Good Tuesday A.M.,

Bonds are having a good start today adding to yesterday’s win. Equities are taking a breather after what feels like a year of gains (really 9 days), but the comeback has been remarkable. The S&P is up 40% from the lows in just two months. How is that possible? The S&P closed yesterday in positive territory for the year. Does that make sense to anyone? I’m not complaining, as bonds and rates have continued to perform well, but it just feels like a huge disconnect between equity prices and economic reality (or manipulation).  Something will have to give and as I have shared, I don’t think it is possible to just turn back on the economic light switch with 40mm people having lost their jobs. Maybe I am wrong, and I guess if the government wants to extend unemployment benefits indefinitely,  it could shorten the recovery (and increase the deficit by some incalculable amount), but it seems unlikely and certainly at least unknown. I guess that uncertainty is just the clear and transparent proof markets need to run up stock prices to some ridiculous multiple based on some undefined and ethereal earnings into the future. I am not making this up. To share a glimpse into the bizarro world we are in, Hertz filed bankruptcy so arguably the stock should be worth zero as the liabilities are more than the assets. The buying frenzy is so ridiculous that after Hertz filed bankruptcy, the stock price jumped 825%… WHAT???? You have to know that in the end, logic will prevail. It may take a bit and a lot of people may be really unhappy when the tide shifts, but I am confident that it will shift. Bonds and rates, which we are most focused on, should improve when that happens. Friday of last week everyone was talking about a 10-yr at .96% and breaching 1.00%… today, just two days later, we are back at .82%. I am not sure that we get back .65 right away but I would think that we will get there.

Great news to share, the NAR found in a new survey that 65% of potential buyers who attended an open house within this past year felt comfortable enough with the safety precautions taken to say that they would have no hesitation to do so again. Additionally, nearly 47% of home buyers felt that recruiting the help of a real estate professional was even more vital and desired than before the pandemic arose, citing peace of mind as the main benefit of such aid. Also, 54% of buyers and 62% of sellers agreed that specifically because of the uncertainty swirling around them thanks to COVID-19’s impacts, the extra guidance from an expert was among the top of their must-have list now.

Last and not to continue to harp on Friday’s unemployment report for too much longer (despite being a bit frustrated by fuzzy math), the below graph from the WSJ shares a clearer picture (and reemphasizes my concern for equity prices) of US employment.

Please remain safe and healthy, make today great!