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A thread based on separate but related ideas brewing in my head the last few weeks. Mostly about what I see as current false narratives and their impact on outcomes. Push back welcome. @RaoulGMI @John_Hempton @LongShortTrader @DTAPCAP @TeddyVallee @EpsilonTheory 1/x
Every negative outcome that is forthcoming will be accompanied by the statement “if it weren’t for the Coronavirus.” But COVID was the catalyst not the cause. If you continue to stack up dead Christmas trees around your house, your house is eventually going to catch on fire.2/x
The growing pile of dead Christmas trees is debt and there is too much of it… everywhere. It will never be repaid, and we are in too deep to let people/businesses/countries fail. The time for that was probably 1998/2001. 2/x
Neither the Fed, nor the government, are making monetary/fiscal decisions based on a depression outcome. The proof of this is breadlines and foods banks with miles-long lines. These would not exist if money flowing into the system was in excess of the fiscal contraction. 3/x
If we just exited “the greatest economy ever” why does a few weeks of no income lead to miles-long bread lines? A great economy would have people/businesses/countries ready for the inevitable rainy day. 4/x
The fact that we didn’t have the greatest economy ever is not Trump’s fault—although he didn’t help the fiscal situation—it has been building for years. Blame can be handed out to just about every participant. In short, an inability to wait until you can afford things. 5/x
To much debt = deflation. Inflation will have to come—as Buffet said its the only way to deal with the debt—but first comes deflation. The bond market sniffed it out this week with negative rates. 6/x
It doesn’t matter that the Fed doesn’t want negative rates. The market has led the Fed for 2 years and Powell doesn’t have the backbone to fight it. 7/x
I have not heard one good argument for why gold doesn’t go much higher. I think it does higher and I think Buffet buys gold (see thread from a week or so ago) 8/x
Gun to my head, the S&P hits 5k before 2k. We are going to blow the roof off this mother. 8/x
If you think gun sales got whacky when the lock downs started, just wait until some re-openings fail and govts try to go back to lock down. $AOBC is my biggest long and I think it could just be heating up. See article https://seekingalpha.com/article/4338928-american-outdoor-brands-coronavirus-sparks-firearms-boom-destroys-short-thesis-45-upside">https://seekingalpha.com/article/4...
There is unlikely to be a cure for COVID unless we also find a cure for the common cold. I wouldn’t bet against humans now that they have the incentive, but coronaviruses have a long history of beating human ingenuity. 10/x
