Pro Perspectives 4/3/20

April 3, 2020

The $2.2 trillion government relief began today with the launch of the Payroll Protection Program (PPP).  

This is the small business program, for companies under 500 employees, that distributes forgivable loans to cover payroll (to keep jobs intact) and expenses associated with keeping the lights on (mortgages/rent and utilities).

The goal is here to keep businesses intact, so that they can hit the ground running (to the greatest extent possible) when the economy reopens, instead of leaving behind mass business casualties and an economic depression in the wake of the virus.

If you qualify for this aid or any of the aid in the pipeline, regardless of your financial position or business status, you should participate!   The PPP is a simple two page document (here), with instructions (here).
The design of this program is to make you whole, to make businesses whole, to make the economy whole (to the greatest extent possible) in the near term — while inflating away the value of everything in the medium-to-long term

Participate in the programs/ take the money. On the other side, when inflation runs, you will understand/appreciate why. 

This is "debt monetization" – not just domestically, but globally.  It's the only option, in the face of the abrupt economic stoppage (domestic and global).  It's the devaluation of cash against asset prices.  This makes holding cash the worst place to be

Add to that, with the Fed involved in virtually all risk assets now (not broad stocks, nor high yield corporate bonds … yet). They have become the bid in risk assets in the near term, while inflation will become the bid in risk assets in the medium-to-long term.  With this, not only will gold be a preservation of buying power, but stocks, real estate and broad commodities


Special Invitation:

Last week, money moved out of mutual funds and into cash in the highest amounts on record (the worst place to be).  Meanwhile, billionaire Bill Ackman was putting over $2 billion to work.  Legendary value investor, Bill Miller, was buying.  He called it one of the top five buying opportunities of his lifetime.  The best investor of all-time, billionaire Carl Icahn, was adding to two stocks we own in my Billionaire's Portfolio.  And one of the big investors we followed into a beaten down airline, has added more to his stake. In addition, he was setting up a new $3 billion fund, just to load up on the hardest hit stocks in this crisis.

With this last anecdote in mind, most people that are willing to buy stocks in this environment, tend to feel more comfortable buying big cap brands/ industry leaders at a discount (Amex, Coca Cola, Goldman Sachs, Walmart). 

But the best investors are on the hunt for companies they are confident can survive, but are the most beaten down. That's the formula for huge returns.  In our Billionaire's Portfolio, we have a perfect list that meets that criteria — transformed companies that have been thrown out with the bathwater.  

With this portfolio, we should expect to do multiples of what broader stocks do on the rebound, just as we did in 2016 (bouncing more than 40 percentage points from the lows that year, and finishing almost three times better than the S&P 500 on the year). 

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