BBUS, page-7042

I'm afraid that others are greedy, which means S&P 500 keeps going up longer than I can afford to short it (arguably already there but at least i'm hedged)

I'm hoping the market will look back on this phase as one of "excess optimism" that disconnected from reality. There is likely an element of herd behaviour that comes from the "buy the dip" and "dont fight the FED" sentiments. The current forecast is for re-opening to get the economy back up and running, rhetoric out of the White House is bias towards V-shaped recovery largely due to Trump needing the economy share market to be positive for a better chance at re-election.

There is a reasonable amount of +ve/buy analysis that comes out from major trading groups with many viewing the downside of COVID largely behind us.

However, this is at odds with most economic analysis coming from respected and (mostly) unbiased economic modelling and forecasts (World Bank, OECD, IMF etc). Even the FEDs own forecasts are bleak - hence their unprecedented buying of corporate bonds (why do people keep saying they are buying stocks, ive not seen any evidence of this and bonds =/= stocks??).

In response i've seen commentary saying "Market has priced in" certain negative outcomes. I've never been a fan of this "Pricing in" nonsense as if you accept the market has a diminished level of price discovery then the idea of pricing something in becomes largely nonsensical. Further the original expectations in early May were for COVID cases to die down, with some restrictions in place to prevent spread too much - a view that the warmth of summer will stop the spread and hope that a vaccine would be confirmed by end-of-year.

We now have very clear evidence that those expectations were wrong, COVID is much worse than it has been even during March/April and it looks like it is going to get worse. Yet with this becoming undeniably evident this weekend with new cases hitting ATH consistently in multiple states and the US as a whole, the market appears completely unphased by this concerning and dramatic change (although for many of us it has been coming since late May). It is the perception of the market that the FED can backstop equities markets to prevent losses a.k.a moral hazard which is causing the market to price far above where it should accurately be. If that perception is damaged, you will see equity flood out the gates.

Notwithstanding the PPT, this in my opinion, is grossly overestimated. Ultimately the FED does have a limit to how much they can do and once we reach it they will either have to cross lines no true capitalist could tolerate or the market needs to adjust to the reality that things are bad, returns will be bad and we need to accept that for at least the medium term we need to deal with.