Synthesis #1 April 2021
Taking much longer than expected adding significant distortion to an already unprecedented amount of distortion in the economy and in asset valuations. I suspect most of the assumptions underlying econometric, valuation and price models do not adequately account for current conditions rendering the models extremely dangerous to institutional investors and market stability.
Residential housing markets may be affected as forebearance ends. Various classes of REITs will be affected... e.g. ...Hotel and Apartment REITs may present some good opportunities soon, strip mall, Hospital and Office REITs may take a dive. Certain foreign markets may provide rock bottom pricing.
Sovereign debt is a firecracker with a short fuse...drop it quick. Taleb popularized the concept of the Black Swan...a large unpredictable event so unlikely to occur that it is universally unhedged. Sovereign debt is in such a precarious position that it is susceptible to a Black Duckling event induced catastrophe.
Small cap funds and equities in hard hit industries will provide some interesting short sale opportunities. Unable to tap into "too big to fail" funding mechanisms they will be taken out behind the barn.
The culmination of the insolvency phase may provide the forcing function for institutional and government cryptoasset, cryptocurrency, NFT and blockchain adoption. Watch for it. Adjust accordingly.
Speaking of Black Swans: quantum computing will not be one. Quantum decryption implies quantum encryption. The leapfrog process between white hats and black hats will continue. Black hats and white hats ensure an ongoing balance of power.... (More)