Another day and another rollercoaster in the US stock “markets”. The market has one job- determine fair value with each and every trade. Since the central banks have become the buyers and lenders of last resort the “markets”, which have not been really free for decades are far more manipulated in every way than free.

For anyone worried about a democratic challenger don’t worry. I believe that President Trump has been the perfect guy for the Fed and their handlers as he has led us way past anything Bernie Sanders had in store for us and the majority of people still think we are practicing capitalism. We haven’t practiced true capitalism since prior to 1920. What is happening now, however, is unprecedented in our country’s history.

The best analogy I can come up with is Nazi Germany and pre WW2 Italy where Fascism was the economic system of the day. It is like a public-private partnership where there are private owners but those “in charge” in either government or central banks call the shots. The “owners” can play along and get rich or be replaced.

As we speak the US Treasury and the Fed (A private corporation owned by 6 major banks) are executing a plan to conjure up “Unlimited Amounts” of dollars and buy assets. These assets include Stocks, US Treasuries, Muni Bonds, Corporate Bonds, ETFs, and probably anything else you can imagine.

It appears to me that at the end of the day the Fed (and Treasury) working in tandem will likely own the lions share of US businesses and will likely be calling all of the shots as they will control production, logistics, money supply, who gets support and who doesn’t.

Anyone who isn’t concerned by this should get some therapy. The government has virtually nationalized healthcare and the greatest healthcare system in the world has been reduced to a national disgrace as Healthcare CEOs become filthy rich while many regular people are bankrupted by skyrocketing costs not only for services but for insurance premiums also.

Infant mortality and the overall mortality rate of our country has been getting worse in the last few years also.

Colleges, Universities and the public school system have been taken over by the government. Our world-class education system has been destroyed and our rankings in the world continue to plummet in subjects that are important like Reading, Math and Science. But everyone knows how to put a condom on a banana. This information won’t help when we have to compete with other countries that teach marketable skills instead of creating compliant little subjects.

What I am trying to point out here is that when government gets involved things don’t go well.

In Venezuela they are blessed with some of the richest oilfields in the world. The government took the sector over and kicked out corporations that knew what they were doing. Political hacks were put in charge and in a matter of years the entire infrastructure was failing and their main source of income was halted. Shortly thereafter one of the worst humanitarian crises I have ever seen took place- and continues today.

By the way, as the oil revenue fell the Venezuelan government “printed” money to pretend they could pay their bills. Inflation turned to hyperinflation and the nation was impoverished in a matter of months.

To date, they have not recovered and there appears to be no end in sight to their misery there.

This should be a cautionary tale to all of us here. YOU CANNOT GET SOMETHING FOR NOTHING. EVER.

The central banks can conjure up all the cash they want, buy all they can get their hands on and, in their case, they got “something for nothing”.

The sad part is, however, the former owner has been stripped of his ownership and rights while those who can conjure up money from nowhere “bought” the asset with a click of a button. The previous owner is financially destroyed along with his investors and the new owners move forward.

Does anyone else think this is grossly unfair or am I, as usual, just looking at the negative side?

Anyone who thinks these are really markets should ask a few questions like:

  • How could “markets” stay elevated when 10 million people file for unemployment in 2 weeks?
  • How can auto manufacturers stay elevated when Sales are crashing across the globe and here in the USA “US Auto Sales Plunge To Lowest In A Decade, But The Worst Is Yet To Come In Q2?
  • How could, in a world in virtual lockdown, see oil prices rise even though at current production levels all storage may be full in a few weeks?
  • How could Boeing be rallying even though it is offering buyouts to its entire workforce and doesn’t expect a rebound in business for YEARS?
  • How does anyone expect things to just go back to normal after this episode? How many people do you know that will go to a crowded bar or restaurant after this? How long will it be before people will be comfortable enough to go to a sporting event- particularly indoors?
  • How many people will be taking cruises in the next couple of years, or flying unnecessarily for that matter?
  • How will retailers survive when they were struggling to start with, they have laid off, fired or furloughed most employees, don’t know when or if they will reopen, many have stopped paying rent, and they are faced with massive debts and unprecedented unemployment so the weak demand just may turn to no demand.

There are many other questions I could ask but we have economies across the globe in freefall, we are at historical levels of debt at every level of society, we are attempting to appear solvent by issuing trillions of dollars of new debt to prop up previously issued debt and continue unabated spending to bail out insolvent industries and families.

Again, does this sound like capitalism? This is some crazy mix of national socialism or fascism.

This is NOT the America I grew up in. Pretty soon you will all know this to be true. I don’t believe we will see in our lifetimes the economy that we had just a few weeks ago. There are many who may NEVER return to work. My guess is 10-15% of the jobs lost are lost permanently right now- if this ended today. We all know it is NOT ending today and may last another month or two.

The economic damage has been done. We were in a weakened financial state to start with and the virus just sped up our demise.

Conjuring up money is NOT the answer. At the end of the day, the “printers” print and buy- they own the assets and you and I own the debts. Talk about using other people’s money!

This exponential growth in “printing and buying” has led the world’s elite to purchase gold in record amounts in the past few years. They knew this was coming in one form or another. Today, it is nearly impossible to find physical gold or silver without paying a huge premium and having to wait weeks or months for delivery.

My opinion is that in a short period of time this illusion will be exposed and a reset of prices will take place that many will be stunned by. Judging by how fast events are unfolding I believe we are very near that time.

For anyone concerned about their current portfolio- particularly if you are being told “buy and hold” or “the market always goes up over time” consider giving me a call. This time IS different.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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