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A Staggering Number of Businesses Are Set to Collapse as COVID-19 Continues to Accelerate - Nathan McDonald (July 10, 2020)

A Staggering Number of Businesses Are Set to Collapse as COVID-19 Continues to Accelerate - Nathan McDonald (July 10, 2020)
By Nathan McDonald 25 days ago 5786 Views No comments

July 10, 2020

Despite the chaos of the world around us, despite spiking COVID-19 cases, and despite a record number of businesses shuttering their doors (many never to re-open again), markets remain relatively healthy.

(Chart source, google finance)

This obviously defies all common sense and rationality, but that is unfortunately the world we live in now—an artificial world, where the markets are driven purely by wild speculation and grotesquely negligent money printing.

Although there is a "recovery" story to be had, we are far from it. And the current state of affairs in the markets is nothing more than an illusion, like so many other parts of our economy.

The stark truth of the matter is that the world is a mess at the moment, with political strife, upheaval, and chaos coming from all directions. And we have come nowhere close to peak boiling temperatures.

COVID-19 Continues to Accelerate Worldwide

One such form of disruption and arguably the world’s biggest immediate problem is the coronavirus pandemic. Although far less deadly than at first predicted, it continues to spike across the globe, as the world suffers from the third straight record jump in new cases of COVID-19.

(Chart Source, Bloomberg)

Although many nations have gotten a handle on the pandemic for the time being, many others who originally thought to have had it in check are finding out that cases are surging once again, as restrictions have been steadily lifted over the last couple of months depending on the location.

However, there are a few key nations that have never truly gotten COVID-19 under control, and they are now seeing a drastic rise in both daily deaths and daily new cases. The United States, Hong Kong, Italy, Philippines, and India are just a few.

The United States is most heavily affected in four big states, including Texas, Florida, California, and Arizona. Other states are also adding to the total number of new cases in a lesser, but still meaningful way.

This comes at a time when the campaign cycle for the 2020 U.S. elections begins to enter full swing and people scrutinize every action or inaction on both the political left or right.

Businesses Continue to Collapse

The preceding lock-downs and the continued strain that COVID-19 has placed on the economic system has already taken a heavy toll on businesses, and it’s only going to get much worse before this crisis fully resolves itself.

We are now beginning to see the first true COVID-19 damages being reflected in large business earning reports, and as expected, they are severe.

Walgreens recently joined those businesses— such as Hertz and many others I previously reported on—who have already fallen victim to the economic disaster. The pharmacy chain recently revealed the damage that has been inflicted upon their earnings over the last few months, missing estimates wildly.

As reported by Zerohedge:

"Adjusted earnings for Walgreens third fiscal quarter (comprising the three months ending in May) came in at 83 cents per share, down 43.5% YoY. That was well shy of the Wall Street consensus estimate of $1.18 per share. Group revenues rose 0.1% to $34.6 billion, just below analysts' projections for $34.35 billion."

Unfortunately, we should expect a tidal wave of horrendous earnings coming our way, especially when you take into consideration that Walgreens is much better positioned to weather a virus pandemic than other businesses, whose goods would be deemed less vital during the same period of uncertainty.

(Chart source, Trepp)

As Trepp's recent CMBS (Commercial mortgage-backed securities) remittance report indicates, we have a major problem on our hands, as the percentage of CMBS who are now considered delinquent in payment has exploded higher.

This is a level we have not seen since 2012, and it paints a very bleak picture of the future for businesses, which were already under heavy pressure due to the highly competitive and rapidly accelerating online business model prior to the additional stressors of 2020.

In their latest report, Coresight Research estimates that a staggering, additional 25,000 stores may shutter in the remainder of 2020 alone.

As we head into 2021, things will likely only get worse, especially if the lockdowns resume this fall. The "second wave" of COVID-19 expected to accelerate across the United States and other parts of the world could place the final nail in the coffin for businesses who were just barely getting by.

Intervention is the Name of the Game

Governments are stuck between a rock and a hard place, and many people already believe they have no choice other than to let COVID-19 run its course, lest the coming economic fallout result in more deaths than the virus itself. Fortunately this is not a decision I have to make, and I do not envy anyone who does, as it is a lose-lose situation.

However, all of this negative news is heading us into the direction of more intervention, more money printing, more collapses, and rapidly increasing debt creation the world over.

(Chart source, goldprice.org)

These are just a few of the many reasons why we are seeing gold and silver bullion rally higher once again, as people seek safe haven assets to help weather the current storm and the future tsunami that is coming.

Future gains are likely to continue, with a "great reset" higher in prices eventually unfolding in rapid succession, as the masses begin to finally realize the situation the world economy finds itself in.

Until then, stay safe and keep stacking.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.



Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.



The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

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