1/ Many of you asked me to forecast where we end up next 18 months. I wanted to write a full blog post on this, but time doesn't allow, things moving too quickly. So I'll do it here, which sucks bc it's narrowband.
Depression.
Depression.
2/ Long view: for 50 years we've destroyed capital by investing in crap that doesn't meet cost of capital. Geek point, but basically money been too cheap relative to our investments. This has grown an increasing cancerous mass of insolvency worldwide.
3/ As example, I've been saying for years that today's disruption would happen. I knew 2000 and 2008 would, too. I've nothing to sell, but it's true, financial largesse is not hard to spot.
4/ So now: firestorm of demand destruction. China will be devastating. That's probably enough right there. But if not, now Europe. Now US (restaurants, retail, wholesale, etc.). This is ruthless. What's coming: layoffs, defaults, rent delays, cash shortages...
5/ From there: unemployment goes up, house prices drop, wealth effect ends. People feel poorer. They stop buying largesse, only buy necessities. Two months indoors is bad, but survivable. Real harm is done next 12 months: the cash flow hit makes companies default.
6/ And this is why we're heading towards depression: we're irresilient. Why? In financial domain, bc debt. Planet is saddled w debt. (Interesting, btw, how this impacts irresilience in other 3 quadrants, like politics.)
7/ There's no easy rescue now. Fed just lowered to zero few hours ago. But it's "pushing on a string." Which means, no place for the debt to go.
8/ If you've followed me for a few years, and followed my thinking, you not only were prepared for this crash, but maybe even profited from it. That's why seeing what's next is important. So what's next?
9/ To sum it up: we're heading for a one customer economy in the next 2 years. Government.
UBI w/in 12 months. (Not as political pref, but bc it's necessity.)
UBI w/in 12 months. (Not as political pref, but bc it's necessity.)
10/ Govt will be only source of demand. Restaurants shutter. SMBs thrashed. Startups destroyed.
No one is being pessimistic enough on this, all think biz as usual. Little flu, then back to growth. Fed can boost. Lending can help.
No one is being pessimistic enough on this, all think biz as usual. Little flu, then back to growth. Fed can boost. Lending can help.
11/ Wrong. I don't think so. (TBH, I hope I'm wrong, better for me, & all of us.)
This is a historic unwind. Prices will fall across the board for everything, a widespread deflation. Not only deflation bc demographics (aging retirees), but also economic crash bc corona & debt.
This is a historic unwind. Prices will fall across the board for everything, a widespread deflation. Not only deflation bc demographics (aging retirees), but also economic crash bc corona & debt.
12/ So what I've said for years: cash is king; no debt; gold.
And at some point, stocks. Bc they will continue to crash, hard, and volatility will be brutal. But when things can't get any worse, that's when you buy. Govt will debase our currency into oblivion.
And at some point, stocks. Bc they will continue to crash, hard, and volatility will be brutal. But when things can't get any worse, that's when you buy. Govt will debase our currency into oblivion.
13/ And then stocks & gold will do well.
14/ Now, this is important. Look at my tweet #10, where I say historic unwind. True, but partial: Fed will unload its gun on this one. Expect a Fed balance sheet from $4 trillion to $20+ trillion. Why? Has to reflate the dollar as world's reserve currency, which means printing.
15/ This won't lead to hyperinflation in real goods in intermediate term, as monetary channel is still broken (see past 10 years). (It might very well make fin'l assets soar again circa 2021+. So think S&P 500 5,000, Gold $5,000, real estate $500/ft. h/t @LukeGromen)
16/ But it does mean that we may have another up-cycle in The Great Release of US hegemony. US is ugly, but still prettiest girl at dance.
And Russia & China still angling to displace USD as reserve.
And Russia & China still angling to displace USD as reserve.
I have no idea why it posted same linked tweet in this one. Hmmm.
To wit:
And this. Point I’ve been trying to make for 3 months: forget US, forget EU.
JUST ON CHINA, WE’RE SCREWED.
*Now* add in EU & US
JUST ON CHINA, WE’RE SCREWED.
*Now* add in EU & US
17/ Few other points. Volatility is massive right now in mkts, these aren’t tradable for most ppl. Expect huge swings, lots of pain to come w stocks down, gold down, BTC down etc. I expect serious ugliness yet for a few months yet. Again, cash is king.
18/ I hope I’m wrong on depression call. Maybe we recover faster, maybe businesses are resilient, maybe govt stimulus works well & fast. Hard to see, but I’m hopeful & hate to rain cloud. But I’m loyal to telling you truth of what I see, & just don’t think others seeing clearly.
19/ As I’ve said for awhile, politically this changes everything. Bernie’s agenda just won, Bernie or not. Most progressive agenda in a century on the way. No atheists in foxholes, ppl will demand govt unload the cannons on this thing.
Everyone’s a socialist now.
Everyone’s a socialist now.
20/ And, I believe this will be our finest hour in years. I believe in America when we suffer. It calls us back to our values, reminds us who we are, & unleashes our talent & resourcefulness.
