Good morning?
Futures went limit down again, QE Infinity and $1.2Tn of stimulus wasn't enough, it seems....
Here's the problem - even if you give every man, woman and child in this country $2,000 a month ($600Bn) - where are they going to spend it?
And, even if the US is that generous (we're not), what about the rest of the World? If every country doesn't do something similar, we're still looking at a global Recession. Recessions end when people goo back to work and things start getting back to normal. The problem is, there's no "normal" in sight at the moment. As I keep saying - you have to fix the crisis first - NOT the economy!
This is like firemen showing up at a house fire and painting the house - who cares about that?
Bloomberg reporters are reporting from their homes - how's that for inspiring confidence!?
Sadly, we'll have to add more hedges today, in case 2,400 breaks down and we head for 1,800. Fortunately, that's down 25% so up 50% on SDS, which is already at $34 so $51 would be the target and the SDS May $35 ($7.50)/50 ($4.50) bull call spread is just $3 and pays $15 so 400% upside potential means we can get $100,000 back for each $25,000 and we just sold $81,000 worth of short puts in the LTP which pays for $300,000 worth of protection.
Of course we don't need to take it all at once but 80 of those for $24,000 pays $120,000 back at $50 and we certainly hope we lose the $24,000 but I'd rather have the insurance. If 2,250 fails, we add another layer (maybe June) and another at 2,000 and, by the time you are adding at 2,000, the S&P is down 17% and that's 34% up on SDS to $45.56 and the May $24s ($10 in the money) are $12 so we'd already be able to cash in the original calls for $12 and leverage that to buy more long spreads, etc.
