Juggling Dynamite

The IMF has declared the recession of 2020 the worst since the Great Depression, assuming that the virus goes away in the second half and the economy gets back to growth. This chart shows the IMF’s projections for the G7 economies in this best-case scenario.In the more likely scenario that the virus abates over the next month on social distancing but then returns in the summer as life tries to resume, these forecasts are probably optimistic. Hoping for the best while preparing for worse outcomes is the prudent course.

“The world has been put in a great lockdown,” the IMF’s chief economist, Gita Gopinath, told reporters. “This is a crisis like no other.”  Here is a direct video link.

The mainstream never sees a recession or bear market coming not even when leverage and price-indiscriminate buying have reached record levels.  Now that a major loss cycle has arrived once more, the same crowd is saying that everyone has lost and no one could have seen this coming (neither is true) and that everything will rebound quickly in the second half of the year.  Probabilities do not favour this outcome.  As explained in this segment, the base case suggests a recession and bear market as bad as 2008, at least.

Dr. Nouriel Roubini returns for an in-depth analysis of the coronavirus crisis. Roubini explores coronavirus-related destruction in the real economy, the impact and shortcomings of the containment effort, and his view of the risks caused by an underlying debt bubble. He also explains to Real Vision’s Ash Bennington the individual elements of the policy response with a special focus on monetary policy and the US dollar. Here is a direct video link.

Good discussion of historical precedents and probable market paths from here.

John Hussman, Ph.D discusses his valuation framework, the problematic 12-year expected equity returns, the most likely inflation outcome and shows why we’re a long way from a slam-dunk buying opportunity. Here is a direct video link.

Hmmminar 5 – John Hussman (8 April 2020) from Grant Williams on Vimeo.