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Dear Reader,

It’s all happening at once: a domino effects of epic proportions that few predicted but all must now pay attention to. The global economic slowdown prior to the coronavirus crisis is now in full meltdown mode as the consumer, the lifeblood that keeps society functioning, is justifiably afraid to socialize or spend money.

With only a few exceptions, the financial carnage is everywhere and we’re nowhere near hitting rock bottom. Put it to you this way: companies are now firing people over Zoom in a wave of “remote layoffs.” The firings are so commonplace that companies that typically gather physically, can’t even be bothered to “furlough” in person anymore.

The coronavirus lockdowns have had unexpected results, nearly all of them bad. For instance, the automobile and auto-insurance sectors are in deep trouble now as driving in the U.S. is down by about 35% to 50% in most states. Allstate plans to refund more than $600 million to its customers because they simply don’t need the insurance.

Businesses of all sizes are on the brink, but small businesses are in particular danger. A recent survey of small business owners revealed that nearly half (43%) say their livelihood is on the line and they’ll have to close down permanently if they can’t resume normal activities soon. Slightly more than one in 10 (11%) are less than a month away from going out of business permanently.

Source: ZeroHedge

We’re talking about your favorite hometown restaurants, barbershops, hobby stores, and the list goes on to essential businesses as well.

There’s one thing for a business to be recession or even depression proof, but what do you do if the government tells you to completely stay home. Just look at the movie theaters which tend to ride out recessions well as it provides cheaper alternatives to vacation and be entertained are down massively. In January and February, China’s box-office total is generally around the $1.5 billion mark. This year, the total only eclipsed $220 million in the two-month span. 

Former Federal Reserve Chair Janet Yellen, who is usually calm and mild-mannered, admitted that the current unemployment rate could already be 13% (it reached 10% in 2009 during the worst part of the financial crisis) while economic growth is down 30% or more.

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Meanwhile, the energy sector is treading water. Millions of barrels of oil are being produced with no demand. The American Petroleum Institute reported a massive build of 9.445 million barrels of gasoline for week ending April 4, after the previous week’s 6.085-million-barrel build.

Yet, demand has cratered as people aren’t traveling. Even if they wanted to travel, stay-at-home mandates are preventing it. The ripple effects are going to weigh on oil companies as petroleum producers can’t survive on $25 oil for much longer.

These same travel bans and lack of demand are destroying the airline companies, which are begging the government for more bailouts just to survive. The CAPA Centre for Aviation warns that “Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full.”

Source: OilPrice.com

As the airlines burn through millions of dollars of cash on a daily basis, CAPA warns tat “demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon” and most of the world’s airlines could be bankrupt by May of this year.

These fiscal catastrophes will have a butterfly effect of all of the ancillary businesses that will be forced to lay more and more people off. Expect this to cascade throughout the economy, with few places left to hide for both job seekers and investors.

Some might look to Bitcoin as a safe haven, though for the time being at least it’s following the pattern of the stock market. The blockchain certainly holds promise over the long-term, but expect Bitcoin to pull back if we do continue to see more selling off in the overall equities market (which, given the facts mentioned above, is almost a certainty).

And finally, there’s gold, which is quietly stair-stepping its way higher. Seeming to stall at $1,500 not long ago, gold recently made a quick touch of $1,700 and then retraced. It’s easy to see what’s happening here as gold is finding its way higher in a long-term inflationary environment.

As long as businesses and job seekers are having problems – and they will have problems for a long time to come – there will be large-scale money printing. And as long as that’s happening, gold investors will prosper even while the shutdown wrecks just about everything else.

Unlike the virus, which the world will eventually build up immunity towards along with medications and vaccines, the economy is very exposed.

Look for the butterfly effects to play out for the remainder of 2020 into 2021.

Prosperous Regards,
Kenneth Ameduri
Chief Editor, CrushTheStreet.com

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