04-06-2020: Making Sense of Insanity

Let me make sure that I'm thinking straight here... By flattening the curve regarding the rate of COVID-19 infections, we have managed to keep hospitals from becoming totally overwhelmed and while that seems to be working, we have at the same time prolonged the time people have to continue sheltering in place... we haven't reduced the number of people that will get this virus and we have not reduced the number that will die from this virus, we have only slowed the rate at which that will occur. Ok, in an insane world that makes perfect sense as to why the market was up 7%+ today. Got it!

If the rate of infection goes down (and it appears it is), then we have shown that sheltering in place works. So, at the end of this month, let's all go back to work, eat out, go to theaters, ride the subway, fly in cramped airplanes, socialize like it's pre-February 24... right? I mean, if sheltering in place works, let's get out of that mode because in some perverted twisted logic, that somehow means eliminating the one thing that has slowed this virus down; and by stopping what has worked, new infections will somehow be inconsequential. Now, I understand why the market boomed higher today. That's all becoming clear to me now.

Or maybe that when we get a vaccine (in two years), we should all just assume the virus will leave us alone in the interim. In this bizarre-o, insane world, that makes perfect sense, too. It's no wonder the market skyrocketed higher today... any fool can see that kind of logical makes sense. Right?

Ok... forget all of that... I think I've hit on the reason and this one just cannot be ignored... it's all the people who are unemployed and becoming unemployed (the FED's Bullard is projecting 32% unemployment) and who were working for a small business that will likely never come back. Yes! This has to be the reason why the market boomed today. The plummeting employment numbers; the plummeting GDP numbers; the horrifically bad earnings reports that are coming; and, above all else, the fact that a completely stopped economy that has never been taken from dead-stop to restart and no one knows what issues will be encountered in that process. Now, I guess we should just get out of all of these inverse ETFs and buy, buy, buy. Everything's on sale. Why not??

I'll tell you why not... common sense tells you that this is not the end of a declining economy; in fact it is likely not the beginning of the end of a declining economy. There is no magical switch that can be thrown to put this economy back to work. This economy is on life support and the politicians think they can throw money at the problems and those problems will go away. They tried that (via the Fed) at the beginning of the Great Depression and it didn't work then and I have serious doubts that it will work now.

For people to feel safe enough to venture back out into the world and aggressively get back into the mode of buying, interacting, growing the economy, there has to be a vaccine or reliable therapeutic that can remove the massive fear of death that is associated with this virus. And, even if that day were, literally, tomorrow, there has been so much damage done to our economy (much of it permanently damaged) that it will take months and trillions of more dollars to get us back and the small business world back.

If you think the bottom is in, and I know some of you think that, then I wish you well. I am afraid you are setting yourself for another massive disappointment and even more losses than you have already experienced.

I am mostly in cash in my client accounts, but most of what is not in cash, is in inverse ETFs. You know what I did today? I sold into this rally by buying more inverse ETFs. In my ULTRA-MAX strategy, I am already 100% into 2x inverse ETFs and wish I could have bought more today. If you are in a buy-and-hold strategy or if you are a dyed-in-the-wool bull, congratulations... you had a great day. I just hope you sold at the close.

Could I be wrong? Some of my readers will say, "There's no question!" And, I guess my common sense could be wrong, but the fundamental data regarding this economy is horribly bearish and the technical trends are even more bearish. I'll stick to being a bear right now.

Stay safe out there. We are a long ways from being out of the woods.

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