I am watching Trump’s COVID-19 Task Force Briefing right now after he signed the $2 Trillion stimulus bill. The US just passed 100,000 positive cases (1,581 deaths), which is on par with my worst case prediction two weeks ago.
So we have passed where China was back when I wrote that post. If we follow their tragectory, then next week is going to be very, very interesting.
Some fast napkin math:
100,000 Cases today (3/27/2020)
200,000 est. cases by 4/1/2020
400,000 est. cases by 4/4/2020
800,000 est. cases by 4/8/2020
1,600,000 est. by 4/11/2020
It could take another week or two to start getting these produced. Trump is aiming for 100,000 ventilators ASAP he saids.
It seems like he is talking more about mobilizing companies to start producing medical supplies like masks and ventillators, which is good but he should have done this two weeks ago. The severity of the situation seems to have started to sink in.
Markets continue to have wild fluctuations daily.
There were over 3,000,000 unemployment claims filed since this has gone down and the market went up 5%!
So markets are now extremely divorced from reality. The Fed is pumping a trillion dollars into the repo market every day.
Two scenarios can happen moving forward:
1) They reinflate the asset prices and this corona virus thing blows over
2) They can’t reinflate and the support they’ve given it so far won’t suffice, so markets will continue to go down
I feel like #2 is going to happen, but I can’t rule out #1 either.
That being said, April 1 is on Wednesday next week and rent is due. People are not going to be able to pay it (despite the $1,200 check that the government will send everyone…eventually) and landlords are then not going to be able to pay their mortages. This will continue to increase the demand for dollars. People will need to sell assets which will have few buyers, especially if it looks like things will continue to go down.
This lends good support for #1. The Fed seems to have no shame anymore when it comes to printing money.
California is preventing landlords from evicting people, although they will still be obligated to pay once this blows over. I guess that means that those mortage payments will go unpaid, and the Feds will bail out the banks who lent for that. Again, strong demand for dollars in this situation.
It is important to note that all of this debt is denominated in dollars, and therefore increases the demand for dollars when it is paid back. The demand for dollars will be satisfied by calling in dollar denominated obligations (stonks, loans) or printing dollars. This should drive asset prices down.
My thesis continues to be that Bitcoin is going to follow the S&P until “The Great Decoupling”.
I think this week reinforced my belief as Bitcoin remained in the $6,000 - $6,9000 range.
What “The Great Decoupling” really is an increase for demand of Bitcoin over stocks and dollars. So once the liquidity crunch for dollars is finished, I would expect money to go back into Bitcoin, Gold, and Stocks.
It will be interesting to see what it does over the weekend and into Monday next week. And how the market moves too.
I am still liquid with cash. If we step down into the $5,000 range, I could see dipping back into $4,000 if the S&P goes under 2300. I’m not sure if that will come next week, but I could definetely see it by the week of April 6.
Again though, this is a public health crisis first and an economic one second. I think a lot of this will depend on how fast we can get tests, vaccines, and ventilators to hospitals. If the medical system can get the situation under control, then public sentiment will shift positive again, and maybe people can get back to work. Even then though, like in California, there will be a lot of debt to repay again which may require even more government money, which is bullish for Bitcoin.
I am aiming to get fully invested again by the time people start returning to work.