Just wanted to send an update that I’ve been increasing writing cadence a bit on my Notes surrounding my horrible and poorly researched views on the public markets each morning pre-open (with some takes on private markets that I’m much more willing to defend).

I figured it was better to post there than spam this newsletter, which likely you are following for other hot takes on things I know a bit more about. But if for some reason you care, I’ll spam you once.

You can access my posts here or at this twitter thread. See below for today’s for a general idea.

And don’t worry, I’m still reading lots of research, building out theses, and writing on other views, so this is an update, not a content pivot :).

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Market Views 3/23/20 - Infinite QE and the BTFD Recession

Disclaimer: This is more for scalable sending notes and personal accountability. Not a professional public market investor, not investment advice, likely all bad advice from someone spending not nearly enough time researching public market dynamics. Also not really editing these pre-posting.

So as I started writing this the Fed announced “open ended quantitative easing” which also added their ability to purchase corporate bonds (a rarity). I don’t have proper time to digest this right now but it feels like the government has now answered the question of “how much money do we need to feel good about the market” with “UNLIMITED”. Shout out to Bulger for this tweet.

FWIW I don’t think this will materially prop up markets from bad news that is coming this week surrounding unemployment.

That said, this doesn’t come as a total shock as we’ve started to hear rumblings that there was a general feeling that we wouldn’t be able to continue much longer with this shutdown (and resulting domino effects in the economy). This sentiment began proliferating through VCs over the past week, which as I said in my last note, felt very odd and I disagreed with, at this time. The various investment banks and research firms throwing out GDP predictions over the past 4 days certainly didn’t help.

This feeling was only further accentuated by Trump and Pence repeatedly bringing up that we are 7 (or 8?) days into THEIR 15 DAY PLAN! Hear that? 15 DAYS! And if you didn’t, Trump made sure to fire this off before he went to sleep last night.

So this is basically saying that the 15 day time is when he’s going to try to keep this going, and if not, welp we’re starting this machine up again because fuck it, the economy AND the American healthcare system can’t suffer (well at least, the economy can’t).

The BTFD Recession

I wanted to write more on this but feel important to get out now due to the various conversations I’ve had surrounding this.

There’s a saying in finance called Buy The Fucking Dip, which speaks to a greedy view of people wanting to buy stocks as prices fall. Normally, during widespread panic, what we’ll see is a total fear in holding any equity and a flee to cash. We’ve seen this and will continue to see this across equity and bond markets as traders unravel their positions (hence the 30%+ sell off). I wasn’t professionally trading in 2008, but my sense is that as the financial sector was experience the meltdown (and for some time after) there wasn’t a ton of deep buying that was happening as institutions unlevered. Instead many were wondering if this was the end of the world and our financial system as we know it.

The interesting thing about the coronavirus meltdown has been the overwhelming sentiment within my various circles of many waiting for a price to enter and hoarding cash to do so. Within the tech bubbles, this makes sense. We generally believe software continues to eat the world, high margin companies with duopolistic like moats should win out over time, and we’re broadly optimists about humans and our ability to outpace impending problems with solutions.

However, this sentiment has proliferated a bit even outside of the tech world due to the lack of data and/or general optimism. But the optimism comes from a general unwillingness or lack of desire to imagine a very inconvenient truth in the most literal sense. The inconvenience of being locked inside for a few months and radically changed behavior for possibly ever. To quote one of Josh Wolfe’s oft-repeated lines “failure comes from a failure to imagine failure.”

And that’s where we are today, IMO. We’ve seen a failure of the government to want to imagine the proliferation of COVID-19 in the US and what a shutdown economy looks like. A failure of the population to imagine being locked down for an extended period of time, regardless of how they’ve been short-term impacted due to layoffs or furloughs. A failure of retail investors to understand the trickle down effects from illiquidity in bond markets to the rest of the world (including me at times, tbh). And a failure of many millennials that were in HS/college during ‘08 to understand the wave of layoffs that are coming in the coming weeks.

What I’m Doing

Up until about an hour ago I was thinking that we’d see a sharp sell off today, and agreed upon deal today that would then push the markets up slightly tomorrow, and then further fear of new employment statistics to come on Thursday cause pause or negative movements on weds/thursday. With infinite QE I’m basically holding my shorts, with the belief that we still have at least one more downward run in the market left, but I can’t say I have a nuanced view right now on short-term timeline.

Other Notes

- We published our COVID-19 update to our LPs last week. It summarizes a lot of my views on the market and our fund and portfolio specifically. If you’re interested you can read it here.

- Ah Zerohedge and paranoia, like peanut butter and jelly.