Lockdown Investing – Part 2

Lockdown Investing – Part 2

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“I don’t have to tell you things are bad, everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job.” Thus did Peter Finch in the 1976 movie classic Network define the day. He then prompted viewers to “get mad,” open their windows and shout “I’m mad as hell and I’m not going to take it anymore!”

Getting mad and shouting out the window might be something we all do before this is over. But the first order of business is making your own assessment of how this economic setback might impact you … then constructing a plan to deal with it.

As a result of comparing today’s circumstances to those associated with the 2008 financial crisis and the 1930’s Great Depression, I tentatively regard the economic period immediately ahead as worse than both! And I shudder to think that before this is over, we may be making comparisons to the Civil War.

My sources for this depressing outlook include Gerald Celente, Doug Casey and Martin Armstrong. Armstrong, who currently advises much of the world’s wealth, predicted the Dow’s recent drop, then admitted surprise at the speed of its fall.

Initial victims of U.S. COVID lockdowns have mainly been low-wage earners [restaurant employees, clerks, hotel maids…]. Businesses who sent office personnel home to work are now beginning to furlough them, as business prospects begin to evaporate. Job losses are occurring in government (shrinking tax revenues), healthcare (workers not needed on the front line), and even among corporate lawyers.

Reports received by the states of Colorado and Washington as to whether layoffs are “permanent” or “temporary” indicated that 30% are permanent reductions. According to ShadowStats, unemployment is already at 26 million, or 23% of the workforce. And the recession/depression we’re entering is likely to continue on into 2022.

The Trends Research Institute forecasts near-term taxpayer demands for removal of non-working public servants from payrolls, and resistance to maintaining school and property taxes at current levels. Bankruptcies are surging in the retail sector, with construction to follow. Airlines are issuing stock warrants to the government to receive bailouts. Advertising is shrinking on TV, radio, internet and print news. Crime is rising. And we’re just getting started.

The COVID-19 pandemic did not deliver this hit to our economy; political reaction to the virus did that. Bloomberg reported that for every confirmed COVID-19 death, 565 Americans lost their job. Shame on our so-called political “leaders” for allowing this to happen! This tragic blow to the U.S. economy and American freedom has been driven by globalists and supported by the hapless Democratic party.

Even so, damage in America is mild compared to the rest of the world, for whom starvation is on the near horizon. Small consolation. The house of cards and paper promises that were generated to get us past the financial hurricane that appeared in 2008 are now being ripped apart by the backside.

Welcome to the major event of our times. Rather than waiting for help or advice from any government, your time will be better spent reading, thinking and planning. Dig as deeply as you can into areas of most importance to you and how to best protect your position… Following is my first-cut analysis on what to do with your investment assets.

Real estate is headed into a global fall, with the only question being how far? The most pessimistic forecast I’ve seen is from financial trader Rick Ackerman, who thinks real estate “will sink 70% with maybe a 90% drop in second homes.” In my opinion, it’s already too late to try pulling something out from the cash value of your real property.

U.S. stocks’ The Dow Industrials’ 38% February plunge to a 18213 March bottom was followed by an awesome bounce back to its former uptrend line @~24K, largely due to Federal Reserve open-market purchases of U.S. stocks. Socrates is forecasting a DJI retracement back below 20,000 to a lower low — once the full magnitude of domestic economic damage becomes evident. But it will then rise under the weight of European capital deserting the collapsing EU ship. To new highs, at 40k or above.

Oil prices plummeted to $17/bbl, turning negative in some circumstances. Lacking demand, surplus oil is headed for storage in oil tankers on a “temporary” basis, until oil prices “stabilize.” These tankers are—in total—providing just 30-days storage capacity for current oil flows. Oil exporters’ income is projected to plunge by over $1 trillion in 2020, forcing widespread stock liquidations.

Gold’s advance into the $1700’s reflects global instability, with Europeans leading the charge, as the EU slowly collapses (many large EU banks appear unlikely to survive into July). Looks like the real deal to me, but Armstrong says it’s “not time” yet for gold. Once COVID-19 pressure is behind us, he looks for a retraction to 1462 or 1362, and then in 2022 an advance to ~5000.

Cryptocurrencies are largely uncorrelated with the above markets, but fell 50% (then recovered), due to sales to cover positions in other plunging markets.

Cash is king. Not only is nothing wrong with holding cash, U.S. dollars are the place to be—destined to appreciate in purchasing power against the rest of the world’s currencies, as the world sinks into deflation [which increases the purchasing power of cash].

How about inflation? Does seemingly endless creation of new money by the Fed mean we’re heading into inflation? Perhaps surprisingly, NO. Here’s the reason: economic trauma being disclosed can be translated into capital losses. Since most failing assets have been leveraged through credit, their destruction is amplified by an order of 10 or more. So far the amount of deleveraging in the global economy exceeds $100 Trillion! Therefore, new capital being created for government giveaways hasn’t even begun to replace the capital being destroyed. But stay tuned: a lot more destruction is coming (think mortgages).

I put a good deal of thinking on these subjects into my 2016 book “But What If I’m Right,” which is still available on Amazon, and digitally or in print at our website.

This post follows Part 1 on Coronagate, also at our website.

(Wayne Peterson publishes this blog weekly at his website.)

Legal Disclaimer: Material in this blog is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination that any investment strategy is suitable for a specific investor. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. This blog does not constitute an offer to sell any securities in the United States. We will not be liable for any financial losses which might occur as a result of your use of this material.


7 Comments

      • Thank you for your insight! Your valuable and concise information is commendable.

        Reply


      • Larry LaBorde

        Dear Wayne,
        As always, very interesting and informative. It was interesting how quickly the silver & gold market seized up last month. Silver dropped low as people sold to raise cash but the premiums shot upwards negating the drop in the spot price. In spite of that there was almost none to be had at any price. Even if you can call the bottom in precious metals, there may be nothing to buy there!

        Reply


      • Wayne Peterson

        Good point Larry. If however Armstrong is correct, laggards might have one more opportunity to get on board–in 1-2 years, below $1500/oz.

        Reply


    • Dr. Phil Burbutes

      Wayne, Extremely insightful indeed! Well done. World War C is upon us! Food shortages are on their way. I had to go to 5 different stores to score a 50 pound sack of potatoes. WOW. Still buying silver coins monthly- when I can get them. Have been looking for that perfect lake house here in Hot Springs. But now acreage with a place for a garden makes more sense. Keep up the great work.

      Reply


    • Nice to hear from you Wayne. Candy and I think and speak of you many times. I have some of my best memories working under your tutelage. All is well hear despite the total collapse of society as we new it. Pray for our children!
      Good to see your thoughts in writing again, we missed your wisdom. Can we sign on to your Blog?

      Hope you and the family are wading through the carnage in good health. Our best and we look forward to more thoughts.

      Reply


    • Wayne Peterson

      Cheers to you and Candy. These times may not be joyful, but they are historic. I feel privileged to be able to live through what may eventually be recorded as the restoration of the American Republic.

      Reply


  1. Wayne. I appreciate the work you do to produce this concise and relevant update. Excellent.

    Reply


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