Jim Rogers Warns : This is a Financial Crisis Like No Other – Helicopter Money Wont Fix Debt Bubble
The markets took a lot of aspirins today, but they will wear off tomorrow, and the headaches should return. Dow should finish below 20,000 tomorrow. Unless they are given more aspirins. Eventually, though, all that aspirin will create an ulcer.
Legendary investor Jim Rogers warns that “the next time we are going to have a financial problem it’s going to be the worst…” and right now it appears we are headed toward “the worst financial crisis of our lifetimes” and “we will know in a few months.”
However, Rogers noted, the reason behind such market mayhem is “not just the virus, it is certainly much more” than that. The FED created the three largest mega-bubbles in history: in housing, bonds, and equities. One is exploding; the others are not far behind. With millions now unemployed, billions in delinquent car loans, and credit card interest rates at astronomic highs, it won’t be long.
They should just print infinity dollars and say the Dow rose to infinity, and we’re all rich. That would solve everything. It’s always the same outcome: BANKERS BAILING OUT themselves in the total mess they created! Witness in action our “government” of Wall Street bankers, by Wall Street bankers, for Wall Street bankers! No matter whom the people elect, you always get JPMorgan and Goldman Sachs in charge.
The Shit going on is unbelievable. All to save massively overpriced assets. All the talk of helicopter money to save the economy is insane. What good will give people who would have never made money in the first place, a giant wad of cash. They’ll blow it on garbage like some did with their Katrina cards. The only money given out should be the money stolen from working Americans. Whatever was stolen in payroll taxes should be given back for one year. Warren and the rest of the oligarchs who pay nothing in payroll taxes can eat their dicks.
Now perhaps it should be clearer. This crisis will, in all probability, be more serious than all those experienced so far. Including the Lehman crisis. More serious because its nature is different. It is not a shock from fundamentalist aggression to the West (remember September 11) and not even from financial contagion like the financial crisis drugged by the subprime of 2008-2009. This is a crisis of global economic paralysis, of interruption (it is not known how long) of the vital organs of the corpus economicus. And it is not resolved by flooding the system with liquidity or by loosening the leverage of interest rates even more. It is not a shock of demand, but it will be a shock on the supply side with chain repercussions on all the world production chains that will amplify each other.
MORE THAN The Stock Market, THE REAL ECONOMY is The Real Problem . Rather than looking and being surprised by the collapses of the stock exchanges, we should look at the underlying. To the real economy, which is the real vulnus of a health crisis never known so far in its planetary dimensions. The data of the Chinese economy brought out yesterday should be enough to understand the extent of the crisis: in just two months of the epidemic, industrial production fell by 13.5%; down retail sales by 20%; and even more limited investments (as obvious at this point) are the peak investments of 24%.
That script will replicate around the world. With economies collapsing everywhere. Perhaps here is the explanation for the fact that despite the drastic measures taken by the Fed on Sunday evening to bring zero interest rates at once and to re-engage in post-Lehman-like buyback policies, the stock market reacted by deepening the falls, rather than mitigate them. The market is well aware that in the face of a protracted infarction of the global economy, central banks have little room for maneuver having, among other things, spent many of the cartridges in the last decade of monetary policy which has never been so expansive.
LIQUIDITY ALONE IS NOT ENOUGH.
Even if you throw the money from above with the helicopter, it will not end up in a circle but will remain confined to bank accounts and deposits. No real transmission of liquidity to the productive economy. And then more money to spend on doing what, if you can’t move, work or spend. And especially if goods and services are not available. Investment bank analysts around the world are refining their forecasts. That the world will go into recession in 2020 is now obvious.
Still, no one can predict how intense and prolonged it will be. But the signals from the various businesses are eloquent: in the front line the carriers, tourism; then to follow the car industry; the luxury; the energy impacted by the collapse of crude oil and finally the banks that will see revenues, profits and bad debts increase.
PEAK TURNOVER EVERYWHERE. Recent Cerved research foresees two scenarios: In the best case, if the epidemic in Italy ended in May, the loss of turnover of the Italian industrial system would be around 275 billion euros; in the most dramatic scenario, with a war economy lasting all 2020, then the collapse would be over 600 billion in the two-year period 2020-2021. A shock equal to almost a third of the turnover of the Italian production system.
Almost no company has been able to make predictions for 2020. Among the Italians, Ferragamo did it, which said that if the current situation remained unchanged until the end of March, a 25 to 30% loss of revenues is expected in the first quarter of 2020 on an annual basis.
A global look at the price lists giving by the UBS analysts , who are now talking of the fastest “Bear” market in history, referring to the sudden and rapid drop in stock exchanges. UBS analysts observe that since 1945 the most pronounced drop from the highs has been 34.5%. Applying it now, the S & P500 should find its lows around 2,200 points (yesterday it closed at 2,386). Another simulation predicts that against a 10% drop in profits and with a price/earnings of 16, the balance value of the S & P500 would be 2,375 points. But if Corporate America sees profits fall by 30% this year, as many already predict, then the S & P500 could continue to drop to 1,800 points.
THE CRASH OF THE AIRLINES. The alarm launched by the airlines from British to Lufthansa to EasyJet on the blocking of flights that is likely to last for a long time will impact on profits and, therefore, on prices on the Stock Exchange. It is evident to see how much the carriers have already lost on the price lists. IAG, the holding company that controls the British Airways, has lost more than 60% of its value since February 19. Lufthansa has almost halved the prices; Easyjet has left 60% on the field. After The Airlines , the next shoe to drop is going to be The Car Industry. Another major sector that is heavily impacted is the car sector: from FCA to Peugeot to Renault. Almost everyone has announced plant closings in Europe. On the stock exchange, the result is that FCA has lost 40% of its value in less than a month. Renault more than 50%; Volkswagen -40% and so on. And even the most resistant luxury has suffered: the average fall in European fashion stocks has been 30% since mid-February.
DEFENSIVE TITLES ARE NOT SAVED. And not even the most defensive stocks like pharmaceuticals and utilities have shown resistance to the outbreak of the virus. Just to give an idea, a title such as the Italian Terna which has increased the dividend policy, operates in a monopoly with regulated tariffs and has a gross margin on revenues of 70%, however, falling from 6.7 euros by February 20 at 4.8 yesterday. As you can see, no one is saved on the stock exchange. But the market is only the amplified mirror of the underlying economy. And the signals it sends are that the generalized sell-off implies very gloomy prospects for the performance of the economies in the coming months. This summarizes the picture that has never been so gloomy.
The current situation is also worsened by the fact, so far, that the spread of the virus has triggered simultaneous shocks unprecedented for demand, supply, and financial conditions. The more the virus spreads, the greater the number of economic “sudden stops” around the world, and, consequently, the market will need more time to recover. Initially, we hoped that the recovery had a “V” trajectory, then “U” and, potentially, also “L.” Conditions could remain unchanged or even worsen for longer than initially estimated. A simultaneous stop of supplies and a reduction in growth will necessarily translate into lower earnings and greater difficulties on the debt front.
The implication of these developments is that, despite the drop in bond yields, as financial conditions become increasingly restrictive for companies, there will be a greater risk of default on the debt markets, and the wave of buybacks. Which in the past has served to bring up the stock markets, will stop abruptly “. This system is designed to benefit globalists, government bureaucrats, and aristocrats or in the USA old elite business money. If anyone else thrives, it is a byproduct of the aforementioned system.
The stock market has always been a market designed to benefit the people mentioned. They will cleanse the system when they feel it needs to be cleansed as they have done with all previous market crashes. Until then, you will continue to see those stocks do their magic. For anyone outside the stock market elite, that makes money count your lucky stars. Well, if you didn’t sell into ‘strength’ today, you’re out of luck. You will not see this price range again for a while.
Tomorrow (at the latest Thursday), you will see an 18,000 print. A Lil stall after that, and the REALLY big leg down. It’s pretty much baked into the cake at this point. The fed is actually being gracious to investors. They’re telling them to get out if they need mone. And they’re giving them ample opportunity every third day. Selling today will net any long equity holder ten percent this week. I would imagine there’s going to be a lot of overnight sell orders hit in the morning. Absent fed intervention, we’d be at about 10,000 right now. It’s heading there anyway, but they’re doing their best to give retail all the chance they need to claim some badly needed cash right now. The promise to keep the market open no matter what was real leadership, and I’m impressed with the call. Trump is starting to get back in sync with events.
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Preparing for Economic Collapse
WHAT SHOULD I DO? How can I prepare for an economic collapse? is one of the most common questions I get. It usually takes me a second to start to explain how complex such a question is. It’s like asking an auto mechanic, Say, how do you build a car? or asking a computer engineer, What’s all that stuff inside my laptop?
I do have some first-hand experience in this matter, though. The economy in my country, Argentina, has gone through various crises, but none as large as when the economy collapsed in 2001 after a decade of apparent prosperity. The currency devaluated, and Argentina defaulted on its USD$132 billion debt, the largest default ever. The middle class took to the streets after bank accounts were frozen, and the president was forced to resign, escaping the presidential building in a helicopter.
What I’ll do is provide five quick foundational steps, based on what I know, for you to follow so as to be better prepared if something like what happened in my country ever happens in yours.
Steps for Greater Resiliency
Step #1: Secure a percentage of your savings in bullion.
Five years ago, even the most paranoid person claimed that you would never see “nationalized” banks in the USA. The gung-ho survivalists claimed the entire country would go up in flames and open revolts would start before something as insane as a $700+ billion bailout to save the “too big to fail” rich elite was laid on the backs of the American working class. Yet here we are.
When I try to explain this very important issue to my American friends, they tell me that banks would never steal people’s money because there are laws against that in the USA; their money is insured. We had those same laws in Argentina, but still it happened. We had a constitutional right to private property. Yet the constitution mattered little during the collapse. Go right ahead – sue the government of the United States if something like that ever happens. Maybe you’ll get some of your savings back in a few years. If they feel like returning it.
What people don’t understand is that laws are written by men, not some greater power. As soon as those running the show feel an emergency decree or law is in order, existing laws are simply rewritten. They may even be ignored altogether! What do you do if something like that happens? You may complain, you may sue, but you’re not changing the cold hard fact that as of right now, that bank door is closed, that ATM has no money in it, and you still have to survive. Hundreds of thousands of us have banged the doors of our banks for years without a penny being returned. You still sued, and waited, and spent the little money you had by hiring a lawyer. You lose, they win…unless you have some of that money at hand before they decide to steal it.
Since you can’t guess the future, all you can do is estimate what can happen and play the odds in your favor. In the event of a full economic collapse, if you have 20% of your savings in physical gold and silver, that’s a percentage of your savings that is spared. It’s not an investment; don’t go crazy over gold and silver going up or down a few dollars. Just be content that it’s not getting any lighter as it sits in your safe. If the economy collapses or even if there’s simply inflation (as there clearly will be), that percentage of your savings in precious metals is safe and will likely go up in price beyond its standard purchasing power as things get worse.
During the first stages of a severe economic crisis, you will see ATMs running out of money fast, and many stores won’t be accepting credit cards. As the saying goes, “Cash is king” during those times. Your precious metal can be sold to a dealer, but you better keep that stored for now. When everyone is running around looking for an ATM with a few bucks in it, having a month’s worth of expenses in cash means you won’t be one of them. Why not more than a month´s worth of expenses? Because if the economy fully collapses, that paper money will lose its value within hours. It may drop 50%, 60%, or 75%, as happened in Argentina. Who knows? All you know is that as the currency loses value, the value of the precious metals you have stored goes up in proportion. Still, during those first days, a wad of cash gets you what you need.
So, Step #1 is acquiring precious metals (I generally recommend 20% of your savings but each person is a separate case) and a month’s worth of expenses in cash, kept safe at home.
Step #2: Stock up on food.
The more you have, the better. There may be periods of civil unrest like the ones we saw where stores are being looted and closed after that. There may be problems with resupply because of logistical complications. It’s better if you already have 6 to 12 months worth of food in your expanded pantry. Also, keep in mind that the food you buy now will be considerably cheaper compared to post-inflation prices.
This large supply of food will bring peace of mind in case of job loss, as well. Who knows how long it will be before you find another source of income? After the 2008 collapse, some people genuinely spent YEARS looking for a job without finding any. I can’t emphasize enough the peace of mind it brings knowing you still have some time, and that you can, in fact, put food on the table the following night.
The food should be long-term storage type, requiring little or no cooking, at least for some of it. Water is also essential, so having a two-week supply is advised. The minimum amount is a gallon per person per day, and you should double that for flushing toilets and taking an elemental bath in case the water service is interrupted.
Step #3: Acquire the essentials by putting together a survival/emergency kit.read more
This will include your typical camping gear: a tent, sleeping bags, a stove (have enough fuel for it in case services are disrupted), first aid kit, medicines, LED flashlights, and several spare batteries. Depending on how bad civil unrest gets, there may be problems with the infrastructure. After the economy collapsed in Argentina, the power company simply couldn’t afford the repairs needed, and it hadn’t planned for something like this. Rolling blackouts became common, and having LED lights and rechargeable batteries was a blessing. You could easily spend two or three days without power during the summer. At one time, downtown Buenos Aires was left without power for five days. Imagine the complications this brings. If natural gas service is interrupted, you may need other ways of cooking. A camping stove and enough fuel will get you through it.
Step #4: Improve your personal and home security.read more
If you ask any Argentinean what concerns him the most, 9 out of 10 people will have the same answer: security. In second place is the economic situation. Ten years after the economic collapse, things are nothing like they used to be. Half of the middle class became poor and its standard of living has decreased considerably. We’re still a high-risk economy, and it shows. Inflation is still rampant and can be anywhere from 5% to 10% per month, usually hitting the middle class the worst. But that’s something we’ve grown used to. That’s something we can live with.
What concerns Argentineans the most is the crime problem, and the out-of-control violent crime we suffer is the major legacy of the 2008 economic collapse. Poverty sure didn’t help, nor did social segregation. But the greatest cause responsible for the crime levels we suffer is our own government. The liberal government that took control after the collapse considers criminals to be poor victims of brutal capitalism. The unofficial stance is that criminals have a right to steal, murder and rape – in their view, it’s how the “poor” get back at the rich and middle class who thrived during the 1990s. Of course, with a government like that, the crime problem just keeps getting worse.
During the first days after the economy collapsed, civil unrest, rioting, and looting were out of control. A state of siege and military law was declared, enforcing curfew hours after 10 pm. This lasted a few months, and for months after that, while order was recovered in the capitol district, there were still occasional revolts and looting. The sense of lawlessness extended way beyond the visible accounts depicted by the TV and general media. It’s during times like these that you realize you must have means of defending yourself and your family.
My advice is to make your home as secure as possible against criminals that may take advantage of the lack of control during the worst of the rioting. After that, a better security plan for the entire family must be worked out. As things get worse, you understand that you can no longer afford to be lax about your personal and home security. Those that are quickly become vicitims. With a more secure home, you may want to consider having a weapon to defend yourself. Certainly not an easy decision, and one you must be extremely serious about. If you have the self-control and maturity to handle one, having a firearm and getting the minimum training to know how to use (it if it ever comes to that) is something you should consider doing.
Crime and insecurity will be one of the greatest threats people all across the USA will suffer, and very few will be ready for it. It won’t happen one dark gloomy night after watching the latest horror movie. It will happen in the Walmart parking lot at 3 pm, with plenty of people around (people who will hurry out of the way, pretending not to see anything). You’ll be thinking about what you just bought, that you maybe should have bought Lucky Charms instead of Corn Flakes. That’s when the nice-looking person with two other buddies, all well-dressed (with neat haircuts, too), will pull a gun on you. Developing a sense of awareness will be the most important part, as well as making the rest of your family comprehend that times have changed and you can no longer be careless regarding security.
Step #5: Embrace a different mindset.
When Argentina went through its economic collapse, people handled it differently. Maybe the most common response was denial. The “I can’t believe this is happening “ attitude was pretty popular. Others complained, but you soon understood that it changed nothing: It only made you feel more miserable, more stressed, and that was something you could do without. Others just ended their misery. Suicide rates doubled after the collapse, with people sometimes jumping under the train at early rush hour in a desperate attempt to make their misery noticed by others.
What you need to do is become more positive, more active. Be someone who, while accepting those things you can’t change, does something about the things you can. Get involved now. Do what I just recommended right now; it will bring you peace of mind. Remember to stay positive and put every problem into perspective. Complain less. You’ll have enough to complain about when inflation gets worse. Soon you’ll understand that material things can be replaced, and you become more grateful for what you have instead of worrying about what you don’t.
It’s essential to keep a positive attitude. Being someone who gets easily depressed will be the end of you as the economy worsens. Problems much worse that what you are used to will be a daily occurrence. You’ll just have to roll with it and learn to cope with the new world you live in. Reinforce your relationships with people. Fight stress by finding a hobby you enjoy, hopefully one that has a practical side as well. After the collapse, lots of people started their own businesses when they realized there were no jobs to be found. It would be better if you get started now, just in case you ever need it in order to earn a living.
These are my recommendations. I know many people could have used such advice back when our economy collapsed.
Some common questions regarding hyperinflation READ MORE
How quickly does it happen?
These events occur fast, but there are warning signs: lack of investment, higher interest rates, unemployment. When banks start coming up with excuses so as to not give you your money right away when closing an account, that’s usually not a good sign.
As for inflation and hyperinflation, they happen right in front of your eyes. It actually happened to me that the price of an item I picked in a store almost doubled in price by the time I reached the cash register. The employee just placed the sticker with the new price over the old one (no time to remove them) Employees rushed around changing prices several times a day, all day long, during the ongoing crisis. It was fun to peel back the stack of stickers with the different prices and see how they had gone up in a matter of hours. Rioting happens fast, too. Once the banks close, rioting is just minutes away.
What happens to your savings/investments?
I didn’t have much but managed to close my account just a day before the banks closed their doors. My parents are accountants and saw the signs mentioned earlier. When we went to the bank, a nice lady told us they didn’t have USD$1,000 in the bank. Our jaws just dropped. That same day we went to the main branch and closed the account my sister and I had. The next day all banks closed and the accounts were frozen.
As for real estate, that was a pretty safe investment. Eventually rents went up to compensate for the devaluation. Of course, you were much better off with your money in bricks and mortar than in a bank account.
How does the populace react?
Violently, as you’d expect when your life savings are stolen from you.
What is the government saying/doing?
Laws were changed to make everything nice and legal. The excuses then-president Fernando De La Rua came up with in his speeches during the crisis just made everything worse.
Just days before the bank holidays, they promised none of that would happen. Same thing before the devaluation. They swore on their mothers’ names that they wouldn’t do such a thing – then did it the following day. Politicians tend to do such things, and they are all similar worldwide.
What happens to the capital markets?
The stock market dropped like a rock, then shut down. What surprised us the most was how everything was simply frozen in expectation. No one wanted to spend a single cent, not even to buy half gallon of paint for a work site, because you just didn’t know what would happen in a matter of hours, let alone next week. The biggest investors had sold and left the country months before everything went down. Another sign to look for.
Does violence and crime become an immediate concern?
Yes, it does. While stores were the more common targets, houses were looted, too. The best thing to do was stay home, have a defendable position, and be armed. I had looters not 20 yards away from my home. What do you do if they rush your home? Can you just open fire on them? What will they do when/if you do? All these things flash into your mind.
A significant amount of people behave themselves because they believe there’s a punishment if they do otherwise. Once that fear is removed, because the authorities have clearly lost control, you see the worst of people’s nature. It’s not a pleasant thought, but it’s better to be ready.
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