Our outlook, supplies, and finances.
Likeable as he is, Dr. Drew has a huge blind spot. He doesn’t understand the exponential function. They all turn up like hockey sticks. Spread is slow at first… then a little faster … then BAM!
Like Dr. Drew, most of us don’t get it. I like to quote my late physics Professor Dr. Al Bartlett who said the biggest shortcoming of the human race is the failure to understand the exponential function.
Our best hope – and this remains possible – is that the virus is seasonal, fading as the weather warms. This will buy time in the North to prepare for the Fall. Either way, winter is coming.
I’m not suggesting this is the black death. The virus itself may not be that bad individually, but the spread is exponential, thus so will be the disruptions. Each person infected is passing it to four others.
That means many of us are going to get it, all at once. Sure, most will survive the experience, and it might feel just like the flu, but here are the serious implications hidden in that-
- Overwhelming hospital systems. We just don’t have enough beds, respirators, and personal protective equipment. Unless you get the virus early (like, today), you’re going to want to and probably have to ride this out at home. Hospitals could resemble a dystopian zombie flick.
- Supply chain disruptions. The global just-in-time delivery systems are a logistical miracle. Globalization, such a boon, right? Plastic shit is shipped in all day on container ships from China, while little green pieces of paper (or mere digits on a screen) are exported out. It’s great, except if it breaks. There is no back-up plan. Community resilience is gone in America.
What if you had to rely on locally sourced products? What might you find on the shelves? You don’t have to ponder that long without getting uneasy.
- Collapse of the everything-bubble. The financial system is an interconnected house of cards built 350 stories high on toxic debt. As we wrote on New Year’s Day, two years ago (This is 40)-
It’s simple. Too many promises have been made that cannot all be financed. There is $300 trillion in paper wealth in the world, in part because of the illusion of it’s worth at today’s prices. Two thirds of it is debt. Our system pushes credit expansion – more borrowing – regardless of project value. We never met a loan we didn’t like. This debt is carried as assets on balance sheets of lenders and noteholders, whose equity (along with the same debt) is stuffed into 401ks, pensions, ETFs, and mutual funds. You can follow it all back to some schlub named Chip in Yonkers, NY with a 596-credit score and a seven-year 120% loan-to-value on a 2015 Chevy Silverado. And Chip just walked out of Best Buy with a 60-inch Samsung, no money down.
It’s a house of cards, and the wind is stirring.
Chip just caught Covid-19, and he’s going to miss the Chevy payments.
The response to this crisis by authorities will be more of the same: money printing. Sorry guys, but money printing won’t put products on the shelves or people back to work. It won’t send salespeople to trade shows, families to amusement parks, couples to restaurants, or put seniors on cruises.
Money printing without real production can only cause prices to rise. This time, it will be consumer prices, not asset prices. Those are coming down as we speak.
So, what has my family done to prepare? Well, we try to remain always prepared for black swan events. We stock a deep pantry, and keep a dehydrated food supply from the Ready Store boxed up on the shelves where it’s been collecting dust for almost 10 years (hopefully it’s still good!).
We’ve got a solar battery to charge the phones, a water filter, and lots of flashlights and batteries. Self-defense is certainly top of mind.
We keep much of our savings in gold and silver (not in the house – but use BullionVault.com). When paper money dies (as it always does), the world will have to turn back to a gold standard. We never should have left gold in the first place, but the forcing function will not be pretty.
What else have we done?
- We bought more food – beans, rice and canned chili.
- We stocked up on booze (we love a good, stiff drink around here).
- We bought some new board games to keep the kids busy if we quarantine.
- We socked away some extra water.
- We topped off our supplies of vitamins, sanitizers, and toilet paper.
- We’re filling the cars with gas when they hit ¾ of a tank.
This is like insurance. You don’t buy it because you expect to use it. With four kids, a wife, and a mother-in-law in tow, I’m not counting on FEMA to take care of us. Remember Hurricane Katrina?
You have to prepare to take care of yourselves. There was a time that people in America understood that. It wasn’t even a question. Of course you took care of yourselves.
Now we’re just pansies, expecting it all from government. It’s no one else’s responsibility to ensure your family is fat, safe, and happy. Don’t vote for governments that promise this fairytale.
They suck at it anyway, and destroy the economy, and community resilience in the process.
Starve the beast.
On February 14, I shorted the whole market, making three small bets that the apocalypse was coming. That was basically the top, a week before the wheels started coming off.
I did it in the options market buying VIX calls. This is known as the Volatility Index, or the market’s fear gauge. It spikes only when the shit really hits the fan. It’s the ultimate asymmetric bet, and unless you can actually call the apocalypse with precise timing, you will lose 100% of your money, every time.
Did I get lucky? For sure, but luck is the residue of design. It’s preparation meeting opportunity, and only if you’re clear-minded and convicted enough to act without the comfort of the herd.
I raise this because what’s really important in this Bizarro World is good information. Largely, we’re not getting that from government or the media. You need sources you can count on, read regularly, and develop trust in their ability to make sense of things — their “spidey senses” — so you can understand what’s really happening through all the noise.
We hope to be part of that for you, but we’re only publishing once per month, so you’ll need to look elsewhere, too. We list many of our preferred sources in the Ultimate Parent’s Guide (free download below).
No one has been more ahead of this than Chris Martenson at PeakProsperity.com. I’ve shared a few of his coronavirus pieces on Facebook to get the word out.
We watch his video updates nightly as a family, then do our best to answer questions from the kids.
I know Chris, and have followed him a long time. It was access to his information that led me to bust out a spreadsheet, model the disease progression, and short the market with impeccable timing.
As for what you should do with your money, my guidance is in the Ultimate Parent’s Guide – it’s solid for any climate – but if you want to speculate on the side, you can also buy some gold mining stocks (only with money you are prepared to lose). The bailouts from this mess are coming.
Bankruptcies will be fought with massive money printing. They might even bust out a “Money for Main Street” program. That will be the final leg of our 50-year experiment with paper money.
Inflation is coming.
For specific recommendations, do your own research, or use Stansberry or Casey Research.
As the crisis unfolds, you’ll be able to get some screaming deals, so keep powder dry in cash. (And if you don’t have any cash saved yet, don’t worry, you’ll get there. One foot in front of the other).
Our book launch
Unfortunately, the virus also delayed the launch of our Better Bedtime Stories™. I’ve got the sample copy of “Where does money come from?” (it looks great!), but our printer (in China) got shut down due to the quarantine. They started the factory again and we are in the production queue, but there is a non-zero risk that things will get shut down again. We’ll let you know how it progresses.
With all that’s happening in the world, the timing certainly supports our thesis.
The debt-based paper money system is breaking down, and we can do a whole lot better to prepare our children for the world that awaits them. Godspeed to your family!
Want more like this? Try We’re Headed Back to a Gold Standard (and what to do first).