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Market Panic, Political Strain, History of Pandemics, and Where's the Exit?

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Manage episode 258923126 series 2639949
เนื้อหาจัดทำโดย Hedgeye Risk Management เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดเตรียมโดย Hedgeye Risk Management หรือพันธมิตรแพลตฟอร์มพอดแคสต์โดยตรง หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่อธิบายไว้ที่นี่ https://th.player.fm/legal

In this latest issue of my weekly podcast, I discuss measures of market panic that have either started to ease or that remain elevated. On the easing side, implied volatility as measured by the VIX is today around 40: That's only half of its peak of just over 80 a few weeks back, but it's still twice as high as it was two months ago. Credit spreads have also shrunk but are still closer to their highs than to the pre-crisis levels. On the elevated side, the USD, relative to other major currencies, is higher than any time in our history. Commodity prices are all down and keep going down. And gold continues to rise.

In early March, the market panicked over two vast and unquantifiable risks. The first was the exponential growth in pandemic cases and deaths--no one had any idea how bad it would get; and the second was the policy response by governments--no one had any idea if political leaders would respond to the economic deep freeze with sufficient monetary and fiscal stimulus. But by the last week of March and the first week of April, the market came to regard both risks as suddenly smaller and more manageable. But this narrative may be wrong...

What's the exit strategy? If we simply relax the lockdowns, we will push the R0 back above one. And once again, we will experience exponentially rising--rather than exponentially falling--infections. One exit strategy would be a vaccine. But a safe and effective vaccine is at least a year away. Some are embracing the "invisible" herd immunity theory, that vastly more people are being infected by C19 than the number who become symptomatic. The result is that in a very short time we'll wake up and find that we're all mostly immune because we've already been infected. But recent findings that only a very small percentage of the Italian population has developed immunity makes this theory a pipe dream.

The pace of destabilizing political change is quickening. In geopolitics, the US, Europe, and China have each made it clear that it will pursue its own interests. The regional strains within the EU have been put on fast-forward--with Italy, Spain, and Greece once again ready to throw off their Euro-bondage. And China-U.S. relations are deteriorating fast with China now putting the full-court press on Taiwan.

How do pandemics change history? Disease and epidemics are NOT mere random accidents of history. Typically, these great epidemics occur after eras of rapid population growth, of rising mobility and long-distance travel, and of growing urbanization and population density.

Will COVID-19 end globalization? Global trade already entered an era of regression over a decade ago. On an economic level, most of the easy gains that came from forty years of tariff cutting came to an end when the average tariff rates on products approached zero. Meanwhile, at an ideological level, globalization as an ideal has lost its luster on all fronts. Now here comes the pandemic recession of 2020, where nations are now fully prioritizing their own interests. This new hit to globalization will endure long after the current "pandemic" recession ends.
******
The content featured here is a small part of Hedgeye’s Demography Unplugged, a game-changing market intelligence product brought to you by historian, demographer and best-selling author Neil Howe. Visit us to find out more and subscribe.

  continue reading

50 ตอน

Artwork
iconแบ่งปัน
 
Manage episode 258923126 series 2639949
เนื้อหาจัดทำโดย Hedgeye Risk Management เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดเตรียมโดย Hedgeye Risk Management หรือพันธมิตรแพลตฟอร์มพอดแคสต์โดยตรง หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่อธิบายไว้ที่นี่ https://th.player.fm/legal

In this latest issue of my weekly podcast, I discuss measures of market panic that have either started to ease or that remain elevated. On the easing side, implied volatility as measured by the VIX is today around 40: That's only half of its peak of just over 80 a few weeks back, but it's still twice as high as it was two months ago. Credit spreads have also shrunk but are still closer to their highs than to the pre-crisis levels. On the elevated side, the USD, relative to other major currencies, is higher than any time in our history. Commodity prices are all down and keep going down. And gold continues to rise.

In early March, the market panicked over two vast and unquantifiable risks. The first was the exponential growth in pandemic cases and deaths--no one had any idea how bad it would get; and the second was the policy response by governments--no one had any idea if political leaders would respond to the economic deep freeze with sufficient monetary and fiscal stimulus. But by the last week of March and the first week of April, the market came to regard both risks as suddenly smaller and more manageable. But this narrative may be wrong...

What's the exit strategy? If we simply relax the lockdowns, we will push the R0 back above one. And once again, we will experience exponentially rising--rather than exponentially falling--infections. One exit strategy would be a vaccine. But a safe and effective vaccine is at least a year away. Some are embracing the "invisible" herd immunity theory, that vastly more people are being infected by C19 than the number who become symptomatic. The result is that in a very short time we'll wake up and find that we're all mostly immune because we've already been infected. But recent findings that only a very small percentage of the Italian population has developed immunity makes this theory a pipe dream.

The pace of destabilizing political change is quickening. In geopolitics, the US, Europe, and China have each made it clear that it will pursue its own interests. The regional strains within the EU have been put on fast-forward--with Italy, Spain, and Greece once again ready to throw off their Euro-bondage. And China-U.S. relations are deteriorating fast with China now putting the full-court press on Taiwan.

How do pandemics change history? Disease and epidemics are NOT mere random accidents of history. Typically, these great epidemics occur after eras of rapid population growth, of rising mobility and long-distance travel, and of growing urbanization and population density.

Will COVID-19 end globalization? Global trade already entered an era of regression over a decade ago. On an economic level, most of the easy gains that came from forty years of tariff cutting came to an end when the average tariff rates on products approached zero. Meanwhile, at an ideological level, globalization as an ideal has lost its luster on all fronts. Now here comes the pandemic recession of 2020, where nations are now fully prioritizing their own interests. This new hit to globalization will endure long after the current "pandemic" recession ends.
******
The content featured here is a small part of Hedgeye’s Demography Unplugged, a game-changing market intelligence product brought to you by historian, demographer and best-selling author Neil Howe. Visit us to find out more and subscribe.

  continue reading

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