Lost in the shuffle last week, was Mr. Rollert's observation and admonishment in reference to the Chair's query, regarding the drift.

"Look at the index performance without buybacks and/or M&A. It's vastly different.

Performance was enhanced by the ability and interest by banks in taking good companies private. The final cycle of the bull will show a very different pattern due to very different balance sheets"

It brought to mind the following quote from David Mamet's "Three Uses of the Knife". The subject of drama is The Lie. At the end of the drama THE TRUTH — which has been overlooked, disregarded, scorned, and denied — prevails. And that is how we know the Drama is done.

After last week, I would imagine that the truth is no longer ridiculed, nor violently opposed, but has now been accepted as self-evident. However, the drama is far from done, and the market still finds itself knee-deep in its own self-created shit.

We were told that the market was driven by a strong economy and solid corporate earnings, which were largely made possible by the President's tax cuts and de-regulation. But in fact, 2019's return was built on a foundation of Fed easing and stock buybacks. To wit, as soon as they were removed the market's foundation began to crack. The coronavirus was simply the stone cutter's last blow.

Those very tax cuts which were attributed to driving corporate growth, actually enabled corporations to buy back more stock. However, the majority of corporate buybacks were funded by issuing corporate bonds. And, corporations continued to execute buybacks right up to the highs of the move.

Taking on debt to finance buybacks while there weren't any revenue-generating investments, has irreparably harmed corporate balance sheets, as Jeff stated. They are now tasked with paying down that debt in an environment with (understatement-of-the-decade) greatly reduced liquidity.

I'm not trying to cast aspersions on the drift, but the truth is prevailing. The events leading up to the crash itself, are emblematic of a disregard for the long-term effects of thoughtless actions. And, sometime in the future, the same will probably be said about any remedies proffered in the near term.

We may bounce, and bounce hard, but the drama is far from over.


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