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Won’t help, if response is infinite QE and monetization of government debt: Dow 1,000,000, here we come! I was thinking deep out of the money gold calls...
by pjkundert 7y ago
Won’t help, if response is infinite QE and monetization of government debt: Dow 1,000,000, here we come!
I was thinking deep out of the money gold calls...
- AznHisoka 7y agoIf the OP really thinks this will be a worldwide pandemic, far dated put options are the best bet. Wall Street has definitely not priced that in. Everyone is assuming this will be over with in a few months.
- pjkundert 7y agoWe printed our way into this problem; we can print our way out! /s Seriously, though; S&P puts yields are implicitly discounted by inflation — do we really think they won’t sacrifice the dollar on the alter of asset price nominal “stability”? Gold calls get you a positive real yield on both stock market drop & inflationary response, no?
- dcolkitt 7y agoQE and monetary stimulus is primarily effective at counteracting demand shocks. For example productive capacity, like empty storefront or unemployed workers, sits unused because liquidity has dried up. A worldwide pandemic would primarily exert its economic effect through supply shocks. The productive capacity of the economy genuinely shrinks. Stores can't open during a quarantine. Sick workers can't show up at the office. A pandemic might have second-order demand shocks, particularly if panicking investors flee to quality. But there'd still be a genuine contraction in real and potential GDP, most of which would get absorbed by contracting corporate profits. Monetary stimulus can't route around those constraints.
- jshaqaw 7y agoVery clearly put. Thank you.