Lots of economic havoc. Everything is down; it's like the opposite of the "everything bubble" which has been happening for the last several years. Stocks are down, which is expected, but GLD, Bitcoin, and even TLT (=long-term treasuries) are also down. Where is the money disappearing off to? Are institutional investors really selling everything and then putting the cash "under their mattresses"?
I was especially surprised by long-term treasury yields. People are saying that the high yields are because the US is about to spend trillions of dollars on the coronavirus response, but I always thought (based on past behavior) that the treasury markets didn't really care about US debt. It'd be interesting if yields went way up -- to several percent --, which would turn this recession into a full-blown debt crisis as well. I don't think the Fed would let it happen, though, and I suspect that their intervention would not be enough to cause hyperinflation or any other short-term disaster, either, this time.
The Fed was already propping up the economy, and now they've turned it up to 11. At some point this is going to cause so much mal-investment & disconnection between the real economy and the financial system that everything really just collapses. It could happen this time, though maybe not: the USD being the global reserve currency strengthens it a lot. I've previously predicted that the collapse would come in a few decades. Regardless, the Fed's actions here very much reinforce my skepticism of the fiat economy in general. I'd much rather own a lot of BTC than participate fully in the Fed's/US's crazy game of Monopoly.
I think that the recession is good for BTC medium-term. People are selling now because people are selling everything now. But 2008 was what motivated the creation of Bitcoin, and the same things are happening now. I could see ATHs this year.
Long end treasuries have fallen off together with stocks because of a series of reasons.
The fundamental one is the necessity of FUNDING.
Essentially, the plumbing in the liquidity system managed by the FED is broken.
No matter how much liquidity you inject into one END: liquidity will ever be poor on some end, even if the major player near the FED end up sucking almost all that liquidity.
So, nothing new: equity and yield move in the same direction, not on the healthy way (QE flattens the curve, thus inducing lower yield and favours higher stock valuation because of the reduced discount of future earning), but on the un-healthy way. When liquidity was abundant you ended up buying everything with positive yield, rising everything valuation (even bitcoin, some nocoiners said, or a duct taped banana).
But now liquidity is a scarce resource, so many actor in the market reverted to cash ("CASH IS KING" motto is cool again).
Cash, not even very much cash-like securities like short term US bills.
This was for a variety of reasons: I think I sorted them in an increasing relevance order
- Banks had to sit on increased cash reserves because of people stocking up for coronavirus related panic. Do you think I am exaggerating? Look here
- Asset Managers need to sell bond because of poor equity performances are a call for investors to exit from their investments.
- Pension funds and liability managers came out of years of low yields. They were deeply under capitalised versus the liabilities to be paid out in the future. So they took higher risks bets trough derivatives. Now these bets are turning negatives for them, hence forcing them to post collateral (cash) to counter parties to offset those losses. Getting this cash, of course, involves selling assets.
- Credit: those war-like times (we are at war, after all) require a stress on both civil rights (lockdowns) and economic rights (the possibility to participate in the workforce, wages etc.). Government are called to extreme expenditures (US in primis), with the possibility of greater expenditures and impact in the future (What if there is a NY lockdown?). Corporates have been using cash in the "wrong" way, instead of investing that cash in productive things, they used it to finance buybacks (someone said "airlines"?). AS a consequence of QE -induced low rates (Another distortion in the free market), they are also much more indebted than they were used to be in the past. So markets sold corporate (both equity and bonds) and credit spreads started widening everywhere (with bond selling off), from US to Europe (guess why Italian bonds were amongst the worst performer during the last weeks (Lagarde aside): because Italy record DEBT/GDP, who has dramatic effect on economy when the GDP denominator start shrinking.
Of course this is making things worse and worse, as everyone is running toward the exit in the system market become more illiquid and correlations brake down causing liquidity not flowing into the system as everyone is scared to be on the wrong side of the trade.
Of course gold didn't benefited by this credit crisis because was sold (in the form of certificates) by the BOJ, who was instead busy buying stocks as per their program.
Regarding Bitcoin, once again showed that honey badger doesn't give a fuck.
I hoped the Digital Gold rhetoric were true, but instead low correlation with other asset classes showed it is.. a rhetoric only, without any data to support Bitcoin is used as a store of value.
Still the vast majority of players in the BTC markets see it as an highly speculative asset, hence the selling, also fuelled by some technical fact probably caused by the halving driving up the difficulty.
Here my
toughs about this story.
Belgium corona lockdown is great, just went for one of my nicest ever 50km cycle rides. Traffic lights become irrelevant after 9pm it's liberating! Ironically, not many less people out on the streets this evening compared to previous evenings, much notably less cars... lots of people also having a walk for "exercise". Don't know what it's like in other cities... but not much has changed here apart from more restaurants are shut now. Night shops still open though, so enough people going out "shopping" it seems
Take care mate when riding in lockdowns.
(
touch wood now)
In case of an accident they would take you to an hospital, the exact place where you DO NOT want to be during a pandemia.
Additionally, during a lockdown firstly nobody can assist you on the road, secondly the rescue team might be busy doing other stuff, so you might be lacking the proper support in a timely manner.
) 
