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Market Update

Market Update

April 24, 2020

No Non Sense News

Today is Friday, April 24 and it is 6 AM.

A second fiscal stimulus program targeting small business and hospitals is on the verge of passing. This will pump an additional half a billion dollars into these targeted areas. 

To illustrate the speed at which the Fed is expanding its balance sheet, I am including the most recent Fed Balance sheet chart. As you can see, at the current pace, it would not surprise me to see the Fed balance sheet grow toward the $10 trillion range shortly. It currently sits around $6.2 Trillion.

It is this rocket fuel being applied to our markets that will continue to push equity prices higher. The following from JP Morgan Chase, demonstrates how this will occur.

“Cumulative, government money funds had seen almost $1tr of inflows over the past seven weeks, and if we include US bank deposits this amount rises to $2tr. In our opinion, this $2tr of dollar cash is likely to gradually re-enter bond and equity markets as retail investors continue to normalize their behavior and further cover their equity underweights”


On the retail front, JCP is seeking bankruptcy protection as the ongoing Amazon effect continues to pressure brick and mortar retailers. I suspect this will be the first of a wave of retailers which will be going out of business in part triggered by the shutdown. Fortunately we have no exposure to these Zombie Retailers. These retailers are likely not going to pay rent this coming month and so expect to see mall operators come under further negative pressure for some time. In the meantime, Amazon announced that they will be quickly hiring 75,000 additional workers. 

As Warren Buffett famously said, “A rising tide raises all boats but a receding tide shows us who has been swimming naked.” Many companies were woefully unprepared for this shutdown. Benjamin Franklin once said “If you fail to plan, you are planning to fail.” As a result, many will suffer irreparable consequences. 

I am happy to report that our models are weathering this most recent storm incredibly well! It is during these challenging periods that we demonstrate our real value and further separate ourselves from the competition. Our rifle approach as opposed to the shotgun index approach continues to prove its worth.  Our unique ability to stress test our portfolio’s in advance, prepared us well for the economic challenge we are now experiencing. And thank you again for referring your friends and family that have not fared as well. We deeply appreciate your continued confidence and support.

Market Overview

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