David compares the coronavirus to the Spanish flu pandemic of 1918 and discusses why it was under-reported.

We’ve had a large rally before this pandemic, and as a result, markets were at or near highs, which means they are sensitive to bad news. Markets are now spooked, and there are a lot of ramifications from possible travel bans. This year is going to be a lousy for transports, airline travel, and tourism worldwide.

There has been no agreement on oil within OPEC, and the pressures over corona have now caused a price decline. Over the years, a lot of cheap money and resulting debt have fueled the fracking business, and at current prices, these operations are now uneconomical. OPEC may be attempting to exert pressure on this industry, but if this persists, the Saudi’s and other Middle East countries are going to have serious budget problems.

Everyone is looking for a dollar rally, but a lot of positions are currently getting unwound. This time, however, there is almost no return on bonds anywhere, including the United States.

He thinks we have already had a blow-off top, and a likely scenario would be a bear market correction and some deflation. However, in a year or two, we could end up with a market rally on paper in dollar terms. This rally would not be real once inflation is factored but would be excellent for gold.

David thinks the repo markets were covering for financial stress within just a few institutions, but what is happening now is entirely different. The central banks may be forced to buy debt simply to fund deficit spending since no one else will be interested. We could end up with a period of high-inflation where the governments would cover up the severity.

Silver is very cheap compared to gold, and this indicates we are still early on for the precious metal markets. The Dow to gold ratio remains quite high, but eventually, everything reverts to the mean. This likely means the price of gold will ultimately meet in the middle with gold, perhaps around $15,000. 

Time Stamp References: 0:35 - Spanish flu and the coronavirus. 6:55 - Weakness in the transportation sector. 8:20 - Drop in oil, OPEC, and the shale sector. 11:30 - Countries that fund their budget with oil. 13:00 - Dollar and interest rates. 15:20 - Meltup, meltdown or a big crash? 17:20 - Repo markets, stress and hyperinflation. 20:00 - Deflationary busts and stagflation. 22:30 - Gold to silver ratio and the Dow to Gold. 25:50 - Outlook for silver and retail investors. 27:35 - Supply-demand picture for silver. 29:30 - Watch the oil and gas sector.

Talking Points From This Week’s Episode• Comparing coronavirus to the Spanish flu epidemic.• Transportation is likely to remain weak for the year.• Oil is under a lot of pressure globally.• A recession and deflationary period could be followed by high inflation.• Silver is cheap, and eventually, the Dow to gold ratio will revert to norms.

David Skarica is the founder and Editor of Addicted to Profits, a popular newsletter known for its stellar performance in both up and down markets. Skarica entered the financial markets at a very young age and, at the age of eighteen, became the youngest person on record to pass the Canadian Securities Course. He is a regular speaker at trade and investment conferences in Canada and is a guest on the Business News Network (BNN), Canada’s flagship business broadcasting network. His work has appeared in publications such as the Bull and Bear Financial Report, Barron’s, Investor’s Digest of Canada, and Canadian MoneySaver. Skarica also writes Gold Stock Adviser, an investment newsletter for the conservative media outlet, Newsmax. David’s newest book, Collapse, is available on Amazon.com.