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ICOA – Sad news: Investment Club loses one of its own. GUIDANCE ON WHAT TO DO NOW!
April 15, 2020
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Members
I start this update with sad news.  Freedom fighter, Marcus Mumford, who spoke at a club meeting, a little more than a year ago, has died suddenly (yesterday) at the age of 48.    Marcus fought successfully against the unlimited resources of the Federal Government.  He defended clients in three cases in a row against the Federal Government – and won.   The Federal Government wins 98.6% of all its cases and it was statistically less than 1 in one million that Marcus could accomplish such a feat.    Marcus had an uncontrollable stutter which made such an accomplishment even more impressive.
After Marcus’s success, the Federal Government worked hard to have Marcus disbarred from practicing law, on unfounded accusations, and were successful against him in a few States.  He died an American hero standing up to the tyranny of the injustice that exists in our judicial system.
REST IN PEACE MY FRIEND – YOU WERE A GREAT AMERICAN!!!


Today, I spoke to a club member who, like many of you, is also a friend.   He said, “During this pandemic, in the real world – people are dying, in the real world – there are unprecedented bankruptcies. It makes no sense that the stock market continues to move up – disconnected from reality”

He is right!   The stock market continues its almost daily rally as if the coronavirus will quickly pass and the economy will recover in short order.

There are too many unknowns that investors are not factoring into stock investing at this time.    The market has retraced approximately 50% from its lows.    Earnings season is fast approaching and the results will be catastrophic.    Today Apple led the stock rally – yet there seems to be no consideration for a consumer that has been gravely hurt or is unlikely to pull out his wallet to buy the latest version iphone.  Do you think Apple will sell many iphones to India – which has been completely on lockdown for a few weeks?   Yet I hear “money managers” say that now is a good time to buy Apple.  Complete Idiots!!

Day trading and swing trading make sense to me and I believe there is a lot of money to be made.  Most people are not trained in these skill sets so this is not a strategy I recommend to members unless you have experience.   Investing for the long term at this point could work but only because the Fed has moved its 2009 philosophy from “Too Big to Fail” to its 2020 philosophy of “Nothing will Fail”.  In other words, the Fed has decided to flood the economy and force feed as many dollars into the market as is necessary.


Today I watched on CNBC (sorry to admit that sometimes I watch this station …. long explanation and members have often heard me voice concerns). The CEO of Cheesecake Junior Restaurant in NYC received $5.5m in PPP Government Loans.   The CEO was asked if he was going to pay his staff as per guidelines of the loan and he said “no”.   He said he would use the money for necessary steps to reopen the restaurants and would only start using it for payroll purposes once the restaurant was not only opened, but guests were returning at previous levels.     In other words, “ I will do what I want with the money and not what the government tells me to do” This was a tell tale sign that the government is handing out money with guidelines that a large number of businesses will ignore and I am sure the comments of this CEO unintentionally convened fraud.


At this time anyone buying a “long position” in the stock market is gambling.   There is a good chance, due to the Feds nonstop running of the printing press, that it will “fool” investors into thinking that we are returning to the glory days of another secular bull market with low interest rates and companies using most of their free cash flow for share buybacks – but there is one consideration every investor must heed and that is – if we “reopen the economy” and the pandemic reoccurs with another shut down – the Fed will no longer have any tools left and all asset classes except gold will collapse.

For the last few years, I have been urging members to hold a position in gold.   The last few weeks I have been “pleading” with members to take a position in gold. Those who listened have now invested in the top performing asset class during this same time period.    I recommended members buy physical gold and silver in the past – unfortunately that is no longer possible as any dealer I have contacted is “sold out”.   So that means the best way to own gold now is through an ETF – as most investors are not equipped with the skill sets to analyze individual companies.   GDX and GLD are two options for ETFs.     For Canadian members the best option is CEF where you can actually take your position in physical gold and Sprott Assets Management is a company I respect in this industry.    I know I just said for members not to buy individual companies but Barrick (symbol GOLD) is the world’s largest gold producer and PanAmerican Silver (symbol PAAS) is one of the largest silver companies and I have confidence in both these companies.    I mentioned these companies only because I know members will ask me.
So members the guidance I have given to guide you through the last several weeks has been accurate.  I know that all that matters is results and my guidance has shown to provide the best results.
At the January meeting when no economist, financial analyst, media etc was discussing a possible Recession, I discussed for 90 minutes on stage at that meeting three ways a Recession could happen in 2020.   I told members to take gains and lessen stock market positions to a small position or completely liquidate.   Those who followed reached out and have said “thank you”.   Some did not and all I can do is deliver the message.  AGAIN, THERE WAS NOT A SINGLE ECONOMIST TALKING ABOUT THE PROBABILTY OF A RECESSION IN 2020 BUT AT THE INVESTMENT CLUB WE DISCUSSED THIS IN DETAIL AND TOLD MEMBERS TO PREPARE.
A few weeks ago I wrote in several articles to OWN GOLD, OWN GOLD, OWN GOLD.   Some listened and some did not.  Gold has been the top performing asset class and again I am saying OWN GOLD as insurance for your portfolio and bring the position to 10% of your net worth – up from my previous guidance of 5%.


Here is the outcome I see in the economy:

The Fed will take all steps to ensure we don’t see deflation.   The Fed has bought tens of billions in Municipal Bonds, Assets Backed Securities Etc.  If the Fed is successful, which has a high probability, then we will see a recovery in the stock and bond market but not based on true fundaments but rather massive liquidity injection.   God help every owner of assets if the economy reopens and then the coronavirus reoccurs without proper testing in place.  We will see a DEPRESSION and the Fed will have no tools left.
So it is likely the Fed will be successful and all assets classes will rise but if the Fed is not successful then all asset classes will fall and the lone survivors will be those who held gold.  As I have told members many times – if gold were to increase to $5000 plus per ounce that only means all your other assets have collapsed.  Real Estate, stocks, bonds etc.  Do you now understand why you must own Gold and to a lesser degree silver?
Members – What strategy am I am looking at for the club members to prosper in this environment?   For those who recall 3 years ago I debated with the CEO of Boyd Gaming, Keith Smith (who spoke at our club meeting) – stating that the economy in Las Vegas was not diversified enough and would again lead the collapse of all States as the economy in Nevada  is based on consumer discretionary spending.  He went on and on about how the economy was diversified and Nevada was now in a strong position and I held steady and respectfully said he was wrong.    Now all reports coming out are saying Las Vegas will be the hardest hit city in America with the highest percentage of unemployment claims etc.

So here is the opportunity as long as the economy does not shut down again.  EVERYONE HOARD YOUR CASH!  CASH IS KING!   Unless commercial and residential landlords are bailed out – by the Federal Government we are going to see very attractive cap rates again – similar to 2010.   There will be a glut of properties hitting the market.   We will consider a Real Estate Fund when the timing makes sense and see how things unfold but for right now HOARD CASH, HOARD CASH, HOARD CASH and get ready to mobilize funds for the coming opportunity.
Yes you can “trade” in the stock market but don’t take any “long positions” Don’t listen to money managers as they are always motivated by “money under management” and 99% of them have caused you massive damage by their “buy and hold strategy” in the last several weeks.   I have said too many times, “these people are the most overpaid, undertalented so called professionals in the World.”    I don’t know who I despise more – money managers who can make tens of millions while you lose money or lobbyists on Capitol Hill who act like sociopaths – with no consideration for the American people!
Members – there is no “sugar coating” I call it the way I see it!!

Caveat: Members, The current economic retraction will be the worst since the 1930s but the Fed is fighting hard.   Even with the force feeding of money by the Fed it is likely inflation will remain close to zero.  This is a fact that works against gold, but I remain bullish.   The main catalyst that will propel gold to much higher levels will be a much lower US dollar and again, because the majority of members hold all their assets in US dollars, gold has to be used as an insurance hedge for your portfolio.

Conclusion: Members, if you buy gold and it declines that is fine because it likely means the rest of your assets have maintained their value.  However, if gold increases by several hundred percentage points then it is likely all your assets have collapsed in value and this is exactly why you need to own it as insurance for your portfolio.  



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Mike Lathingee

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