Ergodicity

In the course of investing we tend to glom onto recency bias. Most recently (in the past 40 years) the bias has been “buy the dip” and “60/40 fixed ratio portfolios”. Over 100 years “buy the dip” and something like a 60/40 has gone COMPLETELY bankrupt 3 times. 40 years ago was 1980 and in 1980 bond yields were 15%. In 2000 bond yields were 7%, so back of the napkin your $1000 1980 bond became a $2140 bond in 2000. Rates are near zero now (say 1%) so your 2000 $2140 bond appreciated 7x to just under 15K. This is why people trade bonds and why if you scoff at bonds you might want to gain some insight. If your 40 year bond was a zero coupon bond you would have paid $1000 in 1980 and received 15K in 2020 guaranteed a 7% per year rate of return.

In the last 40 years bonds and equities have been uncorrelated or negatively correlated, meaning as stocks vary bonds are indifferent or do the opposite. So a crash in equities means bonds yawn or in fact bonds go up as the FED lowers interest rates. In a 60/40 environment that means bonds can save you. Let’s say stocks fall in half to 30 and bonds grow to 50 by appreciation instead of being down 30% overall you would be down only 20%. This is called ergodicity. Ergodicity is anti-fragile. It adds robustness to the system. Properly balanced an ergodic system won’t crash, where as a non ergodic system is absolutely destined to failure. Every system ultimately is non ergodic as every system will succumb to the red giant our sun will become, but barring that over the course of a single lifetime, you can design an investment system that is ergodic.

It turns out over 130 years 1885 to 2015 stocks and bonds we anti-correlated only 11% of the time, moderately correlated 59% of the time and highly correlated 30% of the time. It just so happens anti-correlation has been the rule for the past 23 years, the period when most of us got rich. In the period from 1965 or so to 1997 most of us did not get rich, but most of us were in kindergarten so we were oblivious.

In 68, I was 17 and my father had a building supply business that failed. In about 65 we had a recession especially in the mid west. I was savvy enough to understand what was happening. My father’s business was quite fragile based on economic conditions. I then lived through stagflation in the 70’s and the FED reaction of increasing interest rates in the 80’s. To me that meant my medical school tuition went from 6800 to 8600 in 2 months and then from 8600 to 16,000 in one year. By my 2nd year I was basically out of money. I had enough saved in 1981 to pay for the whole thing and by 83 it was all gone, frittered away by inflation. Color my plan fragile, so I went into the Navy because no way was I going to take out a student loan with 20% interest. The Navy plan was anti-fragile. I got paid $700/mo as an Ensign and all school expenses. They paid 2 years and I served 2 years. The government soon realized they could lever their position to a 1:2 or a 1:3 position but my commission was unlevered at 1:1.

So what about retirement? What is our future? Is a 60/40 fragile or anti-fragile (much less an 80/20 90/10 or whatever foolishness you can cook up.) What kind of portfolio has a chance of being ergodic over the course of 100 years?

The answer of course is to study diversity since independent degrees of freedom are the basis of an ergodic portfolio. What the hell does that mean?

In 2008 we tried to construct my portfolio using a long volume ETF called the VXX. The portfolio was long stocks, long bonds, long gold, long commodity, long EM, and long vol in the form of VXX. VXX and commodities and EM was the wrong choice, but the idea was the right idea, and is still the right idea.

Chris Cole at Atremis capital management has a portfolio made up of

long stocks 24%

long Bonds 18%

long Gold 19%

long Volatility 21%

long commodity trend following 18%

This is a radical portfolio but it is ergodic. It back tests over 100 years as never failing. despite its cost. It is not a cheap portfolio to own. Long vol and CRB trend require active management. Long vol means creating derivatives in combination when there is asymmetric risk reward, where you can afford the carry cost to have a portion of your portfolio that explodes to the upside in the face of explosive downside. CRB trend is a means to follow momentum in either direction. CRB is an asset the government does not manipulate, hence the reason oil futures went negative a couple months ago. The government had no bid on oil, so oil actually behaved in a free market non manipulated fashion. As we see commodity prices rise in the likely coming stagflation being long commodity trends will counter balance the fragility of the stock market fomo. If you bought Hertz because it was cheap, I guess you missed it’s also dead.

This kid of portfolio is like the Harry Browne Permanent Portfolio in that it requires life long adherence for it to pay off. You can’t screw around trying to be a real estate tycoon. It’s advantage is it’s long term risk because of its diversity is minimized and of you have a lower risk at a given return you can withdraw a slightly greater draw without suffering the increased SORR.

I’ve always been attracted to the PP as an investing strategy, but to date I’ve sought the feigned security of the crowd and recency bias even though I tend to be on the perimeter of that perspective. I believe the regimen has changed. Regimens do change which is why the 60/40 went bankrupt 3 times in 100 years. I think the future is quite bleak and won’t look like the past 40 years much at all. I think the political landscape is bleak and there is much damage to be done with the stroke of a pen. I do know I absolutely can’t afford to stay in cash.

As I work through this I’ll likely write more. The geodesic dome is a structure based on the distribution of triangles across a pattern of vertices sometimes hexagonal in pattern, sometimes pentagonal in pattern dispersed across the face of a sphere. What you get is a inherently strong thin walled structure capable of distributing stress across the perimeter of the sphere the structure encloses. A Geodesic dome encloses the greatest volume for the least surface area which can be viewed as a measure of efficiency. Conceptually this is along the lines of how I view this kind of portfolio. Light weight, strong, efficient, in a word anti-fragile in the face of multiple insults.

DXY Crash

The DXY has crashed It peaked in march and now is down 6% from the high. This means it takes more dollars to buy the same value. More dollars for same value is called inflation. More dollars for same value means stock prices go up but the value contained does not. Effectively this is a buy high result and is the basis of FOMO. FOMO is a greater fool strategy. You buy now in the hopes a greater fool will buy from you later. Passive index investing is a greater fool strategy as well.

Hertz is a perfect example. DEAD company with DEAD stock being bid up to 5 bux a share in a greater fool strategy, because there is always some dumbass who will buy my dead stock at 7. There’s always a dumbass until there isn’t and your $5 stock is now worth $2. In the mean time the cost of bread goes from $2 to $5 because inflation. The dollar crashed so by definition a less valuable dollar buys a lower value of goods. The smart money would have bought wheat or grocery stores or bread companies. In a time of inflation Shell oil might look good also.

In a time when GDP is crashing AND DXY is crashing, bad juju.

In addition I was just on a call regarding the economy. It turns out we now need to take out $7.50 in credit for every $1 increase in GDP. Now that’s what I call diminishing returns.

Here is an Example of Financial Engineering

Dow is down 5.16% as I write. I came across a video that explains some of how as investors we are manipulated by our government. We read a headline number like GDP or unemployment and think we understand what it means and may be use it as a way to judge risk. But do we really have a clue? You may not agree with George, but why did the government back in the 90’s change the way it did calculations?

What Does Equity Price Measure

In the late 90’s I was day trading options. The late 90’s were the lead up to the .com crash. In the early 90’s small caps exploded as tech blew up. I knew guys who made 10M on things like Compaq and Sysco and Sprint buying stock at 10 cents per share. Later they levered the hell out of it and we got Long Term Capital Management. LTCM blew up and the NY banks covered the leverage. The market narrowly missed catastrophe. Next cake .COM and stocks with no property and no earnings, not worth anything were trading in the stratosphere. This is when I was trading options. JDSU was typical. It would undergo a stock split every 90 days with the stock eventually reaching 150 bux so a single share might split 8 times in a year and the price soared to 150 bux a share. Eventually the party was over the musical chairs were filled and JDSU did not have a chair. The stock went to $2 and the stock did a 8:1 reverse split. I made money trading JDSU till I lost money. I still don’t have a clue exactly what I owned in the stock from a value perspective, but what I cared to own was access to cash flow. JDSU LMNOP QRSTUV whatever, all I was doing was trading cash flow and momentum. It’s like sky diving. The acceleration is breath taking and only ends once the ground is hit. By then you better have risk management in place. If you don’t you will bounce. That is what sky divers say happens to people who “go in”, that is suddenly decelerate without deploying their risk management. I’ve seen bounces, they are not pretty. Pretty much everything gets crushed.

I didn’t manage my risk very well in 1999 and managed to loose 1M. I made it back and managed to loose that same 1M in 2008. I made it back as well. In 1999 I did have what I thought of as risk management. I didn’t know much about bonds but I did own some muni zero coupon strips that were paying 7.5%. I had GE. GE got to 57 bux in Aug 2000 AND NEVER RECOVERED! It’s taken GE 20 years to die but dead it is. I owned Fidelity Countrafund It was 6.5 bux in 1999, went to 7.8 bux in 2007 and is about 14 bux today. I sold Contrafund around 2008 but had I held it over 20 years I basically would have doubled my money in that period. That’s a 3.5% rate of return over 20 years dividends reinvested. I did own some Fidelity tech mutual funds in 1999 that actually went out of business. I thought I owned diversity. The interesting thing about 2000 was everybody and their brother was a trader. My contractor who had dropped out of high school had 1M in the market and was filling me in on his book out on my driveway back then. Didn’t turn out so well for either of us, but my risk management was better than his.

In 2005 or so I was having coffee after Church talking to a welder. He owned 5 acres of scrub land out in the sticks near where I live. He was telling me how the 5 acres across the street from him had sold for 90K an acre. I said 90K an ACRE? SELLLLLL I said!! I had priced 10 acres a few years earlier for 4.5K an acre in a much better location and I couldn’t get myself to pull the trigger so no way was 90K an acre reasonable by any stretch. He just looked at me and said: what if it goes to 120? I live in rural FL out where I live there are no lights to pollute the night time sky. My neighbor to the east is the Atlantic ocean so when I get up to pee the eastern sky is magnificent. That same 5 acre plot today would fetch 9.5K/acre. If I was in the market I’d wait a year and could probably get it for7K.

This time feels very much to me like 1999 and 2005. High school dropout contractors and welders are all tycoons. Not to diss them at all. They are my patients neighbors and friends. They go to my Church and shop at my Walgreens. So the question is what does price actually measure these days?

I looked at the market today and saw this:

I’ve read that there are several million new brokerage accounts that have been opened since the crash in March. I’ve read that many peeps on unemployment ate making more on unemployment than they made working. I read that peeps are getting an extra $600/wk. How is it the NAS closes up .29% while the Dow closes down 1.09%? That’s a 1.4% spread! The answer is this is 1999. This is my contractor sitting at home trading QQQ waiting for the job to come back. This is JDSU. This is 90K/acre. This is where the 4T in stimulus went. This is living in a video game called “Stock Market”. This is every fund manager having to go “all in” or else be left behind and loose his job. The laws of gravity have not been repealed. I just reviewed a side deck of world wide demand and world wide production and world wide shipping (supply chain) on a region by region basis. This deck is what life is like outside the video game.

Here is an example Singapore. Singapore is a city state Island in south Malaysia. It is a wealthy country and has 6M people and had 25 Covid deaths with 38K infections. Here are a couple charts of what’s going on in Singapore

Recreation is down 65% and work is down 60%. This is common across the world. Nothing anywhere is gangbusters. The title of the report is “Slowly Recovering”. Is Singapore consistent with a NAS of 10K? What happens to QQQ when the stimulus rolls off in July and NAS has a down day? What does price measure? Rate of change or value?

How Much Risk?

Here is a shot of the S&P on Feb 19 when the market peaked at 3393 intraday.

Here is a shot of the local market low on 3/23 of 2191 intraday

Here is a shot of Friday’s chart with an intra day high of 3049

Indexes are designed to go up. Indexes because of their design do not represent some intrinsic value associated with some intrinsic risk. Instead they represent a market elevator of unknown value and unknown risk. Passive investing is simply a on off switch. You pay some money and turn risk on or you cash out and turn risk off. The buy and hold passive crowd neither knows the risk they hold, nor do they ever turn the risk off. It’s risk on all the time. The risk however does vary over time. At market peak on Feb 19 here was the VIX 10.20

On March 18 it topped out at 86.76 with the resulting market low 5 days later. That’s 8.5 times the Feb 19 level

On Friday it topped out at 27.51, 2.69 times the Feb 19 level.

Since risk is what you own. Is something 269% above the Feb 19 level a high level of risk?

I was listening to a podcast breaking down the makeup of the S&P in comparison to the MSCI. They broke down the S&P with and without FAANG plus MS in the comparison using the Friday 3044 level. The expected level of the S&P 500 minus the FAANG + MS was about 2400 meaning without the FAANG+MS the S&P is up only 209 points above the March low. Over 600 S&P points are due to 6 stocks, the FAANG+MS. Only 200 points are due to the remaining 494 stocks, and the volatility is still +269%.

40.77M jobs lost. Let’s say when all is said and done 15M go back to work leaving 25M unemployed. Do you think if you left a 100K/yr job you are going back to a 100K/yr job? What if some joker will do that job for 50K? What happens to market risk if the job you go back to pays 50K less, meaning you will be severely limited in your purchasing power. No brand new F-150’s for you. Maybe no college for Junior.

The FOMO machine s basing everything on 6 companies and every Robinhoodie out there is plowing his stimulus check in the 6 FAANGS. You can make money on the way up and you can make money on the way down. It’s buy low sell high or sell high buy low (short sale). Either one will make you a ton of money. If you buy higher and then hold, in a market with 269% excessive risk what could possibly go wrong?. You can’t short an IRA or a Roth. The algorithms live to make profit and they make it selling high buying low just as easily as they do buying low selling high. The whole time the talking heads are selling you on a V shaped recovery because they know you have sucker stamped on your forehead. Your very mantra has sucker stamped all over it “buy higher never sell”. What buy higher never sell means is you constantly accumulate more and more risk. Sometime you might ask the question how much risk is enough risk to own?

What is the Enemy of Long Term Success?

The usual Mantra is BUY and HOLD even if your ass falls off! Then they go into some story about not being able to time the market. Just because YOU can’t time the market doesn’t mean the market isn’t time-able. The story goes “Oh the market fell and then Billy Bob sold, and now the market “recovered” and now he’s at a loss!” This isn’t how you time a market. How you time a market is, the market is high and I’ve made a lot of money, so maybe I should book some profit before the profit is lost.

There is some asymmetry to a market cycle. Early in the cycle there is mostly upside, late in a cycle there is ever increasing potential big time downside. At the end of a 12 year hyper-expansion there is MAJOR downside and not much upside. One thing to understand is as an investor you are really wall street’s sucker. Wall street wants to do one thing, sell you shit no matter what. The world is totally under water and the boobs on CNBC are quacking about green shoots. THAT crowd is paid to sell you shit. The Wall Street Journal is paid to sell you shit. Vanguard is paid to sell you shit and YOU are expected to buy shit no matter the asymmetry of the investment cycle, and no matter whether it’s healthy for your portfolio.

No matter that the rate of change of GDP has been slowing since Q4 of 2018 because that was the quarter acceleration peaked and turned to slow deceleration. It means yes there will be a higher high but a slowing higher high that’s bound and determined to become a major draw down.

We do simple calculations on our money, compounding calculations like this:


Here is a typical retirement portfolio. It starts at 50K, adds 50K/yr compounds at 6% and yields 3M bucks after 25 years. And we think that’s the ticket! 56% of our money comes from compounding. But wait that 6% needs to be in excess of inflation. If inflation averages 3% over the 25 years

Our 3M is really only worth 2M and we made only 33% on our money.

When you have a draw down how you get back to zero follows a formula Y=X + X*A.

Y = back to zero amount

X = starting amount after loss

A = % growth needed to get back to the start

L= % loss

So lets say you loose 10% on $100 how much do you have to compound to get back to $100?

100 = 90 + 90*.111, .111 = L/X = 10/90

So you have to compound an excess of 11.1% total ABOVE INFLATION over some period of time to get back to zero.

Let’s say you loose 30%.

100 = 70 + 70 *.428 to get back even ABOVE INFLATION. To calculate the % increase needed simply divide the starting point (in this case 70) into the % loss in this case 30. In other words L/X = 30/70 = .428. So you have to grow your money almost 43% above inflation to break even. Here is the sad truth

If you have $70 and need to grow it to $100 to break even and you have 3% inflation which yields only 3% of growth, it takes 12 years to get back to zero. Bet you never saw that on buy and hold CNBC. Bet you never saw that on some bogglehead web site. This is what you get with the old “you can’t time the market” mantra. It takes 12 years to get back to zero, with zero drawdown on the principal (say for retirement income). Lets say you correctly exit at a market top, say at $99 and the market falls 30% how long does it take to get back to $100 presuming you can time the market bottom. So the market falls from 100 to 70 and then you stick your 99 back in the market. How long does it take to get back to 100?

In one year you’re already $2 ahead. In the buy and hold case you’re $28 behind in one year

There is a saying

“The enemy of long term compounding is short term draw down.”

This analysis is a variation on a system control called a bang bang control analysis, where you model and optimize abruptly bounded conditions, like what if you loose 30% vs what if you loose 1%, how do you optimize those possibilities, solving for length of time to get back to zero. It assumes a steady 3% over inflation return. But even with those constraints it’s illustrative when Wall Street is trying top sell you FOMO, quick quick buy high it might go higher! Never mind 34M unemployed, never mind several years of projected negative GDP. Remember when you can’t identify the sucker, you are the sucker.

Gimme That FOMO!!!

Over the weekend I was looking at an app on TomTom called the world according to traffic. Here is the view I found most interesting. It’s a sampling of traffic across the world. You can also view the Full Ranking which allows you to deep dive into many many cities across a given region.

By looking at this data you get some idea of what’s happening apart from the media narrative. Here is an example:

Wuhan

The real time data is the bold line to the minute. The dashy line is the previous week, and the dotty line is the average for 2019. All you hear about i how CHINA is open. How they squashed the bug so well. If Wuhan is open why does the traffic indicate it’s closed? It was pretty open till last Thursday and now it seems to be closed again.

Guangzhou:

One of my kids comes from Guangzhou. I’ve been there a couple of times. It’s a big bustling city of 13M people. It is the most important financial hub in southern China, but also loaded with industry and manufacturing. Seems like Guangzhou was open till last Thursday and closed on Friday similar to Wuhan. There is a holiday going on in China so maybe that’s the deal.

Hong Kong:

Hong Kong doesn’t have a holiday. It did have a holiday on May 1 so we see a 4 day weekend. On the Covid-19 map China doesn’t report individual data else wise I could look at Hong Kong infection rates vs traffic. So I will look at a city that has both infection data and traffic data NYC

You can see NYC is locked down tight. What about infections using the Johns Hopkins map?

You can see locked down NYC has dramatic improvement in new cases implying NYC has good success in driving down the R0.


This is where I live. It’s pretty closed down but not as closed down as NYC. The Johns Hopkins case map shows only the infection rate for FL so I can track that and it does show individual data for my specific county so I can track that

This is what FL as a state looks like and this is waht Orlando looks like as a data point.

Today FL is supposed to at least partially open up. GA opened up over the weekend. These maps give a way to gauge increased traffic vs increasing or decreasing infection rates and the likelihood of re-quarantine as a function of economic behavior apart from the media spin machine.

Regarding FOMO if the world is shut down as demonstrated by traffic, and the virus is still growing at an exponential clip world wide, I’ll let you complete that thought on your own.

I Still Ain’t Feelin’ It YET

So I’m looking at the COVID map after seeing the FEDS just ordered 100K more body bags. Today we stand at 62K dead. Yesterdays infection rate added 27K. At 27K/d at the end of May we will have added nearly 837K more to the case total therefore giving a expected total of 1.891M and if the death rate is stable @ 5.8% we can expect 109K dead by June 1st and 1/3 of those body bags to be consumed with 2/3 in reserve. This is under a social distancing society closed regimen. If the regimen goes away why would anyone think things get better?

Deflation is not the same as recession. In recession the fed cuts rates and a stimulus impulse surges through the economy. In recession things get cheap but it looks like tomorrow things will be more expensive i.e. things will reinflate. So the motive is to buy low before things go high. Deflation is an entirely different psychology. The deflationary psychology says “yes things are cheap, but tomorrow they will be cheaper so I will wait”.

CNBC wants you to believe this is recession. They get paid to hawk stocks. Virtually ALL of FIREland is buying that narrative as well. I’ve seen several blogs doing post mortem’s on how passive investing has worked so well and now it’s on to new heights! 30 MILLION people are out of work and an economy that was supposed to be up +3.5% is down -4.8% for a net of 8.3% decline for the quarter and that data only includes 2 weeks of virus. The world is in depression. Commodities are in depression. OIL actually traded negative. Ford’s bonds turned to junk and the Ford CEO on the quarter call admitted there was no hope, yet the Nasdaq is down only 0.93% on the YTD.

In Quantum physics reality s governed by wave functions which give probabilities that describe where a particle, say an electron MAY exist. Those probabilities are described by the wave function raised to the second power. It works like the risk distribution in a model of prices. A stock may have a price of $15, but the likelihood of that price being the real price (the real price is the price at which a transaction occurs aka the price where the transaction becomes liquid) actually lays across a distribution, say between $7 and $22 (just an example). So if you bought yesterday at $15 what you bought is quite unlikely worth $15. It’s worth what the market says it’s worth most likely between 7 and 22. So what determines? If we are in a V shaped recession the price is $22, If we are in a deflation the price is $7.

109K projected dead on May 31 with no change in social distancing policy, worse if the policy is more lax. The whole world in deflation and Ford has no hope. Today Gold crashed so I bought more gold. I just read Shell Oil cut dividends for the first time since WW2. I did not buy Apple, because my bet is we are headed to 7 not 22 and people aren’t in the market for a new iPhone. They’ll wait and get it at a cheaper price.

In the end the zombie companies will fail there will be deflation and then recovery in the US but the future won’t look like the past. We no longer are an extension of 2019. The bond market will predict the future. I’m not sure the stock market is even a market any more. It’s more like a wind sock clown hooked up to a big money pump flopping around. Ford says there is no hope. Shell cut dividends. Some people are dealing with reality, some are watching CNBC.

The Power of Magical Thinking

I sit here today and watch a world that is being pressured to reopen. The reason we are in this mess is we refused to understand reality. China refused to admit and treat the release of the Wuhan Virus. It is my belief the Wuhan virus was likely released from the level 4 Wuhan virus factory, through shoddy sterilization practices. Having worked in an OR for 35 years the conditions necessary to sterilize the tools in the autoclaves are severe and those machines break down regularly sometimes daily. The quality control is demanding and if not adhered to would cancel any insurance protection the facility would have, i.e 100% compliance. In other words working with contamination requires pristine commitment. My guess is an autoclave broke down and the test tubes went into the garbage unprocessed. The first recorded tic of some new virus in Wuhan was in late Oct. The senior corona virus researcher at the Wuhan level 4 lab seems to have left for “the country”, likely as ashes spread around some bean fields. The Wuhan facility is about 200 yards from the wet market where all of this transpired. China apparently Magically Thought hiding the reality under the carpet was a solution when in fact aggressive contact tracing was what would have worked at that stage. ANY SECOND YEAR MED STUDENT KNOWS THIS. It is not esoteric knowledge.

The WHO failed to call this a pandemic till March 11 even though it met all of the WHO’s criteria for a month. I guess they Magically Thought by NOT calling a spade a spade it somehow wouldn’t be what it is. Now I read the Magical Thinking that there are way way more infected than we realize. Instead of doing the experiment we make assumptions. I read that though the social distancing has slowed the spread, the Magical Thinking that a slower rate of spread is somehow consistent with no rate of spread as in herd immunity.

I read an article about SF in the Flu pandemic of 1918. The spread was slowed by social distancing and wearing masks. The Magical Thinking was the coast was clear. The mask order was lifted and victory was declared. 6 weeks later the death was back. After the first ban had ended the ability to restore the ban was extremely diminished, and so as any 2nd year med student can tell you. Magical Thinking is simply lying to yourself using a narrative to stop the cognitive dissonance of choosing to believe a lie.

Today the price of OIL went negative for the first time ever. It’s a concept so ridiculous it can’t be believed. What that says is the producer will pay you to take a barrel of oil, yet the QQQ is at levels that are positive for the year. Unemployment is at 22M and fully 1/3 of the companies are likely to be out of business by the end of the year. I talked to someone yesterday who told me they lost their business, nothing Magical about that. Yet we Magically believe in a V shaped recovery. World wide supply chains are not disrupted but destroyed because if you can’t make sell and ship product, well you simply can’t, and the debt will work its Magic. Everything runs on margins. Landlords will discover the Magic of renters who have no jobs, and their debt will have its way. How does an oil industry who’s product is under water stay in business? So what’s it going to be, your money or your life? What chapter in Vicki Robbins book covers this eventuality?

The solution is for the world to move away from the past, and move to a leaner more rational existence, called the future, and a narrative that corresponds with reality. FIRE actually got this more or less correct by right sizing existence. They got it wrong by over leveraging their tiny little nest egg. The beginning of recovery is to understand what you have is not what you had. What you had was extremely low volatility and high return and a narrative based on that. In a world of 22M unemployed what you have is extremely high vol and low to negative return maybe for the rest of your life. Oil at <0 is called the mother of all deflation. Well disciplined children listen to their mother. If you allow the narrative to rule you, you will be ruled and screwed at the same time. Jim Creamer doesn’t get paid by you, he gets paid by them, to sell shit to you.

Living in the Land of Hurricanes

I live in FL and have been through 2 dozen hurricanes. Some have been close calls some direct hits. I live on the Atlantic coast and some have skirted landfall with the eye 30 miles from my doorstep traveling a 3 mph. I have been involved with tornadoes spawned buy wind sheer. I’ve had hundreds of tons of once majestic trees that have left my property in the back of a dump truck. I’ve had infrastructure destruction. I’ve had power outages that lasted 7 weeks in 85 degree FL sun. Ya So???

The rise in virus may have peaked, but the aftermath is FAR from over. I remember in Francis the storm hovered over my house for 24 hours. Having a hurricane overhead does not induce an easy rest. Of course the power was out and I had to keep buttoned up or risk loosing the roof so I sat in the dark alone listening for a freight train indicating a tornado. Emotionally you get the shit walloped out of you.

Then the storm passes and you are left with the aftermath. One storm every 3rd power pole down my street had snapped and twirled the wires around forming wires expected to be separated by 6 feet into a tightly twisted cable. To power that would simply short the system. I think I was out of power 2 weeks on that occasion. Another time they were just about to turn the power back on and my neighbor Paul Bunyon and his trusty chain saw decided to cut down a tree and it tore down the main line that fed about 10 families which of course put us at the bottom of the triage. That one kept me out of power for 42 days. I often would get in the car and head over to my carriers’s cell phone tower and park underneath to make calls. The man with the strongest signal possess the bandwidth and a car parked under the antenna is a pretty good bet to acquire a cell.

What’s the point? The very first thing is to assess the damage. Did the roof blow off, are the windows intact, are power lines down. The next is to access stores, yep plenty of Peanut butter, plenty of water stored in all the bathtubs. When the power is out the pumps don’t run and there is no flushing unless you have a bucket and a source of stored water, like a bath tub. You flush then throw a bucket of water in the toilet tank for next time. You flush about once a day.

Fire up the generator and cool down the refers to try and keep the frozens frozen. You have to switch between the refer and the microwave because you can’t run both and a hot dog tastes damn good. You spend the day timing how and when to refill the genny because there is no gas available. There will be in a week, but right now it’s ration city. You sweat a lot. Next try to get some communication going maybe a TV with local coverage and maybe internet. The genny keeps the phones charged and the modem hot. At night you sleep under an open window and the dew settles on you and makes you clammy so instead of hot and sweaty you’re cold and sweaty

People think this is going to be a V. There is no chance of that. We are not even out of the storm yet. We have not even the first clue of the damage, and the damage is going to be far more extensive than we understand. The peak infection may have been realized but infection will continue and the next phase will be trampling down flare ups. I live in a forest and have been through forest fires also and have experienced flareups. It’s going to be brutal. In a month we passed from a predictable life into a cloud of unknowing. Don’t just presume everything will be OK. If you can’t predict when you will be out of gas, your meat will rot. If you don’t know where to get gas and when it will be there, your meat will rot. If you don’t have water for the toilet… We are entering a survival phase. This virus disaster will follow a disaster based reality not a historically based reality. Things do recover but not quickly and not without hiccups probably multiple months of hiccups.