Good Tuesday AM,
Cinco De Mayo looks a little different this year. I imagine lots of zoom parties and no Corona.
The 10-yr is leaking a little higher to .66% as the Fed is limiting its purchases a bit. Mortgage bonds are unchanged. Equities continue to move up, but I don’t understand it. The Nasdaq is actually going positive for the year. That is a lot of Kool-Aid despite the Nasdaq being tech heavy and faring better in this down economy (the best of the worst). The economic data so far this week doesn’t matter. Friday’s jobs report will likely be the market mover as unemployment could rise into the teens (17%). Think that 2 months ago we were below 4%. What a shift…
I am going to share the commentary from Dan Rawitch this a.m., as other than his humor, I agree with his assessment.
Its opposite-day once again in the Stock market as we enter Bizarro World. Bizzaro World was a comic book when I was kid and they lived on the planet Htrae (earth spelled backwards). In Bizzaro world, good was bad, ugly was beautiful, and Superman was evil. In the last couple of days we learned that Warren Buffet has dumped ALL of his airline holdings, Hertz is going to file BK, and Norwegian Cruise Lines is exploring BK. Does the market have any idea what all this means? It means companies that have survived countless markets are either wiped out or will be restructured beyond recognition. Does the market think it stops with these two companies? The Stock market is up over 300 points after reversing a huge loss yesterday and ending positive. Why? Because the economy is reopening. Seriously? If you could, would you walk into busy restaurant, movie theater, busy shopping mall, or anywhere that has a lot of people? Are you ready to jump on a plane?
Sunday we had a record amount of deaths in the US and if you divide the cases by the number of deaths you will quickly see that this virus is killing 7% of the people that get it. Recently it was found that a call center watched as 44% of their employees caught the virus. This is not a one-off situation. We are seeing huge numbers in meat plants and our food supply chain could be impacted. It is a fact that when humans engage, they get sick. Look, I know how you feel and I catch myself feeling the same way. My neighbors and friends do not have it, so this much all be BS. Do as I do and fight back the urge to think that way. Mark my words on this. As the economy reopens, we will see a surge in deaths greater than what most imagine. Do I think we should stay in quarantine? Sort of, but I realize this is not sustainable. Thusly, business must open with the strictest possible standards. Given this, I do not believe the economy will be back on its for at least 6-12 months. So, the stock market will fall and rates will remain low. Really low. At the moment the 2.5 coupon is testing support at 103.75. I THINK it will hold, but things are not normal and I cannot measure the impact of the FED. I am however bullish on bonds.
Please remain safe and be healthy.
Make today great!