Covid-19 Market Update #7

Today’s email music Villms – Anything
https://www.youtube.com/watch?v=8DBFS1Z0-Mw

The lyrics are perfect for what is going on in the stock market.

I don’t wanna lie, to you
But you see it in my eyes
So we’ll pretend like there’s nothing wrong
But we both know that we’re so far gone
No I don’t like my heart exposed
But I can’t fight the way it goes
When you’re underneath my clothes
There’s nothing I can hide, nothing I can hide

Reviewing yesterdays market activity is an exercise in insanity. For those at or near retirement; I don’t know how you participate in the this market. Diversification does not exist in the capital – stock – markets.

Get some real estate.

I got a feeling I, I can’t define
Close to drownin‘, but I got tonight
Just need a moment to pretend it’s love
Cause I’ll say anything for you

Case in point I was reading a hilarious article from Zerohedge about VIX. Side note: if I were to day trade – it would be VIX. The formula for VIX can be found above; and for the math nerds out there it is incredibly elegant while being horribly flawed.

Compare VIX to Black-Scholes, which they won a Noble Prize for, and VaR and I swear all these financial math gurus stole everything from junior level thermodynamics. Don’t get me started on the Markowitz “bullet” as we enter ZIRP/NIRP in finding the Efficient Frontier in Modern Portfolio Theory… it is bananas and the models just flat out do not work….but I digress.

Right now, right now
Ah-oooh, I’ll say anything, anything
Right now, right now
Hey, anything
Anything for you

“Someone Big Was Utterly Blown The F**k Out”: Here’s The Reason Behind Today’s Unprecedented VIX Move

That is the best title of an article for 2020. Someone, BIG, got blown out of the market. So what happened.

“Market – forced them to keep buying the VIX as the VIX soared, in the process ending the VIX even higher, only to get margin called out of their position by their clearing firm, puking their entire position while liquidating anything they could, and unleashing the VIX selling avalanche and the 700 Dow point rally.”

Let me explain this in language that makes sense. You are driving home to Katy, with your new F150 Raptor you have to be home by six but left the downtown happy hour at 5:30. So you decide to bolt a nuclear missile in the bed of your truck in the hope that you can make it home in time – while not killing half the city in the process. Gamma-traps are a NUKE in the market.

You’re stuck inside my head, for now
I’m keeping it unsaid
And I’ll pretend like we’ll be alright
Like the fantasy in my mind
No I don’t like my heart exposed
But I can’t fight the way it goes
When you’re underneath my clothes
There’s nothing I can hide, nothing I can hide

“Bull Market Has Reversed” – NYC Multifamily Building Sales Plunge

Class A Multifamily is about to get smoked. “sales plunged from 1,225 in 2018 to 828 in 2019, a 32% drop. Total deal flow volume in terms of dollar amount fell 41%.” I have three multifamily class AA, who knew such a thing, in my inbox. I’ve been negotiating them for over 6 months. We’re down to $220MM – not sure I want them at $175MM – this asset class just does not work longterm. Let someone else take the loss and call me when they have 10-15yrs of deferred maintenance on them.

I got a feeling I, I can’t define
Close to drownin‘, but I got tonight
Just need a moment to pretend it’s love

the market rises on the stairs, but descends in the elevator.” The rate of rise and ascension is what most investors do not understand. Slow steady rise, but a collapse of downside that erases years of gains.

Cause I’ll say anything for you

“unless the Fed manages to hammer the VIX as it always has in the past decade, and puts the “coronapanic” genie back in its bottle, the credit bubble – the biggest ever – is about to burst and wipe out the global economy in the process.”

That’s is where this all goes. Expect another 75-100bps reduction before June. The cost of capital is going to the basement.

If you think real estate is expensive now, just wait – JB

SO…...here is what are we doing during Lockdown 2020.

Lots of real estate training; most of it free. We are going to be hosting a ton of free webinars and “lives” throughout the quarantine.

There are a few ways to enjoy our content:

Join the – Mr Texas Real Estate Facebook group

Join our email list

Register for one of our online workshops

Subscribe – to the Texas Real Estate Radio Network YouTube channel

See you online!

Jason Bible
Mr Texas Real Estate