Free eLetters

March 2020

The Four Things America Needs to Beat the Pandemic (and Save the Economy, Too)

March 25, 2020TradeSmith Research Team

The coronavirus pandemic is not just one global crisis. It is actually two distinct crises rolled into one. On the one hand, there is a public health crisis. The speed of contagion combined with the severity of symptoms — for about 20% of those who catch the virus — leads to hospitals becoming overrun. At the same time, there is an economic crisis. The work stoppages and severe “social distancing” measures required to slow the contagion rate — and protect

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The Day the Fed Went to Infinity — and Markets Didn’t Care

March 24, 2020TradeSmith Research Team

The Federal Reserve went to infinity, and markets didn’t care. It’s hard to say which part of that statement is more remarkable. On the one hand, the Fed has promised to print endless trillions, if need be, to absorb whatever assets it needs to. That is mind-blowing. On the other hand, the market took the Fed’s announcement in stride — and then decided to ignore it, which is even more mind-blowing. Before we get into what happened on Monday, keep

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Why Mental Capital is Just as Important as Financial Capital

March 23, 2020TradeSmith Research Team

Investment success depends on two types of capital, financial and mental. We are all familiar with financial capital. This is what goes in the brokerage account. Financial capital is what we use to buy and sell stocks, options, cryptocurrency, or whatever it is. But mental capital, though less well known, is just as important. Without mental capital, financial capital is useless. The wise investor practices risk management not just with financial capital, but mental capital, too. So, what is mental

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America and the World Will Never Be the Same

March 20, 2020TradeSmith Research Team

Vladimir Ilyich Lenin once said: “There are decades where nothing happens; and there are weeks where decades happen.” We are living through one of those weeks. Lenin led the Bolshevik revolution of 1917 and the formation of the USSR (Union of Soviet Socialist Republics) in 1922. When he said “there are weeks where decades happen,” Lenin meant society can exist in a certain way for a very long time — decades even — and then, all of a sudden, radical

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U.S. Treasury Bonds are the Most Important Market in the World Right Now

March 19, 2020TradeSmith Research Team

The most important market to watch right now might be 30-year U.S. Treasury Bonds, known as “long bonds.” Treasury bonds are supposed to rise in value when the stock market falls sharply. There isn’t a rule that requires this. Instead, it is just the normal way things work: When stocks drop heavily and across the board, capital flows out of stocks and into “safe havens.” One of the largest and deepest “safe haven” destinations in the world is U.S. Treasury

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Congratulations: You Survived the Wildest Market Conditions Since 1929

March 17, 2020TradeSmith Research Team

Have you ever wondered what the 1929 stock market crash was like? Have you ever imagined how it might feel, as an investor, to endure 1929-level panic and turmoil? Have you ever wondered if you could handle it? Well, you don’t have to wonder anymore, because it just happened. The extreme volatility and fear displayed on Monday broke all records going back 91 years, all the way to the crash of (you guessed it) 1929. On Friday of last week,

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You Don’t Need to Hoard Food or Empty Your Bank Account

March 16, 2020TradeSmith Research Team

Thucydides, an Athenian general and historian from the fifth century B.C., has words of wisdom that apply well in a time of crisis. Here they are: “The bravest are surely those who have the clearest vision of what lies before them, glory and danger alike, and yet notwithstanding, go out to meet it.” Real courage means knowing the stakes and rising to the occasion. In day-to-day life, there isn’t much call for this. In the midst of a crisis, however,

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The Next Two Weeks are on High Alert for Crash Risk

March 13, 2020TradeSmith Research Team

The next two weeks have heightened “crash risk” for various reasons. While vigilance is always a good idea, it makes sense to be even more vigilant over the next 10 trading days or so. “Hold on,” you might say, “Didn’t the market just crash?” After all, the Dow Jones industrial average saw its biggest single-day decline since 1987 this week. Meanwhile European equities had their biggest down day ever in percentage terms, and the S&P 500 broke a record for

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Why “Flattening the Curve” Means Sacrificing the Economy

March 12, 2020TradeSmith Research Team

Global financial markets are facing a stark reality this week. To save lives during an outbreak, the health care system has to function. To keep the system functional, the caseload has to spread out over time. To spread the caseload over time, the rate of early cases must be slowed. To slow the rate of early cases, the economy must be sacrificed. The term to describe this process, now trending globally, is “flattening the curve.” It comes from a visual

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Italy is a Foreshadow of the “Tsunami” that is Coming. All Americans Should Prepare.

March 11, 2020TradeSmith Research Team

We have been sounding the alarm on the coronavirus situation for weeks. Last week, we explained that America is entering the coronavirus J-Curve. We also explained why more than 80 million Americans are likely to be infected (as a low-end estimate). One of the replies we received was short and blunt: “Thanks for scaring the s–t out of me.” It is not our goal to scare you. The goal is to prepare you — or at least to inform you,

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Why “Zero” is a Four-Letter Word for Financial Stocks

March 10, 2020TradeSmith Research Team

As the stock market dissolves into coronavirus chaos, three of the hardest-hit sectors have been energy, transports, and financials. The pain in energy and transports is relatively simple to understand. Crude oil prices have collapsed, wreaking havoc on anything fossil-fuel related. Travel and shipping demand has also collapsed, due to contagion fears and supply-chain disruptions, respectively. But what about financial stocks? For banks and other lenders, the pain revolves around “zero” — as in zero interest rates and zero growth.

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The U.S. Shale Industry Might Not Survive the Saudi-Russian Oil War of 2020

March 9, 2020TradeSmith Research Team

The overnight futures markets were a stunning sight to behold this weekend. On Sunday night, the Brent and West Texas Intermediate crude oil futures markets were down more than 30% at their lowest point. That is the wildest price move for crude since the first Gulf War in 1991. Crude oil is still, by far, the most important commodity in the world. Prior to the coronavirus slowdown, the world consumed roughly 100 million barrels of oil per day. For a

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