Investors have sent the stock market on a pretty unbelievable five-week rally… as if 26 million Americans haven’t lost their jobs in the last five weeks… as if sending the S&P 500 back to February’s valuations will bolster their flagging faith in that rocketship second half.
These gains might look good on paper, at least for those who convert their paper winnings into that spendable kind because this kind of action, a recovery rally that takes back 50% of the losses, is what broken markets do. It’s been two months since that 1,200-pound grizzly stood at the mouth of his winter abode and scared the bejeezus out of everybody with a wake-up roar. In the ensuing silence over the last five weeks, we figure maybe he did what we would do — go back to bed.
Alas, no, he just hasn’t gotten hungry yet. Pretty soon he’s gonna saunter down, looking for his first real meal in a decade.
I sold my last speculative position last week, taking a fantastic 30% from a company called SmileDirectClub (NASDAQ: SDC). Who am I to ignore a bear market rally? But like that old joke, I’m lacing up my running shoes as the bear wanders into camp. I don’t have to outrun the bear; I just have to be faster than the rest of the campers.
And so my message to you today is: Lace ’em up, maybe do a little stretching. This is no time to pull a hammy.
The situation is this: As we came into 2020, the S&P 500 was expected to earn ~$175 a share. As of today, analysts have revised their estimates down to ~$145 a share. THAT IS NOT ENOUGH.
Twenty-six million Americans have lost their jobs in just five weeks, the unemployment rate now stands at 16%. Did you know during the financial crisis of 2008–2009, the unemployment rate only hit 10%? I say “only,” but 10% is still the worst rate we’ve seen since the Great Depression. Nine million people could get their jobs back right away, and we’d still be at 2009 unemployment levels…
The $24 Cheeseburger
Same store sales are down 80% across the board. The U.S. has a surplus of retail square footage per capita, roughly double anywhere else in the world. Nordstrom, Lord & Taylor, and Neiman Marcus are the first to wave the white flag. There is an Imelda Marcos-sized closet of second shoes ready to drop on the retail sector.
The oil market is a rolling disaster. The Saudi budget is crafted for oil at $90. $90! Talk about having your head in the sand… It’s gonna take years just to get back to $50. At peak production, 10 million Americans worked in the Permian and other U.S. oil fields. Now, 533 U.S. oil companies face bankruptcy, with WTI at $20, meaning $240 billion in debt has to be restructured.
Restaurants may lose 50% of their capacity when they have to employ social distancing. It’s already a low-margin business. Throw in disposable menus and added sanitation, how many of us are going to pay $24 for a cheeseburger? And what does that mean for the food suppliers, linen and uniform companies, and landlords?
There should be no doubt: Many of the jobs lost so far aren’t coming back. That’s why second-quarter GDP is likely to fall an annualized 40%.
And to make matters worse, Senate Majority Leader Mitch McConnell says that strapped states consider bankruptcy because they can forget about any more financial aid. That means hiring freezes, more furloughs for workers, and probably cuts to state pensions, too.
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A Financial Oasis
The bottom line is this: There’s a storm surge of 26 million paychecks worth of demand destruction ready to wash over the country. Those $1,200 Trump checks are just a finger in the dike.
I’m not gonna pretend that I have the panacea for what ails us. But I’ve been showing regular investors just like you how to use one simple stock market trick to secure frequent cash infusions into their brokerage accounts. It’s not peanuts, either.
I’m talking hundreds, even thousands of dollars at a time — straight into your account. This is money you can spend on whatever you want: pay down debt, downpayment for a new car (there’s gonna be some amazing deals!), maybe buy everyone in your neighborhood a $24 cheeseburger!
In a special internet video event this coming Thursday, April 30, I’m going to show you how you can use one of Wall Street’s simplest and safest strategies to turn the coronavirus bear market into your own personal ATM.
You’ll even get to look over my shoulder as one of these cash infusions — a cool $650 — hits my personal account!
Armed with the simple information I’ll share with you, you could be cashing one of those Trump checks every few weeks. That is the type of certainty that will have you sleeping like a babe while most investors spend their nights staring at the ceiling, wondering when it’s all gonna come crashing down.
As a Wealth Daily reader, there is no fee for you to attend this event. Join me Thursday, April 30 at 2 p.m. EDT. You can register for this landmark event right here.
It’s just a few days away! See you then.
Until next time,
Briton Ryle
@BritonRyle on Twitter
The Wealth Advisory on Youtube
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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.
