Tips For Surviving Social Distancing – MIT

Posted on March 30, 2020 by macromon

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Florida Should Quarantine Itself

Posted on March 28, 2020 by macromon

After leaving Florida’s beaches open for spring break and allowing the Covidiots to return home throughout the country to infect countless others, Governor DeSantis is still exhibiting a colossal failure of leadership.  The third Tweet is a perfect example of why the country needs a nationwide lockdown.

Until then, forget about even thinking about sustained recovery anytime soon.

We must, indeed, all hang together or, most assuredly, we shall all hang separately.  – Ben Franklin 

https://twitter.com/travisakers/status/1243990179557359616?s=21

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The Rhyme Of History

Posted on March 25, 2020 by macromon

Flashback from the 1918 Spanish Kansas Flu.

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Nobody Saw It Coming. Not!

Posted on March 25, 2020 by macromon

Well, not until 2016,

The NSC devised the guide — officially called the Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats and Biological Incidents, but known colloquially as “the pandemic playbook” — across 2016. The project was driven by career civil servants as well as political appointees, aware that global leaders had initially fumbled their response to the 2014-2015 spread of Ebola and wanting to be sure that the next response to an epidemic was better handled. – Politico

Until they chose ignorance,

The Trump administration disbanded the “pandemic response” team, but some of the team members were reassigned to roles that included pandemic response.  – Reuters

Politico has also reported that, in the days before Trump was inaugurated in 2017, his incoming team — including many who would become his Cabinet officials — were warned about a flu epidemic that “could become the worst influenza pandemic since 1918. – Washington Post

and denial,

We have contained this…pretty close to airtight. – Larry Kudlow

Now we pay the price,

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Rosie The Riveter 2020

Posted on March 24, 2020 by macromon

America stepping up.   Go Rosie 2020!

Rosie the Riveter was the star of a campaign aimed at recruiting female workers for defense industries during World War II, and she became perhaps the most iconic image of working women.  – History Channel

 

Rosie_TR

 

Rosie_TR_2

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The Falcon Cannot Hear The Falconer

Posted on March 24, 2020 by macromon

Turning and turning in the widening gyre   
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity. – WB Yeats, The Second Coming

Liberty University’s  decision to reopen is very bad news, in our book.   Another example of the life threatening downside of not believing in science.   They can do whatever they want but this decision will put the public at risk.   Smells like politics to us.

Things are falling apart and center is not holding.

Here’s to hoping Jerry Jr. is building an Ark to save his students and that Liberty has a good legal team.

Liberty

Lynchburg Mayor Treney Tweedy said she did not endorse having the students return to campus.

“I was very surprised and disappointed to later learn of President Falwell’s most recent decision to allow students back on campus,” she said in a statement Tuesday. “We are in the midst of a public health crisis. I am concerned for the students, faculty and employees at Liberty University, and I am also very concerned for the residents of the Lynchburg community.”

The university gave students a choice in whether they wanted to return by filling out an online form with their intent. As of Tuesday afternoon, about 1,900 students have returned to campus out of the student population of 14,000 to 15,000, Liberty University’s spokesman Scott Lamb said.

University officials are prepared for about 5,000 students to return to campus, Lamb added.

“Our thinking was, ‘Let’s get them back as soon as we can — the ones who want to come back,” Falwell said in the statement.  – CNN

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Got Gold?

Posted on March 24, 2020 by macromon

The Fed’s effective nationalization of the financial markets in the past week has spiked gold prices.  It does appear the first phase of the bear market and bursting of multiple asset bubbles is almost complete.  Phase 1, an initial massive deleveraging, brought gold down 15 percent from its recent high before the big spike over the past two days as the Fed announced it will print “whatever it takes.”

Gold is now our highest conviction trade and fully expect the 1704 recent high to be taken out very soon, clearing the way to take out the September 2011 all-time high at 1920.80, which is only 15.6 percent higher.  A chip shot on the gold yardage card.

What We’re Watching

There are two things we are focused on like a laser.

Bond Auctions

We are watching the Treasury auctions with the 5-year and 7-year note to scheduled to take place in the next two days.  The budget deficit is exploding higher and the Treasury near-term funding requirements are growing exponentially.  How much the markets are willing to finance and how much will the Fed be forced to monetize will determine the slope of gold’s trajectory.

Our back of the envelope estimate with both the decline in tax revenues and increase in spending will put the effective budget deficit well north of $4.5 trillion for the year, which is almost a 25 percent increase in the federal debt held by the public.   We may not see that number due to window dressing, however.

We don’t know but suspect the Fed will have to directly credit the Treasury’s operating cash balances held at the Federal Reserve but not certain if the law allows it, which will then have to be changed.   Risking a series ugly auctions would strike another blow to confidence.

Dollar 

Trouble with the auctions and an accelerated move down in the dollar index below the recent low of 88.23 will fuel gold’s rally and signal a bigger problem.  The dollar index spiked 8.81 percent during the recent collapse and has started to sell off after the Fed’ big announcement earlier in this week.  Watch this space.

MMT is finally about to get its big test.  We are open to be converted and do pray they are right.

Stop losses über alles, folks.   As always, we reserve the right to wrong.

Stay frosty, folks.

Gold

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Gold_2

 Dollar Index

Dollar Index_3

 

Dollar_2

Dollar_4

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The Stock Market’s Gas Gauge

Posted on March 23, 2020 by macromon

Market_Cap_Mar23

The stock market, as defined by the Wilshire 5000 has fallen 35.1 percent from its closing high on February 19th and has been unable to sustain a decent bounce for more than a day.   Our favorite valuation metric, stock market capitalization-to-GDP has worked for us and is still not screaming cheap.

The chart above illustrates just how overvalued the market was at its peak.

The bursting of the stock market is one of several forces, including the bursting bond market bubble,  converging to create a perfect financial and economic storm and complicating the policy response to the coronavirus crisis.

As of today’s close, our estimate of the stock market capitalization-to-GDP ratio (Q1 GDP has to be estimated) puts it just 6.3 percent below the peak before the Great Financial Crisis (GFC).   We have been expecting a nut-cracking bear market rally but it has yet to materialize.  Possibly when Congress passes the stabilization passage now being debated.

Use Valuation Metrics As A Gas Gauge

The valuation metric has worked for us, and we compare it to a gas gauge to inform us that the tank is running low or high —  i.e, how much potential upside/downside there is in current prices — and not the exact spot where the market runs out of gas.   Trying to top-tick the high is a mug’s game, ask Issac Newton.

The higher the black line moves above past highs, the harder and more painful the fall, or a meaner regression to the mean.

Write that down, folks.

The question is have stock valuations “reached a permanently high plateau” as the famous economist, Irving Fisher, stated just a few weeks before Black Thursday 1929?

Believe it, if you wish.  After all, we now live in a culture and political environment where,

It’s not a lie if you believe it. 

To that, we say hogwash.  — GMM, Feb 17th 

Long-Term

We now view stocks at current levels as a gas tank one-quarter full and not yet conducive for a long-term rally or a market bottom.  After a bubble pops, stocks almost always overshoot their fair valuation level.

Falling From A Basement Window 

The following table is a list of price changes for key commodities from their recent highs.  The 75 percent move in RBOB gasoline is stunning and reflective of both a severe supply and demand shock.  Gas prices in the lower $1.00 range in California is going to be hard to believe.

Natty And Gold

Natural gas was already in a brutal bear market before the economic collapse and illustrates the trading dictum, “it’s hard to break your neck falling from a basement window.”

Gold is starting to take-off after the Fed has effectively nationalized much of financial markets over the past week.  As the Fed monetizes a large portion of what could be a $4 trillion deficit, we suspect gold moves much higher, easily taking out $1,700 level.

Wheat had a big move today over concerns about global supply chains.

 

Commods

 

As always, we reserve the right to be wrong.

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Is America Already Waving The White Flag?

Posted on March 23, 2020 by macromon

We are now in this war. We are all in it- all the way. Every single man, woman, and child is a partner in the most tremendous undertaking of our American history. We must share together the bad news and the good news, the defeats and the victories—the changing fortunes of war. — President Franklin Roosevelt, Dec 1941 Fireside Chat 

…the one who doubts is like a wave of the sea, blown and tossed by the wind… Such a person is double-minded and unstable in all they do.  – Book Of James 1: 6-8

This afternoon I was hit with a wave of fear after internalizing the mixed messaging coming out the White House and certain news outlets.

Less than two weeks after declaring war on the invisible enemy that has invaded America, President Trump and many in his sphere of influence are talking about picking up and going home.   Not exactly your Greatest Generation.

Debate Needs To Had

For sure, the debate as to whether the cure is worse than the disease has to take place.  What are the consequences of not taking the medicine?    We’ll stick to the economic issues and leave the moral and ethical for others to debate.

Welcome To Sparta

We are very concerned, however,  a “spirit of Sparta” is taking hold or surfacing in America (see the video above).   Where those considered “unproductive citizens,” such as the elderly,  are expendable and doomed to a similar fate to what those experienced in ancient Sparta, who were marched off a cliff to premature death.

Sparta

Economics

If the economy is “reopened” next week, will the stock and bond market bubbles reinflate?   Will the unemployment rate move back to below 4 percent?   

Very unlikely.  False hopes and false choices will result in disastrous consequences. 

If people are afraid that the invisible enemy is still among us,  the economy has zero hope of recovering and the country should prepare itself for a long drawn out recession or even depression.  Forget about productivity, which is the ultimate driver of long-term economic growth.

Only if most of the public has confidence COVID-19 has been dealt a fatal blow can a robust economic recovery even be considered a possibility.

The Day Will Come

There will come a day, hopefully sometime soon, to start thinking about getting back to work and reopening the economy but not until the inflection point in reported case growth curves, i.e, the second derivative starts to turn negative.   

The planning should begin now but pulling the trigger before the slope of the growth curve (first derivative) turns negative could be one of the biggest policy mistakes in the history of the country.   

 

True Economics

          Updated chart

Covid_2

 

                 Source:  Dr. Constantin Gurdgiev @GTCost

Ignorance and denial will not shield us from this ugly curse that has fallen upon the world.   Spending needless energy on this debate only distracts from the important priorities of winning the war on COVID-19, limiting its long-term economic damage, and strengthening the social safety net for most vulnerable.

We suspect, however, something more cynical is trumping rationality.  Politics.

Why Do We Still Listen To These Clowns?    

We are baffled by those who once labeled COVID-19 a hoax,  no worse than the common cold, and its containment was airtight still have any credibility and continue to influence national policy.

Just say no to herd immunity.

Let us not surrender.

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It’s Time For Capitalists To Help Save Capitalism

Posted on March 22, 2020 by macromon

It looks the lock down in much of the country is going to last a bit longer than expected.  Small businesses account for a large portion of U.S. GDP and employ almost half the U.S. workforce.   Most of these companies won’t be able to survive such a protracted downturn.

Every American needs to step up and answer their call to duty to get us through this dark night.  The government’s finances are now extremely strained and it is impossible for the taxpayer to bail out every business and worker. 

Rent Holiday

Landlords need to seriously consider granting their small business tenants a long-term rent holiday, as in up to one year. 

It’s not only the patriotic thing to do but it is also in their best interest.  Imagine the value of the real estate holdings if, say, 4 out of 5 store fronts become vacant and a large portion of commercial real estate is left empty. 

The commercial real estate space was already in bad shape and what we labeled the New Rust Belt.  

Rent_5

It can either be voluntary or by fiat as an addendum to the economic packages now being considered in Congress.   Some landlords will be strapped and their creditors will have to workout another extend and pretend deal.  It’s much better than the alternative.

Let’s go, America.

It’s not like we are being called to storm the beaches in Normandy.  This is easy.

I’ll take staying home, washing my hands, and pitching in wherever possible over taking incoming any day.  Be thankful.

No free riders.

Time for everyone to step up.

Rent

See article here.

Rent_4

See article here.

Small Businesses Are The Anchor Of The Economy

Rent_2

Rent_3

Source:  JP Morgan

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