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I am posting today my journal entry from April 13th, as I entered it in my personal journal. I am placing it here as a landmark because just yesterday on the “Off-The-Chain” podcast host Anthony Pompliano’s guest, Cathie Wood (the podcast was originally dropped on April 16th) repeated the government line that there will likely be 60,000 US covid-19 related deaths. I think it is an important insight into that particular investment strategists thinking that she is using the government number, which I view as objectively false. Here is what I wrote on April 13, three days before the podcast dropped and, I believe, two days before it was recorded:

“I am continuing to hang out and read and such and just want to make a note that my current guess is 160,000 dead in US from coronavirus by August 1. I don’t know if that is enough to make a dent and have anyone care, but that is my number. On facebook I encountered two posts, [from friends and colleagues] about how it makes sense we would have so many cases because we are bigger than the European countries reporting. I think that is wrong. I think we have a pretty big problem and people aren’t getting it.

Here is the math I am looking at: in Italy, our canary in the coal mine, since their outbreak preceded ours by over a week, they are currently reporting 159,516 cases, 20,465 deaths and 35,435 recovered. The reported death rate is 12.83%, which is the total number of dead divided by the diagnosed cases (20,465/159,516 = 12.83) It seems to me that the case fatality rate should be calculated using resolved cases. I think the total resolved cases in Italy are the recovered plus the dead, or 55,900. Of the resolved cases, the case fatality rate is 36.6%. If we think we might experience that level of morbidity, then, using just our current number of cases, and not our projected cases even three or four days from now, our deaths of those CURRENTLY INFECTED would total 212,565. Italy’s numbers are pretty high. Maybe we use Spain’s numbers and that is how I got to 160,000 [which I had postulated in a different part of my daily writings]. If we use China’s numbers, then we wouldn’t expect any more deaths, because our case rate is already at their reported level of morbidity. Only they claim to be just about finished, and we are definitely just starting.”

That’s it. That’s the post. I continue to hear projections of 60,000 or 70,000, but even as I post this on April 24th, we have reached 50,000. I see nothing developing in the ten days since making my first estimate that would change my thinking, and the path to 160,000 US covid-19 deaths by August 1st looks wide open. There are about 100 days between now and then. If average daily mortality is 1,000, that is all it will take. Yesterday’s mortality count was 3,300. Almost 30,000 new cases were added yesterday. The total unresolved cases are still 740,000 people in the United States. It will be interesting to see how the collective conscious moves itself toward the reality of the situation, and whether it will really change anything.

Recent  market events have me sitting up and taking notes. Most of the past year I have been focused on building and running my little main street business, Good Find. Good Find is a resale and consignment boutique in Thousand Oaks, California, which I started after leaving my last corporate job in the fourth quarter of 2018. There were hundreds of personal considerations that went into my decision to start a resale store, and a few investment and business reasons, too. Part of the investment thesis was that, over time, the large supply of semi-valuable personalty and collectibles available in the market today would hold up better in value than the current dollar. In other words, I thought better-quality home goods, art and collectibles would provide a hedge against the programmatic inflation our economic system is based upon. Our economy has expressly run on an inflationary, acceleratory platform, which has been fueled mainly by debt for the past fifty years. It seemed like an easy bet against that trend sustaining very well, and my tiny retail shop is a part of my bet against it. There is no way I could have anticipated the current confluence of events: The coronavirus outbreak, and its attendant effects, the Saudi/Russian oil production rift, and the off-shore dollar shortage. These things are happening at a time when US political leadership is simply not available to take our call. In my opinion, it is also consequential that the bitcoin halvening is coming up in just a little more than a month. With so much going on, I am riveted to my Twitter feed and other news sources. This is a difficult and complicated time, but also an opportune one.

As the covid-19 emergency broke out, there was the obvious short trade. Now, with super Fed intervention and the beginnings of a pandemic response taking shape in the US, the trade is definitely still down, but the timing and magnitude are very uncertain and so the trade is not as straight forward. I have no doubt there are a lot of great trades out there, and at the high level, I remain short the broad index through the end of the year, and I am long junior gold miners. But right now I am particularly interested in silver and the silver ratio. The silver ratio is the price of silver to the price of gold. Today, gold closed at $1,603.40 and silver at $14.40 for a ratio of 111:1 .  Over the course of the 20^th century, the average ratio was 47:1. It has been higher over the past 20 years, averaging about 60:1. The ratio is now nearly twice as high as its average over the last twenty years. It is possible that the price relationship is a broken metric. It may no longer hold up due to extraction cost improvements from modern mining methods, the expansion of silver’s use as an industrial metal versus medium of exchange, or any number of other fundamental reasons why the ratio should now be much higher than its historical average. Maybe it will not revert to mean, or maybe the ratio will revert as a result of a steep drop in gold’s nominal price without a correspondingly deep drop in silver prices. I just don’t know. But in the past I have had great success looking at big dislocations like the wide silver/gold ratio and thinking my way back to a trade. In this case, I feel this is a trade that has its full expression ahead of it yet.

Moreover, I like this trade because it speaks directly to my main street interests, and is something everyday people in the community and especially the resale community can be aware of and take advantage of, or at least plan for. Not every consignment store or reseller maintains silver items in their product spectrum, but many do. And for others, silver is a big part of total inventory, particularly for silver jewelry. If main street buyers and sellers can have a window into some of what is coming for the economy, the dollar, the price of silver and how to plan for their inventory, it will strengthen our communities and give useful, actionable information to people who can employ it. Real people. Business owners, pickers, collectors, sellers alike.

So for my first day looking at this trade I have tapped in to resources at the Chicago Mercantile Exchange https://www.cmegroup.com/trading/metals/precious/silver.html, the Silver Institute https://www.silverinstitute.org/, and the internet-at-large to come up with some newsletters to follow and to begin a list of companies to watch. My initial thesis is I think silver may yet see some really shocking lows as we move through the dollar shortage in international settlement, but then to the moon. I don’t have my own price thesis built yet, but targets by the experts are for $18.50 to $22.50 by year end. From today’s spot price at the close of markets of $14.40 that would be a gain of between 28% and 56% by year end. The estimates were made in research that was being released in the middle of February, and does specifically address the potential impact of the virus on China, but the analysis may not have fully comprehended the global impact, and so the price of silver by year end could be very different if you asked the same experts now.

Before the market close I opened an order to sell an October put at $11. I was asking $0.80, which was a little above the market ask price of $0.77 at the time I placed my order. The market closed without getting done. I will be spending the next few days looking at this trade and researching it more. Follow for updates on what I learn. Share and re-Tweet if you know others who would be interested. Stay safe,

I have to take this opportunity again to re-frame FIRE a little bit, this time for Mark Hulbert’s benefit. I am a long-time reader and admirer of Mark’s. I appreciate Mark finds a more fundamental argument around the FIRE movement, as do I. And that Mark recognizes there is danger involved with change.

Here is Mark’s thesis: This more fundamental problem is that the FIRE movement is irrelevant to almost all individuals, and as a consequence is dangerous. Only a very small minority of individuals have sufficient assets to retire early at more than a subsistence level.

Posted here, for reference: https://www.marketwatch.com/story/the-problem-with-the-fire-movement-2019-02-07

This, I think, is the fundamental misunderstanding. Critics can never look past their own paradigm of work-life. The one where you go work for someone else for forty years and if you are very servile and don’t ever call out the bad behavior, terrible stewardship and lazy thinking of your betters, if you live below your means (but apparently not too far below, or will have violated some other social contract construct) and “stay in school”, used here as a metaphor for some kind of structured, long-term work-life configuration designed by someone other than yourself. Then, the thinking appears to be, you have a better chance of reaching your old age with enough money for relative financial security, as long as no one with real money wants to crush you under the legal system, and you stay healthy.

Well, people want more out of life for themselves and their families. This being America, no one is waiting around for a corporation, government, king or wrestling promoter to make their lives great for them. People are already finding new vectors, new venues and marketplaces, and new form of money, value and exchange. For me, this is more the nature and spirit of the FIRE movement. Mark, Suze and others are looking at it too narrowly when they try to contain it within an older model of corporate life-work.

I think almost everyone, and certainly everyone who is currently employed in a traditional office or corporate job, has the assets they need to retire, not just early, but at any time. I think a comparatively small amount of savings is needed to break out of the old model career and ‘retire’. It is among the most important economic innovations to emerge, that the tools of business operations have been democratized. Now, everyone is a business. People take meetings while on their pottery wheel (yes, they took that meeting with me). It isn’t that people aren’t working hard. People are working way, way harder, because they want to, and because they can harvest more benefit for themselves than if they worked just as hard for someone else. It is such basic economics. People are self-optimizing their outcomes, and pundits are confused.

I also think the old fear model doesn’t hold up to the future. The dangers of future privation if people take economic risk today is, in my view, anachronistic and dystopian when viewed through the lens of likely futures. I am the last to suggest there is no risk of a social retrograde that diminishes mankind so substantially that the future is no longer bright. There is that risk. I just don’t see that risk as having the statistical advantage. Instead I see abundant, structural obsolescence which both will create wealth through its destruction/reinvention, and also return economic value to society through cost reduction. Collectively, and in the absence of corruption, there is more than enough wealth, opportunity, experience, fun, resources, and even time. Because I am a capitalist, I don’t even worry about how we will find our way to the best expression of our skills and technology to achieve this vision of abundance; I just need to know people have a good, strong, incorruptible playing field from which to work, and we will arrive at a future fundamentally peaceful, prosperous and free. I think as long as our society progresses toward utilization, stewardship, and a focus on individual experience through growth and development (which for the record is how I see the macro trend today. At least, when I am looking across the billions, and not just when listening to the broadcast news), then there will be economic safety for our elderly even if their private 401(k) balance isn’t as high as the retirement advisor of yester-year says it should be.

Going back as far as the irrational exuberance or conundrum days of Fed Chief Greenspan, we have seen the cracks in the confidence of economists, and especially Fed officials, as they scratch their heads publicly and wonder about the discrepancies between their model outcomes and what they see happening in front of themselves with their own eyes.

At the highest level, my thesis is traditional measures aren’t capturing the kinds of economic activity that are evolving around and outside of institutionalized environments. Basically, I think shadow banking, darknet commerce, as hinted at here: https://bitcoinmagazine.com/articles/chainalysis-darknet-market-activity-nearly-doubled-throughout-2018/ , barter and exchange commerce, and other commercial innovations or adaptations are thriving. While these commercial channels thrive, they also substitute and replace some of the traditional, institutional economic activities, leaving holes in metrics like the labor participation rate, unemployment rate, GDP and other measures. I expect the trend in commercial innovation to continue in this way, leading to risk of some potential missteps by pundits and officials.

There are a number of other significant pressures mounting on outdated financial structures, like mortgage servicing rights, the reserve currency, or euro-dollar system. Increasingly, it appears as though corruption has packed itself deeply into the cracks in these broken systems. I don’t expect dispassionate minds will step back timely and marshal to address these outmoded systems as they give their final snap. I expect it to be pretty rough and ugly.

For clarity, I don’t mean the Fed is managing the panic of others. I mean the Fed doesn’t know what is happening or what to do, and they are in a panic, blindly lashing out with their paradigmatic, mindless words and actions. I have seen it before, in corporate settings, when leaders aren’t able to stand back and accept what their environment and senses are telling them.

I won’t have time to share my thoughts about it at length this morning, but definitely wanted to get my belly laugh over this headline: https://www.marketwatch.com/story/dovish-pivot-means-stock-market-investors-will-pay-more-attention-to-data-less-to-fed-talk-2019-01-31 out into the bloggisphere. Also, as I laughed this morning reading the MarketWatch headlines, I raced to my twitter account to see what @JeffSnider_AIP  would say about it!

Fighting Pelosi is a tactical error.

Today I find another article about the debate between FIRE movement members and…Suze Orman? And a guy named Jared Dillian. The article is this one, by Shawn Langlois at MarketWatch.com. I am moved to share.

At the start of the matter is the idea advanced by Orman and apparently supported by Dillian, that early retirement would require at least five and more likely six to ten million dollars. They find the FIRE movement’s life strategy tools of extreme savings, unconventional living and disciplined action too risky and unpleasant. They believe this choice of strategy would most likely be due to laziness and a desire to avoid work. Dillian believes the FIRE movement’s success or failure depends upon the stock market’s direction.

I have not seen any of Suze Oman’s shows or heard any of the spots from where this conflict springs. I don’t know what work Suze recommends for accumulating the needed ten million, or how long she believes is the right amount of time for that to take. I am sure her intended audience does not include those who, sine qua non some radical life strategies, would never, ever, be able to save anything like ten million dollars, and maybe could not retire at all. But those people do exist. There are a lot of them. And even though they will never have ten million dollars, they still want good lives.

Dillian seems to make two points. First, that radical savings is a doomed strategy in a bear market. Dillian defers to Math for more details on this first point. Second, that the FIRE movement is doomed because it is based on a value system that is in conflict with Hard Work, and only Hard Work can provide the things people really need: purpose, someone else to structure their time for them, and dignity.

The author, Mr. Langlois, editorialized a couple of Dillian’s comments as being valid. Langlois says it is true of Dillian’s remarks that younger investors in the FIRE movement have enjoyed primarily positive stock market outcomes in recent years, and asks the question of the reader, ‘What happens when the music stops?’. As the reader, I would have liked for Mr. Langlois to have taken that question back to the FIRE boards for an answer.  It does not need to go unknown and the answers would have enriched the article. Langlois also characterized this comment from Dillian as a valid reflection on the benefits of having a “regular job”:

“What is wrong with working? Why do the FIRE people dislike working so much that they want to quit at age 35?” he asked in his piece. “Working gives people purpose. Most people do not function well with a bunch of unstructured free time. I am one of these people who thinks there is dignity in working, that every job is important no matter how small.”

I will have the odds on my side that Langlois is talking about working for a company or companies other than one’s own, for forty or more hours a week, more or less continuously for thirty-five to forty years when he says, “regular job”. The same guess about what Dillian means when he says “hard work” or “working” will also have good odds. For purposes of discussion, that is what we will call a regular job.

For me, this is the central misunderstanding. It is a misunderstanding that is much larger than the tweets and quips of out-of-touch financial advisors trying to make a buck hyping one thing or another on TV, and feuding with Reddit. It is this perception that regular jobs are good, or even going to be around much longer. The idea that the work structures and organizations of the industrial age are even remotely competitive any longer. The blindness of corporate business leaders to the radical changes in work-life that have already taken place and continue to evolve and develop at an incredible speed. How these changes skew what we see in traditional metrics like labor participation rates, and in turn, how these new modes confound policy-makers, pundits and professionals. These are the stories behind FIRE, I believe, if you keep looking.

I respect the radical savers and all the people in the FIRE movement who are looking for their freedom. They know that freedom begins with self-determination and is supported and protected with money, among other things. Many aren’t retiring from working. They are retiring from working on things that aren’t important to them. They are retiring from work environments that don’t make them feel happy. They are retiring from having to tolerate abuse and disrespect out of fear. They are retiring from watching their lives go by through the window of an office building while their loved ones are at home. They are retiring from doing the hard work that creates value for a society and passing most of the rewards to the investor class. At least some people are excited about the FIRE movement for the work it will allow them to do, not so they can avoid work.

Technology has created a new frontier of work configurations. People can explore, innovate and monetize the things they care about in ways they never could have before. These changes and innovations allow people to reprioritize where a ‘regular job’ falls in terms of activities that support a good life. As regular jobs have been scarce for most of the young FIRE movement’s life, people have found purpose and dignity working multiple jobs part-time. They are working projects, specific assignments, contracts or gigs. They are writing blogs, posting on Instigram, advertising to followers. In at least one case they are in a public beef with high profile media figures. They are finding more economic security in diversification than they found at their regular jobs. They are also finding more purpose and dignity. Much more. In some cases, they are making more money, too.

If we redefine the FIRE movement in this way, to say that it is made up of those who are turning away from the convention of a regular job in the belief that new strategies offer better economic security, purpose, dignity and opportunity, then I think we would be looking at this phenomenon in a way that I hope Suze and Jared can understand.