Raoul Pal @RaoulGMI Founder/CEO - Global Macro Investor and Real Vision Group, Business Cycle Economist, Investment Strategist, Economic Historian, Traveller and Rum Drinker.. Feb. 24, 2020 1 min read

This does remind me a bit of 2007/2008 when first we saw Iceland go, then Northern Rock and the UK banking crisis along with the US mortgage lenders and then it hit Wall St and the global economy fell apart.. Feels a similar rolling contagion - a spreading cause and effect.

We don't know how far it will go, or if the virus can burn out but the markets will have to trade the fear and governments and central will have to act, regardless. The actions will all be rational, but the outcomes of those actions risk an outsized economic effect.

It is not a big stretch to imagine where this all could be in a month or two months and that is too much for markets to deal with...

As a good friend says "Trade the obsession, not the recession". The virus outcomes are literally unknowable but the human behaviour is.

We do not know how fat the tail is of this distribution. We will have to price something closer to a multi-standard deviation event, not a 1 or 2 standard deviation event, then we can see if we have over-priced it or underpriced it.

The next 30 days are going to be rough as F.


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