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Mis a match

The markets were created by humans yet it seems as though we understand it less than the inalienable laws of the universe. It seems there are fewer definitive answers about a man-made creature then there are about man’s own origin. The markets are currently trading at a Price-Earnings multiple reminiscent of February, before the Coronavirus pandemic. Additionally, America is borrowing against its future growth. The Federal Reserve is taking unprecedented risk with their purchase of new asset classes and is expanding their balance sheet to impossibly large levels. All of the monetary and fiscal stimulus will inevitably slow future economic growth. It seems that the Coronavirus pandemic will not be the crisis but will set up the next one.

The only area ripe for accurate forecast is the oil market. Crude is trading at less than $18 a barrel. The drop in demand will rebound and production will follow as soon. It is literally unprofitable for most of the oil producing nations to continue production at below $10 a barrel. This offers a floor of oil prices. Additionally, the massive oversupply of the market will diminish as demand returns in the coming months. The world runs on oil and as soon as it starts running again, oil will run too.

In summation my beliefs are simple, equities are confusing, commodities are simple. Get out of equities and into oil.

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