Along came Covid-19, which was the trigger/black swan for the adjustment of valuations, not the cause in our view. If valuations were reasonable, equity markets would not have fallen 37% in 23 trading days – the fastest bear market in history.
And now we have Uncle Sam Inc. to the rescue, bailing out yet again, a flawed and leveraged capital market. The US central bank will expand its balance sheet to over $11 trillion (i.e. $11,000,000,000,000) in a few weeks’ time. The “independent” Federal Reserve is now very dependent on Congress to lever its balance sheet and buy whatever it wants, even junk bonds and Exchange Traded Funds (ETF’s).
Simply STUNNING.
And now we have Uncle Sam Inc. to the rescue, bailing out yet again, a flawed and leveraged capital market. The US central bank will expand its balance sheet to over $11 trillion (i.e. $11,000,000,000,000) in a few weeks’ time. The “independent” Federal Reserve is now very dependent on Congress to lever its balance sheet and buy whatever it wants, even junk bonds and Exchange Traded Funds (ETF’s).
Simply STUNNING.
KEY POINTS
- Valuations matter and are only back to fair value in our view
- This will be a long workout
- Attractive stressed opportunities will present themselves
- There is little transparency of future earnings
- Remain diversified, patient and liquid