Something doesn’t feel right. The world seems to be crumbling all around us, but is it really? Is the keyword in all that “seems”? And if so, would we not be well advised to remember the old saying, “Not all is as it seems?”
For as long as I can remember, if everyone was in agreement one way, I looked the other. Professionally, when everyone was bullish, and it seems like everyone is almost always bullish, I found reasons to be bearish. On the other hand, like now, when everyone is rushing over to the bearish side of the boat, I’m thinking it may be time to be ….
No, I can’t finish that thought, at least not now. But I am reminded of a Warren Buffett saying, “Be fearful when others are greedy and greedy when others are fearful.” I’ve been thinking of Mr. Buffett often of late, recalling how he was mocked for moving much of his investment position to cash while the S&P 500, Dow Jones Industrial Average (DJIA), Nasdaq, and Russell 2,000 all screamed to new highs over the fourth quarter of 2019 and early Q1 2020. But Mr. Buffett was only following his own sage advice, being fearful when others were greedy. Now, with global stocks markets in free fall, others are racing to get out of stock holdings and move their investments to cash out of fear.
Fear because we are living in a time of mass hysteria. The President of the United States continues to use the DJIA as a measure of success for his administration, so I’m going to use it as a measure of how hysterical domestic sentiment has become. Let’s review last week: Monday (March 9) saw the DJIA losing a record (by points) of 2,014 points followed by a 1,167-point rally (and closed near the high) Tuesday. Wednesday brought another 1,465-point sell-off that set the stage for Thursday’s colossal break of 2,350 points. Friday saw the DJIA try to recover over the course of the day, before a late afternoon presidential press conference led to a record 1,985-point gain, much of it happening over the final half-hour of trade. However, as some of what was talked about in the press conference turned out to be not quite true, U.S. stocks indices locked limit down Sunday evening, setting the stage for circuit breakers at a 7% loss to be triggered shortly after Monday’s opening bell.
All the while, citizens of the United States are being told to stay home, avoid crowds, practice what will likely be the phrase of 2020, “social distancing”. The CME has shuttered its physical doors, followed by news that Nasdaq would be doing the same. Sure, much of the trade these days is done electronically, but there is still important option and spread trade done in physical pits. The question being asked now is when the New York Stock Exchange calls a 2-week emergency “holiday”, shutting the market down completely. To me, that is akin to if the Chicago Fire Department had shut down for two weeks because the Great Chicago Fire of 1871 was simply too hot to handle.
Something else not sitting well with me is the continued panic of the U.S. Federal Open Markets Committee (FOMC). Shortly before Asian stock markets opened Sunday evening, FOMC Chairman Powell announced the Fed fund rate was undergoing an emergency cut to 0% (to 0.25%, because it still has to be vague) and the Fed would begin a “$700 billion Treasury and mortgage-bong buying program”. This after a 50 basis-point cut to the Fed rate at the beginning of the month and a $1.5 trillion dollar infusion of cash into the U.S. system over the next quarter. Much of this is due, or so it seems, to the constant badgering by President Trump as he hopes to save his precious stock market rating.
Now, industries are melting away with the hardest hit being oil, airline, and cruise ships. On the other hand, few in financial media or the administration are talking about what has happened to the U.S. livestock industry as nearby live cattle futures have fallen $32, or 25%, since the January high near $127.50. Lean hogs, the pork industry living through one disappointment after another over the last year, has lost 41% from its May 2019 peak near $93.00. Has the demand for meat actually been destroyed by the coronavirus? Let me put it this way: Take a look at pictures of the stripped shelves at U.S. grocery stores as panic buying spreads across the nation, and what do you see still sitting there? That’s right, plant-based meat. Just as there are no atheists in foxholes (and some have said no capitalists in crises), there are no vegetarians/vegans in a pandemic when everyone is worried about food supplies.
Somewhere along the way, we lost our collective mind. We are in the final stages of a complete takeover of the individual by the state, all for the greater good. While I can’t applaud those fighting back by ignoring the calls for self-quarantining, I understand the rebellion. To a point, because part of the nonconformist crowd is actually conforming to the viewpoint of a particular party, just as those allowing the state to run roughshod are doing so to stay in line with the opposing party.
Like everything else in the United States these days, belief in the pandemic falls along party lines, an incredibly dangerous situation and one that could have deadly results.
Or not. To quote the great Freddie Mercury, “Is this the real life? Is this just fantasy? Caught in a landslide, no escape from reality. Open your eyes, look up to the skies and see….”
…and just remember to breathe.
Until next time,