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The Real Reason Markets are Panicking

by John Galt
28.02.20 05:00 ET

Life as America has known it is about to come to a screeching halt.

History’s cruel lessons of arrogance, willful ignorance, and punishing reality all have this nasty habit of coming back to teach new generations of over confident souls a truly harsh lesson. As of 0430 this morning, equity markets globally are tanking and everything is being sold off including precious metals. The only rallying points are the safety trades of sovereign bonds and selected currencies.

The U.S. markets are primed to open substantially lower again with technical support levels being obliterated (as I warned the other day) and all normal trading theories are, as we say in the South, blowd up. The numbers are devastating from any perspective after the largest point drop in history yesterday:

Courtesy of Investing.com

The talking heads were on various “business” television networks last night still promoting the idea that there are “buying opportunities” and that the ongoing crash is what a capitulation looks like.

Bullcrap.

The real reason equity markets are panicking is that the big money, people who have unimaginable amounts of resources to the average person, know that the global system is in the midst of a reset. The intertwined globalist system designed to create low cost supply chains and extravagant consumer lifestyles beyond their means based on credit is going to unwind. And they, the politically powerful and financial elites know it. The media will never tell any viewer or listener that the central banks are powerless and the “investing” class only wants the average schmuck to end up as the last bagholder as markets implode.

The entire economic system was based on faith, albeit not a religious one. It was and is still based on faith that our political leaders would never directly attack the means of how the average citizen would maintain their lifestyles and support it to whatever methods are necessary and in return the obedient working class would plod along. Now a virus, probably created by the Chinese Communist military, could indeed upend seventy years of a system which was in relative balance.

Thus begging the question, how does the coronavirus or Covid-19 create a panic and why in financial markets?

For the uninitiated, aka, sheeple, take a minute to review your life. Most people carry a modicum of debt be it in a mortgage, car payments, credit cards, etc. Now imagine what happens when demand in almost every industry collapses. Now in the U.S. think about what is happening overseas and the sudden inability to service that debt and enjoy the current lifestyle.

That is what is happening in Lombardy, Italy and South Korea as I type this.

This video on February 26th from the BBC should provide a clue:

Think about this from a logical perspective; what would be the real reaction of the average American seeing a large tanker truck spraying a disinfectant in downtown San Francisco, or Atlanta, or New York City? While the President dutifully attempts to tamp down speculation on how bad this outbreak could get in the United States, the reality is that decades of open borders has resulted in Americans being among the most vulnerable of all nations outside of Europe.

No movie theaters open, no sporting events, no concerts, no shopping malls, no theme parks or festivals, no vacation travel, not anything involving large crowds will be spared once the outbreaks depart from individual reports to large clusters. And apparently the incompetence of D.C. and our judicial system (yes, activist judges)will only guarantee that the severity of the outbreak in some areas of our country will be far worse than need be. Think about what a roadblock near a major city close to one’s home will do for the confidence of the go-go spending consumer.

Thus why would anyone want to invest in the unknown? Why gamble on an outcome which is undefined, on a system so fragile that one invisible virus will destroy it? The smart money is getting out now, knowing full well when this is over the government will have to reset everything. Bailouts to industries, subsidies to citizens, and worse, an expansion of the size of government intrusion into everyone’s life to make this happen.

Once the three phases of this viral outbreak passes, an assessment as to the policy reaction can be made and that is when a bottom in financial markets will result in a return of capital and speculation once again. Until then, things will only deteriorate and get much, much worse.

Panic now, beat the rush was always the most sound investing advice throughout history.