🔥F.E.A.R. Part Two.🔥

⚡️What. The. Hell. Part. Two.⚡️

Pardon us: it’s a little hard to write with a neck brace on. This week’s whiplash has us all sorts of flummoxed.

On Monday, the stock market surged 1000 points because … well … who the hell knows? Was President Trump correct last week when he suggested that some of last week’s negative market price action had to deal with the rise of Bernie Sanders? Maybe. On Monday, while the mainstream media simultaneously reported on the consolidation of the moderate democrat lane and new coronavirus-related deaths, the stock market somewhat-inexplicably rocketed higher. Apparently the thought of 2% of the US population succumbing to a painful pneumonia-like death was no longer so frightening now that “the establishment” was rallying against good ol’ Bernie. We know, we know, you’re wondering: is this really the reason? The answer: we have no f*cking idea. But whatevs 🤷‍♀️. The market was green!

Enter the FED. The market was looking mighty volatile again yesterday when the FED came out of nowhere and lowered its benchmark FED Funds rate by 50 bps — acting between meetings for the first time since 2008. We all know what happened that year. Why couldn’t the FED wait two weeks? Chairman Powell said:

“The committee judged that the risks to the U.S. outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”

In other words, the FED must be seeing some disturbing-AF data that we aren’t privy to yet. Less likely though equally plausible: Jerome Powell continues to be Reek to President Trump’s Ramsey Bolton.

The result? Well, the market rallied for about 1.2 hot seconds and then puked all over itself. It subsequently tumbled 2.8%. The energy sector is now down 23% YTD. The Ten-year treasury yield dipped below 1% for the first time in history.

FOR THE FIRST TIME IN HISTORY. Yes, folks, sh*t is getting real. We’d opine as to “how real” but, again, this is THE FIRST TIME IN HISTORY that this has happened. So, literally nobody knows.

To the extent this extraordinary measure was meant to calm markets, well…

``It’s doubtful that when JP left home this morning he thought ‘50 bp will really crush the stock market.’ So it goes.'' #coronaclientnotes pic.twitter.com/ZuptQoK5Bu

— Eliza Ronalds-Hannon (@ElizaHannon) March 3, 2020

A generation of investors believes that Central Banks are omnipotent and that pre-emptive strikes on financial stress are the solution to every crisis.

Today, that world view is being tested. It could represent a profound shift in the collective consciousness and a new regime.

— Christopher Cole (@vol_christopher) March 3, 2020

Time to extract that gold tooth: it’s going up in value.

You know what else is going up in value? Food. As coronavirus reports spread to multiple cases in NYC, North Carolina and other places, people are stocking up like crazy with an eye towards a potential quarantine situation. Lots of marriage about to get tested, y’all. Netflix and…KILL?!? 😬 Long divorce lawyers.

*****

What does all of this coronavirus disruption mean for restructuring professionals? It’s still far too early to tell. But this doesn’t bode well:

This shows that supplier delivery times are slowing due to China-related issues.

This doesn’t help either:

Ooof. No bueno. Like 2009-level no bueno. Stating the obvious, JPMorgan noted that “…demand, international trade and supply chains were severely disrupted by the COVID-19 outbreak.”

Bottom line: it’s hard to generate revenue (and service debt or comply with covenants) when you don’t have product.