This is an email to a friend that asked me if I thought investing the down payment for a house was a good idea right now. Some of you might find it interesting. This is not investing advise.
That 99k daily swing was off of 50k invested. I'm mostly buying puts on companies I think will go down. High powered leveraged bets that I either win a lot or just lose everything. So far doing okay. My goal is to make enough money that I don't have to sell the Huracan, my emergency beer money savings for this type of event. Would like to get $500k or so saved up in fiat. Id like to keep the miles off the other cars but in tough times we need to make sacrifices. Yesterday the market went up but I only lost 16k, so over all not so bad, I'm repositioning myself as time goes on into longer dated options. At first I bought puts on things like, American Airlines, Las Vegas Casinos, Sea World, Cracker Barrel. Things I assumed beer flu would fuck up hard. Many of these things are way way down since when I bought them. I got in right before I sent you that e-mail about my not coming to the USA in May. I saw the spread of the virus and realized what was going to happen. I new travel in the USA in May was not going to be an option, and they because of that the markets would get really messed up. I still think it will be getting more and more bad for the next 3 weeks as the beer flu blows up despite lock downs. I would bet in a week USA really has 100k cases, now maybe not official cuz no testing but this thing will get out of hand. Italy is going to be in lock down more than 2 weeks ad Whoohan is locked down still after 2 months. 2 months in lock down? When will they unlock? Tomorrow, in 6 months? Who knows...
The only risk was that the US government was going to be like whatever, we will take the 2 to 3 million dead no problem, can't shut down the economy. However the US government is now locking stuff down (too late for it but still they are doing it). This will highly fuck over all the business that need to bring in cash flow in order to service their debt. They need to pay for loaned money on land and buildings and computers and everything else they have. 2 weeks would be hard but maybe okay. But this is going to be months, and now even the CDC is saying late summer maybe. Some companies are going to get fucked fucked. American Airlines has huge amounts of debt. Will the US govt save them? It is tricky cuz they used 96% of their savings sine 2008 to buy back stocks to push up the stock price, not pay off debt. That seemed smart at the time cuz debt was cheap and people like high stocks. So clearly people like me who bet on it going down, made even more money cuz of their silliness. Airlines might get bailed out, but Casinos are going to be more hard to bail out. Same with coffee shops. I shorted Starbucks as well, who can pay for $5 coffee on their way to work, if they don't go to work? Start bucks has a lot of rented places in not cheap areas. What is going to happen? Who is going to order the same amount of star buck to their house? Lol no...
What is going to happen when all the banks fail cuz they loaned out all this money to these companies? Right now we are in a supply shock, with a demand shock (biological, not cuz lack of spending willingness of people). Some places can't get from China stuff they do want to sell, and other like Tesla have their cars sooner than expected but no one is willing to now buy them cuz they see the beer flu really messing stuff up. Who needs a new car if you can't drive it anywhere? I'm shorting Tesla too, fuck Musk, lol.
So anyway, if you want to get into the markets, a lot of stocks are way down. But Sea World for example is a huge discount. But do you really want to invest in something like Sea World, a place with debt out its ass, odds are closed for the summer, and still having to feed all the whales? Sea World might go to 0. Who is going to bail that out? So yeah I know you won't invest in Sea World but lets just look at Microsoft...
Who buys stuff from Microsoft? Companies like Sea World and people who used to work at places like Sea World. Microsoft will not go under. If you had to buy something it would be something that will be around in 10 to 20 years. However you want to do short term investing with house savings money? Lets look at what is going on, please pull up a stock price chart for MSFT.
You can see we had a rise in the 2000 .com crazyness, and now a rise in this crazyness. Hyperbolic. That shit crashes. Also look at 2008 when it was $15, that was cuz the banking issue of 2008.
Now what sort of market are we in right now? We are just on the down side of that crazy run that happened in all stocks. This was the tail end of a 11 year bull market, with tax cuts and low interest rates pumping a solid economy. Now in 2000 MSFT cut about in half. This was back when MSFT was not pushed up as hard for as long as 2020 high prices. It would be reasonable just assuming that the bull really is dead and we are going into a correction we could see at least 50% down on MSFT. So we are looking at a $100 price target for MSFT just as a correction for the price. That mans $100 is a fair price in an okay economy.
However while we are popping a bubble, what is popping the bubble is a beer flu that is causing a huge disruption in everything. This disruption could hit as hard has the 2008 banking fail stuff as honestly banks might fail cuz of all the fuckery about. So, MSFT fell down to $15 back then not cuz MSFT was bad but because of what was going on in the economy. So it might be reasonable to see MSFT cut in cut in half again to $50. $50 might be fair in a bad economy.
That being said what if things really get bad and this turns into something like a great depression type event? I honestly think this could be a great depression 2.0. Honestly this could happen and if so we could see a 90% drop in stock price from the highs, looking at something like $20 for a buy price.
So we could see some down side here, I honestly think it will keep going down as most people do not yet realize how fucked it will be. Also people are "buying the dip" and no yet selling 401k to pay rent. When the average small business guy is selling everything he can to keep food on the table and in a house all the stocks he has will be sold.
MSFT is now back to its November 2019 price. Is the economy as good and strong as it was back in November 2019? I honestly think no.... I think MSFT is going to lose waaaay more money for lots of reason esp in the short term. I'm betting on the markets losing 66% MORE by the end of the year. I might get out of the bet once I thinklock down might let up, as we get a temp rise in the markets but I think there is real damage going on right now.
How do we fix the problems with beer flu? The shots are going to be a year out at least, can't really cure a virus. Anyone who lets 2 million people die, wont get elected again so they have to lock down like it or not. Also since the govt is so divided right now they will not exactly be working together on things as well as they should in a crises. Interest rates are at 0 percent. If they go neg that causes huge problems, maybe more than it helps. They are doing 500 Billion in over night repo, and that is more or less infinity money, the next step is really just give all Americans like $1000 a month, just so they have enough money for rent and food and the like. But even then that will only go so far.
Now am I correct? No idea. But I think some of the above could happen. Do I think now is a good time to buy MSFT at Nov 2019 prices? Helll no.... Investing now you could lose your much of your savings in a year...
In a depression and esp in the crash, cash is King. That's why I have been getting cash out. Gold is going to come back into play after the sell off but hodl that cash and get ready to buy back in. 2 months, 6 months, 1 years, 6 years? Not sure when it will turn around, but I'm pretty sure that day is not today. Even if the market goes back up 20% I still think we are a bit fucked for a while. Also I would not have bought MSFT in Nov 2019 cuz the market was being pumped to sillyness. It needed a correction and is now getting it while beer flu fucks everything.
I do plan to buy back into the market at some point assuming I do have cash, but that is going to be a long way off. Also if this really is great depression 2.0 this is going to be crazy crazy bad. We have never really seen hard times in our life time in the USA, even our parents do not really have an understanding of what is coming. That is assuming beer flu does not go away in 2 weeks. If it does then I'm just being silly and will lose a lot of invested money, but whatever, I'm getting ready for what could happen. If we go into a great depression I still want my coke and hookers fund to be flush:)
No matter what happens it will be crazy for a while, USA could try to print their way out, but right now US dollars are about the best investment one can make as far as fiat goes. We are still the reserve currency for the world. We could see many international banks fail, India is looking pretty shaken, and some other are as well.
You know we never even talked about the debt that the normal young people in the USA have. Student loans, medical, car loans. These people work doing things like garb and amazon factory, stuff that will be replaced by robots in 5 years. The USA could be proper fucked for a long while.
If I were you I'd not really look at some other companies for a job, that might not be around in a year, stay at XXXXXXXXX and stand out that you are needed. 2008 was crazy hard to find a job, 2020 is going to be hard to keep a job.
So TL;DR I don't think now is a good time to buy stocks with money you might want to spend in 10 months.
Disclaimer, this is not investing advise, I don't really know what I'm doing, all my thoughts come from drug induced paranoid visions so trading on them would be silly. Go forward at your own risk. :)