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Things to Ponder

By Mike Savage
April 3, 2020

If we had “the greatest economy of all time” as was beaten into us for the last 3 years do you really think that the economy would have collapsed as it did in the past few weeks?

If $12 Trillion in global stimulus in a week can’t lead to rising markets- what is the number that will?

Is there a number that will OR is this a bottomless pit of debt that is going bad?

The economy is virtually shut down and people are shut-in. It appears that we could be shut in for another month. Even after that, how many will either not venture out, have no reason to venture out or have no means to buy anything but bare essentials after no pay for weeks?

The unemployment numbers for March were staggeringly bad. How many of you know that historically bad report was for data ending March 12th.??? This is set to get a LOT worse and in a hurry.

Stock “markets” are being propped up by central bank buying, bank buying, and jawboning (jawboning being Fed officials or even the President making statements that computer algorithms pick up and initiate buy orders). This was done just yesterday as our President announced that OPEC and Russia had a deal to reduce oil output. Too bad just an hour later the Russian President said it was not true. Anyway, mission accomplished! Oil (WTI) had a record gain of over 24% in one day! Too bad this will do NOTHING to change the fact that because of the worldwide slowdown- now almost 2 YEARS OLD- not 2 months old the demand for oil, gas and many other resources remains dead low.

Traditionally, we can tell if a stock is cheap or expensive in many ways. One is the Price/ Earnings ratio. Basically, how long before I earn my investment money back based upon the price I am paying. How in the world can anyone value ANYTHING in an environment like this. All we know is that earnings for most companies are going to crater. The only question is “how far?” Many companies will likely not survive this. What does that mean? Any money you have invested would likely be wiped out in a bankruptcy and cause a 100% loss. There is NO recovery from that. In addition, many companies are announcing an END to dividends for the time being. Can anyone tell me the allure of stocks are at this moment?

Personally, I believe stocks, bonds and real estate will be screaming buys- as soon as they correct (or overshoot) to fair value or less. That is likely FAR FAR lower than where we currently are.

I am amazed at how many people think the “market” is cheap just because it is 30% lower than it was. What is a company worth that may or may not survive, is cutting dividends, and can’t give any forward guidance because things are so uncertain they can’t even guess what the future holds?

On the other side of the coin- you can only get gold and silver if you want to pay a premium to the fake paper price of 50-90% HIGHER than the daily quoted price. There is VERY little supply and overwhelming demand. The only way that the price is not skyrocketing- in the words of Dr. Paul Craig Roberts- is fraud.

As those who conjure up money out of nowhere also conjure up gold and silver paper contracts to give the illusion that someone “in the know” is selling the price is held artificially low. The last time this scheme blew up was in 1969 when gold was $35.00 per ounce (held there artificially). By 1980 gold was $850.00 per ounce. Look out when they lose control this time!

Just this week the COMEX and LBMA have had to come out and ASSURE the public that there is plenty of gold supply. Interesting that this is happening as mines are being shut down globally because of the virus and the same thing is happening with the refiners.

Finally, the FDIC is out there with advertisements letting all the depositors know that the FDIC is SAFE!

Call me a little paranoid but when those in charge have to let me know that I am safe it has generally been a good time to take note and worry at least a little bit.

There are MANY signs, in my opinion, that the economy that we had just a month ago is dead and buried. There will be MANY who will not return to work anytime soon- if ever. Many small companies will not survive.

Anyone who is thinking that this will go away when the virus numbers start to fall is, I believe, being grossly misled. The economy has had a shock that may take decades to recover from. While that may sound over the top it just may be far too tame.

This appears to me to be similar to the great depression of the 1930s where stock prices took 25 years to get back to levels that were seen in 1929. By the way, Japan has a stock market that is 55% LESS than it was in 1989 TODAY- after conjuring up over $550 TRILLION YEN to support it!

If 2008 was allowed to play out and capitalism to do its job- cull the herd and let the strong companies survive and weak ones die- we would likely have markets that would be recovering right now. Instead, the hard days still lie ahead.

Hopefully, the episode will be swift and lead to a bottom where we can be somewhat assured of a lasting recovery that will be real rather than an illusion based upon ever-increasing debt.

This is NOT a drill. The issues that I have been warning about for years are finally upon us.

Be Prepared!

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