The Fed's Sunday Surrender--Brace Yourself for WTF Monday Market
Dear Subscriber,
#1 I Apologize we have not given advice on the QQQ Put Option HEDGE We Advised on Jan 24--been a little cray cray. Our Game Plan remains the same--continue to hold CASH and XOP/SPY PUT options hedge AND OUR QQQ Hedge--do NOT cash them in yet. $10K-a-Month Income still in cash and the XOP hedge.
#2 All-Access Club Members: We moved our conference call with Jay Hatfield the portfolio manager of PFFA and AMZA to Tuesday. Look for the email we put out Friday. We have added 5 memberships to our All-Access Club--we just want to make sure we have enough bandwidth to answer all questions for our members--so far so good.
If you want to join us on the call and not an All-Access member, you can still join here. Make to sure you scroll down the All-Access offer.
Final Word-- as I mentioned a while ago, my forecast was IF the Fed went all-in on zero Fed Funds rates BEFORE the March 18 meeting, the markets would take that as an "oh fuck" moment--what do they know that the market does not know!
Well--look at the futures contract tonight after the Fed "Sunday Surrender" zero rate move at 2pm today--down limit. WTF do they know that we don't know?
Our Gamplan is the same, folks
IF We break and stay below SP 500 2850 we go to
Next strong support at 2600 and if we break 2600
We go to 2350 on panic capitulation melt-down--30%+ drawdown. 2350 is the Dec 2018 bottom that was pricing in a 2019 recession.
IF 2350 does NOT HOLD at the close tomorrow or this week
As always, the stock market carnage ends when stocks have moved from forced selling hands and weak hands to strong hands with the foresight and conviction to imagine the world in 2021 snapping back from pent-up demand.
The good news? IF we get below 200--our favorite Industrial Revolution 4.0 stocks will EXPLODE higher with the economic recovery! BUILD CASH--HOLD PUT OPTIONS and roll them out to September--and be ready to leg in 1/3, 1/3, 1/3 when we get a legit bottom.
A legitimate bottom will be an "I give up--get me the f%^k out--I can't take the pain any longer" capitulation with 75-80 VIX and our Industrial Revolution 4.0 stocks ready to SNAPBACK like a rocket ship.
PS--Our "6-Month Portfolio Protection Plan Membership" to Transformity Investor PRO is here to help family and friends to navigate this 3-6 month bear market. They need CASH to earn a lifetime of wealth when the US and global economy snap back.
My mission here is for Transformity Research to make a positive impact inform as many investors as possible this year about
WHY this 30%+ Bear Market for Stocks will be powerful but relatively short as its an event-driven bear market
HOW they can protect their retirement nest egg (raising cash and using XOP XLE SPY QQQ put options)
WHY there will be SOON another historic buying opportunity like late 2018 to earn 100-200%+ gains over just 6-12 months. With average stock market return since 1988 8%--there will be a once in a lifetime opportunity to earn 20-30 YEARS of stock market wealth in 24 months or less.
We know the leading 20%+ unstoppable secular growth sectors of the great Industrial Revolution 4.0 being led primarily by American based disruptors WILL BOUNCE BACK HARD because
"Value Investing is Dead" in a world where you discount future earnings and terminal value of companies growing just 2-4% at 1%!
IF YOU HAVE family and friends that have a lot at stake and at risk in this now undeniable global pandemic and the negative real-time second-order global economic effects that are rippling through the world economy, feel free to forward them our Code Red Updates and invite them to click here and join us for just $49 in the Transformity Research digital bunker.
Our Game Plan Remains Intact
Action to Take: HOLD your XOP QQQ and SPY PUT OPTIONS. We are in a bear market--when the biggest one-day short-covering rises like Friday. USE THOSE melt-ups to raise cash.
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PS--there was a Goldman Sachs corporate client call this afternoon--all hands on deck.
Here are my notes--our data supports much of their conclusions. Let's see if 2300 holds this week--that will be a real line in the sand and will absolutely make this massive meltdown a very rare 7 standard deviation market event going back 120 years.
Here is the Goldman Sachs client call where 1,500 companies dialed in. The key economic takeaways were:
* 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 affected.
* 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 mortality highly weighted towards the elderly.
* Mortality rate on average of up to 2%, heavily weighted 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 primarily means elderly people dying sooner due to respiratory issues. This will 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 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 and psychologically the market generally has been looking for a reason to reset after the longest bull market in history.
* There is NO economic systemic risk like 2008. 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 general, this feels more like and should be modeled like a 9/11 event than it does like the 2008 Great Recession financial system meltdown.
Stay strong, watch your email, and be ready to take advantage of this once-in-a-lifetime opportunity. EVERY one of these disasters since the end of WWII have ultimately been buying opportunities. BUT to take advantage, you need CASH.
