In the morning, as told on Saturday, I blew out of my entire Quant and retirement accounts — leaving only TLT. As much as it pains me to sell, I felt it was a decision I needed to take — as I STEEL MYSELF from the horrors of this decline.
This afternoon in a press conference, Trump and his Coronavirus task force spoke in gloomy terms and suggested this crisis could in fact last thru August.
At my local Harris Teeter, the produce guy sat there doing nothing — produce shut down for at least a week. The suppliers are out of stock.
In the market, we saw stocks like CLX, GIS, and KMB do well — as consumer staples becomes the go to denizen for cash looking for a home.
I was SHOCKED by the decline in the Russell 2000 — down more than 15%. More than that, giant financial institutions like PUK, JPM, and C were lower by 15%-25%. These aren’t ordinary declines and if you were to ask me if any company in the Dow could make it under lockdown until August, I’d be hard pressed to give you a confident answer.
CAPEX is going to zero.
Share buy backs ZERO.
Unemployment will rise to over 10% within a week.
This is a financial shock that will ruin the US economy. I’m afraid of the ramifications of all the bailouts might mean for the dollar, to be honest. I do not believe banks can remain solvent with every company under the sun drawing from their LOCs.
Major disruptions in the leverage loan markets and of course MBS and corporates. Junk bonds ripped to shreds. Expect another significant Fed action tonight or tomorrow, targeting commercial paper, followed up with something on the fiscal side. I want to be wrong — but am afraid I will be proven unbelievably right — yet again.
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TLT – virtually return-free risk. Not criticizing, I’m similarly positioned, only in even lower return and lower risk very short term gov’t …and I don’t like it.
“virtually return-free risk”
Hi, I’m Numbersgame. You must be new. You sound just like this guy Ferd…
https://ibankcoin.com/flyblog/2019/04/12/milquetoast-roaring-rally/#comment-560042
https://money.cnn.com/quote/quote.html?symb=tlt&sourceid=mozilla-search
I’m amazed at your ability to dig through the archives. Do you have them stored and indexed offline or what
Didn’t Jim Grant coin the term return-free risk?
Not everyone thinks TLT is ‘virtually return-free risk’.
https://slopeofhope.com/2020/03/ok-ok-one-short.html
You have the FED against you, investor momentum against you, and just a techincal chart – based on just a few days action – supporting you. I guess it’s better than shorting the VIX.
He *really* couldn’t find an overpriced stock with a weak chart to short instead?
No mercy.
See My Finger
Showtime..why didn’t anyone ever step in and stop it these past 10 years?. It is such a Nasty Nasty Mess that they have created. I am shaking my head how so many people believed in it at the end.
So, now that we all understand the gravity, how deep is the ocean right here?
Nobody fucking knows. NOBODY, because the asshole in the White House is a fucking moron and we’ve only tested less than 0.01% of the population
Dr. Fausi should have just shown Trump a picture of a lot of dead bodies and some photos of the great depression isntead of trying to expalin to him how viruses work.
Dead bodies and bread lines won’t do. He won’t even feel sad if his third wife dies–he will just mail-order another one from Slovenia or Russia.
The stock market is fucking him up though.
Wow, the great FLY, quivering after a ***12%*** down day.
Did your balls retract? Isn’t Exodus going bonkers? Is China really better than the U*S*A?
Another day like today and we reach GS’ S&P 2000 target. Think that will really happen tomorrow? Fuck no.
Sure, we could go down further eventually, but unless you beleive we are seeing the **end of the stock market** and all the 401k, then this is at least good for a trade.
Overweight CURE
+ FAZ to cancel out the AZholes that keep screwing up the economy
+ cash for S&P 2000 watch
+ bonds to sell to the FED
You really should hire someone to translate your jibberish – just in case you, one day, have a coherent thought to convey.
“jibberish” is spelled with a “g”
Translation:
1) Buy when the fearful are selling
2) I’m a bear, and I’m long anyway (ask your wife)
Vindication:
1) S&P futures up 4%
2) VIX looks like it has peaked, heading below Thursday and Fridays *lows*
Of this could all reverse and go to sh!t, but I’l sleep well tonight.
Its not just about a down day, but whether or not markets will even open for you to sell. Money’s no good if you can’t access it.
A repeat of Black Monday 1929. So I said last night.
Thank God that we didn’t vote for a President who coughed. We really would be in the shitter.
All this emergency policy, without an assessment as to what we are truly dealing with is freaking people out, and in turn, driving the market down. USD is last resort. At this rate, will we see bank runs?
Largest daily percentage losses
1 1987-10-19 1,738.74 -508.00 -22.61
2 2020-03-16 20,188.52 -2,997.10 -12.93
3 1929-10-28 260.64 -38.33 -12.82
4 1929-10-29 230.07 -30.57 -11.73
5 2020-03-12 21,200.62 -2,352.60 -9.99
Congrats 2020! You’ve tied 1929 with 2 daily percentage records and well before the traditional October crash season.
2020, I think 2020 you can do better!
When I read through various comment sections I’m stunned by the number of people who haven’t grasped the danger.
“Buy the dip. No big deal”. They have no idea of what they are dealing with.
Its been hammerred in. Just liek,
“Go to college and don’t think about the cost or the degree. You’ll have a good job wating for you.”
or
“Housing never crashes”
“CPI” is a reliable metric of inflation
There’s rumor that small fast groups are ambushing solo folks coming out of Costco and other places with necessities. I think we need to shop in groups or pay for protection.
….or just stay strapped and not be a little bitch?
Some communist countries, like NJ do not allow such things.
Shopping in groups is against the law – social distancing laws.
10 feet away – safe
9′ 11″ away – dead
Goldman Sach via Zerohedge:
*50% of Americans will contract the virus (150m people)
*Global GDP growth rate will be the lowest in 30 years at around 2%.
*S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.
*Stock markets should fully recover in the 2nd half of the year.
*There is NO systemic risk. No one is even talking about that.
https://www.zerohedge.com/markets/half-america-will-get-sick-here-what-goldman-told-1500-clients-its-sunday-conference-call
How can all this be true at the same time?
It probably isn’t. Only Trump is more dishonest than Goldman. Maybe it’s the other way around. Never trust Goldman.
That info was scheduled for release on April 1. Back office screw up.
Let’s vote on that
1 50% of Americans will contract the virus (150m people)
2 Global GDP growth rate will be the lowest in 30 years at around 2%.
3 S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.
4 Stock markets should fully recover in the 2nd half of the year.
5 There is NO systemic risk. No one is even talking about that.
1 True
2 True, except – 10%
3 True – but if if S&P is – 20% how TF can global gdp be 2% Your point exactly
4 NFW
5 There is plenty O’ systemic risk
Systemic risk is pretty much the point!
Many companies have value only because one piece of paper has value only because another piece of paper has value. When cash flow stops you’re fucked. There is a lack of intrinsic value in our financialized economy.
I guess I’ll just take my 100% cash into tomorrow and fly by the seat of the pants. We’re deep in the pandemonium of the middle of a bear market, and this one is unique.
I don’t have a plan except for targets of opportunity.
Futures showing us up 5%! Maybe Fly’s liquidation was THE BOTTOM?
There is a bottom? Then it’s not completely hopeless?
Major bear market rally tomorrow, then they ban shorting and we will be 15% higher within a week. That’s the short covering rally to sell into.
That makes a lot of sense. There’s been huge point moves but not many “hanging curveballs”. Good stuff Benny.
Maybe it happens, maybe not, but I’ll look for it.
The biggest, easiest hanging curveball was the brief surge after the initial fed rate cut. It was a no-brainer to sell that fucker.
Time for bed. I love bear markets but they require a lot of sleep.
The first thing Krazy Donald needs to do is get on the phone to Russia and the Saudis and get them to sort out their oil horseshit. Threaten them with sanctions but that shit needs to get off the table.
One thing I don’t get. Rock solid preferreds are getting hammered. You can get 6-7% on utilities easy even if they don’t reset for a few years.
Which preferreds you looking at? My preferred ETFs (PFF, PFXF, and FPE) have gotten absolutely demolished as if they are junk bonds.
That’s what I mean. I’m in Canada and Fortis Preferred is yielding 6.7%.
Never trusted GS, but for once here they put an excellent report regarding COVID epidemic, better than any crap you have been listening from Fauci, Gupta OZ et al. From Zerohedge. Maybe they have better doctors working for them.
I may add the virus is already here, and on the way out it is not coming on a slow boat.
Mortality overall maybe a fraction of one!
50% of Americans will contract the virus (150m people) as it’s very communicable. This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.
70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be effected.
Peak-virus is expected over the next eight weeks, declining thereafter.
The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather. The coming summer in the northern hemisphere should help. This is to say that the virus is likely seasonal.
Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.
Mortality rate on average of up to 2%, heavily weight towards the elderly and immunocompromised; meaning up to 3m people (150m*.02). In the US about 3m/yr die mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3m new deaths from the virus, it means elderly people dying sooner due to respiratory issues. This may however stress the healthcare system.
There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop a natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow the rate of transmission giving the healthcare system more time to deal with the case load.
China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.
Global GDP growth rate will be the lowest in 30 years at around 2%.
S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.
There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.
In the past week there has been a conflating of the impact of the virus with the developing oil price war between KSA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.
Technically the market generally has been looking for a reason to reset after the longest bull market in history.
There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like ?9/11 than it does like 2008.
Lots of unknowns though.
Is a vaccine even possible or does CV19 mutate too fast?
Will summer slow it down? The Aussies are getting hit with it too.
If the economy stops for 8 weeks how will the Government support businesses that have no income but lots of expenses?
If someone found a way to successfully treat people who have severe cases, the whole thing would blow over. There would be no reason to panic.
A vaccine is likely to be useless. There is already more than one mutation. The vaccine would make some people feel like they can do something about the problem but it would not help.
That looks familiar, but for once i had the shorter, more readable version!
https://ibankcoin.com/flyblog/2020/03/16/unprecedented-blow-markets-crashe-3000/#comment-567845
THE DEMISE OF THE FINANCIAL SYSTEM IS IMMINENT
March 16, 2020
by Egon von Greyerz
“Next five years is not about winning but surviving.” This is the headline of an article I wrote in early August 2019. At that point I was primarily thinking of economic survival. But now the world is facing multiple threats and multiple failures. As I have already stated, the Coronavirus is not the cause of global market crashes but the catalyst.
But even if I have been totally certain that the world will see an economic collapse greater than any crisis for 100s of years, this is the worst catalyst that anyone could have expected. Yes, a global virus was always one of the potential risks but of all triggers, this one was certainly the most unwelcome and horrible.
CORONAVIRUS IS FAR MORE SERIOUS THAN THE WORLD REALISES
Before I talk about markets and gold further on in this article, I will mention some of the horrific effects that are now hitting the world due to Coronavirus. Just to summarise that my market views haven’t changed. Stocks will go down by at least 90% from here and gold will surge to levels that few can imagine.
No one knows the extent of people affected by the CV. China has never given us the real figures. And the rest of the world hasn’t got a clue where they stand. Every country thinks they are in control of the situation until they panic. Outside of Asia, poor Italy got it first and there we have seen an exponential growth of the number of people affected. And still, in Italy like in most other countries, they haven’t got a clue how many people have been infected.
Same in the UK, US, Sweden, Switzerland, Germany and most other nations. No country has the capacity to test a fraction of the population. You hear from most countries that when people have the symptoms, they are just told to stay home. So the real numbers are certainly 10x greater than reported or much higher. Somebody forecast that 70% of the world will be infected and that doesn’t sound improbable.
DOCTORS AND HOSPITALS HAVE NO CHANCE TO COPE
And as Italy discovered, there is not a fraction of ventilators available that are required to treat the seriously ill. There is on average only 12 critical hospital beds available per 100,000 in the EU. The EU has 500 million people. If the estimate of 70% becoming infected will be correct, that would be 350 million will get CV. Say that 10% need a critical hospital bed. That is 35 million people who would need to share 60,000 critical beds available. I am sure that the US figures for critical beds available are no better but probably much worse. No wonder Italy’s health system has no chance to cope with the situation as we have seen from many reports and nor has any other country.
EUROPE IS SHUTTING DOWN
Any government and health authority just needs to look at Italy to understand how quickly Coronavirus spreads. But every government, including the US and UK, think that they are different and are therefore totally lethargic and irresponsible in their actions to fight the disease. In the winter, I spend time in the Swiss Alps. On Friday the 13th, the Swiss government decided to close all ski resorts and all schools. Many European countries have closed their borders like Poland, Czech Republic, Denmark, Slovakia and Malta.
Italy is totally paralysed with virtually everything closed. Shops, except for food and pharmacies, major part of industry, hotels, restaurants, schools etc. are all closed. I have heard from Italian friends that they are just shutting their businesses since there are no customers. How tragic.
Spain is starting to close a major part of the country including the whole tourist industry. Most European countries are likely to follow although they are too slow to react swiftly. And so is the US who still hasn’t understood how serious the situation is.
If we just take Italy as an example since Corona is more advanced there than in any other country, it is a total disaster for this great nation. Italy has wonderful culture, history, heritage, food and people. But the country was already on its knees before this crisis. The economy is broken and so is the financial system. Much of this is due to the EU. I have difficulties seeing Italy coming out of this intact. But sadly the same thing will happen to Greece, Spain, France, Germany, the US, the UK and most other nations.
SMALL BUSINESSES DON’T EVEN HAVE CASH FOR 2 WEEKS
For a world economy that is totally dependent on credit to the extent of $265 trillion, what is happening is a total disaster. Small business will not have cash to survive for even a couple of weeks. Same with ordinary people. Virtually nobody has any savings, only debt. Many are being laid off already. The airline industry was extremely weak before the crisis. Norwegian Airlines has already made 50% of staff redundant. The tourist industry with its thin margins is collapsing. The same is happening in a great number of industries.
The banking industry will not survive the next phase but will initially be the beneficiaries of massive global money printing.
MARKETS
What is now happening economically in the world was totally predictable even though the catalyst was not the most obvious one. But what is not obvious for 99.5% of investors is what will happen next. And for most people, it is of course impossible to understand a market that can go down 2,000 points in one day and up 2,000 the next, like the Dow. This is obviously totally illogical and irrational behaviour. With High Frequency Trading and irrational investors creating a lot of this volatility how can we expect markets to behave in a logical manner. And more importantly, with dip buying investors having been supported by central banks for decades, it has been impossible to lose money.
But those days are now over even if after Friday the 13th 2,000 point Dow rally, the false optimism will return for a day or so. Sadly, anyone buying the dips in the current market is going to be burnt for years.
Let me summarise how I see markets in the short and long term.
STOCKS
Stocks globally have topped and crashed as I forecast in January and February. See my articles:
INFLATE AND DIE – STOCK COLLAPSE AND GOLD SURGE IMMINENT Jan 30
THE CRISIS WILL SINK STOCKS AND PROPEL GOLD Feb 13
We are now facing a secular bear market which will last for at least 5-7 years. The economy will be in a recession and depression for much longer than that.
There will of course be volatility on the way down with major pullbacks. But there is absolutely no question that all stock markets will decline by 90% or more in coming years. There will of course be violent corrections up, like we saw last Friday, often assisted by the Plunge Protection Team in the US and similar in other countries.
GOLD
Often when a crisis starts, the public focuses on the wrong area. Thus, shops both in Europe and the US have run out of toilet paper. Yes, toilet paper is useful in the short term, but history has taught us that in the medium term, as hyperinflation ravages, gold will be much more important to own. For the very few Venezuelans who understood this 10-20 years ago, it saved their lives.
Let me categorically state that there is no shortage of gold, YET.
Some gold dealers are reporting that they are running out of stock. There was a recent article on Zerohedge on this subject by a Singapore dealer. Precious metals dealers who mainly deal in retail quantities are probably running out gold and silver coins.
But as we are based in Switzerland where 70% of all the gold bars in the world are made, we can state that there is currently no shortage of physical gold at the wholesale level. There is ample supply of gold bars currently from the Swiss refiners. But there is high demand for smaller retail bars.
That is the good news. The bad news is that this situation is not going to last long. As we know, the gold price is set in the paper market currently. And when global markets panic, many speculators in paper gold sell their positions for liquidity reasons. This gives the manipulators, with the BIS leading the exercise, a chance to push gold down $100 on a Friday afternoon in Europe over a 3 hour period like they did on Feb 13th. The BIS and their lackeys, the bullion banks, clearly wanted the opportunity to pick up gold at bargain prices before the real rally starts.
STOP PRESS
Due to Coronavirus, the Swiss refiners are now cutting down on production as they must reduce the work shifts. At some point it is possible that production must shut down completely. At this stage decisions are taken from day to day. This is likely to lead to shortages of both gold and silver in the short to medium term.
GOLD IS AT THE VERY BEGINNING OF A LONG TERM BULL MARKET
Let’s be very clear. Gold is at the very beginning of an extremely strong long term uptrend. Current volatility is just temporary due to global conditions. This will soon change. The state of the world economy and the extremely precarious financial system guarantees that.
Coronavirus is the catalyst and not the cause of the coming economic and financial collapse. The trigger could have been any event such as a credit default or a bank in trouble. But unfortunately Murphy’s law prevailed and anything that could go wrong did and also at the worst possible time.
I have for years warned about the risks in the world economy and most recently that a market collapse was imminent as I mention above. This collapse has now started. I have also stated that gold will surge and this is still to come. There is absolutely no doubt in my mind about this.
The current correction in gold could last a bit longer and at worst go down to $1,450 where the price was in November and December 2019. But that is not my preferred scenario. At some point soon, I expect gold to turn up strongly on its way to new highs, also in US dollars. In all other currencies gold has already surpassed the 2011-12 highs.
CENTRAL BANKS ARE GOLD’S BEST FRIEND
I have for many years stated that the Central banks are gold’s best friend. Sure, most CBs prefer to hold gold down since a high price reflects their mismanagement of the economy. But unlimited money printing, especially since 2006, is the best support gold can ever get. Incessant printing of worthless currencies has zero positive effect on the economy but a massive effect on gold since it debases the value of paper money. Due to suppression, the price of gold is not reflecting the total effect of this, but will very soon as central banks start the next phase of accelerated money printing.
Back in late August 2019 I stated the central banks were starting actions that were similar to August 1971 when Nixon closed the gold window. In August 1971, China was the only country to realise the effects of Nixon’s actions:
“These unpopular measures reflect the seriousness of the US economic crisis and the decay and decline of the entire capitalist system.”
The above quote is from the People’s Daily in China in Aug 1971.
CHINA HAS 20,000 TONNES OF GOLD AND THE US VERY LITTLE?
Since then the dollar and most currencies have lost 98% against gold and global debt has exploded. The Chinese saw it clearly then and that’s way the Chinese government has probably accumulated gold of at least 20,000 tonnes whilst the US probably has very little left of their official 8,000 tonnes. How right the Chinese were already 50 years ago. And the world is likely to find out who really holds the gold and the power in the near term future.
The Central Banks around the world started panicking already in the early Autumn of 2019 with Repos and QE in the $100s of billions. Major parts of the world are today in total lockdown due to Coronavirus. No one understands or can estimate the effects of this. But what we can say with certainty is that a world which was already very fragile economically and financially before the Virus, will suffer immeasurable financial and human consequences due to the CV.
$1.5 QUADRILLION OF DERIVATIVES ARE NOW AT RISK
With economic activity virtually shut down in many countries and more certainly to follow, like the UK and US, the amount of money printing coming will be endless and of unimaginable quantities. It will start in the $ trillions, but as the banking system comes under pressure, it will grow to $10s of trillions. When one day Deutsche Bank, with $50 trillion in derivatives, comes under real pressure, which is not far away, the Bundesbank and ECB will have to print in the $100s of trillions. Remember that counterparties will fail simultaneously and JP Morgan for example also has around $50 trillion in derivatives. And soon at least $1.5 quadrillion is at risk when all counter parties fail.
The collapse of the banking system might not be in 2020 but once it unravels, Central Banks have no chance of stopping it but they will still use the only tool they know which is unlimited money printing. As I have said many times, YOU CANNOT SOLVE A PROBLEM WITH THE SAME MEANS THAT CREATED IT IN THE FIRST PLACE. Thus the money printing will fail, but before that many clueless investors will buy stocks again before the next big fall.
THE BOND MARKET WILL NOT SURVIVE
I must finish this newsletter now since it must be published. The bond market is the biggest danger globally combined with the derivatives. The artificial manipulation of interest rates might last for some time yet. It could go on for a year but the bond market might also collapse tomorrow. There is so much junk and so much bad debt in the system that it would be surprising if Central banks could maintain this charade for much longer.
Thus the bond market will default and collapse at some point not far away. The question is only when. What is certain is that investors will soon start bailing out. And as Central Banks accelerate money printing, they will be the only buyer of their own junk debt. The end of the financial system as we know it today is guaranteed. Its demise is imminent.
THIS TOO SHALL PASS
But please remember that This Too Shall Pass. The world will have difficult times ahead for some time. It is obviously made worse due to many people, and especially the old, being isolated. Still we have phones, FaceTime, Skype, Zoom etc so it is still possible to keep in touch with our loved ones and friends. At some point in the next few months Coronavirus will hopefully weaken and we can then function better.
The financial implications will last a lot longer and the world will have to get used to a much lower level of economic activity. But as I have stated many times, there are so many wonderful things in life that are free – like family friends, nature, books, music, television etc. Hard times bring people closer together for as long as we have a roof over our head and enough food to eat.
PS Italy just reported a 20% increase in CV cases in one day. Italy is sadly the model for the world. I implore everyone to be extremely careful and self isolate themselves. Doctors and hospitals will not have the capacity or the tools to help us all.
Matterhorn Asset Management (MAM) / GoldSwitzerland – Procedures
MAM has always had a contingency plan for emergencies of the nature that the world is experiencing currently.
All MAM staff is now self isolating. The company is structured in such a way that we can operate with 100% efficiency without sitting together.
During this period we will not receive visitors in the office but are happy to have video conferences with clients or potential clients.
The vaults are operating normally but have also taken the precaution of separating staff as well as self isolation whenever possible.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45
My SOXL position is down and I reduced ti. However, what is most egregious is that it was down, even while the underlying index was up! (SOXD was also down).
This means that I wasn’t wrong, but worse: I was stupid, and bought somethign overpriced to start with baked-in losses. The closign price was $79: the NAV was $68.
A well-deserved loss and lesson learned.