Faber News Flow

We have entered a depression that is going to turn our world upside down. Before it ends the general stock market will be down 85-92%, banks will close and governments fall. People still do not realize the impact of the Coronavirus. It will kill tens of millions of people in the world before it fades away. It will change how we physically interact with each other. The quarantine is going to create a measurable increase in the number of babies born in about nine months. In two weeks or so, the number of divorces filed will skyrocket. Suicides are going to increase a lot, some people not only can't be alone with others, they can't even be alone with themselves. In 1981 I got to fly in an air race from Paris to New York back to Paris with the most incredible pilot I ever flew with. He had an interesting saying that he had picked up as a child growing up in the depression. I heard it a lot, it was like a mantra to him;  Use it up, make do or do without. His name was Tom Danaher. He...

On Saturday, March 22, the Wall Street Journal ran an article related to an issue on every investor's mind – the trade-off between the economy and health.  As the Journal noted, " governments and the public always face a trade-off between economic stability and public health and safety.  The more they prioritize health and safety, the bigger the near-term cost to the economy and vice-versa ."  While the impact on people of the virus has been the focus of attention to this juncture, economic catastrophe also takes a human toll. Workers who lose their jobs, business owners who are bankrupted, shareholders whose life savings are profoundly compromised all suffer emotional, and possible health, consequences because of the measures taken to slow the spread of  the coronavirus .  The human consequences of a severe economic contraction must be weighed carefully when setting policy. Numerous studies have shown that poverty and economic loss create their own health risks in terms ...

https://www.google.com/amp/s/www.wsj.com/amp/articles/how-to-hedge-a-coronavirus-11583321400  

Over the last couple of years, we have often discussed the impact of the Federal Reserve's ongoing liquidity injections, which was causing distortions in financial markets, mal-investment, and the expansion of the  "wealth gap."   Our concerns were readily dismissed as bearish as asset prices were rising. The excuse: "Don't fight the Fed" Dudley Says Sending Checks to Households Is Good Idea With Recession Looming However, after years of zero interest rates, never-ending support of accommodative monetary policy, and a lack of regulatory oversight, the consequences of excess have come home to roost.  This is not an " I Told You So,"  but rather the realization of the inevitable outcome to which investors turned a blind-eye too in the quest for  "easy money"  in the stock market.  It's a reminder of the consequences of  "greed." The Liquidity Trap We previously discussed the  "liquidity trap"  the Fed has gotten them...

Something odd happened late last week: with the Fed unleashing an unprecedented bazooka of liquidity in the market, cutting rates to zero, and backstopping virtually every security, one of the most closely watched credit market indicators did the opposite of what it was expected to do. We are, of course, talking about 3 month USD Libor which for better or worse (and at this point its replacement with SOFR in 2021 seems like a complete pipe dream) remains the reference rate for some $300 trillion in fixed income securities, and which instead of continuing to decline alongside other 3 month tenor securities (such as T-Bills) inexplicably proceeded to rise, and rise... and rise some more. The main reason why the rise in Libor is prompting much head-scratching across Wall Street, is that as part of the Fed's aggressive re-launch of Lehman-era rescue facilities, Libor was one of the key rates that was supposed to benefit and drop, resulting in easier financial conditions for all those m...