“Above all, we have actively & repeatedly encouraged institutions to use their capital buffers for their primary purpose: to support safe & sound lending throughout the credit cycle” - Fed Governor Quarles

***Editor’s note: the above quote is worth considering, in the context of bank lending. Will reg-cap relief be used, or abused? We expect Congress to be uniformly at odds w/ “safe & sound”. And understandably so, as they aren’t properly incentivized.***

MARKET NARRATIVES.

Paul Singer, David Tepper, & now Stan Druckenmiller have expressed concerns that there’s more risk in asset markets than prices imply.

While all concede that QE / money-printing has played out as expected (when QE is on, equities rip), the smart-money consensus seems to be that the Fed providing liquidity doesn’t solve for the coming insolvencies.

“The risk-reward for equity is maybe as bad as I’ve seen it in my career” - Druckenmiller, at the ECNY

If fear shows up & asset prices drop, then it’ll be apparent in fund flows data.

On that note, let’s check in on weekly flows:

• $36BN into cash

• $16BN into bonds

• $2BN into gold

• $6BN out of equities

While those aren’t dramatic amounts, they do fit the concerning / risk-off narrative.

Looking a little closer - at ETF flows - emotions are running high:

Precious metals (gold) - there’s your fear.

And energy (oil) - after record price declines - there’s your greed.

“The time to buy is when there's blood in the streets” - Baron Rothschild

The long-gold trade has worked.

The oil trade… that one’s depended a little more on timing -

CRUDE.

The OPEC MOMR & US EIA STEO reports came out earlier this week.

While the updates look negative relative to their prior editions, when compared to more recent / 3rd-party estimates, they aren’t that bad.

Demand seems to be recovering.

Albeit from a steep decline.

Both organizations forecast Q2 as being the peak of demand destruction -

• So far as a 2nd wave of the virus is averted, we’d agree

A recent, strange silver lining - for crude products - has been a fear of public transport.

And while we expect more commuters - on a relative basis - to drive…

…more still, will Zoom -

OTHER NEWS.

• Stan Druckenmiller’s interview at the Econ Club of NYC

• Graham Duncan’s latest blog post is worth the time

• Bloomberg found the Cushing Pig: BB Energy

• CS on Dollar Swap Lines / Money Markets

That’s it for today - the Bundesliga is back: Dortmund / Schalke kick-off the return of team sports - catch y’all Tuesday -