FREE ACCESS March 23, 2020

MorningWord 3/23/20: Where Is My Mind?

by Dan

“Trust me, everything is going to fine..”

These coronavirus pres-conferences have one job, instill confidence in the government’s response at the same time giving useful information to scared citizens, they are failing at that, and something needs to change.

I have said it for weeks on CNBC and on RiskReversal, financial markets will not find a near-term bottom until we get more visibility on the health crisis, and when it is likely to abate….but also we will need to see a coordinated, unified response to the ballooning economic crisis, one that is likely to be felt by way more Americans than that of the coronavirus. The U.S. Federal Reserve has been ahead of Congress, the Treasury and trump on its monetary response. If Congress can’t agree today on the first of what will be many aid packages then we go lower. As I write the S&P 500 futures, that were locked down limit last night (down 5%) following the impasse in Congress on aid package have now rallied more than 7% on a whole host of new Fed actions (let’s see if it holds), per WSJ:

The Federal Reserve unveiled a major expansion of lending programs Monday that are designed to unclog credit markets that seized up last week, expanding its facilities to include certain types of corporate and municipal debt.

The rate-setting Federal Open Market Committee said the purchases of Treasury and mortgage securities that it approved one week ago are essentially unlimited, and the central bank said it would buy $375 billion in Treasury securities and $250 billion in mortgage securities this week.

It also said that it would begin purchasing commercial mortgage-backed securities issued by government-supported entities, which primarily consist of debt on apartment buildings.

 

There have been lots of economists, strategists, journalists, pundits, Doctors and even astronauts offering suggestions on how to fight this multi-pronged crisis (health, economic & financial), here are a few below I read over the last week:

This Is the Only Way to End the Coronavirus Financial Panic – Dealbook NYT

The Virus Can Be Stopped, but Only With Harsh Steps, Experts Say – NYT

Shutting Markets Isn’t the Solution to What’s Wrong. – WSJ

The tech execs who don’t agree with ‘soul-stealing’ coronavirus safety measures – The Guardian

How Long Will the Coronavirus Lockdowns Go On?- WSJ

How to Survive a Plague – NY Mag

I Spent a Year in Space, and I Have Tips on Isolation to Share – NYT

The Economic Rout Accelerates – WSJ

Denmark’s Idea Could Help Avoid a Great Depression – The Atlantic

Is Our Fight Against Coronavirus Worse Than the Disease? – NYT

 

“You met me at a very strange time in my life”

I often get asked by readers and viewers how I come up with convicted thoughts and ideas when it comes to financial markets. The answer is fairly simple, I read a lot, I think a lot about history, I take a holistic approach, I read the room, I am not afraid to be wrong, or to change my opinion. Those are characteristics I learned in this business that over the last twenty-five years I have worked into many other aspects of my life.

This morning I woke up to an email from an old friend that I have not spoken to in years, After a few paragraphs on the virus, family, economy, etc he had the following to say about my MorningWord from Friday (The Bailouts Will Continue Until Capitalism Improves)

I also want to let you know that, in all the years I’ve read your stuff, I’ve never been struck by a missive as I have this one. It seemed to me a bit … messy. I’d encourage you to read it again and reflect on it. I don’t want to be critical – not my place. But I do want you to hear – from a friend – that I think you have much more to offer when you speak to the way forward. Trump is a child who has never done anything wrong – that’s obvious to all of America at this point. But America is more interested in solutions than blame. At least that’s my view.

He is entitled to his opinion about how messy the missive was. I did read it again and frankly, I think it strikes the right chord as our Fed is once again gonna change the rules of the game on capitalism, as our Treasury is about to dole out hundreds of billions (maybe trillions) of taxpayer dollars first to corporations and then to our most vulnerable citizens, and we are NOT unified as a country on some of the most central tenets of a democratic capitalist society. But, I am not really in the solutions business, well above my paygrade, but I will offer my decently informed opinions on some of this stuff to those willing to read/listen, knowing that they will not always be right or palatable to some, but logic certainly has to be part of any constructive solutions going forward.

But they are not all critics, and in my Inbox there is balance… this comment from a guy who I very much admire, personally and professionally, let’s just say is a CEO type:

this is superb. Agree with every word of it. He may “preside over the greatest socialist experiment in the history of the world” – is beyond brilliant.

If we can’t point out the perils of the past and think critically about the logic that got us here, and yes even place blame where it is appropriate then, of course, we will continue to repeat the mistakes of the past. My worry is that in my career, since starting in 1997 at a hedge fund firm, I have now seen three major economic and financial market meltdowns, and while we have come out the other end, it is becoming increasingly clear to me that we are NOT more financially sound and each time we further exacerbate the disease that we can see, income inequality in our country, and each time (2001 & 2008) the cure of the financial disease ends up being a plague on our most vulnerable citizens. So I reiterate my missive from Friday, and I will highlight the very last bit despite trying to be optimistic:

Delete and unfollow any pundit or advisor who is telling you we will see a V reversal in the economy and financial markets, even in the best-case scenario of a shallow health crisis, it will all take more time than we hope and think is practical to dig out of this economic quagmire

 

So where is my mind?

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