Van Trump Morning Summary
Companies around the world are drawing down credit lines and laying off workers at a record pace. Google searches for "unemployment" have skyrocketed as the coronavirus closes hundreds and thousands of businesses. Venture Capital firms are sending out notes to founders that funds are drying up rapidly, meaning thousands and thousands of start-ups will soon find themselves in harm's way. I'm targeting the 1,700 to 2,100 level in the S&P 500 as perhaps some type of bottoming bowl. I like the number 2020 for some reason... I've heard some Goldman folks talking major support around 2000 with others talking more like 1500 to 1700.
Personally, we've been sitting with about 30% invested for the past several weeks and had a short-hedge working in the S&P 500 futures market, so despite the loses I feel somewhat like a huge winner. There is massive carnage in the market as ALL asset classes have melted down. I tried to take a small position in silver on yesterday's massive fallout but my orders were rejected at three clearing firms because margins had been raised so significantly on my other positions. The crazy part is all are winners expect my long spring wheat position. I'm having to make banking adjustments this morning and having to use traditional "wires" over ACH transfers to make the move more timely. Moral of the story, I should have done a much better job of having my troops and dry powder positioned properly and been prepared for the massive spikes in margin. Make certain you take some time today and get your ducks in a row. These waters are moving way faster than I had anticipated and I don't see them slowing down anytime soon.
Cities across the U.S. and the world are shutting down as we speak. The most optimistic "peak" for corona infections seems to be estimated at 30 to 45 days from now while others are forecasting the window of "peak" infection may not happen for another 3-months from now. Keep in mind, I'm talking about just peak infection, not peak fallout, and not peak death. Make sure you are planning and adjusting accordingly. This is NOT a period of time where you want to make major miscalculations.
We are hearing talks that some travel bans might start being more heavily debated. I'm telling my family and friends it's is past the time to be reeling the kids back in and reducing all unnecessary travel and exposure. At the same time, those of us north of 50 years of age have to be paying attention to our movement and daily activity. Remember, our health and wellbeing is probably the most important financial asset we can bring to our family at this moment. Be mindful and take the necessary steps to keep yourself out of a quarantine situation and or a major healthcare burden. Yes, I understand many think this is overblown and a massive overreaction, but as I mentioned earlier, in this environment with the waters moving so swiftly you can't afford to be wrong or take a misstep. I like to error on the side of extreme caution in this landscape... I suspect there will be plenty of opportunity for those simply left standing. Yesterday afternoon I was on a call with some fund managers who now suspect 70% to 75% of all the restaurant and bar businesses will be put out of business. In other words, you don't have to be a hero or an investment gunslinger in this environment, you just have to survive!
I should also note, I am hearing many pre-booked financing deals are starting to fall apart. Apollo Global and other firms are backing off a commitment to finance shale driller EP Energy Corp.’s exit from chapter 11. At the same time, I'm hearing other financing deals are starting to quickly fall apart. I suggest staying in close contact with your bank and financial institutions. We can afford no hidden surprises. This is when you want to open up and increase all lines of communication. Do NOT put your head in the sand and avoid the problems or the communication. Be extremely proactive.
As numerous analysts and economists have pointed out, there has never been a scenario in U.S. history where the entire economy has basically been shut down, meaning there is no history to help guide us on how this might play out. The early numbers aren't painting a pretty picture. The New York Fed's Empire State business conditions index yesterday reported a record thirty-four point plunge to -21.5, reflecting conditions from March 2-10. Not surprisingly, optimism about the six-month outlook fell sharply, with firms less optimistic than they have been since 2009.
President Trump yesterday announced new coronavirus guidelines during a press briefing. Officials recommended that for the next 15 days Americans avoid gatherings of more than 10 people; avoid discretionary travel; avoid eating in bars, restaurants, and food courts; and work or engage in schooling from home when possible. Unfortunately, the President also warned that the U.S. may be fighting the outbreak until July or even into August.
Economists trying to calculate the damage have said the expected severity and duration of a downturn will depend on several factors, including fiscal stimulus measures. As Jerome Powell said over the weekend, “The thing that fiscal policy—and, really, only fiscal policy—can do is reach out to affected industries and affected workers.” Currently, U.S. lawmakers are working on several options and expect to have at least one major stimulus package ready to roll out this week. Once we start seeing more specific details on this and various other programs, investors will at least have something to chew on as far as trying to gauge where the economic damage might be cushioned. In turn, this could hopefully help guide money back into markets and start to counter the massive fallout.
As with most everything in life, it's rarely about the "destination", but rather how we manage our own human psychology while along the "journey". I believe in miracles and I believe in America's ability to rise to the occasion. I am certain we will get past this. Stay positive, stay alert, and stay highly mindful...
Special Note: We received tons of great feedback yesterday from our first ever "Highly Volatile" podcast! Unfortunately, the great response crashed our site and our servers, so I wanted to give everyone another opportunity to listen to it as it's still extremely relevant and filled with great insight. All you have to do is click on your preferred platform below! We are now having it hosted by the big boys!
Click HERE for Spotify and HERE for Stitcher
In addition, since our FarmTank site was crashed and unavailable, if you would like to continue to receive future FarmTank podcasts, I need you to Click HERE and enter your name and e-mail. I will be sending ALL of our updated "Highly Volatile" podcasts direct to your inbox in real-time when the info comes out and is first available.
Thanks again for being patient and understanding with our tech struggles. I'm trying my best to keep up with all of these new platforms of communication. The kids are educating me more and more each day.
It saddens me to think we are going to need to do more to keep everyone updated while we are socially isolated but I guess it is now the world we live in. I assure you, my staff and I will be working tirelessly to help keep you, your family and your team up to speed with all the latest. I believe I have some of the best contacts in the industry and have been up morning, day and night talking to everyone trying to sort it all out for my own businesses and family. As always I will pass along all I know and am hearing. We have to be smart here and can not afford to make mistakes. Our families and all we have worked so hard for are going to be tested. Be safe, keep healthy and I will be relaying all I have to help you make the best decisions possible. Together, we can do this!