1/11 This downward guidance from $AAPL has got me thinking...
Here we have a market darling illustrating the macro-dynamics of #COVID19. Its both a demand shock and a supply (chain) shock. So equilibrium output will be lower and price (inflation) impact not yet known
Here we have a market darling illustrating the macro-dynamics of #COVID19. Its both a demand shock and a supply (chain) shock. So equilibrium output will be lower and price (inflation) impact not yet known
2/11 #coronavirus arrived in a world starting with negative real yields, ie signalling an excess of productive capacity over aggregate demand, ie low pricing power for too much (printed) capital.
3/11 If the supply chain is disrupted, and demand is dropping, owning upstream productive capacity is a bad idea. Doubly so when the starting price point is benchmarked to negative real return.
4/11 The better trade is to own downstream outputs, like soft commods & finished goods. Supply chain disruption now makes these supply curves much less elastic. If I were a business — especially w/ easy credit — I’d be stockpiling inputs inventory now to prepare for disruption.
5/11 This may temporarily make the growth impact of #COVID19 less apparent in the data, by pulling forward midstream demand, even in the face of declining downstream demand. But there will of course be payback later as businesses de-stock, making the fwd growth impact even worse
6/11 In other words right now you want to be long downstream outputs (hard assets and finished goods), not the upstream productive capital stock.
7/11 In simple English:
1. equities are toast
2. buy “stuff” now (the more downstream value-added the better)
3. buy #bitcoin and #gold, not #sovereignbonds, for capital storage given uncertainty in future nominal rates, even as low/negative future real rates seem quite likely
1. equities are toast
2. buy “stuff” now (the more downstream value-added the better)
3. buy #bitcoin and #gold, not #sovereignbonds, for capital storage given uncertainty in future nominal rates, even as low/negative future real rates seem quite likely
8/11 Finally, note also that central bank policy doesn’t matter as much when the real world supply chain is broken. Molecular flows of goods, people, and viruses don’t care about financial nudges when core linkages are broken.
9/11 Put differently: Broken supply chain means the “hardware” of the physical economy is more important than the “software” of the financial economy in determining market conditions...
10/11
...Which means central banks are not in control now.
....Which is a *huge* break from the core narrative of “Fed is the boss and they have my back” which has dominated the markets since the GFC.
...all illustrated in $AAPL the market’s special darling
...Which means central banks are not in control now.
....Which is a *huge* break from the core narrative of “Fed is the boss and they have my back” which has dominated the markets since the GFC.
...all illustrated in $AAPL the market’s special darling
11/11 In conclusion: Sell everything.
(Except maybe baked beans, bullion, beer, butter, beef, and bitcoins. And throw in some consumer electronics /entertainment as well...everything you need for a nice 3 month staycation under quarantine)
Fun stuff!
(Except maybe baked beans, bullion, beer, butter, beef, and bitcoins. And throw in some consumer electronics /entertainment as well...everything you need for a nice 3 month staycation under quarantine)
Fun stuff!
