What to do when there’s blood in the streets

I’m a contrarian. When everyone says A, you’ll hear me saying B. Some people can deal with that. Most can’t. My life would be easier if I had the same mentality as everyone else, except for one problem: I would have less money. The one place in the world where you want to be a contrarian, is on the market. You want to be buying things when nobody wants to have them and you want to be selling them when everyone is desperate to get them. It’s dangerous when you’re right and everyone else is wrong. However, it’s also profitable.

The reason contrarians like me exist, the reason we haven’t been removed from the gene pool yet, is because any society that doesn’t have people like us will enter stagnation. We’re not right most of the time, but we’re right often enough to be necessary. You need to have people who are willing to ask: “Why are we all afraid of X?” “Why is everyone so sure X did Y?” “Why is nobody eating X. Some magical book told us so? Why should I believe the magical book?” These are the kind of statements that can get you killed, but they’re also the kind of statements that get you a place in the history books as “the guy who understood X even though everyone around him thought he was evil/wrong at the time.”

Contrarians seem like assholes to most people, but the main reason for that is because our society places so much emphasis on being as inoffensive as you can possibly be. Adjusting to what other people around us are doing just doesn’t come naturally to us. We try it at first, because we realize it could make our lives easier, but it’s difficult for us to hold up the façade. We’re very bad at pretending to like the emperor’s new clothes. Who is the naked emperor today? Here are five numbers to give you a hint:

639

8,000

10,023

22,000

1,320,000

These are respectively, the number of batsoupflu deaths in the Netherlands, the number of flu deaths during a typical Dutch flu season, the number of batsoupflu deaths in Italy so far, the number of flu deaths during a typical Italian flu season and the number of deaths of children under the age of five from diarrhea caused by unsafe drinking water every year.

Here’s a suggestion: Could it be the case that our society may be misjudging different risks? Could it be that people are acting based on fear and hysteria, rather than science and reason? Do you think the answer may be yes? Then it’s time for you to make money. People are capable of acting based on fear and hysteria for a while, but eventually reality catches up with them.

“We’re not going to sacrifice people’s lives for the economy!” A politician looking to score cheap points says, as dumb people applaude. Irrational people can shut down their economy and force everyone to stay inside their home, sure, but eventually they’ll realize that the economy isn’t just there to increase a number in a rich guy’s bank account, it exists for an actual reason: It exists for you. That realization may be hard, it may be painful, but eventually they’re forced to make it. In Southern Italy right now, government officials are discovering that without the existence of an economy, people can’t pay their bills and begin to loot and plunder.

How long can people stay retarded? That’s another question you need to be asking yourself. It’s perfectly possible that it’s going to take two or three more months, before the media is finally forced to acknowledge that Mister Scienceman on TV, who has a Phd in never-being-wrong, had it wrong yet again. Of course they will not face any consequences for the unemployment, suicides, mental illness and bankruptcies they caused. But people will want business as usual to continue eventually.

Right now government officials are massaging their prostates, while fantasizing about how much power people’s fear of batsoupflu has given them. But eventually that starts to bore you. Sure, you can have the kind of totalitarian police state that makes Kim Jong Un green with envy. However, even Kim Jong Un and his brothers enjoy hanging out with basketball players and visiting Eric Clapton concerts.

Even your president or prime minister wants life to continue eventually. “But not if that’s going to kill people!” I hate to break it to you, but everything you do on a daily basis is killing people. Shaking someone’s hand or gathering in large groups spreads batsoupflu, sure. You know what driving your car spreads? Toxic air pollution that kills people. You know what eating meat spreads? Antibiotic resistant bacteria. The device you’re reading this on is using electricity. That electricity came from a nuclear power plant. That nuclear power plant uses uranium, that gave children cancer once it was dug up from the soil. Every single thing we do, screws other people and non-humans over. If you can’t live with that reality, you shouldn’t be asking your government to lock you up inside your house. You should book a flight to Tibet and become a buddhist monk.

Advice for the rest of you

The current situation sucks. The only thing that makes mass stupidity tolerable, is the fact that it’s profitable to be right, when everyone else around you is wrong. I’m not right 100% of the time. I’m right often enough to have made some good money from it.

So, with no further ado, here’s what you want to do. You want to look up the country that’s being ravaged by batsoupflu while you’re reading this. Of course the country probably isn’t genuinely being ravaged by batsoupflu, elderly people are dying who would have died within a few months from other causes if it weren’t for batsoupflu, but that doesn’t matter. What matters is that people panic when this happens.

That’s a known human bias. Human beings overreact to bad news. As a consequence, stock prices overreact to that same bad news. What this means is that right now, there are cheap stock up for grabs, particularly in Spain and Italy. In addition, there are sectors that are worse affected than others. Amusement parks have been heavily affected, but I just really couldn’t get myself to invest in Seaworld, dolphins should not be locked up for our entertainment. Airlines and tourism however, are also heavily affected.

Cruise ships are also heavily affected, but in contrast to the other sectors, there’s a fair chance they won’t recover, as the bad reputation they got from this incident is kind of deserved: Locking up sick old people on a big boat far away from any hospital is a recipe for disaster. This is now so obvious that almost anyone can see it.

So this is what you do. You go to your online broker, you look at small Spanish and Italian companies and you observe how they were doing before this panic broke out. The price was stable or going up before february, but now they’re down by forty percent or more? Research them further, figure out if they’re offering something real. Check their price to earnings ratio, see how they compare to the rest of their industry. Check their price to book ratio, see whether their ratio is healthy.

After you’re done and think to yourself “I like this company”, you need to ask yourself how much of an arrogant bastard you really are. Are you basically a normie? Buy stocks of a basket of companies, with a little bit of leverage. Are you a complete degenerate? Buy call options. Don’t be stupid, don’t buy options that expire in April. Heaven knows how long it will take until people stop being in denial about the fact that it’s literally less deadly than the flu. Please be smart. Most call options are thinly traded, especially far into the future. Don’t just make an impulse buy, do the calculations, check at what price you would break even, check the bid-ask spread.

The reason I’m telling you this stuff, is because opportunities like this are rare. It’s a cliche statement, but Rothschild supposedly said that you need to buy when there’s blood in the streets. Right now we’re in the middle of such a situation. Why not just buy index funds? Because passive investing is in a bubble.

I know some of you will be reading this and saying “you’re a disgusting pig profiting off other people’s suffering!”, but that’s because you yourself don’t have enough confidence to take opportunities when you spot them. If you genuinely want to help people in Italy or Spain, the thing you need to be doing is buying their stocks. Imagine you’re an Italian guy. Your wife was laid off, now you can’t pay rent. You realize you have some stock left from your company’s employee ownership plan. You sell your stock, even though the price looks unfair to you, because you need the money right now. With people like me around, you’re getting a fairer price for your stock.

This is how business works: You offer people services or goods with the limited means at your disposal, to the mutual benefit of both parties. You can offer people charity, but charity tends to insult their dignity, breeds corruption and worse, it’s unsustainable. No organism in nature engages in charity. What wild organisms engage in, are sustainable symbiotic relationships. When you help Spanish and Italian people get fair value for their stock during a period when nobody has spare cash to offer them, you’re participating in a mutually beneficial exchange.

Of course it’s theoretically possible that I’m wrong. If I’m wrong, if this is genuinely not a good time to buy, you need to buy euthanasia pills, or an AK47, because things are about to get very nasty. With the current state of the stock market, Dutch pension funds would have to cut pensions by 20% next year. This thing has now crashed faster than during the Great Depression. How much more can the markets crash exactly?

The thing is, during every previous crisis, it seemed like a bold move to buy anything. It always looks like everything is about to fall apart during a recession. After 9/11 it looked like the world was falling apart. In 2009 we had record food prices, record oil prices, a new influenza virus that jumped species from pigs and an economic meltdown that knew no precedent. It looked like the world was going to shit. People have been predicting the end of the world forever. They’ve also always used the same dumb method: They look around for something bad that’s happening and extrapolate it into the absurd. That’s what they’re currently doing with batsoupflu.

It’s theoretically possible that they have made such bad decisions that everything is starting to unravel now, but I don’t really see that happening. It’s becoming increasingly awkward that the deaths are missing. I lost track of how long the United States has been “two weeks behind Italy” now. Sweden, which doesn’t bother with quarantine measures, also seems to be functioning just fine so far. As the days go by, it’s going to get increasingly awkward that Swedish people are not dropping dead like flies. When it gets too awkward, the measures are lifted.

As I said before, we shut down the global economy, over a virus that appears to be less deadly than the flu. You can look at this as a nightmare, fine, but I can promise you one thing: A few months from now, people will also be looking at this as an opportunity. An opportunity for what exactly? Either an opportunity to buy cheap stocks, or an opportunity to still buy guns and canned food.

Godspeed.