The Cure Equation
It is obvious that the US Economy and COVID-19 need a cure.
That is not going to be easy. Obviously the COVID cure is out of our hands, all we can do is try to be safe. While the chances of getting the virus are low, if you do get it, it can be devastating. The fact that Washington is in denial, means all you can do is stay away from people.
As to the economy.
The big problem is that the Fed and Treasury plan revolves around making it easier for entities to leverage up, while the real value of what they are buying is declining. This is a huge problem as entities were already overleveraged on February 19.
A second factor in this side of the equation is the belief that the market appears to embrace, ie. things are going back to the Normal before February 19, that is not going to happen, we are going into a new world.
What are we trying to do in this environment?
Our goal is to work around a market price level where the P/E ratio is compatible with where the economy is in the long cycle (currently this level, basis the S&P, is optimistic at 2450). Only then can the market act as an investment vehicle rather than a speculation vehicle managed by the FED and Treasury. That will allow the Real Americans to get involved again. Forget MAGA and its artificial/speculative direction.
The Macro Trade is still on Track
Currently up 4.83 % at 9:30 AM CDT, S&P at 3030. This is the long bonds and gold, short stocks and commodities trade.
Fed Rescue Trade, One other thing to Watch, Update at 10:20 AM CDT
The Rescue Trade, Long High Risk bonds, HYG ETF, is at a crucial point. At this moment it is trading at 81.14 and the average since the start of the FED trade on April 9, 2020 is 81.15.
Leave a Reply