First Word

This market is not NORMAL... and despite mounting fears and no 'end date' odds still favor V-bounce and bottom this week


The Dow has posted 4 1,000 point drops this week.  

This is not normal and the market is clearly indicating to us a change, and it could mean one of the following:
- Significant change in fundamentals
- Significant increase in 'risk' to fundamentals
- Financial plumbing is breaking down
- Meteor or alien invasion to end global existence has been spotted and arriving is unknown (or virus pandemic)

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Of these factors, perhaps many will cite the 'risk' of economic calamity from COVID-19 and the lack of US preparedness for its eventual arrival.  To an extent, this makes sense to us.  And the natural question, therefore, is when is this priced in. Because of the idiosyncratric nature of a potential pandemic, this is really difficult to know when it is priced in.   But here are some perspectives and why we think we end up with a V-bounce: 1. China stock market tanked 3 weeks before the S&P 500 peaked and has bottomed and rallied 14%.  Even as the economy has not fully recovered or restarted. 2. S&P 500 has fallen 6 consecutive days with >8% fall.  This happened 10 times since 1948.  10 of 10 times stocks higher 12M later (27% avg, median 28.5%).  When PMI>50, 100% win-ratio 10D, 3M, 6M and 12M later. 3.  VIX surge to 48.  This is peak fear and seen on...

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