Potential Plays as the Markets Wait for Washington to Act

Brace yourself for another rough news week.

As we do more testing, the coronavirus numbers are going to pile up dramatically in The United States.

Financial markets are being decimated, and there are too many unknown unknowns for the end to be sight right now.

The oil price war occurring at the same time as this virus began to spread aggressively around the globe has proven to be one of the worst double whammy shocks to the financial system of all time.

While it feels like no way out at the moment, it will end at some point in the future.

The economy and the markets will recover and move to new all-time highs.

Waiting it out is not easy, but it is necessary.

Every bear market has ended and led to a full recovery, and this will transform from a disaster into a buying opportunity of epic proportions.

I have seen some around the web declare that the moment is here. I don’t think so.

Here’s why…

This is No Time for Football

Washington has a very critical role to play in this crisis.

We have almost half the country on lockdown, and businesses all over the nation are simply not functioning.

Unemployment is likely to hit 20% in the next month, and I find it absolutely infuriating the two political parties are playing political football with the economic relief legislation.

People all across the country need these bills to be passed to help them deal with this situation and get the supplies and funds that are so desperately needed on the front lines of the medical system and the economy.

I understand that bailing out companies that used all their cash flow and even borrowed money to buy back stock during the runup is repugnant.

I don’t like it any more than Nancy Pelosi does.

However, we have to save jobs, and in order to do that, we have to save the companies that provide jobs.

When this is over, we will have all the time in the world to prosecute executives, confiscate wealth, and take whatever other measures are deemed necessary to punish those who used buybacks to enrich themselves and whose companies are now on the verge of disaster.

For now, we need to take whatever steps are necessary to bail out the economy and the workforce that has powered that economy for so long.

Positive Steps Toward Stabilization

The Fed has declared that they will do whatever it takes to keep the economy functioning.

We are now in QE Infinity, but given the choices we made to prevent the spread of the virus, the economy is shut down, and I don’t see what choice Jerome Powell and the Fed Governors had.

It’s either print and pump cash into the system or stand by and watch the system collapse.

When we hear discussions of forbearance in real estate lending markets and junk bond default rates soar into the stratosphere, we will be a lot closer to a bottom and a momentous opportunity.

I am currently exploring opportunities to sell way out-of-the-money cash-secured puts as we get closer to the eventual bottom.

With volatility at extremely high levels, we are going to have an opportunity to bring in double-digit returns by merely agreeing to buy stocks we like at 20-30% below the current market quote.

This is a strategy that worked very well during the last market crisis, and it will again this time if we are smart and disciplined about our approach.

Insiders are still buying aggressively as prices fall, and that’s also a very positive sign.

Insiders historically have not been great market timers.

They have, however, been excellent judges of long-term value, and right now they’re using their checkbook to make a statement about the future of the economy and the stock market.

Life, Liberty, and the Pursuit of Happiness

I was asked the other day how someone with strong Libertarian leanings could support aggressive government intervention.

That’s easy.

The two functions of government are to provide for the common defense of its citizens and provide an environment where commerce can function.

Both of those are under attack, and to not act would be like ignoring Pearl Harbor.

Unfortunately, it has proven that heavy-handed government intervention will be needed.

The news this past weekend showed footage of dozens of boats pulled up on islands and sandbars for huge parties on both coasts of Florida.

The acceleration of this epidemic will be escalated by the number of people who are too stubborn or selfish to stay at home.

The National Mall in Washington had so much traffic to see the cherry blossoms that the Mayor closed the mall and called out the National Guard to enforce the restrictions.

The Federal Reserve is doing everything it can.

Hopefully Congress can quit bickering long enough to pass legislation that will help us win the war against this disease and get the economy and our daily lives back to normal.

In the meantime, we need to resist the urge to make mistakes and focus on what is most important in life.

Support those you care about, check on friends and family frequently.

Stay Home. Wash your hands. Call old friends.

Leave me a comment below and let me know how you’re doing.

Stay calm. Avoid biased cable news stations.

This will end. Life will go on, and markets will recover.


Tim Melvin

P.S. Right now, people everywhere are asking the same questions about their money. And I want you to know we’re here to help. That’s why we’re inviting you as a Max Wealth member to find out all about this in-depth crisis response plan from my colleague, Tom Gentile. He’s going through some of the best strategies for protecting every dollar you have in the markets. Watch it in full right here.

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