The Market Priced in $2 Trillion in Bailouts Bills by Monday and Congress FAILED
Dear Subscriber,
Day 88 CoronaVirus Pandemic
Advice 3/22/20
#1 Continue to hold your cash close and hold your remaining XOP/SPY/QQQ PUT options
#2 Keep your $10K-a-Month Income Portfolio in cash and the XOP hedge--our Feb 24 Recession Call for Q2/Q3 is now the standard call (where were these economists in late February????)
#3 READ #1 Again
#4 Based on the futures, the market opens down 7% limit down tommorow morning as the Congress failed to get a bi-partisan bailout bill voted. Here is the latest from Washington Post update--it does not require a subscription.
As I have shared for the last 8 weeks, the key S&P 500 support levels are 2305,1950,1660 ish
Is The ANY Good News Toby?
As I shared last week, the good news is we WILL get a generational opportunity to turn $100k or $1 million into $300K-$3 million of new wealth IF YOU PLAY THIS RIGHT.
Rule #1 You Have to Have CASH or liquidity to profit from this generational wealth opportunity
Rule #2 We will buy the VERY BEST 20+% 3-5 Year CAGR Growing Sectors with VERY BEST 15-20%+ CAGR IP owning companies and some incredible new disruptive opportunities, too.
Rule #3 We will enhance those gains with long term stock options (to lower cash risk and enhance leverage)
Rule #4 We HAVE to assume a full-blown Fiscal/Monetary/Corp TARP/TALF like bailout will EVENTUALLY be passed and the Federal Government and Federal Reserve will become the "lender of last resort" to keep the $21 trillion US Economy afloat while it declines 20%+ or $4 trillion+ in GDP in April/May/June Q2.
BUT do not kid yourself here. UNTIL WE HAVE
A TARP/TALF plan is announced and stood up
Get positive preliminary news from Moderna (MRNA) on its vaccine (a stock we will buy on a pullback NOW btw) or Regeneron for a therapeutic
Get the BRUTAL increase numbers in Covid-19 cases and infection data via testing
The Investment Grade (IG) corporate/mortgage/leveraged loan markets stay open and stay borrowers stay solvent with Fed buying
I continue to advise NOT stepping in front of this market meltdown--it's just not safe and not wise to start legging into our favorite transformational sectors and leaders.
There are TOO MANY unknowns. There is no earnings guidance to understand what price multiple we are paying for our favorite companies. LOOK at how much the stocks we sold Feb 24 are down from where we went to Code Red cash...and look how much our hedges are UP!!
Again, the core thesis of our Transformity Investing Principle (and ChangeWave Investing before that) is as simple as it is powerful: that "true S-curve transformational change is the greatest force of wealth creation and wealth destruction force in the world."
Typically investors think of this principle with regards to a disruptive new technology (iPhone) or consumer product category (say athleisure from Lulu Lemon or energy drinks from Monster Beverage) or major disruptive regulatory, fiscal or monetary policy transformations.
But this transformational event we are living in now is actually now four globally transformational events that have morphed into a negative economic feedback loop and vicious cycle of falling economic dominos:
We have
1) a new novel world coronavirus pandemic that is 10X more infectious than the common cold (rhinovirus) with no human immunity and no hope of a vaccine till early 2021
2) A geopolitical oil price war between the #2 energy export country and the #3 energy export country against the #1 American energy production engine that has added 5+ million barrels per day in production since 2010.
There were "conversations" with the Saudi's and Russians over the weekend--but nothing substantive.
3) A stillborn "Greenspan/Fed/Congressional TARP/TALF Put" whereby America's Federal Reserve+ Congress protects risk asset values with the quantitative easing playbook (QE) it learned in 2008 Financial Crisis and the Great Recession.
4) A coming debt solvency event for over-leveraged companies in travel/transport/hospitality/food services and manufacturing supply chain participants.
Like I shared last week, last Sunday night's emergency Fed action was NOT ABOUT the stock market--call it the Fed's Bank Put. It was 100% about the liquidity of the US banking system to not add a fifth global solvency shock. All my sources on Wall Street confirmed this morning, the bid/ask liquidity in US bonds and corporate bonds were, just like in September 2008, was not enough to allow banks to maintain their asset liquidity standards and leverage regulations.
75 million Americans are left to worry about lost wages, about inadequate supplies of medicine and protective gear, about leaving the ill and elderly even more isolated and vulnerable, and about jobs, institutions, relatives, and neighbors that might vanish and never return.
Get This In Your American Economic Threat Calculus
You probably are not aware of it (unless you have read one of my books) but about 44% of ALL American households today live in working poverty defined as "above official poverty line but below median HH income of $63,000." The term for this working poverty household is "ALICE Households: Asset Light, Income Constrained, Employed."
When you add the 14% of American households living IN poverty to the 42% in working poverty, and wage-earning retired Americans on fixed incomes below $30,000 per year, nearly 2/3rds of American households--who cannot pay a $400 medical bill in cash--are VERY AT RISK of significant economic disruption. .
Where Do We Go Now?
Like I said--you tell me when 1) the vaccine or therapeutic news is positive 2) the TARP/TALF plan is approved and stood up 3) Millions of Americans are actually tested so we actually KNOW where the infected are and how many 4) How long the major American urban regions are locked down (remember 16 regions in America produce 78% of our ENTIRE GDP).
Our New Target: 50% retracement of the 2010-2020 gain to 1650 unless
1) $2 trillion Fed liquidity lines this week
2) Congress passes a $2 trillion bailout
3) Mortgage and Rent Forbearance Rules are enacted for April
4) $2000-$3000 check go out by April 15
We have a very real risk of a real economic depression scenario. We are in a health crisis that has created a massive economic domino/ripple effect. We were 40 days late in gaining the literal cognition of this fact and scope of the destruction. Our leadership has failed to have to imagination needed to see the scope and breadth of this perfect economic storm.
Here is my take on cable news recently--https://m.youtube.com/watch?v=hBaUUNYWRuI Fast forward to my hit--its a message we all need to hear and absorb.
Final advice: elbow bump your loved ones. USE ANY 1000-2000 point short-covering rally to LOWER your equity exposure--that cash will be extremely valuable soon.
And feel free to share this email with your investor friends and family. The mission here is for Transformity Research to make a positive impact to inform as many investors as possible in the time of fear.
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.
WHY this 50%+ 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 another historic buying opportunity like late 2018 and March 2009 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.
Final Word: 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 has ultimately been buying opportunities. BUT to take advantage, you need CASH.
The panic is NOT OVER yet--hard stop. It has already exceeded every pandemic event because this one is different.
