Monday, April 06, 2020

The world has coalesced

into one giant mess
of hate and unrest

So let's all sing along
a little bleeping louder
to a happy song
and pretend it's all okay.

"Happy Song" by Bring Me The Horizon* 

This was definitely the mantra (another BMTH album) of the markets today, as a mild overnight rally picked up steam throughout the day and just never let up.  If ever there was a day to validate the importance of the computers and lines drawn by technical analysts today was that day.  About two weeks ago, I mentioned that despite dismal data, stocks had started a sharp reversal and most of the charts said stocks were going back to 2660 or so, roughly 20% off the bottom.

Where did they goose stocks to today 2661 (or 2663 at final settlement).  It's comical that the markets are this predictable but it's the reality when the stock market has become the world's simplest video game and everyone is playing by the same rule book.

** EDIT: overnight the futures traders decided to push stocks to EXACTLY the next technical level 2725.  Remember when investing was about buying a company in the hopes that they would make a profit on their products? Yeah, neither does anyone else, now it's just gambling and the charts run the world.

Now that we have hit this number it becomes an interesting point of contention - is it a new floor or is it a ceiling?  I suppose the people that equate the stock market with the economy (generally, people that aren't very bright but I'm not pointing any fingers) will be thrilled with move and will probably start sending out more autographed copies of the stock charts.

However, even the most optimistic traders are starting to see the second and third derivative impacts on the economy.  People are getting optimistic about a return to normal in the Northeast by 5/1 but when you follow local news in other parts of the country it's staggering how long they are projecting an impact from COVID19 (things are being cancelled through August). Also, the thing that everyone seems to forget is that the problem with our economy is not COVID19 but an economy that has been on living on life support with a constant flow of excessive debt at every level (consumer, student, corporate) and COVID19 merely exposed our economic issues as too many were operating without a safety net.

It will take years to tell the final full story of COVID19 when we are fighting bad data at every corner.

Via NYC Council Health Committee - "It’s not just deaths in hospitals which are up. On an average day before this crisis there were 20-25 deaths at home in NYC. Now in the midst of this pandemic the number is 200-215. *Every day*."

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Won't someone please think of the poor banks?
I occasionally have this dream where the my fellow citizens suddenly realize they are being robbed by the nations banks in the name of helping us through another bailout but then I wake up and remember, that nope we still are a nation of the banks, by the banks and for the banks.

* As part of the $2 trillion bailout was the payroll protection program - a $350 billion treasure programs to assist small and medium businesses meet payroll.

* Well, the banks were hesitant to lend because it only takes a few loans to go bad to make the whole program unprofitable.

* Late today the Fed announced that it would establish a market for these loans if packaged and the end buyer of the loans is likely to be the Fed itself.

* So these loans are now effectively risk free and the banks will earn 1-5% "administrative fees" for loans which won't be on the banks balance sheet.

* In essence, because our Federal Government is so inept at it's job, we have to rent the services of the banks for $10 billion to pass your tax dollars to small and medium businesses.

I know when we're talking billions and trillions, a $10 billion transfer of wealth from you the taxpayer to your bank (who is still paying you 0% on your money, while charging you 15% on your credit card) seems like a small violation but it's not about the size of the violation it's about the continued efforts by our government to bailout the banks at the expense of everything else.
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Stat of the Day: via @realwillmeade
The indicator Warren Buffett and every top hedge fund uses to value the stock market is Stock Market Capitalization to GDP ratio
Historical average is 0.8
in 2008 it bottomed at 0.5
Today its still a whopping 1.2

To go back to 0.8 the average, stocks would have to drop 30%

And I would add that those calculations are before accounting for rapidly falling GDP.  When you cut GDP 10-15% in 2020, it makes the market look even more expensive.  If you wonder, why every weekend people predict a Warren Buffett buying spree and every weekend he passes up the opportunity, it's because he's waiting for value and we aren't in the value range.
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Quote of the Day:
Isaac Asimov from 1980:

“There is a cult of ignorance in the United States…. [It is] nurtured by the false notion that democracy means that ‘my ignorance is just as good as your knowledge.’”

Quote of the Day: Part 2

"Our entire society has forgotten how to take responsibility. We have forgotten that life consists of setbacks and that you have to have safety margins for difficult times" - Felix W. Zulauf
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Daily dose of humor:
@daddydoubts "we're done with homeschooling, we just do anger management now"

@nayele18maybe "There’s nothing quite like removing a couch cushion and searching for a remote control to make you appreciate how truly disgusting your family is."

@mom_tho "My thoughts on Tiger King: I'm doing very well in life and should literally never worry about anything ever again."

Cheers!

*if you find the right video online you are likely to see me in the middle of the BMTH mosh pit during this song :)

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