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Weekly Memorandum 3/9/2020

The circuit-breakers were activated in futures markets as equity futures opened with a limit down. Panic and hysteria is in the air. There is no question about it. Actions matter now more than words. "Buy when there is blood in the streets." It takes a lot of courage to do so, and in such environments like we're in, managing risk becomes more difficult. Nonetheless, it can be done. A new Mercator Letter was published yesterday. Fortunately for subscribers, we've had extensive cash positions in the last month, as most long positions were liquidated in early-February, and many of our buys on new positions still haven't triggered. This is the benefit of letting price guide actions instead of opinions.

There is serious carnage in Crude Oil, as it traded down to levels not seen since early-2016. Last time it traded near these levels, we saw an impressive rally, but it's too early to tell if that will occur again. This will definitely cause major pain to oil producers, and specifically fracking companies, who need oil to be around $50 or so just to break even.

Precious metals are down again while Treasuries are up. The U.S. Dollar continues its implosion and one can't help but wonder when this will translate into inflationary pressures. The market is at an extreme right now, but even more important to remember is that when markets trend, they can last longer than most expect. The short-term trend in equities has undoubtedly been down, so we must tread carefully here. We explained our new macroeconomic thesis in the latest Mercator Letter, and we provided our new levels of support for various markets. Some of them have already been achieved, so we are paying very close attention to price action at the moment.

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