We have a New Fever

February 11, 2021 by The Long View

Liqudity is flowing and the most illiquid names are seeing the biggest benefit. While the coronavirus is fading and vaccines are here, markets have shifted from despondency to mania in some segments. Thankfully the large cap equities and international equities (which represent the bulk of assets) are reasonably priced (relative to rates) there is a ton of speculative froth in small/microcap and crypto currencies. Currently, anything that sounds “futuristic” to retail investors (cannabis companies, 3D printing, artificial meat, solar panels, etc) is priced like it will be the next Tesla.

A Very Depressing Virus

March 25, 2020 by The Long View

The US is infested and so is the economy. Regardless of what happens with SARS-CoV-2, the economy is already very sick. The only parallels we have are the Great Depression. The GFC will look mild by comparison. Policy makers are doing what they can to offset the pain, but if this lasts more than a few weeks, they will need to do much more.

Economic Implications of the Coronavirus

February 01, 2020 by The Long View

Last week’s post highlighted the likelihood that the scope of the problem was significantly under-reported in China. Markets spent the week digesting this reality, commodities were hurt the most. This week Chinese economic activity will grind to a halt as measures to contain the virus hit the broader economy. There is is a very clear trade-off - the more effective the response; the bigger the hit to growth (though expect more stimulus as well). 2020 GDP is likely to be lower by 1-2% even if this is contained. The hit could be as much as 3% in a more protracted lock-down. Even China’s own propaganda machine has acknowledged growth could fall in the 4% range from 6% today. Efforts to contain the virus will be painful given how widespread the virus is - China now has over 14k cases and 14 regions with over 100 cases.

When China sneezes, the whole world catches the flu

January 26, 2020 by The Long View

Chinese economic data has been notoriously questionable and its healthcare data should be treated with the same skepticism. International cases suggest the number of cases in mainland China is much higher than official reports. Additionally, the death rate is approaching 5% in Wuhan (double initial reports). Chinese New Year travel has spread the virus across the country and it remains to be seen if it will be contained. Watch closely. This is not a risk to ignore.