Whitney Tilson’s email to investors discussing the three reasons the stock market might crash in the next year; ‘Starting a Fire’: U.S. and China Enter Dangerous Territory Over Taiwan; Moderna keeps COVID vaccine out of reach of poor.
Q3 2021 hedge fund letters, conferences and more
Three Reasons The Market Might Crash In The Next Year
1) If you were to tell me that the stock market will crash by 25% or more over the next year and asked me to identify the possible reasons for it, here are my top three:
a) Rising inflation and/or debt levels across the world will roil debt markets and spook equity investors,
b) A new COVID-19 variant will emerge that is resistant to the current vaccines, leading to a surge in deaths and a return to lockdowns, or
c) We will get into a shooting war with China – likely over Taiwan.
(Other possibilities not in my top three include an economic crash in China, a collapse of the cryptocurrency sector (whose market cap now exceeds $2.3 trillion), and a terrorist using a nuclear or biological weapon in a major city.)
To be clear, I don’t think a market crash due to these – or any other – scenarios is likely.
In fact, I’d estimate that there’s only a 10% chance that the market declines more than 25% from today’s level at any point over the next 12 months, and there’s a less than 3% chance of a 50% decline.
But the odds aren’t zero either…
U.S. And China Enter Dangerous Territory Over Taiwan
2) The reason I’ve been thinking about these doomsday scenarios is this in-depth article published over the weekend about the rising tensions with China about Taiwan: ‘Starting a Fire’: U.S. and China Enter Dangerous Territory Over Taiwan. Excerpt:
As such confrontations intensify, the balance of power around Taiwan is fundamentally shifting, pushing a decades-long impasse over its future into a dangerous new phase.
After holding out against unification demands from China’s communist rulers for more than 70 years, Taiwan is now at the heart of the deepening discord between China and the United States. The island’s fate has the potential to reshape the regional order and even to ignite a military conflagration – intentional or not.
Moderna Keeps COVID Vaccine Out Of Reach Of Poor
3) What a total disgrace! Moderna, Racing for Profits, Keeps COVID Vaccine Out of Reach of Poor. Excerpt:
Moderna (MRNA), whose coronavirus vaccine appears to be the world’s best defense against COVID-19, has been supplying its shots almost exclusively to wealthy nations, keeping poorer countries waiting and earning billions in profit.
After developing a breakthrough vaccine with the financial and scientific support of the U.S. government, Moderna has shipped a greater share of its doses to wealthy countries than any other vaccine manufacturer, according to Airfinity, a data firm that tracks vaccine shipments.
I’m all in favor of Moderna Inc (NASDAQ:MRNA) making a ton of money for rapidly developing its amazing vaccine (which most of my family and I received). But this needs to be balanced with the fact that: a) Moderna developed its “breakthrough vaccine with the financial and scientific support of the U.S. government”… and b) we’re experiencing a global pandemic that has led to nearly 5 million deaths – and is still growing by more than 5,000 deaths per day (these are just the reported numbers – the actual numbers are far higher).
Pfizer, for example, didn’t take any government money to develop its vaccine, yet has done far more to make it available in low-income countries.
Best regards,
Whitney
P.S. I welcome your feedback at [email protected].
