Friday, April 03, 2020

Friday fun

For everyone thinking about jumping back in the water to buy stocks - remember we've just lost 10 million jobs in two weeks and stocks are still up 5% from the lows 15 months ago. 

There is an interesting push/pull going on in the markets - a lot of people want to buy this bottom in the market thinking that it we will turn on a dime once things reopen. On the flip side, there are a number of people lining up thinking that this is the big one.  A great recession or possible depression, that will take stocks down 50%, 60% or even 80% further from here.  These people are waiting for one more good rally to get short the entire market. 
Morgan Stanley is the first of the big investment banks to say publicly that the economic impact of this shutdown will linger.  They are now predicting a more U shaped recovery without a return to 2019 levels of economic activity until the end of 2021 (21 months away). 

Unfortunately, this may be an optimistic view.
Random hard to believe fact of the day - the Federal Reserve's balance sheet increased by $586 billion in the past week.  That's 30 billion more than they added during the entire QE 2 process which lasted 8 months.

In related news, it's interesting to note that in 2007 the US had a $19 trillion economy with a Fed balance sheet of $850 billion and total Federal debt of $9 trillion.

In 2020, the economy in the US will be under $22 trillion with Fed balance sheet of $9-10 trillion and total Federal debt of $23 trillion. That's not a good trajectory.
On the bailout plan's paycheck protection program - Secretary Mnuchin is imploring banks to participate because they can earn 5% in 90 days risk free. He stated today to the banks that "you'll never have this chance again." 

Do you know what 5% in 90 days works out to? Roughly 20% per year, which is probably more than what your local loan shark in Poughkeepsie would charge. 

Reminder - the bailout is not designed for you and I, it's designed to line the pockets of the banks.
Daily dose of humor:

I made my very first loaf of bread today. Much like the pioneers, I started by going on to Pinterest and typing "Italian bread recipes easy."

“Just a little midnight snack”, I whisper, knowing full well I have no concept of what time it is, what day it is, or what the words ‘little snack’ even mean"

"Remember when we didn't cry when we accidentally rolled off too much toilet paper?"


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