Tuesday, November 3, 2020

Gundlach: The U.S. Could Split Into More Than One Country, Fortunately There's A hedge For That

Back when the Large Hadron Collider was first about to fire up, there was some concern in the media that the LHC might bring about the end of the world. Markets being markets, this situation was addressed, specifically by Long or Short Capital—motto: "At Long or Short Capital LLC, we leverage our superior intellect and extensive investing experience to recommend explicit Long or Short positions and related abstract trades, which may or may not be possible with real world financial derivatives. We use science to improve the lives of the rich."—with the introduction of  LorS proprietary End of the Universe Puts.

Okay, a bit wordy for a motto, more like a mission statement but here we are:

July 2008 LHC End of the Universe Puts

by Johnny Debacle

People are concerned about an end of existence event that may be caused by the Large Hadron Collider and there is talk when the LHC is turned on in July 2008, that a super-collision here, a super-collision there and *bam*, no more Universe. This would doubtless be an event from which most investors have not adequately protected their portfolios. That is why Long or Short is now offering LHC End of the Universe Puts. It’s a simple put option wherein the buyer retains the write to sell the Universe at a strike price of “Existing”. Based on our Black-Holes model used to value all “end of the world” options, the July 2008 vintage options are currently priced at $20.....

Well, the universe did not end, the market for the puts went to "By appointment only" and folks forgot about the odd little vehicle. However.... 

From MarketWatch:

Donald Trump is most likely to win re-election, but no matter the outcome of the presidential race, the U.S. could find itself broken into more than one country as unrest and acrimony grip the electorate, noted investor Jeffrey Gundlach said Monday.

Speaking on a webcast hosted by Rosenberg Research with its founder, David Rosenberg, Gundlach said he had “far less conviction” about Trump than in 2016, when he was one of a handful of people taking Trump’s long-shot candidacy seriously.

Gundlach has previously shared his views on the election, but in conversation with Rosenberg, a noted economist, he also weighed in on the prospects for the economy if Washington isn’t able to deliver a big enough fiscal aid package. “The economy is already in tatters, but it would be a disaster,” he said. “When you use such blunt instruments, like the money spray, the effects for the economy are quite uneven. There’s a big tremor but then there are aftershocks.”

Perhaps more ominous than any outcome he expects over the next year or so, however, is Gundlach’s slightly longer-term outlook.

Could America lose faith with democracy? “People are strongly committed to the concept of democracy and yet China has had massive growth and way better infrastructure under totalitarianism,” Gundlach mused. “What are we doing when our outcomes are inferior? Is it possible we could change in that regard? Yes, it is possible. I think we are going to see substantial changes in the next six years.” That might even include the U.S. breaking into more than one country, he said.....


By the bye, although we did not catch the exact recent bottom on the 10-year yield,  0.5040% on August 6th, (we really started beating the drum that rates were going higher at 0.56%) the 10-year's yield—proxied by the CBOE's TNX—has backed up to 0.891%:


One last comment from Mr. Gundlach: