The Big Boot

It was nobody's idea of a "good" day. The worst economic downturn since the Great Depression was confirmed. Jobless claims rose for a second consecutive week. Donald Trump raised eyebrows by suggesting the election should be delayed. And lawmakers on Capitol Hill appeared no closer to a deal on additional virus relief, even as extra federal unemployment benefits lapse, leaving millions of jobless Americans to ponder a sharp reduction in government assistance. The figure (below) is from the GDP

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4 thoughts on “The Big Boot

  1. Can anyone explain why the Fed is buying the debt of Philip Morris? If the Fed is now in the business of picking winners and losers, and shaping the economy, then why prop up a company whose products impair public health and result in huge costs for our healthcare system?

  2. ““Hindsight being 20/20, could it really have been that simple on the 2020 version of the ‘Fed rides to the rescue’ trade yet again?”, Nomura’s Charlie McElligott asked, in a Thursday note, citing huge returns for virtually all assets since the Fed’s emergency actions on March 15. “The answer seems to be a resounding ‘YES’”, he went on to say.”

    As far as I can tell, the stock market and the housing market will henceforth be propped up no matter what. The only way these markets can correct is if the entire system fails. So making a rational contrarian bet is to bet on the failure of the system, it seems. Being bearish is essentially defined to be betting on the destruction of America.

  3. “…and the likelihood of a significant cut to the level of unemployment benefits [together] mean the upcoming data flow may not point to as vigorous a recovery as markets are pricing”, ING’s James Knightley cautioned. I’m not sure the markets are really pricing a vigorous recovery, I believe professor H is correct when pointing out that the unstoppable rise in tech equities betrays a very defensive tilt to markets, price action in banks and most industrials is terrible, for the most part these securities reflect economic reality. At this stage the only thing that may change this dynamic is an actual improvement in economic data, presumably this would trigger the rotation to value taunted by Kolanovic and Wilson. I suspect eventually they’ll be proven right, but all indications are we may have to wait a while.

NEWSROOM crewneck & prints