Reasons to Feel Better

How about some good news?

Last night, China reported no new local infections for the first time since the outbreak began three months ago.

The Federal Reserve invoked its emergency backstop for prime money market mutual funds, a step that helped in the 2008 crash.

Congress and the White House are closing in on a $1T stimulus package that will include distributing cash to many Americans and propping up small businesses to help avoid layoffs. Airlines and hotels top the list for rescues.

The European Central Bank announced an $820B emergency bond-buying program.


Projections from Britain’s top modelers of infectious disease have the West bracing for a long battle against the virus.

In an interview with Sinclair Broadcasting, I provided the following commentary, which was not included in their story:

“It seems reasonable to close stock markets for the duration of the virus fight. How can stocks be valued if the short-term revenue and profit expectations of stocks go to zero during an economic pause? We humans know they’re not worth zero, but algos might not.

“Markets could stay shut down while the virus is brought under control, then businesses are reopened. After a couple of weeks of life like it used to be, markets could reopen with the economy operating at about the level it was prior to this singular phase.

“The stock market falling 10% one day, rising 10% the next, then falling 10% again is hard on people and the financial system. It would give everybody one less thing to worry about if it were put on ice for a while, as it was after 9/11.”

During World War I, the NYSE closed for four months beginning in July 1914.

Why can’t the government mandate that all payments stop temporarily? Nobody could be fired during this phase, nobody could go bankrupt because nobody would be collecting anything from anybody. It would all just freeze, with Treasury reserves used to keep utilities on and food distribution moving.

There is no sign of such action, and I have a feeling the reason for it is that authorities worry that people might like it too much. Nobody would want to go back to school, work, and bill-paying at the end of the freeze. Instead of pausing the economy, the government is leaning toward providing people with money to feed into it while it idles.

Those opposed to closing stock markets for the duration of this say that doing so would cause irreparable harm to the market’s reputation of operating free from government interference.

Treasury Secretary Steven Mnuchin said Tuesday that he thought it was crucial to keep markets open during the outbreak, but “we may get to a point where we shorten the hours.”

What good would that do? If I were in charge, I would pause the whole economy, markets included. This is a non-economic moment.


Our plans will continue running as ever—no changes.

I want to make sure this is understood by all.

I have recently discussed tax harvesting, moving capital from one plan to another, and changing non-leveraged funds to leveraged. All of this was from various ideas I have researched and thought about, not me making changes to the plans or implying that you need to do so.

The letter’s plans will run unaltered through this event. I will not change funds, I will not move money from one plan to another.

This removes stress you might have felt from indecision. Doing nothing but following the plans is not only acceptable, it is advisable. The letter is on a schedule and will stick with it.

First responders stress the importance of training for crisis times, because the mind is unreliable when under duress. Now is not a moment for more thinking, but less. It is time for autopilot to prove its worth. I am confident that it will.

Soon, the letter will go truly all-in.

It would have done so at the end of this month even if we had already been on a one-sell-skip version of the 30 down rule instead of the four-sell-skip version. Either way, we would have entered April all-in. The plans survived such a scenario in extensive testing. They recovered to new highs.

This is the first real-world, deep-stress test. The wrong reaction would be to alter the plans in the middle of it, so we won’t.

Count on it. No more variation discussions until this is behind us.


We are starting to see repeats of 2008 media memes.

Economists are lengthening their projections of worst-case scenarios. Investors are debating whether it will be a V- or L-shaped recovery. People are saying it’s 1929 all over again. All of this happened near the lows of 2008 and 2009.

People are also selling everything, including Treasuries and precious metals. There is a flight to cash, which is straining money markets and strengthening the dollar, spurring analysts to say it’s harder to borrow dollars.

This looks like the compressed spring set-up that I discussed in the letter as being the bullish case. Little could surprise on the negative side anymore, but plenty could surprise on the positive.

What if the West discovers, as Japan did, that most infected people never exhibit serious symptoms, and that a gradual reopening of the economy is acceptable? What if the 18-month timeline becomes instead two months?

Even after all the attention on the virus, only 9,000 people have died—worldwide. All reaction is to the what-if scenarios, which are doomsdayish, but they haven’t happened yet and we’re pretty far along. What if they don’t happen?

We would find an economy undamaged and heavily stimulated, every American packing an extra $1,000 from Uncle Sam dying to go shopping in excitedly reopened stores, and stocks at compressed prices with a world of cash rushing to get in before everybody else does.

Unleash the algos on that and let’s see what happens.


The next bull market will rise from ruins, not sunny commentary and solid data.

The March 2009 bull roared out of deadened corporate earnings, soaring unemployment, a rash of bankruptcies, and a global contraction that Nouriel “Dr. Doom” Roubini said would render 2009 “lost,” financially speaking.

He told the Guardian in January 2009, after the S&P 500 had declined 43% over the previous 15 months, that the housing crash was only halfway done. He then offered grimmer news:

“The losses now are mostly in mortgages; wait until it hits commercial real estate, the credit card companies, the auto loans, the student loans, the corporate bonds. There’s a whole pile of stuff. The financial system is insolvent. It’s technically bankrupt.

In March 2009, after the market bottomed, he wrote on his firm’s website: “Dear investors, do enjoy this dead cat bounce and bear market sucker’s rally … don’t wait too long until you jump ship while the financial Titanic hits the next financial iceberg: you may get squeezed and crashed in the rush to the lifeboats.”

Stocks kept ripping 70% higher over the next year, and on from there, as you well know. Nobody heard much from Roubini again—until recently, and you can guess the disposition that media coaxed out of him. Sunny? Ha.

It can be distilled to one comment he made to Yahoo Finance yesterday: “For now, there is not much to be optimistic about.”

Among Roubini’s other recent contributions to punditry: He warned in January that US-Iran tensions would cause an oil-price spike. The price of West Texas Intermediate is down 63% this year.

This is not to pick on Roubini. He is one z-val among thousands, wrong half the time, but in a downturn people become vulnerable to the pessimism that he and others of his ilk build their careers upon. They will never say, “That’s probably enough bad news. I think things are about to get better.”

No, they keep saying it’s going to get darker all the way to the bottom and then all the way back up.

The next bull market will begin amid the darkest commentary yet, just like it did last time and the time before that.

The last message you hear before the reversal will be: If you think this is bad, just you wait.


Don’t forget that sunshine and fresh air are yours for the enjoying.

It does me a world of good to get out of the office and take a walk or a bicycle ride. Roger is working in his yard. Japanese friends are circulating early cherry blossom photos.

Spring did not get the shutdown memo.

Make this a good day!

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  1. f e shipley
    Posted March 20, 2020 at 3:16 am | Permalink

    I do enjoy you emails. This time though I wouldn’t mind your estimate on whether China is telling the truth. My “guess” is China’s press releases are at best 20% accurate/truth. “Sky is Falling” thing.


  2. Joe
    Posted March 20, 2020 at 12:57 am | Permalink

    Thanks, Jason and Roger.
    Cheers, Joe

  3. Jerry
    Posted March 20, 2020 at 12:34 am | Permalink

    I doubt that publishers of most financial letters are as “shoulder to shoulder” with their clients as you are Jason. Just letting you know I deeply appreciate it during all this craziness. Many thanks, Jason.


  4. He Who
    Posted March 19, 2020 at 11:02 pm | Permalink

    The distinctions between 2008 and now are important, beginning with the level of global indebtedness. The Fed’s responses to the various elements of the crisis in 2008-2010 were fairly narrowly targeted. (Money market problems aside…) The global slowdown/shutdown in this case is two pronged: healthcare crisis generating isolation, and an oil price collapse exacerbated by a supply shock that is now geometrically amplified by the collapse in demand.
    Smarter minds than mine are probably piecing together rational approaches to this toxic combo, but further money printing seems a bit like an acceleration into a cul de sac.
    While I agree that shutting off the algos (either directly or indirectly by closing the market) could be an important step, I think the crisis reveals one terrible side effect of the “boiling frog” syndrome that the US electorate has succumbed to: the shift to a ‘gig’ economy has consequentially created far too many “tight rope” walkers working without a net. The statistic suggesting that a large proportion of the population cannot handle a $500 emergency is now reaping its due. Simply ‘freezing’ payments won’t be enough for those that are used to stretching this week’s “uber revenues” across groceries, rent, clothes, and necessary medicines.
    Until there is a vaccine (or meaningful reasons to believe one is coming), the printing presses do need to be replacing all that lost income, and especially for those working without a net.

  5. Patrick Ambrose
    Posted March 19, 2020 at 9:39 pm | Permalink

    Jim, I saw your recent letter that you weren’t going to move your plan from one leveraged ETF to another. When you mentioned that in a previous letter I thought it might be an excellent idea. I hope you go into why you’re not doing this in the full letter at the end of the week it would be interesting to hear your commentary on why you shouldn’t move from TQQQ to UPRO or something and use the loss to offset taxes. I’m sure there are a ton of good reasons and I would like to hear more about that.

  6. David Pridgen
    Posted March 19, 2020 at 8:26 pm | Permalink

    I just wanted to say thank you for the positive emails you have been sending. There is a lot of end of the world talk and it wears on you after a while. I just listened to an interview of the governor of NY saying the economy will be worse than the Great Depression after the virus thing is over. Anyway just wanted to say thanks for a more reasonable outlook. I know things could get bad, but there is no indication of that right now. So why borrow trouble.


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