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. 
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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.
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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.
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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.
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Daily dose of humor:

@momtruthbomb
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."

@pork_chop_hair
“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"

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

Cheers!

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