The Disease Market:

I have avoided writing and or finishing this blogpost for over a month now, puzzled by the mental insecurities I have, the theoretical acrobatics, and ultimately the key marker in all of this: uncertainity. However, I feel as though it is my due diligence to write as I feel and think in real time, with real opinions and examples. Should some new found information sway my opinion, I will not shy away from ignorant or ill-informed previously held beliefs. All of that being said, what has troubled me greatly as I have considered this post, but cannot wrap my mind around as a confounding family of variables are, “offshored inflation”, “bailing out banks and wall street before main street”, “money matters and keeps you ahead” “debt that will never be paid off is not really debt”.

These properties of modern day U.S. society and government policy have a large effect on what I am about to write below, but I will not address them here as I do not have concise, formulaic opinions on them. Feel free to email me or otherwise to chat about them.

_______________________________________________________ 1 month earlier: (with a few edits)

The “Market” is a complex idea, that spans the entirety of our philosophical understanding of macro-economics. To this day, the greatest treatise on this subject remains Adam Smith’s The Wealth of Nations. Since this is a blog, and not the Wall Street Journal, or a masters course in Finance, I will try to keep my assessment of the world’s goings on to a relative surface level understanding and overview. I am doing this for a couple of reasons. First to establish the moral and practical conundrum that COVID-19 has placed us in, and secondly, because there is entirely too much to talk about should I go in depth in the varying topics mentioned in this post.

The economic world we find ourselves in largely thrives off of a positive feedback loop between monetary policy, credit based purchase power, trusted third parties and Central Banks and ultimately a unified bet that the future will not only have a larger “pie” overall, but that everyone has an equal chance at gaining more of the larger pie in comparison to the guy next to them.

As we climb out of an oil war that brought negative prices to the WTI, we see an interconnected world that is based on betting for a brighter future but is riddled with uncertainity. Unlike the 1917 pandemic, the world’s symbiotic nature has affected markets and industries in potentially catastrophic ways. Warren Buffet announced just this past weekend that he has sold his entire stake in the domestic airline industry. Both of these different things point to a first time for every citizen and investor. We keep hearing “unprecedented” in every press conference, customer email and news briefing we watch or read. Well, that’s the truth. And unfortunately, many think our economy was primed for a recession even before the virus hit. So what does that mean?

Well firstly, as a general response, the Fed has announced “unlimited quantitative easing”. That means that the government is printing unlimited money and extending their balance sheet beyond all historical markers at a high multiple. I read that each American took out a ~$18,000 tax payer loan from the government to fund these programs, and on average received $1200 back. Where did the rest go? Wall Street and not so small business. (Oh and by the way if you were wondering why liquor stores are considered essential businesses? The government makes a ton of money off taxing those goods.)

I largely fear this solution, because it aids the fat cats so to speak stay afloat, and make their nut, whilst the working American or their children will have to pay for this crisis in one way or another in the coming decades unless we slip into full-on UBI (Universal Basic Income) and Communism, but that is another discussion.

I believe still, that we will experience a W shaped market recovery that will last between 2-6 years in total. In addition to this, the latter half of the W will be deeper than the first. Meaning, for the DJIA, a drop below 18,000. This grim outlook is fueled by an understanding of the ” Broken Window Fallacy” and that you cannot turn on and off large machines of industry and entire global economies. Jobs are shifting, products expiring or being wasted, livestock euthanized and more, just watch Fox Business for thirty minutes. These losses remain losses. Even if the market comes roaring back, it does not replace the money that dairy farmers are literally pouring down the drain, amongst many other ailing industries, reference aviation comments above.

The point to writing this, is none of us have experienced something like this before. And to that end, we are not entirely sure how it is going to affect business going forth and the market. What I can say though is that if you find yourself sitting at home more than usual, do your own research, and try to come out of all this with a slightly larger slice of the pie. The odds are stacked against you more or less, but knowledge is power as they say. Per usual, if you are still reading I appreciate it, that is the reason I write. Please like, subscribe and comment, I would love a good conversation and feedback.