Like a windstorm toppling a hollowed-out tree, SARS-CoV-2 didn’t cause the current recession so much as it exposed how rotten things already were.
Even when hedge funds have a world of risk-protection products at their disposal, such as going short the S&P 500 or going long the volatility of volatility, many still buy gold. Why? Because it offers broad protection against unknowns, rather than targeted insurance against identified risks.
The US economy has stalled as the virus pandemic flares up. Real-time data shows slowdowns in consumer foot traffic, restaurant foot traffic, discretionary income, and overall economic activity as virus cases rise in 38 states.
Today’s Nasdaq price action was likely a bit of a shocker for many freshly-minted day-trading gurus.
So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.
While Morgan Stanley continues to cheerlead some imaginary V-shaped recovery that is increasingly just in the heads of its research analysts who are running out of time to convince the bank’s clients to buy everything the bank’s prop desks have to sell.
Will there be a V-shaped global recovery? Probably no financial question is more important, or more poorly defined.
One by one the world’s legendary deflationists are taking one look at the following chart of the global money supply (as shown most recently by DB’s Jim Reid) and after seeing the clear determination of central banks to spark a global inflationary conflagration, are quietly (and not so quietly) capitulating.
“When you sit down with your portfolio management team, and the first comment made is ‘this is nuts,’ it’s probably time to think about your overall portfolio risk. On Friday, that was how the investment committee both started and ended – ‘this is nuts.’”
Hot on the heels of his CNBC interview in which he praised both bitcoin and gold, predicting that in a world where central banks are doing nothing but printing money “