The market, fundamentally, is an aggregating mechanism.
With an unfettered range of potential opinions, if they all get written down and tossed into a basket, then the winner, in market terms, is decided by the count in the aggregate in opinions... not when the votes are counted, but in the market, when the opinions are acted upon. And then, opinions change... no one wins the market's vote until the next election in 4 years... even when the winners of real elections work against the market, there's still a new expression of the aggregate opinion about that, a new election, being held every tick. Being the lone dissenting vote isn't rewarding as long at the prevailing opinion dictates against you... but that enables the astute in acting, by making different choices, to acquire "far out of the money" options on that future when the aggregate choices being made... change. That effort can succeed, and can only succeed, as long as the bets being made aren't determined within the time functions controlled by the aggregate opinion.
What does that mean ? In essence, I'm writing a note to Benjamin Graham addressing the nature of the interface in the differences between fundamentals and the markets... currently in a period of high volatility... which is the natural result of the aggregate opinion being proven spectacularly wrong.
What I mean by it is: "don't look to the market, now, to provide answers it has proven incapable of giving". Value the expression of confusion as an admission of error... but don't look to that seeking guidance.
Rather than get more technical and intense in focus on minutia down in the weeds... while considering things in relation to the now failed paradigm... instead, keep it simple, and alter the focus from the specific to the general... as the moving of the tides matters more now than the minutia of the confusion occurring in the fire drill happening on the aft deck. Understanding how the tides work... the inexorability of the change ? As the moon rises... you howl at it... ? Fine. But do so out of joy in the experience of life, not in the expectation it will listen to you and change course.
Timing ? The market doesn't have the answer... certainly it does not lie buried in the technical details in the trading in a single issue.
The virus itself contains some mathematical certainty in the nature of it... which I've been howling at the moon about for some time already, hoping still to alter its course, when that was still possible. And now that is not possible any more, from here, we must accept that speck of nature has won its argument, and the best we can do, from here, is to accept that is its nature, as from here we work, not to prevent it accomplishing what it already has, but to alter the impact of its expression in its victory by altering our choices as we still can. But, it is reality... that the virus controls the stage... not the politicians... not the Federal Reserve... and not the markets. The Fed cannot print it away... or alter the timing in events.
Fundamentally ? Sure. A month ago, correct action could have prevented the spread that is now occurring. Now it can't. You pegged it with the Mr. Minister reference. Fauci's comments this week admitted it... they're not trying to stop the spread... they're ONLY trying to "flatten the curve"... which he also admitted means deliberately stretching the event from a span of weeks to at least months. That's now the goal of public policy in the U.S.: making it last longer. The spread itself is "fait acompli"... we're just massaging it now to influence the impact in outcome.
fait accompli
See also: Fait Accompli (disambiguation)
lit. "accomplished fact"; something that has already happened and is thus unlikely to be reversed; a done deal. [29] In French used only in the expression placer/mettre quelqu'un devant le fait accompli meaning to present somebody with a fait accompli. Also see point of no return.
We're just managing the event of it... within the limits we can now... which does mean, with the mathematical certainty and precision of an exponential progression... that this won't be over in 2 weeks... or in a time best measured in weeks.
Perfect Storm ?
This also isn't about a "choice" to be made between "a pause" or a "bear market" ?
There are (at least) three separate issues... One is the fact in the certainty of the virus and its very real economic impacts (including our choices in when and how we proceed in addressing it and them, doing that well or not). Another, second, is the fact in the certainty of what happens in the REAL economy... the one composed of the aggregate of choices made, now almost independently of other influence exercised... given the first issue is what it is. Big life choices come ahead of trading decisions: Third, of course, is what happens in the process of the change occurring, as adjustment to new awareness of one and two above occurs, altering people's choices of behavior, as their understanding changes. I could have, but didn't make item three a purely market focused statement ? I didn't because market focused choices are only a minor subset of the larger issue... and for now they are not the dominant concern, much less the driver ? For now, the fundamentals rule... and market participants need to come to grips with the real need to look outside the market to see whats driving it... because all the answers are outside of the markets and its "control". The markets are NOT driving the bus... just along for the ride.
Beyond that... in the first and second point above... there's another issue relating to the third: If the market appears "broken" right now... it isn't the case that the markets have just now been broken... its only that the stresses of the day are exposing what's been broken, and stayed broken, for a long time already. I won't rehash the whole bit in the argument: "markets were exposed as broken in 2008 and we papered over the problem and made it worse ever since". It's just true. There is a fundamental problem in the markets... and that's a separate problem... independent of the virus and its impacts on the real economy... but not separate from what happens in the process of the change occurring.
So, rather than our having a choice to make between "it's just the virus, we'll take a few weeks off, and then back to business as usual" or "something seems really rotten in the markets, but more QE will fix it just like last time (or not)" ?
What we have now, instead, is both problems joining up in a perfect storm... a storm that's not even made landfall here yet... but it will soon enough... and it is guaranteed by things already baked in now... to dominate our reality for the next few months... at least. Add in on top of that... the market melee in oil... which is perhaps one consequence of those OTHER changes occurring, but which was by no means an inevitability ? the oil carnage was and is a result of deliberate choices... that were not made in a vacuum. At the minimum... oil has accelerated recognition in the market both that external events ARE happening, and that they DO have impact... that the market doesn't control, but only responds to after the fact.
Note, I haven't even tried making any statements defining the eventual outcome ? This post long enough already. But, in considering all that above...determine for yourself what the "tilt of the field" looks like now ? Do you know who all the players are, which teams they're on, and what the rules of the game are, who it is that's officiating... who is cheating... who is holding them to account ? Understand there is a contest ongoing... but don't mistake a sideshow for the big tent... and be aware masses of disinformation are being slung about ? Drill down to find out what really matters ?
One element of that is easy to parse. Just like we saw people's outlook and choices of behavior and dress change between the roaring 20's.... and the depths of the Great Depression ? Address the chicken or the egg issues as you will... there's a mood shift occurring. Welcome to the new world view:
See if you agree with me... that this link below, which is not a Dry Bar Comedy segment, provides a valid proxy for "the mood change" that's occurring now, as it is sweeping the world, and influencing others choices of market behavior:
Coronavirus and Covid-19: What happens now, what comes next
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