Trade Alert: Covering Some Shorts + One Space Nibble
It’s almost like the market walked in this morning and suddenly said, “Oh my gosh, the Coronavirus Crisis isn’t going anywhere and I’m going to throw a hissy fit about needing some stimulus since it sure looks like nobody in DC is serious about it any time soon.” This is just about exactly what I’d been expecting to see for the last week or so, including on Friday when I’d written:
“Let’s do a feet-to-fire analysis of the market set up real quickly. 1) Markets likely pullback 3-5% before the election. 2) Markets likely stabilize and have some up 2% and then down 2% days around and right after the election. 3) Markets have a slow grind lower for a few months after the election.”
No doubt that the trillions of dollars that the government borrowed/printed to deliver on the first batch of stimulus in the form of PPP, boosted unemployment benefits and the Fed’s buying bonds issued by corporations helped people have enough money to get by or even to open Robin Hood stock accounts buy ATVs, start online businesses and so on. Whether it was worth the cost is another question for another time, but for now, as we’d talked about for the last few months, there was almost no doubt that those trillions of dollars borrowed/printed and pumped through the system would help deliver on these things as well as boost asset prices.
Will the next stimulus do the same? Or has the damage to small businesses and employment and consumption already been bad enough that unless/until the economy fully gets kicked back into a more normal gear that it won’t be enough to boost the economy and asset prices the same way unless it’s at least as big as the last one?
The good news is that the markets are definitely, finally really trying to price some of that risk back in. Instead of discounting a vaccine and re-opened normal economy, the markets are trying to start discounting a closed down damaged economic outlook for corporate profits. That’s when the opportunities to do some buying/investing/nibbling start opening up.
And we’ve been trying to hedge ourselves and prepare for these pullbacks that we’re now getting big time intraday as the markets are down 3% plus across the board. I’m not going to surprise most of you by telling you that I’m doing a little bit of covering some of my short hedges in the hedge fund and starting to look at the long side nibbles too. I’ve nibbled a tiny bit of some SPCE for the first time in a long time here after we’d been trimmers of this thing at much higher levels months ago.
I’m also remembering to let you know that I’ll be on Fox Business at around 2:50pm ET today (I do forget to let you guys know when I do TV sometimes, sorry about that).
