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btgmf

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  1. Funny, ERICOPOLY, as you were a big influence to me the past few weeks. When you made a bag back in the day spending $30k on options or whatever it was, you saw that the world was not what it seemed. Italy is totally locked down. Iran is in chaos. China was on full lockdown and still largely is. South Korea is doing well and testing, and will still have a brutal time. Oil fell 25% in a day, and treasury buyers are flocking to safety. The US is so clearly following the path of the worst hit places, that by the time we get around to quarantines our problems will be enormous. Italy had 3 confirmed cases a few weeks ago! Look what happened to Asian tourist locations after SARS. This is 10x as big and still growing extremely fast. We are just getting started. I actually can't believe the market LACK of reaction the past few weeks. I am in the camp that every single one of us will get this virus in the coming years if we live full lives. I have had the flu several times and most of us have. We will call it cold, flu, and coronavirus season and many people will still ignore the free annual vaccine program. I just don't see how all of that translates to WFC and BAC at tangible book. Why? Get a grip Mr. Market. Ericopoly, this is an extinction level event. Why did China put its whole country lockdown, risking serious unrest and the end of the CCP (as people can't go out, businesses are under great stress, etc.)? Why did democratically elected Italy put its whole country on lockdown, cancelling all sports, weddings, funerals, travel? This is an awful disease that has overwhelmed healthcare systems everywhere it's been with enough time so far (China, Iran, Italy). How many businesses are surviving with no people going out for months? I agree that everyone is going to get it, except that it's not going to be "over our lifetime." It's going to be in the next three months. If healthcare systems don't get overwhelmed, it's probably a 2M+ people dead and 30M+ people hospitalized just in America. And then, like other viruses, it can come back again and again. Any business that is levered and / or dependent on funding markets is in great danger. Like the banks, all of them. Already, airlines, hospitals, events, etc. are laying people off. Next will be oil and gas, retailers, etc. Have you seen what happened to bond yields and how the Fed has greatly increased its repo facilities? No bank wants to lend to anyone at any price. They'd rather hoard 30Y government bonds at under 1% per year than lend. There are three separate, 80%+ likelihood events that would each be enough to cause a serious recession: 1. The biological effects of a disease that will kill millions in the US and hospitalize tens of millions. Who is just going back to their normal routine after that? Even if you think you are, I guarantee a large portion of consumers will not. 2. The already baked in vicious cycle effects of layoffs (airlines, hotels, cruise ships, oil and gas, retailers, port workers, truck drivers, etc.), lower business investment (no one is going to buy planes, class 8 trucks, build factories, etc.), etc. This is already happening -- you don't even need to predict it 3. The banking system shutting down and refusing to lend. Again, this is already here. The banks are saying (through yield curves, FRA / OIS curves, the Fed desperately upsizing repo offerings) "We won't lend at any price to anyone." Together they will likely cause a depression. Buying the market down 10% in 1929 didn't work out well then, and it's not going to work out now. Your 2009 successes were an inspiration and great example, which is the reason I'm writing this post. In some weird way, I feel like I owe you. But this time, there's nothing we can even do to stop the pandemic -- not that we're doing anything anyway (schools remain open, planes arrive from Seattle, NYC, Europe, etc. every day, events and sports go on uninterrupted, etc.). We will be lucky to get Italy's experience, and that will be enough to destroy many businesses and banks.
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