I Still Ain’t Feelin’ It YET

So I’m looking at the COVID map after seeing the FEDS just ordered 100K more body bags. Today we stand at 62K dead. Yesterdays infection rate added 27K. At 27K/d at the end of May we will have added nearly 837K more to the case total therefore giving a expected total of 1.891M and if the death rate is stable @ 5.8% we can expect 109K dead by June 1st and 1/3 of those body bags to be consumed with 2/3 in reserve. This is under a social distancing society closed regimen. If the regimen goes away why would anyone think things get better?

Deflation is not the same as recession. In recession the fed cuts rates and a stimulus impulse surges through the economy. In recession things get cheap but it looks like tomorrow things will be more expensive i.e. things will reinflate. So the motive is to buy low before things go high. Deflation is an entirely different psychology. The deflationary psychology says “yes things are cheap, but tomorrow they will be cheaper so I will wait”.

CNBC wants you to believe this is recession. They get paid to hawk stocks. Virtually ALL of FIREland is buying that narrative as well. I’ve seen several blogs doing post mortem’s on how passive investing has worked so well and now it’s on to new heights! 30 MILLION people are out of work and an economy that was supposed to be up +3.5% is down -4.8% for a net of 8.3% decline for the quarter and that data only includes 2 weeks of virus. The world is in depression. Commodities are in depression. OIL actually traded negative. Ford’s bonds turned to junk and the Ford CEO on the quarter call admitted there was no hope, yet the Nasdaq is down only 0.93% on the YTD.

In Quantum physics reality s governed by wave functions which give probabilities that describe where a particle, say an electron MAY exist. Those probabilities are described by the wave function raised to the second power. It works like the risk distribution in a model of prices. A stock may have a price of $15, but the likelihood of that price being the real price (the real price is the price at which a transaction occurs aka the price where the transaction becomes liquid) actually lays across a distribution, say between $7 and $22 (just an example). So if you bought yesterday at $15 what you bought is quite unlikely worth $15. It’s worth what the market says it’s worth most likely between 7 and 22. So what determines? If we are in a V shaped recession the price is $22, If we are in a deflation the price is $7.

109K projected dead on May 31 with no change in social distancing policy, worse if the policy is more lax. The whole world in deflation and Ford has no hope. Today Gold crashed so I bought more gold. I just read Shell Oil cut dividends for the first time since WW2. I did not buy Apple, because my bet is we are headed to 7 not 22 and people aren’t in the market for a new iPhone. They’ll wait and get it at a cheaper price.

In the end the zombie companies will fail there will be deflation and then recovery in the US but the future won’t look like the past. We no longer are an extension of 2019. The bond market will predict the future. I’m not sure the stock market is even a market any more. It’s more like a wind sock clown hooked up to a big money pump flopping around. Ford says there is no hope. Shell cut dividends. Some people are dealing with reality, some are watching CNBC.

2 Replies to “I Still Ain’t Feelin’ It YET”

  1. The state of Georgia just announced reopening of everything. New hot spots coming ! I live on the SC side of the Savannah river with Augusta Ga on the other side of the river, and the river as the state line. I guess there is some magic barrier in the river that the virus can’t cross. OK to open restaurants and stores 100 yards from my house in Ga, but not 100 yards from my house in SC.

    1. Wonder if the virus is democrat or republican? Oh yea that’s right it’s not even alive. The only way it replicates is through the behavior of its individual host, so in reality we have no one to blame but ourselves. Replication is 2 to 14 days so in 2 weeks or less we’ll know the score. Maybe I should start a book making op, and make some dough since all we’re doing anyway is placing bets.

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