July 17 2020


People tend to forget things that are an annoyance to their lifestyle. Covid19 was and still is a brutal one. Two choices are offered: Either live in fear until the very word “coronavirus” has been barred from any news article, or grasp the new reality with a good dose of optimism. Markets, naturally forward-looking, took the latter with a vengeance.

IT doesn’t mean that bankruptcies are going away. In fact, the US bankruptcies are on the rise with a monthly number of about 30 only to match the Lehman-Brothers-collapse Jan09 period. What’s fundamentally different though is that the level of liabilities that come with this downturn is much smaller than the great financial crisis. Back then, we were contemplating the demise of the banking sector worldwide, here we are talking about an acceleration of tech substitution for brick-and-mortar. It’s nonetheless sad, but it is not as systemically important.

So a bit of oblivion might be your friend to find the courage to socialize with your closest friend or visit the restaurant that you’d like to live another day after the lockdown is done and gone. The world goes on indeed. But please, don’t be totally oblivious to fundamentals.

Be conscious that Zoom Video communication will be logically doubling its turnover in FY21, but you’re paying 30x over when you’re buying its stock. Remember that excessive money printing has made artificially cheap these bonds, and there might be a moment of reckoning when the taper necessarily comes. Also, think about how Governments will likely repay the gigantic amount of debt using quite possibly higher taxes in due time.

These checks and balances will keep you sane, and not confuse oblivion with silliness.

360 Advisory – Markets