Hedging for Disaster – The Corona Crisis Continues

Futures went limit down again.

QE Infinity and $1.2Tn of stimulus wasn't enough, it seems.  Here's the problem – even if you give every man, woman and child in this country $2,000 a month ($600Bn) – where are they going to spend it?  

Even if the US is that generous (we're not), what about the rest of the World?  If every country doesn't do something similar, we're still looking at a global Recession.  Recessions end when people goo back to work and things start getting back to normal.  The problem is, there's no "normal" in sight at the moment. 

As I keep saying – you have to fix the crisis first – NOT the economy!

This is like firemen showing up at a house fire and painting the house while the fire rages on - who cares about that?  

Image result for federal throw money on the fire

As you can see from this 1934 cartoon, this isn't the first Government that's taken a crisis (the dust bowl at the time) and thrown money at it.  Money didn't stop the farms from failing and money didn't solve the bread lines or the cascading unemployment that ended up destroying the economy in the Great Depression.  The Trump Administration has been propping up the markets since 2017 and have already used all the Fed's firepower and put us $3Tn more in debt in 3 years of Trump and now, when we have an actual crisis – even $1.2Tn doesn't seem like enough to "fix" things.

Image result for bloomberg tv homeBloomberg reporters are reporting from their homes – how's that for inspiring confidence!?  As I noted this morning in an Alert to our Members:  

Sadly, we'll have to add more hedges today, in case 2,400 breaks down and we head for 1,800.  Fortunately, that's down 25% so up 50% on SDS, which is already at $34 so $51 would be the target and the SDS May $35 ($7.50)/50 ($4.50) bull call spread is just $3 and pays $15 so 400% upside potential means we can get $100,000 back for each $25,000 and we just sold $81,000 worth of short puts in the LTP


continue reading