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DrStool

The Crash is Here 3/6/20

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I have to say Lee that you made a wise choice to get out of the US and the timing was impeccable. Wise on a philosophical basis. On a practical basis I can't say.  As a practical matter the government, such as it is, is now engaged in bio war against it's own people. Culling some old and sick and the institutionalized all to the good is the thinking.  However the hive mind of Conservatives settled upon a strategy of letting the virus rage as fast as possible and be done with it I can't fathom.   

Not coincidentally it was Rick Santelli who blurted it out,  just like he blurted out almost exactly 11 years ago that no citizens would get bailed out in the housing/mortgage crisis. Funny thing that. Well not really. 

I'm attached to the land, so to speak, not so much the American people writ large, so here I'll stay.

Edited by Jorma

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1 hour ago, DrStool said:

I think more than one. Anybody who was short Treasury futures. They're wiped out, and they've taken their lenders with them. That's my guess.  

The Fed will cut the FFR to zero and announce a big increase in Not QE.  But I won't stick my neck out and say for sure that the market will respond positively. The leverage in the system is, I think, too great to get our minds around, and this time, it may even be too much for the Fed to manage. We'll have to let the market render its verdict as judge and jury. 

Yes, definitely more than one.Weird thing is: Under normal cirucmstances a really big Hedge Fund (I'm not talking about those bucket shops, pink sheet swindlers and whatnot) has a proper risk management, which also includes stress scenarios (earthquakes, vulcano erruptions etc.). Part of that should also an pandemia, because we had 2 of them in last 20 years, so a pandemia is NOT a black swan. I really would like to know WHO went bust and with which strategy. 

I share your view regarding leverage. You can add to that doing business with China is a "leverage in itself" so to say. You have only minor legal cerainty and so on. This is no big problem as long as your profits are doing fine, but as soon as there is a disruption folks say: "ah phick off Chiner! Betry someone else, but not me anymore, goddam bastards!" There are many many business people around the globe how are completely fed up with the Chinese since many many years. If there is one how is leveraged up to the wazoo than it is: China. As a whole. The trade deal was not really in favour of China. Slo they have to deleverage somewhere. So now it is pay time it seems.  

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I'm not all the way out. I'm coming back in June to sell my house. I also need to decide where to settle. Mayb Zagreb, maybe Nice, maybe Poland. I know only that I'll spend winters around the Mediterranean. I can assure you that I won't spend winter in Warsaw.  Most likely will be Nice.  

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5 hours ago, fxfox said:

Yes, definitely more than one.Weird thing is: Under normal cirucmstances a really big Hedge Fund (I'm not talking about those bucket shops, pink sheet swindlers and whatnot) has a proper risk management, which also includes stress scenarios (earthquakes, vulcano erruptions etc.). Part of that should also an pandemia, because we had 2 of them in last 20 years, so a pandemia is NOT a black swan. I really would like to know WHO went bust and with which strategy. 

I share your view regarding leverage. You can add to that doing business with China is a "leverage in itself" so to say. You have only minor legal cerainty and so on. This is no big problem as long as your profits are doing fine, but as soon as there is a disruption folks say: "ah phick off Chiner! Betry someone else, but not me anymore, goddam bastards!" There are many many business people around the globe how are completely fed up with the Chinese since many many years. If there is one how is leveraged up to the wazoo than it is: China. As a whole. The trade deal was not really in favour of China. Slo they have to deleverage somewhere. So now it is pay time it seems.  

Great observations. Never looked at it that way before. 

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36 minutes ago, DrStool said:

I'm not all the way out. I'm coming back in June to sell my house. I also need to decide where to settle. Mayb Zagreb, maybe Nice, maybe Poland. I know only that I'll spend winters around the Mediterranean. I can assure you that I won't spend winter in Warsaw.  Most likely will be Nice.  

Doc,

if you have the opportunity to settle in Nice, I have to scratch my head that you even think about going to Zagreb or - holy crap! - WARSAW. If I remember correctly your wife is of Quebecois descent, so she‘s french native speaker. A further plus point for Nice.

Go to Nice Doc! It is like paradise.

btw, in German Nice is called: Nizza 😄 

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2 hours ago, GregFokker said:

Great observations. Never looked at it that way before. 

Thanks.

There are 2 example which come to my mind: 

BASF did built a complete chemical plant in China. After a while their controllers wondered why the sales figures were not as they expected. They drove around. A few miles away from the plant they saw an EXACT COPY inch by inch rebuilt by the Chinese of the BASF plant. That was in the early 2000s. Same counts for a ThyssenKrupp steel plant, which was also built in the early 2000s and as also copied inch by inch. The chinese never paid for that. They just did steal intellectual property. I didn't make these stories up. Those stories and others than these are well documented.

 

 

 

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3 hours ago, fxfox said:

Doc,

if you have the opportunity to settle in Nice, I have to scratch my head that you even think about going to Zagreb or - holy crap! - WARSAW. If I remember correctly your wife is of Quebecois descent, so she‘s french native speaker. A further plus point for Nice.

Go to Nice Doc! It is like paradise.

btw, in German Nice is called: Nizza 😄 

I've been divorced for 2 1/2 years. 

I like Zagreb. It's fun. It's beautiful. It's a great walking town, which I love. Cafe culture is off the charts. But true, it's not Nice. 

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5 hours ago, DrStool said:

I'm not all the way out. I'm coming back in June to sell my house. I also need to decide where to settle. Mayb Zagreb, maybe Nice, maybe Poland. I know only that I'll spend winters around the Mediterranean. I can assure you that I won't spend winter in Warsaw.  Most likely will be Nice.  

The hard right is ascendant in Poland and to the East.  Well everywhere but the places caught between Hitler and Stalin, the Bloodlands.   There are millions of ghosts there.  Be wary.

Nice seems tons better. Spain?  

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I don't see how the Fed can buy coupons at this point.  There is a gigantic shortage of them and good paper in general.  Sure the supply will rise again but not in earnest until June. That's a long time.  The Treasury is stuffed with cash too.   Maybe they can buy hundreds of billions in covenant lite and other crappy corporate paper. That's the real prize truth be told.  Billions in credit so Elon can build 1000 Starships. That's the ticket.

I don't need to tell anyone that is why the call is going out for fiscal stimulus but that takes time.  The market needs the money now. How?   I suppose there are other ways to look at it.  Everyone talks about rates. As long as they don't rise rates don't matter.  It's show me the money Jerry.

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There's no shortage of Treasuries, that's for sure. This so called shortage is apprently manufactured because of the collapse in rates and mortgage convexity.  A thunderous V reversal and rocket launch is coming on yields. 

 

 

 

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Good night all!

 

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14 minutes ago, DrStool said:

There's no shortage of Treasuries, that's for sure. This so called shortage is apparently manufactured because of the collapse in rates and mortgage convexity.  A thunderous V reversal and rocket launch is coming on yields. 

 

 

 

I'll trust your knowledge that the mortgage thing is distorting the market. I had just assumed money flowing out of stocks has to go somewhere and nothing is safer than Treasuries. The mortgage convexity thing just icing on the rally cake.  If the long  dated Treasuries do reverse then the Fed can step in  and buy and not look so silly.  Of course we can count on tax receipts dropping and more supply. Still what about the next few weeks?  The market needs words that the money is on the way, now. Before the open Monday I would think.

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One thing is fer sure. The big CB's will meat today. For hours and hours. If they would do nothing the markets would fall 20% tomorrow.

I guess there will be a statement by the FED not later before the Futures start trading. I'd exapect absolutely unconventional meassures. I can also imagine that they use the "State of emergency" in New York as alibi to close the NYSE for a few days. 

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I was in Milan in late December. 

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