Thursday, March 26, 2020

Markets want to eat their ice cream for dinner

Have you ever seen a toddler that just wants to skip dinner and head straight for the dessert table?  Well, this the way the markets have acted this week.  They've decided that we'll have a recession (though one is not yet declared), it will be fast (far from a certainty) and that the recovery will be rapid so you better buy stocks now.  So, let's price the recovery before the economic impact of COVID19 is even understood - the markets have never been so detached from reality in the US.

Markets and the economy:
As I mentioned the jobless claims numbers would be comical if the situation wasn't so dire.  Expectations of 1.5 million would have been 2.5 times the previous high peak of 695,000 in 1982 or 665,000 during the 2009 Financial Crisis.  Instead the number came in at 3.28 million, almost 5 times the previous all-time high, in statistics numbers don't get more absurd.

Let's do a little back of the envelope math - 250 million adult age people in the US and 60% are in the workforce or 150 million people probably had a job at the beginning of March.  Thus, 3.28/150 = roughly 2.2% or 1 out of every 50 people in the US lost their job last week.  That is jaw-dropping, especially, since it might be worse next week. A visual representation via Bloomberg - that includes oil shocks, 79-82 recession, 87 crash, dotcom crash, Great Financial Crisis and this week.

So, of course stocks soared 6% because..........oh god, who knows. I suspect the technicians wanted to see a 20% bounce of the bottom which would retest one of their drawings on their charts and that's exactly what was achieved today.  I worry, that people are so desperate to put the collapse in stocks behind them that they are ignoring the fundamental collapse in the US economy which is only going to get worse in the coming weeks.

Favorite tidbits of the day:

* if you take a loan from the Florida Small Business Emergency COVID fund, it is will be interest free in year 1 (great!) and the interest will be 12% on the unpaid balance thereafter. 12%!!!

Question Mark What GIF by moodman

* Included in the final text of the bailout bill is language that allows the Federal Reserve to conduct secret meetings without having to provide minutes to the American people.  Ugh.

* It's interesting to get feedback from people on the ground in China. Beijing is back open for business but with few exceptions the city seems to be operating at 25-30% of capacity and many businesses are still at a virtual standstill.  The idea that the US is going to flip the "Open" for business sign in 2 weeks is embarrassing and ignorant of the facts on the ground.


Again, thanks to everyone that has come back to the blog.  Almost 1,000 daily readers this week is fantastic considering I was dormant for almost 4 years.

Twitter: @brianlantier for snarky thoughts throughout the day.

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