February 21, 2020

Fiat Lux

The Five Most Important Things That Happened Today

(and what to do about them)

My Big Call for the Month.

Many traders are perplexed, confused and befuddled as to why both “RISK ON” and “RISK OFF” assets are going up at the same time, especially in the face of a burgeoning Corona Virus pandemic. Stocks, bonds, and gold never go up at the same time. The reason is very simple. The worse the plague gets the more global central banks will expand quantitative easing to blunt the effects on the economy. So, the worse it gets, the more money ends up in ALL asset classes, not just the defensive, pre-recessionary ones. Hence everything goes up. You heard it here first.

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30-Year Treasury Bond Yields Hit All Time Low,

following on from the logic above calling for a melt up of all asset prices. Collapsing interest rates don’t signal an impending recession, but a hyper acceleration of technology wiping out jobs by the millions and capping any wage growth. I’m looking for 1.00% on the ten year. Money will remain free as far as the eye can see.

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US PMI’s Hit a Three Year Low,

the first hard evidence that the Corona virus worries are taking their toll. Managers don’t load the boat with inventory ahead of a perceived economic slowdown.

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US Existing Home Sales Fade,

in January, down 1.3%, to a seasonally adjusted rate of 5.46 million units. Inventories are down to an incredible 3.1 months, near an all-time low. I guess consumers don’t want to rush out and buy a new home if they are about to die of a foreign virus.

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Will the Fed Scale Back QE in April?

Buried in the January minutes was a proposal to ax the repo program, begun in September to facilitate bond market liquidity. Me thinks stocks won’t like this if it happens.

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Published today in the Mad Hedge Global Trading Dispatch: the Mad Hedge Technology Letter, and the Mad Hedge Biotech and Health Care Letter:

(ON EXECUTING MY TRADE ALERTS),

(TEN REASONS WHY STOCKS CAN’T SELL OFF BIG TIME), (SPY)
(A NEW CURE FOR CANCER)
(WHY THE GOVERNMENT IN GUNNING FOR GOOGLE AND FACEBOOK)

(FB), (GOOGL), (TWTR), (ADBE), (FTNT), (EBAY)

Futures trading involves a high degree of risk and may not be suitable for everyone.