Magic
bullet
The markets are doing a
terrible job of processing and evaluating the Corona virus effect. For those who hope that there's a monetary or
fiscal silver bullet coming to the rescue you are sorely mistaken. Look, I'm neither a doctor nor a politician,
but tell me this: is there any
Presidential mandate, any law, that can truly contain the natural progression
of pandemic diseases? I thought
not. No one can truly fathom the depth
of concern everyone is experiencing in the conscious and subconscious
mind. We are all trying in our own way
to deal with this epidemic on a dual level: the medical and the economic. Its effects might be felt for months.
Other than the tragedy
of the disease itself, including the dreadful loss of life, the biggest
misfortune is occurring in the failure to recognize that all things, good and
bad, traverse a measureable path from birth, to life, to death. That parabolic continuum is, in fact, the
basis of quantitative market sciences, statistics, and a healthy mindset about
the effects of all events upon our daily lives.
Remember, the economy
and the markets were already hyper-stimulated by years of aggressive tax
policies, unbridled monetary influences, and excessive greed and speculation in
stocks. Unfortunately, lowering interest
rates and taxes to encourage people and businesses to spend their way out of a
medical pandemic...as is currently being contemplated...is tantamount to
ingesting an aspirin for a knife wound.
I have said it many
times before, you can lead a horse to
water but you can't make him spend!
Monetary easing will
not work because the markets are already too swamped by panic and the need to
"get out". Trying to compel
spending when everyone is worried about how much they have left in the
aftermath of a panic-driven market collapse is folly. No one is going to make additional financial
commitments when their 401-k or cash reserves are dwindling.
The sad truth is that
investors have been obsessive about a highly unrealistic decade during which
asset valuations became so inflated and unsustainable that the Corona
virus...or any other exogenous factor...had the power to derail both valuations
and
expectations simultaneously.
There are no safe
harbors during a crash. One simply needs
to allow a crisis to play out the string.
And that, again, reinforces
the notion that somehow the markets got away from cyclic phase analogy into linear progression. Everything has a shelf life, a duration. Everything has a beginning, a middle, and an
end. A stock can move from $25 to $36,
then retreat back to $30...then begin moving upwards again. This is how parabolic curvature explains the
timeline of most phenomena.
Unfortunately, many of you got caught up in an unending linear spike in
portfolio valuations that distracted you from the realities of economics, market
studies, and life itself. Nothing goes straight up indefinitely, nor
does anything live forever.
The global economy
is/was doing quite nicely in the aftermath of the last Great Recession (2008),
but it had also become bloated and strained at the seams owing to fiscal and
monetary strategies that encouraged all of us to spend our way into
prosperity. The financial and moral
deficit those plans created meant that the wealthy got wealthier, the poor
became poorer, and our vulnerabilities increased exponentially.
Now that the medical
pandemic has come to our doorstep, we are all encumbered with the uncomfortable
residue of those laws and decisions made earlier and presently while
metaphorically stuck at home, recuperating, looking for an aspirin to make it
all feel better.
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