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Coronavirus - A run on basic supplies?
The full update.
As the stock market makes a cautious recovery the situation does not seem to be improving. Here are the numbers and here is why this could get a lot worse and why the media and Governments are downplaying it.
Currently it is being reported that over 90,000 people have been infected with COVID-19 (Coronavirus) globally and the virus has spread to 63 countries worldwide. The most affected areas are;
- China – 79,932
- South Korea – 3,736
- Italy – 1,694
- Iran - 978
The United States (coming in 10th for most infected) has 33 confirmed cases state side (not including US citizens on cruise ships) that has lead to the death of 2 people.
THE MARKET EFFECT (DOMESTIC STOCK INDEX)
The markets last week took quite the hit, in fact, a trillion dollars and major corporate profits from Q1 2020 were all but wiped clean as the market was in free fall for several days.
- Dow Jones Industrial Average – Fell nearly 4,000 points similar to the financial crisis in 2008.
- S&P 500 Index – Fell nearly 400 points.
- NASDAQ Composite Index – Fell nearly 1,400 points.
PRECIOUS METALS MARKET (NYMEX & COMEX)
- Gold Spot Price – Down nearly $75 dollars per troy ounce.
- Silver Spot Price – Down nearly $2 per troy oz.
- Platinum Spot Price – Down nearly $140 per ounce.
- Palladium Spot Price – Down nearly $250.
Stock Ticker showing currency ratios and Gold Spot Price circa November 2018.
Why would the price of Precious Metals be falling during such turmoil?
The numbers for the month of February are a bit deceiving. The original rally for the shiny goodness for both bid, spot and ask price for Gold and Silver happened before the stock market sell off. This is because over night and without much notice late January 2020, the M2 Money Supply was increased by 36 billion dollars by the Federal Reserve. This caused inflation of the U.S. dollar, decreasing its value and purchasing power. Because Gold is always worth its weight in Gold, the price of Gold went up. Confused?
Think of it this way. $100,000 USD in 1980 could buy you about 10 Honda Civics.
Fast forward to 2020 and $100,000 USD could buy you about 5 Honda Civics.
This is because the money supply has increased, inflating the US currency and decreasing its value.
Had you bought $100,000 USD worth of Gold in 1980, that Gold would still be worth 10 Honda Civics in 2020.
Why didn’t investors move to hedge?
Luckily, most investors had patience and the start of this week is promising with indices across the board up by 2.5%. It’s also important to remember that Friday (which historically sees sell offs no matter the financial climate) was not hit as hard as previous days in the week. This was a pretty good indicator that markets would be up this week.
Not to toot our own horn or anything but dollar cost averaging your Precious Metal stockpile with Investor Crate is starting to seem like a pretty good idea now. This could easily off set any potential loss for us regular folk who aren’t staring into the market abyss waiting for the perfect chance to sell off. We can be quite late to the draw in fact!
Market indications point to blue skies, no?
Be careful using the market as an indication that things are OK. Investors, whales and day traders are timing headlines (as they always do) to make money. After all, that is why people invest in it. Additionally, do not underestimate how fragile our society is as most the country, especially mega population centers rely on an extensive, highly complicated network of logistics to get basic durable goods such as food, water, medical supplies and other essentials.
There is some speculation on the incubation period of the virus itself that could spell disaster and exponentially increase the spread. The incubation period is how long a disease or illness becomes symptomatic as well as how long a person is contagious. There is also some confusion on carriers of the virus showing no signs or very mild signs of the illness.
So far the virus incubates (but remains contagious) for two weeks before a patient shows signs of being sick. This is the reason for the 14-day quarantine you've heard about. This means that a person can come into contact with 100's, even 1000's of people (think public transit in a City) before becoming ill, seeking medical attention and consequently being diagnosed with the disease.
There are also reports from several cruise ships that are under quarantine that passengers were testing positive for COVID-19 that were only mildly ill or showed no signs of being sick at all. The passengers that were mildly ill showed signs similar to the common cold such as congestion and slight cough. Its not hard to imagine someone with the sniffle still commuting and going to work without thinking much of it but being a carrier of the sickness.
Time to Panic?
There is some articles from the main stream media bashing the WHO, CDC, China and the Trump administration in regards to their handling of the situation. There is also some more fringe, lesser known media companies and conspiracy theorists claiming the situation is being downplayed and that we are looking at Spanish Flu (1918) part 2. I am not saying either is true, but to give some credit to the authorities, their job, in part, is to downplay situations like this. Over reactions can lead to utter chaos, anarchy and panic which is more contagious then COVID-19 is. It would probably only take one video to go viral on the internet and across social media of a run on a U.S. supermarket to cause mayhem.
A run on supplies?
It should be noted, not to cause panic, but to be completely transparent that there has been a run on some basic things such as masks, hand sanitizer and some food and water items at stores and online nationwide in the U.S.. Abroad, videos are surfacing of small riots occurring at supermarkets in Italy. Amazon is all but sold out of masks and hand sanitizers and some particular shelves (like canned goods) at supermarkets have been picked clean. Additionally, online long-term food storage options have had huge influx in orders and companies such as Wise Food and others are promising up to 8 weeks to fulfill orders being placed now.
More alarmingly and lesser known is that China actually produces a great deal of prescription and pharmaceutical medicine, including things like antibiotics. This is very unfortunate because if China does not get a hold on containment, we could see a disruption in these crucial medicines and vaccine supply chains. Without antibiotics, illnesses that have a low mortality rate (because of these treatment options) could become increasingly deadly such as the flu which claims the lives of over 30,000 people annually and that's with medical intervention. About a quarter million people are hospitalized for the flu every year in the U.S and approximately 8% (30 million) people catch the flu every year, many of whom are treated for it.
What should I do?
If your sick stay home. Wash your hands frequently. Practice good hygiene. Cover your cough. Lysol everything. Use hand sanitizer like you have OCD. Mitigate going into public and traveling unless you must. Be mindful when you do go out i.e touching doors, hand railings, et cetera.
It also might not be a terrible idea to stock up on canned goods and cases of water. Generally speaking, you’ll eat the extra cans of soup, beans, spaghetti-o’s eventually. You might look silly with a shopping cart full of this stuff but I’d rather walk in and buy the stuff peacefully than fist fight someone over Ramen noodles! Most of all don’t panic, be prepared and civil but watch the situation closely. FEMA (Federal Emergency Management Agency) suggests having at least 3 full days of food, water and basic necessities on hand and earmarked for emergency use only. Though one might consider at least a months worth.
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This blog is not intended as informational and is not to be considered investment advice. This is the authors' sole opinion. Any purchases or financial decisions should always be made after consulting with your certified financial advisor. This blog is for entertainment purposes only.
Coronavirus was a plandemic