The Deep State March 18, 2020March 18, 2020 Deep competence, deep expertise, deep experience, deep integrity. As promised, Trump has made great strides in gutting it. South Korea, by contrast, has not. Watch how that democracy, with less time to react, seems to have kept the virus from becoming calamitous. Tom offers this March 16 Washington Post piece explaining how Trump didn’t really shutter the office of pandemic preparedness. His perspective is worth considering, but I find this piece, from three days earlier, somehow more persuasive: I ran the White House pandemic office. Trump closed it. One thing for sure: despite having more lead time than South Korea, we haven’t handled the crisis nearly as well. And it’s not as though the White House wasn’t warned. Before Trump’s inauguration, a warning: ‘The worst influenza pandemic since 1918’ In a tabletop exercise days before an untested new president took power, officials briefed the incoming administration on a scenario remarkably like the one he faces now. Even as recently as March 6 — after the entire world had for several weeks been focused on China and Italy and Iran — Trump spent a visit to the CDC misrepresenting the state of coronavirus testing, praising himself, and attacking his critics: . . . [E]xperts have argued the biggest issue with the administration’s coronavirus response so far is . . . Trump has “made it primarily about himself.” And this concern was on display at the CDC when Trump took time to talk at length about his own intelligence . . . “I like this stuff. I really get it,” Trump said. “People are surprised that I understand it. Every one of these doctors say, ‘How do you know so much about this?’ Maybe I have a natural ability. Maybe I should’ve done that instead of running for president.” For a Trump-virus timeline, click here. It’s devastating. But Tom is fine with it. Pete: “Give up on Tom. I know you find it fascinating that an Ivy Leaguer could join a cult, but perhaps he was a legacy. Can we switch topics? How about this? For those of us who are certain the market will recover in the next 2-5 years, and are betting money we can’t afford to lose, are leveraged ETFs for the DOW30 and S&P500 subject to contango, like commodities?” → Wait — did you mean betting money you CAN afford to lose? Quite a different answer if you did mean CAN’T. Pete: “No, I meant can’t. Going into this panic I had 50% (of 500K total) cash on the sidelines. My intention had been to jump back in when Dow30 = 20,000, assuming it would come back to 30,000 in two years. . I’ll take that return any time. If the Dow never returns to 30,000, then I won’t be retiring. Then, I hear there are 2X and 3X Dow30 ETFs. Management fees are less than 1% on all. Just concerned that there may be contango on the leveraged funds that I am not considering. 2 years of contango could suck.” → You’ll only remember this advice if I turn out to be wrong, but: don’t gamble — let alone use leverage — with funds you CAN’T afford to lose. If you buy a 3X exchange-traded fund (ETF) and the Dow (or whatever index you’ve chosen to bet on) drops 20%, you’re down 60%. As to “contango” — no. It doesn’t apply here. With commodity futures (which index funds are not), buyers frequently PRICE IN some of the future appreciation they expect (that price premium is called contango), so if the price (of oil or cotton or sugar or whatever) doesn’t rise faster than expected, there’s no profit to be made. The real problem with leveraged ETFs — and it’s a very big one — you’ll find explained here. Right now, for money you CAN’T afford to lose, the bank is not a bad place for money. For money you can, you might nibble various places (though I’d be surprised if with hindsight we discover that the bear market ended Friday night). For example, I bought more CNXM under $7 yesterday. It’s acting as if its going to zero, and perhaps it will. But coal and oil — worse polluters than the natural gas flowing through CNXM pipes — still generate way too much of our electricity. So it’s possible the guidance the company is providing is legit: a yield of 20% or so, which they believe they think they can increase in each of the next three years. We’ll see.