Circle of Competence Issue #103

March 21, 2020

QUOTE OF THE WEEK

 

"Just keep in mind: the more we value things outside our control, the less control we have." - Epictetus

 

 

FOOD FOR THOUGHT

 

Macroeconomic Data Dashboard

 

I've added a new dashboard to my website to track macroeconomic variables from the St. Louis Federal Reserve public website. Please reach out if you have any additional macro variables that are worth including.

 

A couple things pop out:

 

- The "CCC rated and below" credit spreads are beginning to blow out like they did in late 2015/2016, but still have a ways to go until they reach 2008 highs. 

 

- The yield curve has reversed its previous inversion, reflecting credit spreads begininng to increase, indicating stress in the credit markets.

 

- This is especially true in the high yield and riskier parts of the market which support highly levered, weaker businesses. This could be the first part of a multiseries credit contraction that has been sparked by the COVID-19 outbreak and lockdowns in place at the moment.

 

Lock Arms

 

While I will continue to post links on investment memos, investment opinions, and new developments in the markets, I want to send my prayers out for those who are being severely impacted by this outbreak and the accompanied economic/social lockdowns that have resulted. While for some, this outbreak represents a massive investment opportunity, for many more, this is an economic shock to their business, their job, and their family. Please keep them in mind:

 

- small business owners with a consumer retail focus

- healthcare providers

- grocery store employees 

- the elderly

 

Notable Fintwit

 

Though I don't normally spend this much time on twitter, the COVID-19 outbreak has driven me to the interwebs far more to keep up with the ever-changing status of the world. Here are a few noteworthy tweets from this week. I will try to share more of these in coming weeks - note to my readers, if you aren't on Twitter, this is the speakeasy where the professionals hang out, in real time. 

 

- Preston Pysh on the bond market sell-off (troubling if interest rates really spike)

 

- Patrick O'Shaughnessy with Brent Beshore on COVID-19 and small business

 

- John Hempton of Bronte Capital on the proper response to COVID-19

 

- Brent Beshore with real time data on COVID-19 effects on small business

 

 

LINKS

 

Investing

 

Tom Russo on investing intelligently in a crisis (MOI Global)

 

America's restaurants will need a miracle (Derek Thompson)

 

Lux Capital memo on COVID-19 (Lux Capital)

 

Memo to the committee - dare to be different (GMO)

 

Askeladden Capital COVID-19 memo (Samir Patel)

 

 

Technology

 

Magic Leap is being put up for sale - what went wrong? (Protocol)

 

Central bank digital currency - opportunities, challenges, and design (CBOE)

 

 

Economics and Other

 

A beginner's guide to Austrian economics (Saifedean Ammous)

 

The price of discipline (David Perrell

 

Interview with the NIH's director, Francis Collins (The Atlantic)

 

Crude oil contango (Adventures in Capitalism)

 

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