Monday, April 6, 2020

This Evening's Log Entry

Note: To the extent that I express my short-term outlook on markets, a sector or a commodity in my log entries, these are not to be the least bit construed as trade recommendations for the reader. They are, under present conditions in particular, subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I'll do an about face on -- as new information presents itself -- tomorrow, with no prior warning. I share excerpts from my notes only when I deem them useful in terms of helping our clients maintain proper perspective.

Another classic bear market rally today:

Watching some of the headlines as they pass by, it's easy to tell who was caught levered-long, or just long, at the top -- the hedge fund gurus and the Wall Street firms who are right now advising folks to back up their trucks and load em up with stocks.

Despite the bullish calls of some high-profile pundits, I find myself sharing Scott Minerd’s sentiment:

“Probably the most surprising thing to me at this point is how well the markets are holding up. Given the economic data, and given the fact that large portions of the capital markets are still virtually closed for business, I would have expected stock prices to be lower at this point.”
Like Scott, when I ponder the economic enormity of this global shutdown, I’m somewhat amazed that stocks are, after today, only down ~20% from the peak:

The possibility of corporate earnings coming anywhere near justifying current equity market valuations in the course of this year, possibly well into next, just doesn’t register at this point. Add to that the state of corporate debt coming into this recession (and the cash flows needed to service it), which I harped on throughout last year as being the story that makes the next recession a rival to ‘08, I can’t even begin to fathom a legitimate case for getting growthy with our portfolio allocations right here.

But, again, in terms of these seemingly unfathomable levels and massive rallies, as I recall, and chart, 
bear markets past (did a little for blog subscribers this morning, here and here), the rallies at least, are indeed the norm -- the uniqueness of present conditions notwithstanding.

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