There is only one thing going through my mind right now.
How can we get back to normal without a vaccine?
I don’t plan on doing much with my money until I have a better understanding of that.
I’m taking on some swing trades here and there. Or trying to lower my cost basis on some positions I am the most loyal bagholder of. For the most part, I am approaching everything like the kid who shows up with knee pads, elbow pads, and a helmet.
The Federal Reserve and the Government want you to think they have the biggest Bullzooka in town. And they just might. The coordinated stimulus of Jerome Powell slashing rates, launching QE, and pumping overnight liquidity while the White House passed a $2 trillion stimulus bill is, easily, the greatest coordinated stimulus package in history. It makes Cash for Clunkers look like a side order of soup while the guy next to you has the prix fix menu and the chef is personally walking out to shake his hand.
When Hank Paulson was trying to save the economy in 2008 he famously said, “If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out.” So far this administration has made it very clear that they want you to think they have a bullzooka.
But here’s the thing, while J Pow and the White House have shot their shot, I am not sure a bullzooka is the answer. This isn’t a financial crisis. We need a damn NUCLEAR BULLHEAD. Something that can wipe the Rona (Coronavirus!) out forever. Erase all doubt. That only comes in one way: a vaccine. I have no doubt we will get there, the question is who will lead us and when will they do it.
I saw a chart the other day that predicted how society will operate over the next 12 months. It looked like an oscillation between normalcy and outbreaks. We go 3 months without much worry, then it breaks out, then we quarantine, we go another 3 months, and then it breaks out again. Repeat. That does not sound like fun.
One thing I continue to write about is the Cares Act, and how we allocated $500 billion to “large corporations.” I just don’t get it. Most of these corporations are going to fail regardless, they offer nothing right now, they are mismanaged, and more importantly, I do not understand the return on investment compared to showering hospitals, local cities, biotech companies, and healthcare so we can search for a vaccine, prepare for future outbreaks. I would take that investment any day compared to giving bad management teams free loans so they can buyback more stock and ensure that their personal bank accounts have more cash in them than the companies they run.
*Schep gets up from his desk, pours a cup of coffee, thinks to himself, “man that was a good line. you let them hear it.”*
In terms of my own portfolio, while the vaccine is on my mind, I am also thinking about stagflation. Let’s add it up. We have an aggressive stimulus bill, an aggressive Fed, a shock to the supply chain, rising food prices, the need for rising oil prices to save energy companies, and a slow down in employment. I have studied a few things in my time and, when I look into Saruman’s orb at the top of Mordor, there is a cloudy haze forming that looks something like the monster called stagflation. Hopefully the tree elders save us before we get there. Only time will tell.
I’ll have an update when I can and I hope you enjoyed my thoughts on markets in this interesting moment.
Thanks for reading.