Just Relax, Abigail Disney

Abigail Disney is screaming about how Disney furloughed 43,000 employees from their parks. 

Abigail, relax. 

First off, because of the CARES stimulus package, all of these employees will get $600 added to their unemployment insurance, so they will be making about $1,100 a week. Much more than  the average Disney Parks employee makes. The parks will be reopened by the time the 39 weeks (almost 10 months) of unemployment insurance runs out. 

Secondly, you complained about how much Bob Iger makes. Iger is the chairman of the company, who under his tenure as CEO helped Disney go up 700%, presumably making billions for the Disney family. Bob Iger makes $0 right now since the shutdown began.

Third, this is how business and government work together. The government asked businesses to shut down. Do you think Disney, started by your grandfather, wanted to shut down the parks? Instead, the government told Disney to shut down, they complied, and the government is directly compensating those employees through the one-time stimulus checks, plus the unemployment. You can’t expect companies to stay in business forever without producing goods and services. If you want to help the millions of employees who benefit from the Disney ecosystem, then just let the government and the guy who increases your wealth 7x do their jobs. 

The employees will be fine. Once the parks reopen in a month or so (hopefully), they will be rehired. IF THEY WANT TO BE. Or maybe they will change careers or explore other interests while they are making $1,100 a week on unemployment. Don’t dictate their lives for them. 

Fourth, who are you? 

Your grandfather’s first film production business went bankrupt in 1923. He started it in 1920, created some characters, made some ads, and then went bankrupt. He had to fire people and he couldn’t pay people back. That sucks. But that’s business. He then borrowed from his parents (your great-grandparents), who took a risk on this bankrupt cartoonist and started his new company, Disney, from scratch. 

And, guess what? His business still sucked. Then the Great Depression started. Horrible. Walt Disney was praying for a miracle. His movies were barely breaking even. And a miracle came around 1935. 

A man named Kay Kamen took a two-day bus ride across the country to convince Walt Disney that the movies were just a giant focus group for toys. If kids liked a movie, that meant kids would like the merchandise, which would be even more profitable. 

He convinced Walt to try one thing. An experiment. Put that mouse, that rodent, drawn by Ub Iwerks (the smartest man in the room that Walt had been standing in), on a watch. C’mon, just try it. 

Walt did it. In 1935 they sold two million watches. Phew! 

He never looked back. And that’s why your family is worth about $10 billion. Maybe more. Who knows? 

It took 15 years of blood, guts, tears, and fears. One bankruptcy. Begging his parents to take a chance. Building a business through the worst part of the Great Depression. And then taking a chance on putting his beloved characters on toothbrushes. Man, 15 years. That’s difficult. You try it. 

Fifth, I get it – you want a wealth tax. People who make $50 million a year maybe should get taxed more. I’m not one to say. But let’s be realistic. YOU AREN’T GOING TO BE TAXED. You moved all of your money into trusts, charitable trusts, family trusts, etc. You can’t be taxed. You can’t be touched. I appreciate that. You did smart things with your money. Billions? Who knows. But you were smart. But, you think, everyone else should be taxed. 

Why didn’t you take some money and help out the furloughed workers? Maybe you did. I hope so. 

All of this is to say: 

Walt Disney always stood next to the smartest person in the room. And he walked from room to room:

• Animation: Ub Iwerks made Mickey Mouse
• Movies: Winsor McCay made a lot of the initial animations for the movies
• Business: Roy Disney, his brother, helped him with the business aspects so Walt could focus on the art 
• Merchandising: Kay Kamen
• Bought his first movie: Margaret Winkler had the insight to buy his first movie, “Alice in Wonderland”
• Named the little rodent Ub drew: Lillian Bounds
• Married him (the most important decision a person in business can make): Lillian Bounds. 

So just relax. Enjoy the ride.

The post Just Relax, Abigail Disney appeared first on James Altucher.

from James Altucher https://ift.tt/3awdhJ1 via website design phoenix

The Problem Is How We Deal With Problems

“Wake up, you idiots!” shouted John McAfee, founder of McAfee, the virus software company, and now billionaire-on-the-run as he hops from country to country after being charged with tax evasion. 

Earlier he told me, “I went to the Bahamas, but then the U.S. tried to get me there… Cuba… the Dominican Republic… and now I can’t tell you where I am.” 

And then we were off to the races! 

I’ll skip the part about his tax evasion (podcast out next week or maybe this Thursday. We’ll see) and get right into coronavirus. 

“Everyone listened to the media,” he said, “like a bunch of sheep! And who is the biggest beneficiary of this virus? The media! 

“You used to go to work and commute 9–10 hours a day. Now, everyone sits at home and reads the media that tries to scare you. 

“‘MILLIONS OF DEATHS!’ they said. We never even got close to those numbers… Sweden, which did zero lock down, was out partying the whole time, and they’ve hardly had any deaths. I’m over 70… I’m in the most susceptible population; do you think I care? Of course not! There’s a 2-in-100,000 chance I die. I’ll take those odds any day. Two million people a year die from diarrhea. What are we doing about that?”

“But John,” I said. And I was about to agree about the media but he kept going. 

“Your dollar will be worth pennies in two months, trust me.” 

“But what other currency will people put their money in?” 

He broke out laughing. “Who is going to trust the dollar?” 

“I don’t know! John! Give me something positive here!” 

He laughed again. “There’s nothing positive. You’re on a plane that’s crashing. What sort of positive news do you want to hear? That the plane will crash more quickly?” 

He said, “The only way people will value the dollar is if they can use it to BUY goods and services. But you guys aren’t producing shit! You’ve shut down! You think the economy is a light switch?” 

I kind of wanted to defend everything because I felt like he was accusing me. 

“OK, but what if we reopen today?!” And I have to put an exclamation point because he got me revved up. 

“Well,” he said, “then there is a slight chance the economy can come back strong. You have to get back right away. Will the media let you? They don’t want people going back to work. Who is going to pay the media bills then?” 

“OK,” he said, “I’ve gotta go.” 

We spoke about his adventures evading the law, coronavirus, guns, the Wild West, the Constitution, N.Y.C., and on and on, but I said, “But I wanted to talk about bitcoin.” 

“Next time,” he said and logged off. 

I get it. I didn’t agree with everything he was saying (he’s INTENSE). 

But I get it about the media. And I get it on the constant analysis and reanalysis of every number and then policy changing based on whatever the latest math-driven model is in the media, even though, as I’ve pointed out here every single day, all of the numbers are clearly off, the assumptions are off, the worst-case scenario is ridiculous, the best-case scenarios are also ridiculous…

The media has been scaring us since day one. Summary of headlines I’ve read since January: 

• This virus is biological warfare
• 140 million people could die
• It has a mortality rate of up to 10% AND it’s very contagious
• Everyone in the world will get it (combined with a high mortality rate).

Right now, all over the U.S. (other than N.Y.C. but N.Y.C. has successfully flattened the curve) hospitals are empty when they were supposedly going to be overflowing. 

Of course, deaths are horrible, but nobody should feel obligated to say that. Of course they are. Nobody questions that. 

But there are “collateral fatalities” from shutting down the economy: 

• Domestic abuse / child abuse on the rise (calls in the Bronx about child abuse have gone up 6x)
• Depression, mental health is up (Indiana’s mental health hotline has gone from 1,000 calls a day pre-virus to 25,000 calls a day)
• “Elective procedures” (including certain cancer treatments, heart treatments, etc.) aren’t happening, which will cause future deaths that could potentially dwarf this virus. 

Running a country (every branch) relies on our leaders taking a complex situation with many variables and making the right decision. 

Variables here were:

• Understanding more deeply (deeper than the media) the cost in lives of COVID-19
• Understanding more deeply the cost in lives from shutting down the economy
• And understanding more deeply the long-term suffering of 128 million workers and the 100 million family members who depend on them.

The average American has $400 in the bank; $1,200 isn’t going to help. The average restaurant had 16 days of cash in the bank (before the shutdown). Yes, many loans were approved. But there are 30 million small businesses in the U.S. Even with $700 billion going to small businesses, that averages out to $25,000 per business. I can tell you that won’t save most businesses. 

What are the agendas? What is the media’s agenda? What are the agendas  of the experts? What are the agendas of Congress and the president? 

I don’t really know. Clearly the economic shutdown is a horrible thing. And clearly anyone dying from the virus is a horrible thing. But what will happen in a second wave, or next year, or the year after, now that this is a part of our lives?

How will we react the next time the media tries to scare us? I don’t know. Will we react worse? 

That said: 

Georgia is opening up part of its economy today. Texas is opening up quickly. And other states will race to open up to not be the last one with zero economy and then blamed by their citizens for opening up too late. 

I do think John is wrong. 

I do think if we open up quickly enough that, although all businesses won’t survive, many will, and some of our supply chain will move back to the U.S., and the rest of the world will continue buying our goods, services, and dollars. 

Maybe I’m too optimistic. But in early March I was on my podcast (the episode with Dr. Marty Makary) suggesting that April 15 will be the peak in the US and the number of cases and new deaths would be minimal (but still sad!) and start going down. 

This came true. I haven’t been buying stocks right now because there’s still a lot of uncertainty. There’s still crazy stuff going on. I can write a whole article no why this oil thing is stupid to worry about and yet, the fact that this oil thing even happened makes me nervous about the insanity of the situation now. 

So I am not always optimistic. I want to be realistic. But I see how the U.S. is going to reopen and I realize the uncertainty and I do think we’ll come out the other side. The world, at the moment, has nowhere else to put money. But it requires action on our parts. 

I was accused of being too optimistic when I was on CNBC during the financial crisis. My friend Larry, a hedge fund manager, told me, “Dude, maybe you need to tone it down. Everyone thinks you’re an idiot. The market is not going up from here.” At the time the S&P 500 was at 700. Now, 2,700.

Even my mom called me when I was leaving the CNBC studio one time in 2009 and said, “Maybe you shouldn’t smile so much when you are being optimistic.” 

“But why?” I asked her. “Things are going to be great.” 

The post The Problem Is How We Deal With Problems appeared first on James Altucher.

from James Altucher https://ift.tt/2VNWA6n via website design phoenix

Always Be Skeptical of the Experts

We have shut down the economy because of the experts. First the mathematical models said there could be up to 140 million deaths worldwide. 

Then they said fewer, and fewer, and fewer, and we shut down the economy, and fewer, and they were wrong about the effect of the shutdown, and fewer…

There is no such thing as an expert.

First, a couple of stories.

In 1799, George Washington caught a cold. He was coughing and he had a fever.

This was considered an emergency. The greatest American alive was sick!

Blood was considered the dominant force in the body for about 2,000 years before this. So if someone was sick, something in the blood needed to be purged.

Hence, bloodletting. I don’t know if leeches were involved.

George Washington died the next day. Not from a cold. From shock. Too much bloodloss.

In 1981, just 33 years ago, Bill Gates said, “There is no need for anyone to have a computer in their home.”

Nobody knows what 97% of the universe is made of (physicists call it either “dark energy” or “dark matter” but there is not a single testable theory of what that is).

Here’s an important story for investors. About a decade ago, a company called Odeo was started in order to build a platform for podcasting.

Two of the programmers developed a side project. The side project showed a tiny bit of traction. 10,000 people signed up.

The CEO was getting frustrated with the podcasting platform. Nobody was signing up.

So he made an offer to all of the investors. The investors were some of the most prestigious and sophisticated investors in Silicon Valley and the CEO was a seasoned professional.

He said they were going to focus on the side project BUT if anybody wanted their money back, he would personally buy their investment back at cost. Nobody would make any money but nobody would lose any money.

100% of the professional investors asked for their money back.

Then the CEO renamed the company to Twitter.

Larry Page and Sergey Brin wanted to be academics. They tried to sell their company to Yahoo! for $1 million. They were rejected. Then they tried to sell to Excite for $1 million. Rejection. They lowered their price to $750,000. Rejection.

So they figured, ‘OK, let’s go for it.’

In 2001, I had a chance to buy half of a company called Oingo. They were running out of cash and my VC firm was giving a look. Someone came into my office and said, “We can probably pick this up for nothing.”

Oingo was basically an auction system for people to buy words on search engines.

I said, “Are you kidding me? The entire search engine business is dead.”

I was an expert. I had a $120 million venture capital fund. I’ve since written 13 “expert” books.

Oingo changed its name to Applied Semantics. Google paid 1% of the company to buy it and Applied Semantics became AdSense, which is 99% of Google’s revenues. Half the company might be worth around $500 million now or more.

I once made a bunch of websites. I wanted to build a business out of each of them. I showed one of them to my 6-year-old daughter. I was very excited about it. I won’t describe what it was but she basically said, “I don’t know. It seems a bit mean to people.”

She was right. It got no traction. Nobody signed up. In fact, nobody wanted to sign up for any of my websites that I had built.

I decided to try one more but I had my doubts. Millions of people signed up and I sold it eight months later for $10 million.

If you were to divide the world between experts and non-experts, who would be the experts who decide? Who watches the watchmen?

Academia can’t be the criteria. How do you know that 200 years from now you didn’t just pick this year’s version of George Washington’s bloodletters, or last decade’s version of everyone who bailed out of Twitter?

Professional experience can’t be a criteria. Bernie Madoff was head of the Nasdaq for a while and a “successful” hedge fund manager for decades. Enron, Worldcom, and AIG were three of the most respected companies in the world before they went bankrupt or got bailed out.

Does net worth make someone an expert? This is all anecdotal but I’m sure you can find people in every single field of life that are experts who don’t necessarily have a lot of money but have a lot of passion for their field.

A great example is Bill James essentially using statistics to create a world-dominating baseball team. Or Nate Silver predicting the electoral outcome in every congressional district despite having almost zero political experience and despite all the professional talking heads disagreeing with him.

Does this mean we are all idiots? I don’t know. I’m not smart enough to answer that.

But it does mean that all of us have a voice.

And then anyone can choose to listen.

The post Always Be Skeptical of the Experts appeared first on James Altucher.

from James Altucher https://ift.tt/2XQBwyU via website design phoenix

My Twitter Class on the Real Causes and Solutions of the Great Recession

1994 – Clinton used an executive order to create the National Homeownership Strategy, with the very good intention that everyone should be able to afford a home. This began reducing borrowing standards so more people could get loans.

1995 – Presidential executive orders forced banks to establish a lending quota of up to $6 trillion to people who were not able to afford a home. Again, very good intentions. I don’t blame Clinton. Owning a home was considered a source of pride. But good intentions often lead to very BAD outcomes.

Seemingly unrelated… 1998 – The hedge fund Long-Term Capital Management (LTCM), set up by top investor John Merriweather and two Nobel Prize winners, was hit by disaster. It was so leveraged that it almost tanked the world, until all of the major banks joined together to bail out LTCM and save the financial system. Well… all of the banks except two: Lehman Brothers and Bear Stearns (this is relevant later).

1999 – The Glass-Steagall Act was passed, deregulating banks, and also allowing banks to form hedge funds that could invest more aggressively than the bank normally would. This also allowed banks to lend more. Good intentions again… 

2000–2001 – The internet bust and recession. 9/11. The market collapsed. Interest rates were deeply cut to restimulate the economy, allowing more subprime borrowers to take out no-money-down, interest-only loans. Again, good intentions. Until… 

2002–2006 – Low interest rates + more lending + more investors allowed banks to lend to make interest-only, no-money-down loans to subprime borrowers. Many subprime borrowers bought homes. Anyone who wanted to could own a home. Good intentions… 

1999–2006 – The government promised to backstop the loans (reduce risk for the banks so they could lend more): Fannie Mae would “buy” the loans as soon as they were made and the banks were simply paid to collect the money (exactly like PPP loans today, with the Federal Reserve buying the loans). 

2000–2006 – As a result of the above, banks had zero risk in lending. So they lent as much as possible, would resell loans to the government, service the loans, take a fee. EXACTLY how the PPP loans today will work. But then derivatives…

2000–2005 – Hedge funds (often run by the banks) started buying the loans, since the mathematical models showed that risk of default in a diversified portfolio of mortgages had never failed. Then mortgages were bundled together to create “mortgage-backed securities.”

Note: The mathematical models hedge funds and banks were using never considered subprime borrowers. Hedge funds were borrowing at 1% and buying as many mortgage-backed securities as they could at 4%. Banks, funds, brokers… making money. People buying homes, homes going up in value… 

As a result, the economy heated up. So the Fed started raising interest rates, from 1% to 5%. Now people who borrowed “interest-only” loans at 1% had to pay 5x more per month in payments. Subprimes started to default… 

2006–2007 – Housing actually bottomed. It would’ve come back quickly — but nobody counted on the disaster of mortgage-backed securities, and a small unnoticed change in the banking laws… 

2006–2007 – Hedge funds started to crack. The mortgage-backed securities started to default. If a hedge fund were leveraged 100:1 (as some bank hedge funds were), then a 1% drop in MBS meant the hedge fund had a 100% (!) loss (because of the 100:1 leverage). But it gets worse… 

2005–2007 – Credit default swaps were created. If a lender was nervous that a borrower would default, a credit default swap acted as “insurance” that the lender would get paid in full. The lender would have to BUY the credit default swap from someone.

Hedge funds got involved… They would SELL the credit default swaps). It was free money for the hedge funds since, up until then were, defaults basically zero if you sold a basket of diversified credit default swaps. This was a ton of free money for the hedge funds. But HUGE, HUGE leverage…

2006 – A few hedge funds (John Paulson, Michael Burry) got smart and started buying tons of credit default swaps from hedge funds. The sellers (the hedge funds acting like insurance companies on subprime loans) were laughing all the way to the bank until…

The hedge funds that were buying the insurance (John Paulson, Michael Burry) were losing money every month. Their long-term bet was that the system would collapse. John Paulson pitched me on his fund and I left his office thinking, “Holy fuck, we are screwed.”

Paulson only had one worry… He told me in 2006 (way before the top of the market) that he was afraid the banks would go out of business before he could get his money out. Two years later, this almost came true.

2007–2008 – Higher interest rates, plus more defaults from subprime borrowers, caused credit default swaps to trigger. The hedge funds that sold these had to start paying up. The system was cracking. But the banks were able to hold on UNTIL the worst happened.

2007 (critical moment) – FASB 157 was passed. This was a new rule that required banks to “mark to market” their assets in order for regulators and customers to determine the financial health of a bank. Again, good intentions. BUT this is what it meant…

For 70 YEARS, banks had “marked to value.”

Example: Your house is worth $200,000. You know this because of the history of house sales in your area. You paid $170,000 a few years ago, etc. Normal house appreciation.

But what if your neighbors are getting divorced and fire-sell their house? They live next door to you and their house is exactly like yours. They sell for $125,000 but you think, “No big deal. That was a weird situation.” That’s “mark to value.”

“Mark to market” turns it upside down… It forces you to use the last comparable house sale and NOW that’s what your house is worth: $125,000. Not $200,000. You don’t care because you know it will bounce back. And banks are now more transparent. Good intentions again…

But a bank that switches from “mark to value” to “mark to market” — RIGHT IN THE MIDDLE OF SUBPRIME DEFAULTS — it suddenly has to mark down its entire portfolio. Still, not quite a disaster yet. BUT… what if the banks borrowed too much?

If a bank or fund used 100:1 leverage, then even if 1% down (caused by the defaults ,plus some manipulation) will wipe out an entire trillion-dollar bank (Lehman Brothers) or insurance company (AIG) or dozens of hedge funds and basically every bank on Wall Street.

Lehman Brothers collapsed. Lehman was one of the only banks that didn’t help in the bailout of the highly leveraged Long-Term Capital Management hedge fund (LTCM) in 1998. The decision-maker, Treas Secy Hank Paulson, former CEO of Goldman Sachs, had a 10-year grudge.

One day later… Paulson saved Merrill Lynch by arranging a sweetheart deal with Bank of America.

Because of FASB 157, nobody could lend to the banks anymore (they had to mark their assets to less than zero)… which meant banks couldn’t loan to companies to make payroll….

The American system collapsed. The Great Recession began. Nobody could get cash into the system. Paulson arranged TARP (semi-nationalizing the banks) and the bailout (same as now — exact same playbook). But some important notes…

November 2007, when FASB 157 passed, was the top of the stock market. Mark to market was the law in the early 20th century but outlawed by FDR in 1938, which probably led to the end of the Great Depression as banks were able to lend more. So how did Recession end?

In early 2009, FASB 157 was a huge debate. On March 12, Congress met to discuss, and eventually new rules were passed to allow “mark to value” again. On March 9, the market started going straight up, until February 2020 (coronavirus)… similar to the Great Depression.

From 1938–2007, because of “mark to value,” there was no depression. Without TARP, and then the bank bailout in early 2009, then the repeat of FASB 157, we would’ve had a depression.

BUT “mark to value” is often called “mark to myth.” Who benefited? And who is benefiting now?

John Paulson turned $100 million into $6 BILLION (I wish I had invested when he asked me to).

Bill Ackman turned a $27 million investment last month into $2.6 BILLION. He went on CNBC saying the world was going to hell. He sold his investment right after. BUT…

The point is: We have to be careful of good intentions. Nobody is to blame. Should we blame Clinton for loosening borrowing requirements? Blame FASB 157? Blame hedge funds for speculating? Blame Glass-Steagall for deregulating banks?

Blame mortgage brokers for convincing subprime borrowers to buy houses? Blame banks for lending the money? Blame hedge funds for manipulating the market of MBS? Blame Bush for not seeing this coming? Blame Paulson for the bailouts?

The point is….

Government, leaders, voters often have the best intentions but don’t realize consequences that could come years later. Watch out for student loans and watch out for future bubbles in this bailout. There WILL be a crisis two to five years down the road created by current good intentions.

I’m not sure why I did this. I wanted to show how, when you connect the dots, something complicated can be presented in a simple fashion. I also wanted to underline future unknowns in what is happening now by looking at the past. AND see if Twitter is a good place to “teach.” THANKS!

The post My Twitter Class on the Real Causes and Solutions of the Great Recession appeared first on James Altucher.

from James Altucher https://ift.tt/2Kccbas via website design phoenix

13 Myths COVID-19 Is Shining Its Light On

COVID-19 has shown us what the myths of society are and now they are quickly unraveling. Here are 13 myths that COVID-19 is shining its light on:

MYTH: Owning a home will give you “roots.”

Many people have left their homes, or stopped paying their mortgage, taxes or rent. We’ll see who truly “owns” these houses afterward and who even wants to return.

MYTH: College is the best way to get learning and then a job.

Well, colleges have sent kids home, refused to return tuition and rent, and online college courses are worse than the online schools. Good bye college, we hardly knew ya.

MYTH: Getting married means you aren’t alone.

During this time of quarantine, calls to divorce lawyers have surged 50–100%. “In sickness and health” didn’t take into account that sickness might mean forced isolation with each other.

MYTH: Having kids is the purpose of life.

I love my kids. But rise in child abuse during this lockdown is a horrific thing. Doctors are reporting they have never seen this many calls about child abuse. I hope this HORRIBLE thing is factored in when we look back at this. 

MYTH: My family is “my family.”

Tell that to many of the people locked in with their family for many weeks now. I’m sure many wish they had a different family. And, again, domestic abuse is on the rise. Stop hanging around toxic people after this is over. Life is short.

MYTH: You have to be dishonest to be successful.

“Success” in today’s environment doesn’t mean money. It means ability to deal with increasing uncertainty. How one measures success after this is over is how one was able to master this uncertainty.

MYTH: Giving to “charity” means you are charitable.

There are hundreds of ways to help others. Volunteering has gone up. And donations to GoFundMes for people who are struggling. Service to others is the best way to reduce the stress of isolation. Give as an instinct.

MYTH: We need to vote to change the world.

People arguing all day on social media in the foolish hope that a mind will be changed show that most only care about being heard and not real change. BE the change you want to see in the world and that is worth more than a vote.

MYTH: Procrastination is bad.

Time is on our side during this lockdown. Maybe procrastination means you need time to find other interests that you can develop and eventually monetize rather than going back to a cubicle job (human domestication program) that fired you. 

MYTH: Needing little sleep is good for productivity.

Some productivity gurus have claimed this for years. Clearly sleep is one of the main boosters of the immune system, which is so desperately needed right now.

MYTH: Humans are smarter NOW than 40,000 years ago.

Compare: 40,000 years ago, a human knew EVERY fruit, animal, predator, and plant within a five-mile radius. Today, people call each other “libtards” and “fascists” on Twitter all day long. Then they watch “Tiger King.”

MYTH: Experts are always right.

Scientists at Harvard initially thought worldwide deaths could be as high as 140 million. What?? So clearly wrong and yet we shut down the entire world economy, which has led to tragic situations for tens of millions of people.

MYTH: Money solves all of your money problems.

Money is useless now. What does exist is your internal strength, your ability to be a beacon for those stuck in the fog. Your ability to rise above and spread common sense to those who are struggling to understand.

Any others?

The post 13 Myths COVID-19 Is Shining Its Light On appeared first on James Altucher.

from James Altucher https://ift.tt/34I0WjI via website design phoenix

I Like the Market. Plus: the New Normal, Robots, Biden, Trump, and More!

I like that the market went down 1.5%. 

In other words, a normal day. To me, this is MUCH more bullish than the market GOING UP 10% in a day. 

It shows me that the general population thinks that the market is fairly valued around here (it might be, it might not be, but that seldom reflects what people think). It also shows me that the market is not anticipating any CRUSHING news that could send things spiraling down. 

Does this mean that things are OK? 

I don’t know. If you want things to worry about, there are plenty: 

• Uncertainty (still) about the economy reopening and how it will happen
• Uncertainty about whether there will be a second wave of COVID-19
• The “new normal” is very unclear. Will restaurants reopen? Will commercial real estate have a crisis? Will there be eventual inflation?

I have pretty pronounced opinions on the above but there still is some uncertainty. 

Does this mean one should buy the market? 

There are two answers: 

YES: If you think there are companies that are very, very undervalued, OR if you can find companies that you think, with good reason, will do well in the new economy. 

NO: If you can’t handle the fact that there will inevitably be volatility that could even take us down to the lows before going up again. 

In my book, “The Forever Portfolio,” which came out during the LAST crisis in December 2008, I recommended IRBT, which makes robots. 

The stock was around $11 then. It went up to as high as $140 a year ago. And now it’s at $47. So down from the highs since the virus started. This is, for me, a “forever” stock. But even more, robotics will be a HUGE beneficiary, wherever the world is heading. 

Remote medicine will require heavy use of robots (doctors would rather not touch contagious patients).

Remote disinfecting: Robots are being used now to disinfect surfaces at shopping centers and hospitals. 

There will be thousands of uses of robots in the years ahead. I would not be surprised if IRBT heads back to all-time highs above $140. This is not a recommendation. Just a guess. I already recommended it in December 2008 and it’s doing well and will continue to do well. 

Warren Buffett once said, “If a company will still exist in 20 years, it’s a good investment now.” 

Will IRBT exist? Well, it is profitable so that’s a good sign. But also, it has $256 MILLION cash in the bank. And about $60 million in debt. So $200 million in cash when it pays down its debts. And increasing cash every quarter. 

My guess is: It WON’T be around in 20 years because someone will buy it beforehand. 

But that means it is probably a good investment now. 

Again, not a recommendation. Just the way I am starting to look at things now.

---

By the way, the above example underlines the two main themes I am looking at for the “new normal.”

• Theme #1: REMOTE
• Theme #2: ACCELERATED

Anything that can be remote… WILL BE remote. 

Even when the economy reopens: 

• More people will work remotely
• More people will learn remotely
• More people will shop for groceries remotely
• More ecommerce will offer remote delivery
• Healthcare will be remote (telemedicine, teletherapy, robots, etc.)
• Sports events will be viewed remotely (even more). 

And everything that was going to happen eventually in society… will start to happen NOW because everything is accelerated. 

• If a restaurant would have gone out of business in three years, it will go out of business within a year or less
• If a couple would have gotten divorced in five years, they will probably get divorced now
• If AI would have replaced worker jobs in 10 years, that trend will be greatly accelerated now
• If colleges were going to play a less important role in society eventually, then that trend will begin much more quickly now. 

And so on. 

REMOTE and ACCELERATED. Use those two words to see if they apply to your thoughts on what \the “new normal” will look like. 

---

Some random but important notes. 

When Will the Economy Reopen?

Finally, the PEOPLE are starting to push it. Over 2.6% of the entire state of Michigan has created and joined a Facebook group dedicated to convincing the governor to reopen.  

The governor of Texas has already pledged to reopen. 

This is starting to happen in every state. 

If I were to guess, this is what will happen: 

• Trump will lift federal guidelines and it will become state by state
• Some states will immediately reopen, pressuring remaining states to join in
• Some states will do it region by region and age group by age group
• Social distancing guidelines, masks, etc. will remain in place
• Schools will reopen because parents can’t stay home to watch kids
• Large events might still be limited for awhile. 

BUT… BUT… what if deaths come back? 

Yes, that’s horrible. 

But, remember. THE ENTIRE PURPOSE of “flattening the curve” was NEVER to eliminate all cases or deaths. 

The entire purpose was to make sure the healthcare system was not overwhelmed. 

Well, on Saturday, there were only 53 new hospitalizations in N.Y. 53!! Down from over 1,000 15 days earlier. 

The healthcare system did not get overwhelmed. And N.Y.C. represents almost all the hospitalizations in the country. 

So, mission accomplished — flattening the curve either worked or we simply got lucky (without a scientific look at this, there is no way to know which policies worked and what was useless). 

So if there are new deaths, enough to threaten the system, then there will be new restrictions. But my guess is we will never lockdown the economy again. 

---

One more thought. I wrote about Predictit.org a few months ago and I mentioned how I was betting on it. I’m up about 30% in the past six months. Which means nothing (I started with $1,000, now I have $1,300 there). 

But I wanted to share my latest best and why. 

Remember: A bet doesn’t imply an opinion about a candidate. I might think Snoop Dogg would be the best president of the U.S. but I would never make a bet that he WILL be president. 

Also, this is important: A prediction doesn’t have to come true in order for a bet to make me money. It just has to have an uptick enough to take off a profit. 

There’s a bet right now on Predictit: “Will Andrew Cuomo Win the Democratic Nomination?” 

A few weeks ago, “shares” of this were trading for $0.07. When he started getting more popular after Trump mentioned him in a press conference, shares shot up to $0.15. One could’ve taken the trade off there. Now it’s back down to $0.07. 

I made a few bets: 

A) TRUMP WILL WIN THE POPULAR VOTE 

$0.32 (the way this works is, if he does win the popular vote, the people who bet on this will get $1. So, the market right now is giving you 2:1 odds that he won’t win the popular vote). 

I have no idea if he will win the popular vote. But I do think several things could happen: 

• Once the economy reopens, he might spike up to $0.40. Then maybe I’m a seller and I wait to see which direction the bet drifts.
• Biden might fall apart because of what appears to be dementia or because of this recent sexual assault allegation (again, not having an opinion but rationally looking at the scenario). If this happens, the Trump bet might spike to $0.40–0.50 and then I’m a seller.
• The Republican National Convention. All conventions in history give a little boost to the candidate. So at the RNC, shares of this might spike to $0.40, and then I’m a seller and will wait. 

Given that the popular vote was almost 50:50 in 2016, I do think 2:1 odds are reasonable for me to place this bet. 

I also bet that: 

B) BIDEN WILL NOT WIN THE DEMOCRATIC NOMINATION 

I have to keep reminding people: This is not a political opinion, but a calculated one. 

I’m hearing from people inside the Democratic party that they are basically s***ting in their pants that Biden is going to be their nominee. That out of 60 million Democrats, the people have selected Biden, who quite likely has dementia and has other baggage (recent sexual allegations, Hunter Biden, etc.). The bet is that perhaps Biden will be persuaded to not run. 

It’s unlikely. If this bet were 50:50, I would not make it. 

But I bought the bet for $0.15 cents (currently at $0.17) and I figured, at roughly 6:1, those were reasonable odds. 

All it takes is for one major newspaper to hone in on the sexual allegations (whether they are true or not) or one more major gaffe, or an uptick of Trump in the polls when economy reopens… and my bet can easily go to $0.30 cents, which is a double and I’ll take it. 

I don’t need to wait around and see if he gets the nomination or not. That’s the beauty of these prediction markets. I am betting more on direction than result. 

In any case, I find these prediction markets fascinating and it’s a way for me to have skin in the game. 

---

I talk about these topics and more on my Instagram Live Q&As that I’ve been doing every day at 2 p.m. EDT. Follow me @altucher on Instagram, tune in to my Live session, feel free to ask any questions, and I usually get around to answering all of them. 

 See you tomorrow. 

The post I Like the Market. Plus: the New Normal, Robots, Biden, Trump, and More! appeared first on James Altucher.

from James Altucher https://ift.tt/2K0AWq3 via website design phoenix

Death and Deflation — Will We Survive?

SUMMARY: Don’t read the headlines tomorrow on the virus and unemployment. 

• There’s been a peak in N.Y.C. cases as evidenced by several days in a row of fewer hospitalizations.
• California, Washington, Oregon, and possibly N.Y.C. are now RETURNING ventilators, saying they have enough. 
• Unemployment is obviously not good. But not as bad the newspapers will say tomorrow. 

Daily Growth Rate of New Cases

We are doing more testing than ever, so there should be more growth in cases, right? 

Here’s an overview of new cases growth rates over the past 10 days: 

• March 26 – 24.9% more cases than the day before
• March 30 – 15.4% more cases than the day before
• April 4 – 12.4% more cases than the day before
• April 6 – 8.7% more cases than the day before.

I haven’t checked the past few days. There’s no reason to obsessively check every piece of data all the time.  

As I’ve been writing here for the past two months, everything is on track for an April 15 peak in the U.S., and then a decline.

Now… next step: economy. 

Some Interesting Observations on the Data

New York and New Jersey represent 54% of total coronavirus deaths in the U.S. 

The top eight states  (NY, NJ, MI, LA, WA, CA, GA, IL) have 9,447 deaths total. 

These are the ONLY states with more than 300 deaths. 

32 states have fewer than 85 deaths. A dozen states have 25 or fewer. 

Obviously every death is sad, scary, etc. 

But those 32 states have over 200 million people in them. 

We don’t know the full damage or total deaths, etc. We might never know.

But factor in also what are called “collateral fatalities.”

People who had regular cancer checkups, or hospital visits for heart trouble or a stroke, etc. Those people are not currently getting treatments and there will be/have been deaths. 

And the economic chaos has caused deaths from suicide, drug addiction, domestic violence, etc. 

At some point, I hope that the partisanship goes away (unlikely) and we take a step back and really determine what the best policy should have been for the country. 

Unemployment and Inflation

Well, it sucks. Another six million-plus people filed for new unemployment claims. 

BUT… what does that mean? 

Tomorrow morning, the headlines will say: “Worst unemployment in history!!!!” and everyone will get scared and the newspapers will never explain the nuances. 

Here they are: 

A) Unemployment is not the same as “unemployment” 

The rules changed. In the just-passed stimulus package, there are two major chances: 

1) DEFINITION – The term “unemployed” was expanded. It now includes part-time workers, self-employed workers, and furloughed workers (who, in many cases, will be rehired when this is over). 

2) TERM – The number of weeks you can get unemployment insurance is now 39 (almost 10 months!) instead of 26. 

3) MONEY – In every state, you get a different amount per week and it depends on what you did for a living. In NY, the average unemployed person used to get $504/week for 26 weeks. 

NOW… the U.S. government is adding $600. So someone who is unemployed in the state of NY will now get $1,104 per week. The extra $600 might stop July 31 (or it might not) but this is for 39 weeks now. 

So someone recently unemployed (or part-time employed or self-employed) will make MORE than the average school teacher (which is sad but there it is) and still might make money from other jobs. 

In other words, don’t cry just yet for the unemployed. This is a new situation. 

B) Will there be inflation? 

When so much money is just airdropped onto the economy, the potential for inflation exists. 

For instance, if the U.S. gave everyone $1 million, then Apple would charge at least $1 million for the next iPhone. That’s called hyperinflation and has happened many times in world history. 

Will it happen in the U.S.? 

I don’t know. 

But a couple of thoughts: 

Currently (and the newspapers and the government won’t tell you this), there is DEFLATION

I’m looking at my emails now. “20% OFF!” is a common headline. Or, “Get these 50 Amazon books for $0.99!” or “One-time sale only! 30-40% off shirts!!” 

 

Those aren’t sales and they aren’t discounts. This is deflation at work. There is ZERO demand right now. Nobody is spending money. So companies are slashing prices until they “find” demand. 

That happens when there is deflation. Deflation is ugly and scary because nobody wants to buy anything because they think prices will go lower (the reverse of hyperinflation when you rush to the store to buy toilet paper). 

But this deflation is artificial. It’s caused by the government enforcing these lockdowns. It will end. 

The U.S. dollar is strong

If the world were worried about the U.S. experiencing hyperinflation, it wouldn’t lend us money. 

 

And yet, the world is buying our debt to the point that we don’t even have to pay interest on it. So, I’m not worried yet. Worry when interest rates start to tick up and nobody wants to lend us money. 

2009

We’re experiencing deflation now (despite what the government says). We’ve only experienced this twice before: 2009 and during the Great Depression. 

 

In 2009, we did exactly what we are doing now in terms of stimulus, and we experienced an 11-year boom — without inflation. 

In 1929 we did the OPPOSITE of what we are doing now and experienced WORSE deflation and the market didn’t come back until 1962 (inflation adjusted). As an example, Herbert Hoover’s government RAISED interest rates rather than lowering them. 

Now, this situation is 10 times 2009. So we’re in unknown territory. But 2021 will see a MASSIVE, MASSIVE surge in the economy (probably starting in August of this year). And I would keep an eye out for inflation in 2022 or beyond. But who knows? 

Productivity

Another force against inflation is productivity. 

 

The reason inflation happens in a “normal” economy is because we reach full employment (as we had in February 2020 coincidentally). 

At that point, the only way companies can hire new people is if they pay them more. But if you pay them more, you have to charge more for products to pay for those new employees. And so on. Inflation. 

Combine that with the Fed printing money and you get hyperinflation (VERY BAD).

But, we have MASSIVE unemployment now, so that is not an issue. Demand will be low for quite some time, so prices cannot go up no matter how much stimulus. 

And, most importantly, productivity is up. Robots are stacking shelves at Walmart. AI is reading X-ray scans of lung cancer patients. Amazon stores have no employees in them. Self-driving cars are in the near future. On and on I could talk about what will happen with automation. 

But productivity keeps employment from getting too heated, even with all this stimulus. Hence, productivity keeps a lid on inflation. 

These four things together will prevent hyperinflation. What we should be worried about is whether, one or two months after the economy reopens, there will still be deflation. My guess is no, because of the stimulus package but who knows how much societal PTSD we’ll see that forces people to stuff their mattresses with cash?

Again, my guess is that won’t happen. Americans have a tendency to not save money. But we are in a new normal. That said, I do think we will see this happen: 

• Horrible data for Q2
• Beginning of surge in Q3
• BOOM for Q4 and all of 2021, with Dow going above 40,000 in 2021. 

THEN… be careful in 2022 and beyond. 

The post Death and Deflation — Will We Survive? appeared first on James Altucher.

from James Altucher https://ift.tt/2Vf4QfA via website design phoenix