life will slowly return back to normal.  I see the stock market in a sucky place for this period, perhaps even 20% lower than now.   I see the bottom at 14,500-15,000.  However, that’s on panic selling for people to have cash reserves.  As things return to normal, I see the money going more back into healthy companies and less into speculative buys.  LOOK AT THE P/E RATIO PEOPLE.  If you had invested in companies like Tesla with a 60x ratio, those days may be over.  Look for lower P/E ratios.  Those with a 6-15 ratio are probably going to be where the first big institutional money goes back to.  What many people don’t know is that for a year after the Spanish flu, in 1921 there was a depression for a year.  Unhealthy businesses didn’t come back, and were replaced by newer businesses that were more efficient.  If you have two companies now that do the same thing.  Company A and Company B.  Company A learned through this experiment that they can save $400 million per year on office space by teleworking, and company B orders everyone back to work.  Company A kept their workforce healthy and people didn’t leave their jobs, reducing turnover costs.  Company B forced their people back to work and got many of them sick, costing them productivity.  Many who went back loved the teleworking and started to look for jobs in their field where they could telework.  Company B started losing a lot of employees and productivity was down.  Company B had to charge a lot more for their product than company A.  Company B wanted federal money to help them, and were denied.  They closed and company A stock shoots up.

Sorry for the length, but this subject requires in depth understanding of the risks today, along with how people, animals, and companies survive in the age of Darwinism.

Do you constantly assess your surroundings and adapt, or do you “do things the way they’ve always been done” and risk being culled for those who are more efficient?

Do you behave as business as usual and get yourself or others sick, or do you take great precautions to assist your country purging this disease more quickly?

Will you support your local businesses strongly when you can when they re-open to provide support?

Will you consider new ways of doing things in the post-COVID recovery like telework and distance education?  Would you consider looking for new work for companies that offered telework?

Would you consider buying a little extra at the grocery store in the future to ensure you had a few weeks of food on hand in case of emergencies?

Would you consider stashing away a couple of dollars here and there to help insulate yourself from the effects of this kind of event?  Those who bitch they have no money are the same people I would see spending $100 a weekend out eating or at the bar.  If you have 5 kids, do they need $150 shoes or is it more important to use hand me downs and stash that extra money so you don’t have to rely on the government?

 

Precious metals…..

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Had to add this.  The first thing that happens when I bring this up to anyone is…”you can’t eat gold”.  True.  But what’s happening in the next few months with cash is not going to be like anything you’ve ever seen with inflation.  Precious metals are:

  1. A “safe haven of assets in times of turmoil”
  2. A hedge against inflation

What we’re seeing happened in 2008.  It’s happened many other times in history with fiat currency.  I watched a series by Mike Maloney called The hidden secrets of money on YouTube and it was fascinating.  It has described a play by play of what’s happening right this very minute, but the series was made over a period of 2013-2018.  What he did was do a documentary on the history of money going back 5,000 years.

Gold and silver are money.  Everything else is “currency”.  What happened was in 1971, Nixon took us off of the gold standard.  Since then, debt has run out of control everywhere.

The point is that in the entire course of human history, fiat currency notes last about 30-40 years before they are replaced by something else.  We are now 49 years into our current fiat currency system and what is unfolding now is EXACTLY as Mike Maloney predicted.

hyperinflation

When the “new” currency comes about, these are then usually pegged to silver/gold in some way.  Those who have this, will make out well.

In the short term, you’re right.  If times are tough, I can’t go to my neighbor with a piece of gold and get toilet paper.  But right now if I take that piece of gold to a dealer, I can get $1500 for it.  That currency I then use to give to my neighbor for toilet paper.  The gold is a STORE OF WEALTH.  As inflation happens, that piece of gold will hold that wealth.  As inflation skyrockets, gold follows suit.  So maybe 6 months from now, I trade in that piece of gold for $2500.  The gold didn’t increase in size.  And – that $2500 then will have the same spending power as $1500 now.  However, that $1500 cash you have now, may have 30% less spending power 6 months down the road.  THAT is why you look at precious metals.

Right now, the EXACT same thing is playing out that did in 2008.  Metals and all assets deflated by 30% or so.  It was a deflationary period that Mike Maloney predicted this time around – followed by a massive bull market in the metals as people scramble to find physical metals.

This played out over the last few weeks.  Silver spot price today is $12.69 per ounce, and just several weeks ago it kissed $19.  33% pull back.  Predicted in 2013 to model 2008.  And then – silver over time went up to $50 per ounce.  Gold hit $1900 per ounce in 2011.

So – with all of the turmoil going on, I had predicted months ago that there would be a run on precious metals.  What happened was this.

  1. Margin calls happened for everyone buying on margin.  EVERYTHING has been sold off in order to cover.  Everyone was overextended.  Corrections happened.
  2. When all assets were being sold off, “paper” silver and gold have been sold off too.   These are a lot of the ETFs and futures.  This is why you see the spot prices dropping.  This is not reflective of physical demand, keep that in mind.  When there is a disconnect between the spot price and demand, you will see significant shortages quickly.
  3. “Paper” spot price and physical demand separate.  If you see the prices drop by 30%, you’d think everyone was selling silver.  No.  You cannot find silver at pretty much any coin shop or bullion dealer in the country for less than $20 per ounce.  Go to ebay and take a look what American Silver eagles are selling for.  The US mint ran out of silver.  Royal Canadian Mint stopped production.  Every bullion online dealer in the country ran out of silver (APMEX, SD Bullion, JM Bullion, Monument Metals, etc). APMEX just secured a 1 million ounce silver order in bars and grains.  Silver right now is being bought up and supply is getting crunched.  Big time.  Silver is also used in millions of products – from cars to mirrors to yoga pants to band aids to solar panels.  It is the best conductor of electricity on the planet and 1-3kg are used in each electric car.
  4. Lower spot price crunches the miners.  In the short term, mining production slows or stops.  If it costs $13 per ounce to mine, and spot is $12.50, you stop production or hold product until price comes up.  Almost all silver is mined as a byproduct of other metals.  These metals are used in cars, etc – and mining of them will stop or slow.
  5. In the short term, physical demand is insane.  Companies may see the shortages and buy large quantities now to avoid costs later on when prices go up.  While spot price does not go up, dealers can charge insane premiums and still sell product.  This makes physical “spot” price seem to be around $18 with premiums.
  6. Spot price of silver will go up violently as a shortage is realized inside of 6 months.  Only a handful of silver miners in the world.  Stock with them shoots up mile high.
  7. Gold mining stocks of the big companies shoot up as gold price fires sky high.

 

So – initial pull back right now happened in 2008 and happened now.  Now it’s a waiting game.  I see gold at $2000-$3000 inside of a year and silver at $26 by the end of the year and possibly $75 by next summer.

For those of you who don’t want physical gold and silver at home, like me, take a look at Mike Maloney’s site at GoldSilver.com where they can house your investments – or Onegold, where you can buy “digital representations” of gold and silver which are backed by their warehouses and vaults and you can take delivery if you want.

The numbers – if you bought 100 ounces of silver on OneGold, it would cost you $1250 or so.  By next summer, that 100 ounces could be worth $7500.  The more you buy, the more reward.  Or risk.  Silver could always go down more as more “paper” selling may happen.

Keep in mind.  Gold and silver have been money for 5,000 years.  Paper fiat currencies have numbered in the thousands, and every single one of them has failed in history going through exactly what we’re going through…right now.

If you have investments, it make sense to “hedge” your bets by having 5-10% of your investments as metals.  Some have more.  Some have less.

If you doubt me…spend 10 minutes.  Call any bullion dealer or coin dealer – IN THE COUNTRY.  Try to find American Silver Eagles or silver bars.  IF they do have them, my guess is you’re looking at $18-$23 per ounce.  But spot price is $12.50?  Yeah.  Keep an eye on that number over the next 6-18 months.

Hold.