Highly Uncertain
Reallocation Shock
Demand Shock
A Most Troubling Dilemma
How You Can Help
Puerto Rico and Final Thoughts

Predictions are difficult, especially those about the future. That old proverb (often attributed to Yogi Berra) is right but you can’t live without making certain presumptions. You presume your car will start, your refrigerator will stay cold, the lights will turn on when you flip the switch.

In fact, you could argue this “predictability” separates advanced economies from primitive ones. Most of us don’t have to worry about being attacked in our sleep or having food tomorrow. That security frees us to do other things.

Right now, some basic assumptions are no longer safe. The economy will keep suffering until they are reliable again, or we replace them with new assumptions. We can’t travel or even go to a restaurant or visit friends without wondering about our health. Where does that leave us?

Today I’ll defy the proverb, consider what we know and don’t know, and try to tell you where I think we’re going. In the long run (after The Great Reset in the late 2020s), I still foresee a wonderful new world. But we have to get there first.

Economists use the word “recovery” to define a rebound from the previous time period. So if there was a 30% drop, a 10% increase would, for an economist, be a “recovery.” But in the real world, it still means you are 20% below where you started. Recovery doesn’t necessarily mean recovered. Even optimistic projections say we won’t see anything like 2019 GDP until late 2021. Many suggest it will be even longer.

Even then, the changes we will have to put into our operating business models, not to mention the massive amounts of capital that it will take to start new businesses or resupply old ones, will make the “recovered” economy look significantly different than that of 2019.

And just for the record, because I am not optimistic about the speed of economic recovery does not mean that I am necessarily bearish on the stock market. When the Federal Reserve pumps $5 trillion (or whatever) into the system it is going to find a home. While I think earnings will take a severe hit in 2021, the market could hold simply due to massive Fed support.

There have been numerous times when the economy and the stock market were out of sync. Don’t equate the two. The stock market doesn’t necessarily tell us anything about the economy, or vice versa.

Now on to the letter…