Another day and another historic day in the markets. A sell-off the likes which has not been seen since Black Monday of October 1987. This of course was also on the heels of the Federal Reserve’s emergency meeting and subsequent 100bps rate cut, expansion of QE, lowering the rates for the discount window, and the basic removal of the reserve requirement. So despite all of this, the major indexes were all down 12-14%! Can anyone say that the Fed is out of ammo? This has been the biggest risk that we have been warning about here at The Kapital News since we’ve been online – once the markets no longer believe in the efficacy of monetary policy then what tools remain to boost the markets? And we’ve always cautioned that if and when this day came to pass, that this would be the end of the bull market and the start of something we may have never witnessed before. Well, behold, a massive 20-30% sell-off in only a few weeks’ time. And remember and be warned that we have still yet to see credit/bond downgrades and/or bankruptcies – both of which are virtually inevitable given the COVID19 situation, the oil price war, and the massive amounts of debt in existence.
In addition, we now have the airline industry lining up at the government trough requesting a bailout of at least $50 billion. Are you kidding us here?! Tax cuts, deregulation, billions of people now taking to air travel, etc, etc… and they need bailed out? Where did all of their cashflows go? Oh, that’s right, it went to share buybacks so they could financially and artificially engineer their stock prices higher – which happened – which then led to handsome compensation packages for the executives. Now we, the US taxpayer have to bail them out?! Today during a COVID19 press conference, the President commented on how the virus is not the fault of the airlines and thus the government needs to assist the industry. While the President is correct that the airlines are not responsible for the virus, they are responsible for their cashflow management! So again, why does the taxpayer need to bail them out? Let them file bankruptcy, restructure, etc… Let them sell their assets for pennies on the dollar to someone who knows how to manage an airline. No more bailouts! And we’re just getting started. Boeing is lining up. As is the cruise line industry. What about the hotel, casino, restaurant, entertainment, energy sectors, and others? Bailouts for all?! This is beyond ridiculous and I hope the American people wake up to this fraud.
When and where will this market find its bottom? We have no idea. But if history, math, economics, financial analysis, and human behavior have anything to say, then we likely have another leg or two lower to go. And the subsequent economic recovery is also likely to take years to find its footing. Therefore, we hope during this massive transition that the correct and prudent policies are adopted and implemented. This of course would be the restoration of our Constitutional Republic and a return to free-market capitalism. We already have the blueprints. We just need the will power, work ethic, and leadership to build our economy on a solid foundation. We can do this and we must do this, if our future is to be brighter than our past. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Invest #Bonds #Gold #Debt #Bailouts #Stocks #Politics #USA #Oil #EndTheFed