Stansberry Research

Doc Eifrig’s COVID-19 Briefing No. 3

April 9, 2020

Editor's note: You can find a full transcript of Doc and Matt's briefing, complete with slides, below the video. If you'd like to view a pdf of the slides, click here.

Dr. David Eifrig: Hi everybody. Welcome, again, to conversation no. 3. I'm Dr. David Eifrig and with me is Matt Weinschenk.

We are practicing social distancing from two different places – two different states. I'm in New York. You're down in Maryland. Welcome, Matt.

Matt Weinschenk: Hello, Doc. How ya doing?

Doc: Good. Nice to see you again.

Matt: You too.

Doc: I understand it's your turn to have tree trimming going on in the background. That little buzz you'll hear, that's not our technician… That's the noise of workers coming back to do essential work, I guess.

Matt: Yeah. And on the video quality note… Last time some people were saying that the slides were a bit blurry. So we're going to make sure it's a higher resolution this time and below it there should be a pdf file so you can look at them as closely as you like.

Doc: Fantastic. And, as always, on the second slide here – if you have questions, shoot them to

And sign up and get free updates… Also this I sort of daily, free letter. Send this around and tell your friends to sign up for Health & Wealth Bulletin. Love to have them join. There's no cost to join that and they can get this for free. In fact, my sister just found this the other day. So, that's kind of fun.


Alright, let's dive in.

Matt: In the interest of questions, we do have quite a few this week, so we'll probably go a little quickly so we have some time for those. Now, we'll check in on the usual stuff…

As always, we're kind of going virus to economy and then to markets.

If you look at the new confirmed deaths in the U.S., there's a little bit of a tick down there. This is a three-day average, but I think it could be a blip. It could hold up. What do you think, Doc, on the current rate of deaths?

Doc: Yeah, I think we're close to that. This is a three-day average, so I note that yesterday's number – Tuesday, April 7– was a little bit higher than the three-day average. So this won't completely roll over from the peak a couple of days ago. It will tick back up. But we'll show you some other slides that suggest that things might be easing off a bit.

Matt: Yes, so this is daily confirmed cases. Again, a three-day average.

U.S. is way ahead of the pack, but that's definitely a big roll down over the last four days. That's a good sign. If the social distancing works, you expect it to take at least two weeks. We are seeing what we would want to be seeing for the virus to start to cool off.

The issue now is, how do we get back to normal without sending it right back up?

Doc: Let me ask you about this chart… I see that the U.S. – the green line – has gone so high and gone off the charts here. What's the reason for that?

Matt: Well, obviously, it's just a bigger country…

Doc: Perfect. I want to make sure that people realize that. That they don't panic. The U.S. isn't going nuts. We're a large country and it's coming on late. We're suddenly getting the tests at the end of March. So I just want to make sure people don't panic.

Matt: So here… This is the sort of popular chart that shows the doubling rate…

The United States still, at this point 35 days in, we're much worse than anyone else. But we're pushing from doubling every two days to every three. So, again, we're pushing it over… Maybe not fast enough, but we are headed in the right direction.

Doc: I want to highlight with that… I think the reason that we're so far to the left, or at least the slope was high for the first 10 to 15 days, is we were really struggling to get immediate testing. And even today, there are places around the country that still have a 24-hour turnaround for this lab, even though these tests are making their way around the country with machines that would allow the results to be returned in 15 to 30 minutes.

But that is one of the reasons that we're a little bit further to the left than you would wish you were.

Matt: Yeah, and all this data is messy. Different countries have different reporting…

Doc: Oh yeah

Matt: …and collecting it. And there's not been a system to put it all together at least beforehand, obviously. Everything here is with a grain of salt, but you look at what you can.

The markets rallied a lot this week…

New York has been ahead of everyone else as far as things getting bad. It's obviously dense and a big place. New York was in rough shape and they just reported two down days in cases. Two days when they were much lower than previous days. The markets rallied and now the third day, which was yesterday, the 7th – you'll be seeing this on the 9th – was another up day. So we'll see.

But the markets did rally on that news. A little bit of positivity out of New York.

And we showed this last week…

This is the same chart from last week that shows the state-by-state progression. New York is right on that two-day doubling, which is much too fast.

Doc: For people who are new, you can see these three gray lines… The one that's furthest to the left is one day. The one that's sort of in the middle where you see the New Jersey and New York lines (the orange and yellow lines), that's two-day doubling. And then down to the far right is doubling every three days.

This was last week. And you can see New York was right on that doubling every two days line. New Jersey was moving from the left to the right, which means it was slowing down. Now show us this week which gives us a little bit of optimism…

Matt: Yep, it's pushing over much closer to the three-day line. Everyone else is kind of heading along the three-day line and maybe pushing past that.

Let's look at Washington down near the bottom… They were one of the states first hit. They're clearly sort of in the five-day range. We'll go back again…

Where was Washington before? They were just a little longer than three. Now, they're way out there probably where five would be.

A lot of places are catching on and doing pretty well. But, the other thing is that a lot of these states are only two weeks from 100 cases. That's when a lot of these charts start counting. They're about two weeks behind New York. So they could be seeing greater absolute numbers even if they can get their growth rate down.

Doc: Right. And one of the things I'm curious about, Matt… California is between the three-day and seven-day doubling. On this chart, it's sort of the lower-right corner, just above Washington.

Why do you think they've been so low? Or, let me throw this out there… I'm sort of optimistic when I see that because I think then that sunlight and UV radiation maybe has a killing effect on viruses, and this virus as well. So that's a good sign to me that a highly populated state is already down that low.

Do you have any thoughts as well?

Matt: Yeah, that could be. I haven't thought much about that. But I know that San Francisco – California is a big state with a lot of different areas and San Francisco seems to be the worst there, which is where it's cooler. So even within the state, that might be.

You can get this stuff county-by-county, too. So maybe we'll look into it and see what's there. But the warmth would certainly help.

So we've updated our outlook…

In the best case, which isn't really that hypothetical at this point, we might be two weeks away from the peak. Other states don't really get as bad as New York did and they have less of a surge. Businesses can start to reopen soon. And – this is the important one – testing is available to really prevent a resurgence. We can do test and trace, and things can turn out pretty well.

It probably won't go quite that well, if you ask us. It's probably more like four to six weeks to the peak. There will be a resurgence that will scare people, but it won't be the end of the world. We'll have certain locations that might have localized epidemics that come and go. And the economy will get better, but it may take a while.

Of course, ideally we won't, but we could have repeated resurgence. This could go on for six to eight months. We just can't tamp it down. We'd have unemployment at 20%. Now there's this talk about how a recovery could be U-shaped… V-shaped. We could have a W-shaped recovery where we come back and then the economy drops again. So that would be the worst case.

I was looking as some projections for how bad that could be with a poor shock, as in a big shock to GDP and a W-shaped recovery. It would not look well because it's going to be a global crisis. Then it will feed back across borders, both the virus and the economy.

Worst case is very bad, but I don't think we're going to get there. But we'll have to see how it goes.

Doc: I would say that I lean, in terms of the virus, more towards the best case scenario because I think that people have done what they think they should do. There are stories now amongst friends and families and people being in the hospital and in intensive care. That risk becomes real. I've seen folks out walking around that weren't wearing masks that are now. Neighbors have made masks or each other and so on…

I'm a little more optimistic that people are taking it serious. And the seriousness is not that you can stop all viruses and stop disease and prevent death… But we want to prevent a premature and early death from overwhelming – and I'll say this again – the intensive acute care that the United States is fantastic at.

That's what you want to avoid in your neighborhood. But the chances are this will be like influenza and other viruses in the sense that we're not going to get rid of it, we're just going to be able to slow it down. And, again, there are some signs that California data is a hint to me that warmer weather will also slow it down.

So I'm more positive on the health side of it. But I still remain nervous about the dislocation of the service sector.

I don't know, Matt… We seem to be functioning fairly well from a distance. Do you think we'll have an office five years from now? Do you think at Stansberry we'll all do our work virtually? What's your take there?

Matt: People talk about what the long-term changes will be. Some people say that everything will be virtual. Everybody will work from home.

But you could also make the case that it's the opposite. It's hard to work from home and it doesn't work that well. It's distracting and things like that. So I think a lot of people will want to get back to the office.

I really don't know. It's a hard behavioral question.

Doc: So economically, I think that it's going to be a little a little longer struggle. And, I think you have this next chart which shows us GDP projections…

Go ahead and tell us about this. You can see on the far right is the 2020 projected performance.

Matt: This is just a chart to show us a scale of what may be happening… How bad will this recession be. Each one of these colored lines is the GDP throughout the year, for a year. So you see that big green 2009 line that we have labeled. In 2008, there was a forecast for what growth would be – around 2%. As 2008 progresses, things got worse and the forecast kept going down, down, down, down. By the end of 2009, we got to what the real GDP number was.

So these are where the forecast came through. If you look at 2020 – the dark green – that's all the way to the right. You can see that right now – and this is the Fed's open market committee forecast – that we're looking at a 1% decline. But the drop there was very sharp and you'd have to expect that's a little behind. I know that the Wall Street firms are predicting a much bigger number than that. So we'll see how it updates.

The magnitude is large. That's what we're trying to…

Doc: Let's eventually come back to this because I laugh at this number and how low it is. I think it should be down and off the charts. But we'll come back to that in six months and you can laugh at me, Matt, or celebrate.

Matt: I'm not saying… Again, we're just trying to gauge expectations. We want to know what the market is pricing in and what people are expecting. We'll look at forecasts into that. We don't think it's going to be right. It's never right.

Then just trying to digest some of the data that's come out since we last talked…

The Small Business Optimism survey came out. Definitely a huge drop there that you can see in the last month. But it's not that low. It's about where it was in 2015 or 2014. But this was a survey collected throughout the month. So some of it might be from earlier in the month of March. So we'll have to see. It was just one of the big numbers that came out this month. And it's a little bit of good news, I guess. But we'll see what the next print is next month.

Doc: I think the next print will be low, low, low.

Matt: I think so, too. Alright, so… Last week, we were also talking about the spending plan and $2 trillion. And we wanted to start thinking about the national debt a little bit.

Well this is – the red line here is the deficit. So when this is higher, the deficit is higher as a percentage of GDP.

You can see that the green line is unemployment. You can see that when unemployment is high, we have less tax revenue and we spend more for stimulus.

Doc: So, Matt… I don't know what you're seeing, but people here, maybe on this side since you're controlling it now… It's the shaded red that is the GDP and is the deficit, correct?

Matt: It is the deficit as a percentage of GDP. It's flipped to make it go up, but you see the peak there is 10%. So in 2010, we were spending 10% more than – we had a deficit that was 10% the size of GDP. So that was a time when we were spending too much.

Doc: But color-wise, you said green. I see a black line. Maybe there's a green tone to it?

Matt: Oh, yeah.

Doc: The black line is the unemployment rate. Before we get to it, let's just highlight the green-shaded area. That was when there was a surplus in the percentage of GDP. And that was back under Clinton?

Matt: Yep.

Doc: So, huge deficit recently that's coming down along with the black line, which is unemployment. That's what you're trying to tell us.

Matt: Exactly. And what we're really trying to say is that these have moved together. And it makes sense that they move together because you spend when times are bad to try to get things a little bit better. But this chart ends in 2014, so now we will update it to now…

Doc: And you say, "You spend." But, really, we're talking about the government spending, right? That's what the government is spending.

Matt: Yes, exactly. So since 2014, this has broken down. We've had amazingly low unemployment, a super strong economy, and the deficit kept climbing. This is a time if you want to be responsible, you tighten up a bit. You stop blowing through taxpayer money because times are good. But that is not what happened.

Doc: Save for a rainy day. You can see from the chart, we don't do much since the 1970's or really ever. But this is a worrisome thing. You and I were talking about this. We showed this chart – the GDP – with a different number… tax revenue. It should be going up, deficits should be going down when employment is doing this well, and it's not. And that's really worrisome for me as a fiscal conservative. But we'll get to that eventually.

Sorry to interrupt you again.

Matt: No, you didn't interrupt.

So that's what we're showing here. People have been worried about the federal government debt and deficit for years and years and years. You can say, "Oh, it kind of made sense." But there is a difference here and these recent times. So it would have been better if we had tightened our belts and been ready to spend $2 trillion when an emergency came.

Checking in on our market indicators…

Credit spreads, which is the top line here, are still pretty high. We expect that those will come down before the market has its real rally. The market has been doing pretty well. I don't think we've seen the bottom yet, but we're preparing for either way.

Just to put this credit spread in long-term perspective…

You can see there it's still 9%. Anything over 6% or 7% is sort of crisis time. There's still a lot of fear out there.

Doc: Yeah. I would say that there's still fear and, we've talked about this as well… Last week, when Carnival Cruise Lines came out and issued debt – I think they're maybe one or two steps above junk now – they issued bonds at 11%, the nominal coupon amount. (An 11% yield-to-maturity.) Crazy demand… wild. That's another conversation we're looking at. We've got our bond guys checking that out. But those are numbers that I haven't seen for 25, 30 years.

Matt: The VIX is easing off…

We said, in our first round of charts when we did this, you don't have to buy at the peak VIX. Usually the VIX comes down before the market starts its real rally. And we are seeing it coming down to 45 from 80. 45 is still very high by any recent history. But it is starting to ease down.

And we've got a lot of questions. So that was about 20 minutes, so we've got plenty of time to go through some of these questions we've got.

Doc: Matt, before we turn to questions, just go back to the VIX thing for a second.

For folks who might be seeing this for the first time, this is a volatility index (hence the "VIX"). And it's a measure on the top of implied volatility. So this is expected future volatility in the underlying securities upon which options trade. And it's thought to be a measure, when it goes up really high – like when it when up in the Great Recession – it's thought to be increasing because people are paying up for options, and particularly put options. So it's driven more by hedging and people wanting to protect by buying a put option, which is the right to sell something. So it's loosely been called a "fear index." We've analyzed this a couple times.

It's imperfect in terms of saying peaks and valleys of markets. But it is to be noted that this is a great time to be selling options because the implied volatility is manifested and derived from the option prices. So when it's high, it means people are paying a lot for the unit of time for the option. You can see last year, under 20 and even in the low teens. That's very different amount of premium someone would pay for an option on a stock for two or three months, versus 45 or 46 on the index.

So I just wanted to clarify for people who don't know about options, don't know what the VIX is. So let's turn to our questions.

Matt: Let's turn to questions. Okay, so I'll fire them at you and we'll see what we've got here. Okay. Do patients who recover from COVID-19 have permanent lung damage?

Doc: Yeah, so anytime you get a cold or virus even infections, the lungs themselves are very very thin and the epithelium, the outer layer, can become damaged, inflamed and over time, it's why many people who get viruses like this have coughs for a long time. The epithelium becomes denuded, it's – you can look it up, d-e-n-u-d-e-d, denuded epithelium and that's why you can get a lingering cough for weeks and even months again, some viruses. So yes, there is some damage, not necessarily permanent.

Matt: Alright. Can we trust well, just a primer here, one of the success stories has been China and Wuhan, they've got their cases well under control, maybe down almost to zero as far as growth goes. But the question is how can we trust China's data on deaths and COVID cases?

Doc: Yeah, you know, I'm a holder of a 10-year Chinese visa and I love China, love – been over there a couple times I've been and the data doesn't seem to be making sense when they've got these 20, 30 million – well, not 30 million – but 20, 25 million people in the cities and they're not getting any reports of the virus. So, I don't… I prefer transparency over secrecy so I'm disappointed in that and as a scientist, it doesn't make sense, but that's their prerogative to do what they want to with their data and information. And I don't know if you have thoughts on that, or feelings.

Matt: Yeah, I mean, I think it's… you never really trust Chinese data fully, it's just a matter of how much you think it might be off. On an early report on Bloomberg about a U.S. intelligence report that was showing that they were not properly counting cases. But I don't know, you always take it… I always take Chinese data with a grain of salt, is what I do. Maybe you can derive a trend from it. But the numbers are never going to be exactly what you'd want them to be.

Alright, next question: Why are people holding up the use of hydroxychloroquine?

Doc: Yeah, so, like any drug that's been approved by the FDA, this drug has not been approved for use against COVID and against viruses. It's a drug for malaria. And the short answer is physicians are allowed to, what's called use "off label" prescriptive authority.

And there's fun and interesting Supreme Court cases – trust me on this, it's a fascinating subject. Some people don't understand: how can a doctor prescribe a drug that wasn't tested and made for that, and some of the greatest discoveries in cures for disease have come from the use of a drug on something else by smart physicians and smart physician-scientists.

So we may be on to something here, but it's not just suddenly because Trump was whispered in his ear that it works, that it's going to work or cure. It has side effects. I have a brother who's a retina doctor in Orange County and this particular drug can cause damage in the back of the eye. The brand name is Plaquinil. It can cause other problems, it comes from and is related to quinine and from a tree that you can have hearing problems and hearing damage so it's…

Drugs just aren't any – everything's not safe. I'm drinking, you know, coffee right now, am I drinking too much coffee? I start flapping my wings, my heartbeat could start changing… Drugs are drugs. You just got to be careful you don't give it out to everybody. History is filled with stories of people thinking things were safe when they weren't.

So they're trying to be – we're trying to be, as a culture – a little more cautious and aware. It's… but that's why.

Matt: Alright. There's still, we still have some readers who say that this isn't any different than the flu, you know, why are we so worried about it? And I'll lead you in with a chart here on this one…

Doc: Yeah, so this is great. So this shows you from year round, it starts at week 40 so that's what, is that October 1st?

Matt: Yeah, I think so. Yeah.

Doc:  So this is, these are cases, the colored lines that seem to almost all go together. The green is a bad year of 17-18 flu cases. This is weekly deaths in the United States. So you can see the 17-18 flu season was terrible, we got up to what we were seeing early January, mid-January 7,000 cases a week – deaths, that's 1,000 a day. That's what we're seeing now in COVID. And this is seasonal it goes year-round, but you can see it never really tapers off.

Look at corona! This thing has shot up. And that's the reason is because the human population is so naïve to this particular bug. We don't have anything, any kind of immunity, we don't have herd immunity. And so this – you can see it shooting up. And that's what's going to overwhelm or can, and in theory, overwhelm because a certain part of these people who get the disease. Again, this just shows you deaths.

The reason you're seeing the shoot up in deaths is because all of the sudden people are coming with it and there's only a certain limited number of ICU beds and ventilators. And so that's the problem and challenge here. And I hope people appreciate that it might ultimately turn into a seasonal virus just like this and could be exactly on this line as a seasonal virus would with this kind of death rate, right? Now, it's not.

Matt: Alright. Let's see here. Is it safe to order from grocery stores?

Doc: What do you think? What are you doing? Where are you getting your food?

Matt: Grocery stores and I mean, I see – I wish, I don't have the numbers off hand – but I've seen the charts of sort of how long the virus can live on certain things and I think on cardboard or something it's like six hours or seven hours or something, so I just take stuff home, I leave it in the garage or put it in the fridge and wash my hands and then just wait until basically the next day. And the odds of someone having touched it within, right before I got it, leaving something on it is pretty minimal.

And then obviously you try and get more – at least two weeks' or so at a time so by the time of day three or whatever, everything is fine. So, again, there is some level of risk there but again, I don't know what it is. But you need food, so there's not much else you can do.

Doc: Yeah, and I've had some deliveries from grocery stores and I've tried to think about just what you're doing and saying is plan four or five days out and have some delivered and I just put that away, really don't even touch it. I just wash my hands immediately after lifting the bags up, put them in a corner.

And then you know with any kind of take out stuff, hopefully you're going to places and they've figured out that they want to have a different person taking money and credit cards from the person who's running the food say to your car and I've just been making sure I've been going to places that do that.

I know there's a glove that's being handed and food that's come from a cook and chef who's bagging it and they're using gloves and away from the incoming potential viruses on credit cards or cash. So I'd encourage that, you don't want to start freaking out too much because again the key is getting and say opening up your container, and now using utensils, not your fingers and hands, and making sure your fingers and hands were washed. So you're going to be fairly safe that way.

And again, probably the majority of us will be exposed eventually over the next year. It's just, you don't want to be exposed when everyone potentially who gets it bad and if you're one of those people, unlucky, you want to make sure there's an ICU available for you.

Matt: Let's see… How are Taiwan and South Korea able to test so quickly for an illness that no one had ever seen before?

Doc: I think part of it is they were dealing with the SARS and the MERS the past decade, they've thought about it. Plus they have a lot of manufacturing for these tests are right there, and machines as well. Is that what – what's your take?

Matt: Yeah, I think so. And I think from just a biological perspective with diseases in the past, you have to find some sort of unique marker or find some quirky way to figure out what it is. But now with sort of genetic testing, you just can get the virus' DNA and you can just test for it. So we can make a test for any disease essentially instantly now, right? It's just that matter of manufacturing and getting enough of them out to everybody. Is that a correct explanation?

Doc: Yeah, I think that there's a whole slew of tests now. Making their way around the United States where they've got 15 to 30 minute results can be given back, you had to make the reagents, they were in short supply for some of the tests and so on and…

So yeah, it takes time and we just didn't think about it. I know there's stories of Bush giving a talk back in '05 and his government and, again I don't come down politically one way or the other, I would say I'm libertarian at heart: less authority, less people telling me what to do. But he did talk about it in his administration did play some serious games where folks then became very afraid of what might happen in a pandemic. We've let some of these things, the supplies you might imagine, you should have had in stock… yeah, I'm babbling at this point.

Matt: Next question. Okay, so now we're a little more onto the financial side. Do -

Doc: I mean, wait, let me finish what I'm saying. I don't… I fundamentally don't believe that it's government's responsibility to prevent every little thing. Like I don't, you're going to fall and skin your knee or get sick or break a bone… I don't think it's the government's responsibility to protect everyone from everything. Including financial risk, including health risk – all that stuff. I think that there are group things we can do together better than individually, but the driving belief about it has to be less interaction and more free market is better for what that's worth, so let me just be clear about that. I don't think, I'm not blaming the next government after Bush's or this one or anything.

You've got to think about it and then decide how you want to allocate. You know, it's a basic question from Economics 101. Do you want to put it towards guns, do you want to put it towards butter, and then when you give the money out, you have to get the money, you actually have to tax people. How do you reward advancement of society and civilization. To me it's capitalism in its purest form, which we don't have in the U.S. So, anyway.

Matt: Alright

Doc: Enough.

Matt: Yeah, I think you managed to get everybody on both sides upset when you cover so much information. There's no way you can get away with an opinion anymore.

Doc: Oh, call in! Call in to Stansberry. Call the customer service line.

Matt: Ask for Porter Stansberry.

Doc: Matt Weinschenk.

Matt: Do we call travel stocks amidst this turmoil? Hotels, airlines, cruise lines…

Doc: I think it's early, what do you think?

Matt: I think it's early. I think many will survive – the good ones will survive. And if they've got the balance sheet to get through this it's probably going to be a time to buy. I don't think yet, some people might think it is now.

A big question we were talking about already is there a real change in the way people behave and do they travel anymore? Do they want to have an office anymore? Do they want to work from home? And it's unknown. I think… I think that we will go back to largely normal. I think people will want to fly and I think people are going to want to see things and… But that's a very hard behavioral question.

Doc: Yeah and you know I cut my teeth and for most of my investing life, airlines were a no-no because it was highly capital intensive, highly cyclical, most of the airlines have gone bankrupt at least two, maybe three times in my lifetime. So it's only been recently where a Delta and a Southwest… Southwest has always been… I wrote a paper, I would love to find this… I might have it somewhere… on Southwest back in the early 80s about what a great airline model it was. But Delta, you know, I don't… Until recently, airlines have not been good investments. So, I don't even know how you deal with travel stocks at this point. But we're looking at it. We're looking at great…

Matt: yeah.

Doc: Great sell-offs and things.

Matt: Let's see. Okay, so the U.S. economy is going to struggle, but aren't other countries going to struggle much worse and won't the global recession be even worse? And yeah, I think if you don't have, essentially we do have unlimited spending these days, it might come to get us in the future, but we have unlimited capital, low interest rates, our own reserve currency… We can do things that other countries can't afford to do. We have our own currency, we can do things that the Eurozone can't do. So yeah, it's going to be… the global situation is probably going to be worse and that's not even getting into the healthcare that some poorer countries are going to have to deal with. That's going to be a true tragedy.

Doc: Yeah, and I haven't checked this out. I have a call in to Joel Litman, but the Philippines are talking about martial law where officers, police officers, are going to arrest and corral up people who aren't abiding by social stuff. We don't have that here and I don't know that would ever fly in the U.S. because of our fundamental freedom and rights. So you know, everyone is sheltering at home because I think it's the right thing to do, so. That's not true in other places and that, again, will become problematic economically and socially, so.

Matt: Does buying mortgage REITs here make sense? Mortgage REITs are a vehicle that essentially borrows money and buys mortgages and collects the interest on the mortgage and passes that back to investors. And they have gotten absolutely hammered. Annaly, one of the big ones that was… down 70, 80%, but it rallied yesterday, which would be two days ago to you people. But they're very opaque, they're very highly levered, and this mortgage market is one of the few places that the Fed has not sort of backstopped like some of the other things.

So it's really fundamentally broken at this point. If the Fed steps in, those things are really going to shoot up but we don't know what's going to happen. So high, high risk but high reward and just so… You can collect every piece of public data you can get on those things and you still really have no idea what's going on inside their books, so, tread carefully. But a very interesting asset class.

Doc: Yeah and we, I think we talked about this last week, on mortgages themselves where rates we think, with lower rates you'd see potential to do re-fis on your own homes, place, but rates haven't dropped for the consumer and might not because of the risk – economic risk.

And I have a friend, well, a couple friends I mean in the solo medical practices or even group practices. Businesses are down 50 to 70 to 80%. These are physician practices. And I know one friend's in Florida that are levered and have two homes that they're in the midst of buying one and trying to sell the other. And holy mackerel, if you don't have income coming in from the breadwinners and you have two mortgages and you go to the bank to try and refinance, bank's going to say "wait a second, you don't have any income right now."

Matt: Oh my God.

Doc:  I don't think so. And I don't think they're going to foreclose. I think there will be some federal backstopping – your words. But I think that will happen. Or at least there'll be a moratorium on foreclosures, let's say for six months or something like that.

Matt: Yeah and even more specifically just the Fed greasing the financing system, even if they don't have to help out homeowners, just keeping things from locking up. But we'll see.

So we're at about 40 minutes and our last question here is what will the Fed pumping liquidity do to asset prices? So that one Doc, what do you think? Can you do that in a minute here?

Doc: No. No. That's a long, long question of the history of the Fed to what the Fed did in the last boom then bust, to what they're trying to do now. That's a philosophical question that we probably need – we probably need to do an evening conversation next week, Matt, with bottles of wine, on that one.

Matt: Sounds fun.

Doc: Good stuff. Alright, well – did I hear a little one in the background there?

Matt: Oh yeah. I guess my daughter's up, she's just turned one. She's very far away in the house but you can still hear her.

Doc: Awake from the nap! Where's Daddy?

Matt: Awake from the nap.

Doc: Alright, well thanks for joining.

Matt: Alright. Thank you Doc and we'll talk soon.

Doc: And again,, sign up there to get our daily free stuff if you're not. And if you're a subscriber – paid subscriber – please for, to help us out, spread the word so we can all stay employed and it doesn't cost you anything for the free stuff. And if you do have questions, Cheers!

Matt: Bye, Doc.

Doc: See ya, Matt.