Without objection. We ARE having a recession event. The debate is over how long it lasts, and how best to play it in the markets.

Yep, we sure are, and you are right. I way not have made this clear but the important thing I think is that Korea couldn’t avoid a recession despite life remaining relatively unchanged. I doubt America could even manage Korea like levels given the lack of infrastructure. (The deadliness of the virus and the actual level of infection is a big unknown variable here that could change this). If the USA will struggle to reach a level of activity that even caused a recession in South Korea, the implication is that the USA will be in an effect recession until a vaccine arrives in 18 months. How you get out of that predicament without risking a second outbreak seems impossible.

Interesting thoughts RE the airlines and I agree they are defiantly a group B. What you describe sounds illegal but I wouldn’t have the faintest clue.

I’d just be worried that if x% of airlines go bust, there will be a significant amount of credit that will vanish, resulting in less capital competing to drive markets higher, even if group A companies do recover. Another way group B can reduce the price of group A is if the consuming middle class don’t return to the same spending levels.

Granted I see the path to a quick bounceback. It relies on the virus being significantly less contagious or less deadly than we think. Then you are 100% correct.

Here are some other unknowns:

— The little known effects in such an environment of the Fed pumping money into the ether. ie.) inflation, interest rates etc

— Other unknown structural problems that may appear when the financial system is stress tested.

— What if immunity of infected patients is limited, or not long-lasting

— What if the virus is at the upper end of the case fatality rate estimates (approx 1%) and only a fraction of the population has immunity following the first wave.

— Psychological/cultural effects on the middle class regarding spending vs saving.

— Even election year market uncertainty

All I’m saying is, that I was more confident of the economy in June than I am now, and the share prices are the same.

Thinking Out Loud

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