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Old 03-06-2020, 10:14 AM   #41
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Coronavirus: The Black Swan of 2020

Here is a note that we sent to Sequoia founders and CEOs today to provide guidance on how to ensure the health of their business while dealing with potential business consequences of the spreading effects of the coronavirus.

Dear Founders & CEOs,

Coronavirus is the black swan of 2020. Some of you (and some of us) have already been personally impacted by the virus. We know the stress you are under and are here to help. With lives at risk, we hope that conditions improve as quickly as possible. In the interim, we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out.

All of you have been inundated by suggestions for precautions to take around COVID-19 to protect the health and welfare of you, your employees, and your families. Like many, we have studied the available information and would be happy to share our point of view — please let us know if that is of interest. This note is about something else: ensuring the health of your business while dealing with potential business consequences of the spreading effects of the virus.

Unfortunately, because of Sequoia’s presence in many regions around the world, we are gaining first-hand knowledge of coronavirus’ effects on global business. As with all crises, there are some businesses that stand to benefit. However, many companies in frontline countries are facing challenges as a result of the virus outbreak, including:
  • Drop in business activity. Some companies have seen their growth rates drop sharply between December and February. Several companies that were on track are now at risk of missing their Q1–2020 plans as the effects of the virus ripple wider.
  • Supply chain disruptions. The unprecedented lockdown in China is directly impacting global supply chains. Hardware, direct-to-consumer, and retailing companies may need to find alternative suppliers. Pure software companies are less exposed to supply chain disruptions, but remain at risk due to cascading economic effects.
  • Curtailment of travel and canceled meetings. Many companies have banned all “non-essential” travel and some have banned all international travel. While travel companies are directly impacted, all companies that depend on in-person meetings to conduct sales, business development, or partnership discussions are being affected.
It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained. It will take even longer for the global economy to recover its footing. Some of you may experience softening demand; some of you may face supply challenges. While The Fed and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of a global health crisis.
...
https://medium.com/sequoia-capital/c...0-7c72bdeb9753
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Old 03-06-2020, 03:01 PM   #42
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`

It might be cause of the corona virus, but it looks like he's got a good shot at having the timing of the collapse right.

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Old 03-19-2020, 09:42 AM   #43
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Key Points:
  • Ray Dalio, the founder of Bridgewater Associates, estimated the U.S. corporate losses will amount to $4 trillion due to the coronavirus pandemic.
  • Globally, the outbreak will cost corporations $12 trillion, he added.
  • "What's happening has not happened in our lifetime before. ... What we have is a crisis," Dalio said.
  • "There will also be individuals who have very big losses."
  • Dalio added the fiscal stimulus package should be at least $1.5 trillion to $2 trillion.
...
More (including video): https://www.cnbc.com/2020/03/19/inve...e=twitter|main

Dalio thinks the Fed needs to explode the money supply over 100%? Stupid goldbugs.
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Old 04-06-2020, 10:54 PM   #44
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Ray posted a 5,000 word essay on LinkedIn back on March 25:

https://www.linkedin.com/pulse/chang...-ray-dalio-1f/
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Old 04-09-2020, 08:20 AM   #45
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As investors rush to cash during these very uncertain times, Bridgewater Associates' Ray Dalio reminded everyone during his Reddit Ask Me Anything event Tuesday that cash is still “trash” relative to assets like gold.

One of the more popular questions the founder of Bridgewater Associates was asked Tuesday was this one — “A few months ago you said cash is trash. But now cash is king. What gives?”

Dalio was very happy to clarify his answer, noting that his opinion has not changed even after the COVID-19 outbreak hit the financial markets hard all across the board.

“When the virus hit and it had its negative impact on earnings and balance sheets, asset values plummeted which made cash look comparatively attractive. However, what did the central banks do? They created a ton more cash,” he said.

“When you think about what assets are safe to own, and you think of cash, please remember that while it doesn't move around in value as much as other assets, there is a costly negative return to it in relation to goods and services and other financial assets that amounts to about a couple of percent a year, which adds up,” he continued.

Dalio sees value in assets like gold and stocks: “I still think that cash is trash relative to other alternatives, particularly those that will retain their value or increase their value during reflationary periods (e.g., some gold and some stocks),” he said.

The U.S. dollar is regarded as the world’s reserve currency, which is why the U.S. government is able to provide money and credit, Dalio explained when answering a question about the current market environment.

“While the U.S. accounts for about 20% of the world economy, the U.S. dollar accounts for about 70% of the world's buying, selling, borrowing, and lending … I believe that increasingly there will be questions by bondholders who are receiving negative real and nominal interest rates while there is a lot of printing of money about whether the debt assets they are holding are good storeholds of wealth. I believe that cash, which is non-interest-bearing money, will not be the safest asset to hold,” he said.

The COVID-19 crisis has been boosting the U.S. dollar as “the world desperately needs dollars,” Dalio added, noting that this renewed greenback strength will not last.

“Having the world's printing press to produce the world's currency is the equivalent of having the world's most important asset, especially in times when so many people need the world's money. So, we are now having a short squeeze on the dollar,” he said. “Eventually, that will end because either that shortage of dollars will be satisfied by enough creation of dollars or it won't be satisfied in which case there will be debt defaults and restructurings that will reduce the need for dollars. When that happens, the dollar will weaken. It will also weaken when those who are holding dollar-denominated debt no longer want to hold that debt because interest rates are inadequate and so much dollar-denominated debt and money is being created that its value is undermined.”
...
https://www.kitco.com/news/2020-04-0...eddit-AMA.html
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Old 04-09-2020, 08:27 AM   #46
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The pandemic sweeping the world will turn global economic growth “sharply negative” in 2020, triggering the worst fallout since the 1930s Great Depression, with only a partial recovery seen in 2021, the head of the International Monetary Fund said.

IMF Managing Director Kristalina Georgieva painted a far bleaker picture of the social and economic impact of the new coronavirus than even a few weeks ago, noting governments had already undertaken fiscal stimulus measures of $8 trillion, but more would likely be needed.

She said the crisis would hit emerging markets and developing countries hardest of all, which would then need hundreds of billions of dollars in foreign aid.

“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020,” she said on Thursday in remarks prepared for delivery ahead of next week’s IMF and World Bank Spring Meetings.

“Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year.”

If the pandemic faded in the second half of the year, the IMF expected a partial recovery in 2021, Georgieva said, but she warned the situation could also get worse.

“I stress there is tremendous uncertainty about the outlook: it could get worse depending on many variable factors, including the duration of the pandemic,” she said.

The IMF, which has 189 member countries, will release its detailed World Economic Outlook forecasts on Tuesday.
...
https://www.reuters.com/article/us-h...-idUSKCN21R1SM
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Old 05-13-2020, 08:16 AM   #47
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Investing legend Stan Druckenmiller unleashed a firehose of cold water on market bulls today during an interview with the Economic Club of NY (the same venue that will interview Jerome Powell tomorrow on the topic of negative interest rates), when he said the "The risk-reward for equity is maybe as bad as I've seen it in my career," (although "the wild card here is the Fed can always step up their purchases"), that the government stimulus programs won’t be enough to overcome the economic problems, that it makes no sense for the market to jump so much when optimism emerges around certain drugs like remdesivir ("I don't see why anybody would change their behavior because there's a viral drug out there") and, most concerning, that "there's a good chance that we just cracked the credit bubble that's the result of free money."

"The consensus out there seems to be: 'Don’t worry, the Fed has your back'," Druckenmiller said during Tuesday's webcast before adding "there’s only one problem with that: our analysis says it’s not true."

Furthermore, while traders think there is "massive" liquidity and that the stimulus programs are big enough to solve the problems facing the U.S., resulting in stratospheric P/E multiples, the economic effects of the coronavirus are likely to be long lasting and will lead to a "slew" of bankruptcies, Druck said, agreeing with our observations from last week that the underlying problems are shifting from illiquidity to insolvency, as a "biblical" wave of defaults is coming:

"I pray I’m wrong on this, but I just think that the V-out is a fantasy," the trading legend said, crushing hopes for a V-shaped recovery, assuming anyone still harbored those, and added that the recent increase in unemployment in the U.S. stunning. The official U.S. unemployment rate is at 14.7%, the highest level since the Great Depression.

As Bloomberg summarizes, "Druckenmiller’s remarks are among the strongest comments yet by a Wall Street heavyweight on the bleak outlook facing the U.S." Druck's apocalyptic outlooks also sharply contrasts to the optimism that has pushed the S&P 500 Index to rally 30% since its March low even as the pandemic has brought the economy to a standstill, seized up credit markets and ended the longest bull market in history, all thanks to the now ubiquitous Fed backstop and moral hazard.
...
More: https://www.zerohedge.com/markets/dr...n-it-my-career

also: https://www.bloomberg.com/news/artic...?sref=61mHmpU4
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Old 05-14-2020, 09:19 AM   #48
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Dalio talked previously about a paradigm shift coming exacerbated by the divide between the haves and the have nots. The division is getting some play in the media lately...

Originally Posted by Kyle Bass :
...
While Bass is hopeful that the current crisis will focus American policy makers on reforming the U.S. relationship with China, he remains fearful of declining social cohesion here at home.
...
“The debate going into [the November] election will be Wall Street getting bailed out and Main Street having done poorly,” he warned. “The price of assets are going to go up. Every rich person that owns those assets, they’re going to get richer, and the middle class that either has to rent or buy those assets, this becomes more unattainable.”

Wondered Bass: “What happens if we get to November and stock markets are at all-time highs, and we’re at 15% unemployment, and the food [banks] don’t have food? Imagine this world. ...
https://www.marketwatch.com/story/in...capitol-report

Originally Posted by Matt Tiabbi :
...
Assuming the Fed bazooka keeps firing, however, a large portion of the investor class is already on a road leading back to champagne and confetti. And that, as Robert Frost would say, has made all the difference.

On the road more traveled, on the real side of the coronavirus economy, the pain has been historic. As of this writing, 30 million people have filed jobless claims during the COVID-19 crisis, and millions have lost their employer-based insurance.

At least one in three can’t make their rent, millions more can’t afford groceries, and workers in supermarkets, medical clinics, warehouses, and other professions are now in a macabre race to see if they’ll turn blue and die before corporate employers decide to slash their salaries or retirement benefits — which has already happened to front-line caregivers in some cities.

There are no projections of record earnings in the futures of such people. The best case is survival, and the grim reality of diminished economic horizons. Yet for the tiny sliver of people whose fortunes depend not on salaries, tips, and commissions, but upon the prices of financial products like stocks and bonds, the coronavirus response heralds a brave new world.
...
More (long): https://www.rollingstone.com/politic...street-997342/
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