Good morning!   I woke up and looked at the markets and thought the price of West Texas Intermediate (WTI) oil was a misprint.  Oil is down 25% to $13.50/barrel due to supply vs. demand imbalances because the global economy is largely shut down.  As evidence of how extreme the shutdown is, we were told by someone at Newark Airport yesterday that operations (all flights) were 4% of normal for a Sunday.  From a cost of gas and heating it seems like a good thing, but don’t forget the amount of high yield debt that is Energy based.  It is a good thing the Fed announced they are buying high yield debt because there is a lot in the energy space that is going to be for sale if oil stays anywhere near here.


We are going to have a post put up on the site a little later today looking at some credit indicators and what they are saying about the economy.  The incredible relief rally in stocks has many expecting a quick recovery that looks like a “v”, but our credit signals a slower recovery once one begins.  Oil serves as great evidence we are just beginning to get the economic impact from the Covid-19 related economic shutdown in an economy built on leverage.  The only economic release today is the Chicago Fed regional manufacturing reading, which we expect to be similar to others – historically weak.


As we move around the weekend, it became clear that people are scared to death of being within 6 feet of someone else.  That sentiment is going to take time to change.


Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expensesAll data points are sourced from Bloomberg as of 4/20/20 at 6:30am unless noted otherwise.

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