05-19-2020: Over Promise and Under Deliver??

The US is beginning to open up, little by very little. Let's be wildly optimistic and believe that 100% of all businesses open up in the next 2 weeks and all have to conform to a 50% maximum occupancy requirement for the next 90 days. While I do think this is far more optimistic than reality, here are a couple of points to ponder...


  1. How many businesses can survive for 90 days at 50% of normal revenue? Whether you have full occupancy or 50% (or less) occupancy, the rent on the building does not reduce to 50%; the staff (in many cases) have to be paid whether they have lots of customers or just a few customers. In other words, the operational costs are, in many cases, only sustainable at normal occupancy levels; not 50% of normal. This means businesses will likely either have to borrow money just for operations, that they can ill afford to pay back, or not open. Many, I am afraid will try to make it on 50% of normal revenue, but may be forced into bankruptcy simply because of lack of sufficient revenue to cover operational and debt obligations.

  2. How many people are actually going to return to normal lives that they had prior to the pandemic? Certainly not 100%. It will not surprise me to see most people over the age of 60, still not venture out into the public, regardless of how many businesses are opening; at least not until they can be vaccinated against this horrible virus... and there is no guarantee that there will ever be a vaccine.


But, hope springs eternal. I, for one, am very hopeful that our (the US) and the entire world's economies can return to some form of normalcy sooner than later. Yes, I am hopeful, but not overly optimistic, unfortunately. I am afraid that too many investors are too focused on the 'promise' of normalcy when reality may come to show us that the promise of recovery under delivered.


Yesterday, the market screamed higher on the hopes that a new vaccine was in early clinical trials and is showing a lot of promise. Today, calmer emotions are realizing that yesterday's move was based more on hope than reality. The best of estimates, even if a vaccine is discovered, indicate that it will take more than a year for the economy to get back onto solid footing and it might take several years to get back to pre-pandemic conditions.


In the meantime, I now have us about 60% invested in a dozen holdings that are performing quite well in today's market, in our Tactical Growth portfolio, which is crushing the market so far this year. I have also put some capital to work in Total Market, ULTRA and ULTRA-MAX, as well... about 20%. The Nasdaq is definitely in a bullish trend and strong enough to put some index ETFs to work in that index.


But... let's not forget that we are (probably) still in a "W" chart pattern. We could easily see some abrupt and somewhat painful market reversals at any time. As I have said many times in this forum, I believe that Washington has put a hard floor in this market that will keep the market from crashing into oblivion. This floor is created from unlimited free money flowing into the economy in one form or another... not just millions of dollars... not just billions of dollars... not just hundreds of billions of dollars... but in fact, many trillions of dollars, the likes of which no one has ever seen or even contemplated as possible to do.


No one knows the unintended consequences of all of this free money. We all hope this money keeps us from falling into a depression, and it probably will keep that from happening. But, we have no idea what the ramifications are for the future and the massive debt we are piling on future generations.

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