RE:Restore the boardWhat a rock RR was when markets were volatile. Watching that VIX and telling you you couldn’t go wrong calling up his pal Vinnie and buying some gold coins, which would be real money no matter what came down the pike. My departed Dad subscribed to two newsletters back in the day when they came as typewritten, xeroxed sheets in the mail ... the Bank Credit Analyst (snore!) and Fow Theory Letter. I used to put my paper route money into the market and wait to scan the prices in the business section. Miss Russell’s take even though I can guess what he would be saying.
I wouldn’t be too worried about disaster just yet. Sadly the economic pain of pandemic has fallen hardest in those who have the least effect of consumer demands downstream. In fact it is an illustration of how bad the bifurcated distribution of wealth has become - the online work from home technical and professional classes have been saving money, not going out to eat, not buying clothes, not traveling especially. And to prevent complaining they were shot relief money they didn’t really need. Savings and liquidity are way up, and don’t kid yourself, as soon as enough people are vaccinated there are a lot of people interested in new clothes, throwing parties, going travelling, and they have the money to do it.
In the meantime, as much as it makes debt hawks anxious, there is lots of room to put a floor under markets. The rubber won’t hit the road until rates are needed to rise to cool overheated inflation and the government’s with bloated balance sheets have the bond vigilantes putting their soft parts in a vide to raise taxes and slow spending to prevent their ballooning compounding debts from running wild. We aren’t there for some time yet. But there will be skittishness every time we see the ten-year peg on a few more basis points of yield.
Last March’s panic was overplayed. Vaccine news is good regardless of hiccups. Commodities and PM’s should do just fine with real negative rates and bloated liquidity. Eventually people run out of anywhere else sensible to stash their wealth.
cg