Weakening Wednesday – Another Insane White House Briefing, Another Market Drop

Trump wants to cut support to the World Health Organization.  

The WHO is part of the UN so this falls in-line with the general attempts by Putin Trump to destroy the United Nations, which is the only thing standing in the way of many Dictator's and Despot's plans around the World.  Our own self-proclaimed despot has always had it in for the UN but much more so since they laughed at his speach last year when he attempted to proclaim himself the best President in US history.

As ridiculous as dismantling the UN might seem, defunding the WHO in the middle of a pandemic is simply insane but not at all surprising since the WHO's job is to set standards and guidlines and that would include how to handle the coronavirus and Trump already knows he doesn't want to listen to that one.  Trump is also looking to blame the WHO for the Administration's failed response to containing the virus – he'll blame the Girl Scouts if he has to – anything but face the truth of his incompetence.  

Trump claims that he read the WHO report on Jan 15th that said they had not yet confirmed human to human transmission of the virus but he also claims he did not read Peter Navaro's (White House Trade Adviser) Jan 29th memo TO TRUMP which said:

“The lack of immune protection or an existing cure or vaccine would leave Americans defenseless in the case of a full-blown coronavirus outbreak on U.S. soil,” Mr. Navarro’s memo said. “This lack of protection elevates the risk of the coronavirus evolving into a full-blown pandemic, imperiling the lives of millions of Americans.”

Navarro warned the coronavirus crisis could cost the US trillions of dollars and put millions of Americans at risk of illness or death.  So, very, very clearly, Trump and his team KNEW the virus was coming and KNEW it was a huge threat way back in January but Team Trump kept on telling Americans through March 9th that there was nothing to worry about.  These are Trump's actual quotes over 45 days of willful inaction that has cost America 25,000 lives already:

• Jan 22nd – “We have it totally under control. … It’s going to be just fine”
• Jan 30th – "We think we have it very well under control. We have very little problem in this country at this moment — five. And those people are all recuperating successfully. But we’re working very closely with China and other countries, and we think it’s going to have a very good ending for it. So that I can assure you.” 
• Feb 24th – "The Coronavirus is very much under control in the USA. … Stock market starting to look very good to me."
• Feb 26th – “And again, when you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that's a pretty good job we've done."
• Feb 28th – “It’s going to disappear. One day, it’s like a miracle, it will disappear.”
• March 2nd – "We had a great meeting today with a lot of the great companies and they're going to have vaccines, I think relatively soon.”
• March 6th – “Anybody that needs a test, gets a test. They’re there. They have the tests. And the tests are beautiful.”
• March 9th – “So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on.”
• March 17th – "I've always known this is a real — this is a pandemic. I felt it was a pandemic long before it was called a pandemic."

As I predicted in last week's Live Trading Webinar (join us today at 1pm for another one), when the US had 400,000 confirmed cases, we are at 609,685 cases as of 7:25 this morning and I made my case for why we are on the cusp of a total disaster in last Wednesday's PSW Report, so I won't re-hash that but clearly DEFUNDING the WHO is not the way to turn things around.  How about giving them an extra $5Bn instead of giving it to Exxon?  Maybe that would be more helpful???

From an investment standpoint, the reason politics DO matter in this case is because we have a catastrophic situation and it can either get better or get worse and that very much depends on the competency of our "leaders" and, despite being laughed at by the Governors, Trump has proclaimed himself the absolute ruler of the United States (unless there is blame – then he had nothing to do with it).  

This is not a blame thing, this is a numbers thing.  600,000 infections is 1/500 Americans.  That means, if you go to a movie – someone there is infected.  If you send your kid back to school – someone there is infected.  If you work in and office building – someone there is infected.  You get the idea….

This is a deadly, contageous disese and we don't have a cure and we don't have a vaccine.  5% of the infected people in New York are dead already and not even 15% of those infected have recovered so 160,000 outcomes still to be decided are not the kind of odds you want to be participating in – especially since even those people who recover can suffer years or a lifetime of after-effects like lung, heart and kidney disease – all crushingly expensive additions to our already over-burdened Health Care System.

That's at 1/500.  There are 8M people in NY and 200,000 infected, that's 1/40.  That means you can't go to a restaurant without crossing paths with an infected person or really go outside your door without exposing yourself to an infected person.  If NY can progress to 1/40 – so can the rest of the country – especially large cities, where 60% of our population (200M people) are.  

THAT is why it is such a big deal to shelter in place – we have no other way to contain the disease and, when you get to 1/40 or even 1/250, you get other problems like SOMEONE at work is out sick or dead and that's disruptive and then we lose 1% of our health care workers and 1% of our plumbers and electricians and nuclear plant monitors – you know – important people.  Then all the survivors get backed up and things begin to fall apart and good luck hiring and training people while the virus is spreading.

On top of that, if we let the virus get to 1/100 Americans (3M infected), where we'll be before the end of May if this Adminstration doesn't do better – then who is going to go to movies, restaurants, malls, etc. anyway?  You can lift lock-down restrictions early but if that allows the virus to spread further – you'll have a much more difficult job getting consumers and workers to go back out the second time – if there even is a second time. 

Taking a month off for Social Distancing is nothing – Europe takes August off every year and they are fine.  Two months off is uncomfortable and three is unbearable but recoverable but if we push past June (end of Q2) and we're not back to work, then this economy will begin to really collapse and the markets are not pricing that scenario in at all.  

The Government just authorized $2Tn in spending and that is certainly enough to get us through 45 days but not 3 months and already it's clear that the money set aside for small businesses is nowhere near adequate.   Not only that but you know those $1,200 checks Americans were promised?  Not only is their distribution being slowed down because President Trump insisted that his signature be on the checks (you can't make this stuff up!) but Treasury Secretary Steve Mnuchin has authorized banks to SEIZE the virus relief checks to pay off any outstanding debts the recipients may have.  

Again, you can't make this up even though it's cartoon-villain levels of evil.  So now the money that was promised to the American people (who mostly plan to use it to buy food) will be taken as yet another bailout for the Top 1% and their Corporations.  Another trick Trump is using is that $250Bn of the relief money that is supposed to go to individuals is instead going to unemployment payments that the Federal Government would have had to pay to the states anyway (that's why you pay Unemployment INSURANCE every week – it's an insurance policy – not a gift!).   

So opening America for business again, if we do it before the virus is contained could be a far worse disaster than the one we already have while failing to get the virus contained in the next 2 weeks, before we hit 1M infections (1/300) will mean we'll have to shelter in place well into June.  The consequences of attempting to restart things too early far outweigh being overly cautious but, sadly, that's something Trump simply does not understand.

We pumped up our portfolio hedges into yesterday's rally and I sent out an Alert to all our Members detailing our Short-Term Portfolio adjustments. 

The STP specifically protects our LTP but it's a model for protecting all of our Member Portfolios.  The LTP is $500,000 so, if you have a $50,000 portfolio to protect, simply use the STP as a guide at 1/10th the position size.  

Stay safe and stay hedged!