Goldretired have nothing left over to the fear propaganda going on in media. Instead we focus on how to profit from Coronavirus instead of being afraid from it. This report was first published only to the insider members of our newsletter, that you can join at the bottom of this page.

If yoyu are interested you will recieve an additional report named “3 Things to Own in a Crisis” and yes you guessed it,

one of those 3 things are gold, but you might not guess right on the other 2 ones… If you want that report simply submit your e-mail at the form at the bottom of this page.

In this report we’ll do two things.

Briefly cover what the virus is and what can be done to protect yourself from it. And on that note please be aware that you’ll almost certainly NOT contract this virus. In that respect it is nothing to get your knickers in a twist over. The other part is what impact on financial markets and what can one do.

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When I shared the ‘3 things to own in a crisis’ special report with my subscribers a few months ago I naturally wasn’t thinking of the
coronavirus. Nobody had even heard of it yet. That report was designed to be a forewarning “buy
these three things in a crisis” and the coronavirus is indeed a crisis so if you’ve not already taken
sufficient action on that front let this be a reminder to you.

Our working hypothesis at this point is that this is more of the GFC variety than the SARS variety in
terms of economic impact. Yikes.

Recently in an article “When trust evaporates” I discussed the distrust that exists in the world and
how this makes the Wuhan virus rather different from any other as a consequence. Or at least the
response and feedback loop is vastly different.

Before we delve into today’s special update let me make one thing super clear. I’m no virology
expert nor do I play one on TV. It is amazing to me how rapidly the number of financial
commentators have turned into virology experts with many expanding into pathology, and even
biochemical warfare experts. Really you should read some of this isht. In that arena I will disappoint
you. I’m not that guy…not even close. I don’t know squat about viruses. Last time I was sick…

it was a near death experience, though I’m proud to
report that my recovery is rather remarkable and I’m back to my fit old self.

In this report we’ll do two things.

Briefly cover what the virus is and what can be done to protect yourself from it. And on that note
please be aware that you’ll almost certainly NOT contract this virus. In that respect it is nothing to
get your knickers in a twist over. The other part is what impact on financial markets and what can
one do.

So what is this COVID-19?
Here I turn to the Public Library of Science as they provide a good description:

“The “body” of COVID-19 is basically a genome enveloped in glycoproteins, with a smear of fat
and bearing the crown of spikes that inspired the name “coronavirus.”

The genome is a single strand of RNA that is termed “positive-sense.” That means that the
infected cell treats the viral genome as if were its own messenger RNA (mRNA), translating it
into proteins.

A “negative-sense” RNA virus requires more manipulation; a host enzyme must make a
positive-sense copy.

Once ensconced in a human cell, a half dozen or more viral mRNAs are peeled off. The first,
representing about two-thirds of the viral genome, encodes 16 protein “tools” that viruses
require to replicate.

In short, this is a particularly nasty bastard that has embedded tools if you will, that mask its
presence while doing serious damage to your immune system.

I was curious to know exactly how this virus works and so after some searching I found that roughly
the virus initially looks like the flu

You can be infected and have no symptoms for up to a week apparently. Thereafter the symptoms
are:

• Fever
• Chills
• Headache
• Fatigue
• Sore throat
• Loss of appetite
• Swollen lymph nodes
• Muscle aches

All the stuff that would make you basically a bit sluggish, thickheaded and less productive than
usual…but nothing too concerning.

Now this is where this little beastie gets sneaky because for many folks they wouldn’t get treated
in the above scenario. I know I wouldn’t. I mean I’m male…I’m not about to go to the doctor for a
bloody sniffle and a sore throat. I’ll suck it up, take a shot of whisky and probably go to bed earlier
than normal. Other than that I’m not likely to do much.

But this is the start. Some folks manage to get over it while others progress with viral lung infection
causing breathing difficulties. Damage to the lungs and what is called a cytokine storm can ensue.
Perhaps you’ve seen the videos circling of folks in China and Hong Kong collapsing in the street and
going rather rigid while shaking and then dying. This is the cytokine storm.

Here’s an explanation: Source

“When the body detects foreign microorganisms indicating an infection, it might respond by
over-protecting the site of infection. It may race so many antibodies to the infection site that
they collect in a cytokine storm. When the infection is in the lungs, for example, this response
can potentially block airways and result in suffocation.”

And here is what it looks like:

Stats so far say roughly 85% of folks get to this last stage (which is quite a lot) however for them it’s
relatively mild…more flu like symptoms however the virus is still highly contagious at this point and
can cause lasting organ damage.

Then there’s the other 15% who get it bad. Mostly this is folks with poor immunity systems,
overweight, and or aged. Rather worryingly they term “aged’ as being folks over the age of 40?
Whaat? In any event in this situation the risk of death or lasting damage is high. Typically folks die
from any of the following:

• Pneumonia
• Pulmonary Embolism
• Lung Fibrosis
• Lung Thrombosis
• Heart Attack
• Multisystem-Organ Failure

There are reports which I’ve no way of confirming yet…that it is possible to contract the virus a
second time and due to a weakened heart from the first infection on second go round fatal heart
attacks are common.

So there you have it. A bugger of a thing.

Current mortality rate stands at 3.4% based on current known vs dead ratio. The problem with this
ratio as I see it is twofold.

1. Chinese numbers are almost certainly bullshit. We just don’t know by how much.
This means as the virus spreads globally numbers out of countries that have no desire
to falsify statistics will provide a more reliable count. In that respect it’s worth watching
South Korea, Japan and Italy where significant numbers of folks are being diagnosed, and
where decent medical and scientific infrastructure exists to more accurately track the
virus and related issues.

2. The process to actually test for the virus requires a medical kit to do so and in most
every country we’re not set up to do so. As such many people who have the virus will
likely be diagnosed incorrectly and any subsequent deaths put down to pneumonia or
some other related side effects such as cardiac arrest.

So in a nutshell the odds appear to me to be decent that the currently stated numbers are less than
what the actual numbers are. Maybe a lot less.

I’m not trying to sound any alarms or anything, that’s simply a rational judgement based on the very
real fact that transmission rate of this virus is very high, it’s asymptomatic and stays latent for many
days before becoming symptomatic. Thus people will be spreading the virus unknowingly, and who
the hell goes to get checked for coronavirus when you get a sniffle? Nobody.

So this is a particularly bad virus. Furthermore….without trying to induce panic in you one of the
problems we face is in its transmission. It pays to always compare things because that’s how we can
put things into context and understand them better.

So put into context, even though we’re in the relatively early days (we think) here is a very good
comparison to SARS, EBOLA, MERS and Swine flu.

 

That’s not particularly SARS like to my untrained eye.

In terms of preparing for something it makes sense to me that we’ll see global supply chains
impacted dramatically. There’s no question about that and so supplies of things we take for granted
will be harder to come by. They’ll be more expensive and the economy won’t be trucking along
quite as dandily. Stagflation

As I watched the outbreak hit Italy and seeing the reports of supermarkets being emptied it brought
home to me the truly interconnected, just in time world we live in. Did you know supermarkets
operate on a 38 hour restocking basis. That’s on a normal day. Increased activity such as a public
holiday or something like that means they prepare for it but still often get down to 24 hrs. Imagine
that. It’s no wonder they’re empty within a day when folks rush to secure supplies.

So in that respect if you’ve got some medical situation that requires medicines I’d certainly be
securing more than you’d normally need. Depending on your condition and drugs required a
6 month supply makes sense to me. In the pharma world China produces the vast majority of
antibiotics for example. Having some handy wouldn’t be a terrible idea, because when or if you
need them they may not be available as supply chains continue to come under pressure.

Trades

All the trades we are going to discuss are with the view to providing a hedge incase this
CoronaVirus crisis continues to escalate. While we do believe that in the longer term this
crisis will pass and China and the world will get back to some normality the impact can not be
underestimated.

It would be crazy for us to not consider the possibility that the Corona Crisis morphs into something
rather more dramatic and tragic than even we could envisage.Therefore we would be fools to at
least not consider hedges.

We’re thinking that by year end we will definitely know if the Corona Virus was of the SARs variety
or if it is on its way to become like the Spanish Flu epidemic that smashed the world from 1918-
1920. Consideration of time frame is important when considering what length of time to buy
options.

Long the USD

One of the simplest trades we can think of is bullish positions on the USD. We continue to believe
that the USD remains in a primary bull trend and the CoronaVirus can only be beneficial to the USD.

Consider the following:

China has closed down roughly 80% of its economy, which itself accounts for roughly 90% of its
exports. That’s a hit to the Chinese economy no matter how you look at it. But now Japan has just
enacted similar measures, shuttering all schools, all universities and asking everyone to work from
home. Crikey. Now you may ask why did Japan do this?

2 reasons.

One they fucked up the Diamond Princess and the government are showing “leadership”. Saving
face in Japan is a big deal.

And two…Japan has THE most aged population in the developed world. They are therefore more
susceptible to this virus than anyone else.

I did find this chart which highlights those ethnic groups most at risk. It would appear that this virus
is racist as well as dangerous.

In any event Japan as you can see is at the tippy top.

So we have two of the worlds largest economies in some form of stall mode. This impacts
supply chains globally as mentioned. Not the least of which are Emerging markets that produce
commodities, sent to China.

Take a look. This year will see $1.5 Trillion with a T USD-denominated debt maturing. EM’s face a
double whammy of exports collapsing both in volume and price, meaning their income stream just
came screeching to a halt….together with a debt wall incoming.

So the potential for a feedback loop to ensure cannot be ruled out. You do NOT want to be short
the greenback.

So how to?

Obviously if you’re an American you’re likely holding cash in USD anyway. But many of our clients
are not Americans and so automatically defaulting to your country’s currency is I think dangerous. So ensuring a healthy dollar exposure is I think important.

You can do so quite easily with the ETF UUP. which tracks the USD Index. UUP has a very liquid
option market.

Options chains for UUP Jan2021 strike.

There is an endless range of possibilities when it comes to options trades. Let’s consider a couple
shall we.

Buying the Jan2021 27 strike @ 0.50. 100% return would be at 28 – a 4.5% move from current
levels. What if UUP were to repeat what it did in late 2014 – a 23% move? This would generate a
11.5:1 payoff! However, keep in mind this was a huge move for UUP within a 12 month period…..it
also assumes you capture all that move exactly – a tall ask!

Buying the Jan2021 28/29 bull call spread @ 0.10. If you are looking for a high payoff trade to
capitalize on the USD raging higher then take a closer look at a bull call spread. If we can buy the
Jan2021 28/29 spread @ 0.10 then it would equate to a 9:1 payoff if UUP was to at least close @
29 come Jan2021 – an 8.6% move, granted not a small move but at least you are well rewarded for
it in the payoff of the trade.

Long Bitcoin

Bitcoin provides us with an anti fiat currency that is deflationary in nature and technologically
superior to anything else out there. It is however the most volatile of anything we own. Position size
accordingly.

Calls on Eurodollar Futures

This trade is a little more tricky to understand than call options on UUP, well at least from the
perspective of understanding the underlying instrument. We don’t want this to be a “user’s guide”
on Eurodollar futures, rather this is aimed at those who already understand the workings of
Eurodollar futures. We’re looking at options on the March2022 Eurodollar future. Currently the
Mar22 ED future is trading at 98.715:
The March2022 99 strike calls are going for 0.25pts – so breakeven a 95.5, 100% return @ 99.75
and 200% @ 100. Remember each point = $US2,500, so 0.25pts = $625
It’s probably not a 10x bagger trade but it wouldn’t be too hard to double your money.

March2022 Eurodollar Future

The March2022 99 strike calls are going for 0.25pts – so breakeven a 95.5, 100% return @ 99.75
and 200% @ 100. Remember each point = $US2,500, so 0.25pts = $625

It’s probably not a 10x bagger trade but it wouldn’t be too hard to double your money.

If you really thought there was going to be a big move up in Eurodollar futures over the next 12
months or so then there is the March2022 100 strike which you may be able to get for 0.04 (mid
price between bid and offer spread). This trade has the potential to generate a dramatic payoff but
above 100 on ED futures implies the 30day yield on USDs going negative.

Gold

Gold fits with our narrative over both the short and long term! It was rising prior to the outbreak
of the CoronaVirus. Furthermore, gold has been rising against a backdrop of a rather strong USD.
Precious metals in general have been strong confirming the upward move in gold. So something
much bigger than the CoronaVirus is at play here.

There are multiple ways to position in gold. Let’s not discuss the bleeding obvious (buying GLD,
GDX, gold juniors etc as we’ve done so previously. Basically you may want to increase your position
size).

Outside of that let’s discuss a few option strategy ideas.

Options on Physical Gold

We think the best instrument to buy options on gold is options on the ETF – GLD. GLD has a very
liquid option market going out to Jan2022.

Here are a few strikes                        (percentage move in GLD from current levels)

Breakeven       100% return        200% return

150 – @ 13.70                                           8.4%               18%                         27%

160 – @ 10.0                                             12.5%              19%                         26%

 

A more aggressive trade to consider would be a bull call spread on GLD. Specifically buying the
160/200 bull call spread.

So the max payoff here is 5.4:1 if GLD was to get to 200 or above come Jan2022 – for a 32% move
in GLD. Breakeven would be at 166.23 for a 10% move in GLD.

The really interesting thing with long term options on GLD is that the further out of the money you
go the higher the implied volatility. What??
Yup. So it really pays to be selling OTM (out of the money) calls because you get a big offset in the
cost of ATM calls. As an illustration – Jan2022 160 strike calls have implied vol of 16.5% and the
200 strike calls have iv of 20%.

Options on Gold Miners ETF – GDX

As with GLD, GDX also has a very liquid option market. Options on GDX have a higher cost than
GLD. As an example ATM calls on the Jan2022 option

GLD 150 strike – 16% Implied volatility, 18% move in GLD for 100% return
GDX 30 strike – 30% Implied volatility, 32% move in GDX for 100% return

It may appear that options on GDX are more expensive than those on GLD. However, one must
keep in mind that gold miners are geared to movements in the price of gold and this gearing isn’t
a constant but rather moves in an asymmetric fashion. The reason is that the cost of mining gold
generally doesn’t rise in line with the price of gold so as the gold price rises gold miners operating
margins rise.

We could present a range of option ideas on GDX but we decided to keep it simple – Jan2022
33/40 bull/call spread.

Assuming you could buy this spread for 1.76 (where it’s at as I type this) this would give a max
payoff of 3.4:1 if GDX was to close at or above 40 come Jan2022 – a 33% move from current levels.
We don’t think a 33% move is a tall ask. In any event B/E is at 34.76 – a 16% move from current
levels (GDX has moved by the same over the last 3 months).

Why a bull call spread? It is to achieve a higher payoff for a given move in the underlying. Sure the
downside is that you cap how much upside you can achieve. As a matter of comparison, if we just
bought the 33 strike call outright – to achieve a 3.4:1 payoff a 63% move in GDX would be required
(come Jan2022).

Putting USD & Gold Bullish Positions Together

If we have long term calls on the USD Index (UUP), and long term calls on GLD then effectively we
have a synthetic long gold position in Euro, GBP, & JPY terms (non USDs).

Lastly before I leave you…we are putting together a report on pharma companies for you. You’ll
recall we suggested in previous weekly’s that the pharma companies that have been obliterated in
the opioid scandal where beginning to look interesting to us, well couple that with those that are
non-China based or reliant and we’ve potential “icing on the cake” for these companies. Should
supply be curtailed of pharmaceutical products out of China (not out of the question obviously)
then these companies could become ever more interesting.

Stay tuned for that and all my best to you!

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3 Things to Own in a Crisis!

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Hope you found value from this report on how to profit from Coronavirus and how you might want to invest during it, and if it becomes worse. Please share your own experience and opinions below as it can help others! Also, if you got any questions about this I would be more than happy to answer them below!

I wish you health and success!

Michael,

Founder of, Goldretired