Jeff Gundlach isn't the only one who thinks the market's April rally has been way overdone.
During an interview with Squawk Box Tuesday morning, Hyman Capital Management Founder Kyle Bass said he was surprised by the market's rebound in April, particularly since official data have shown that virtually all of the jobs created over the last ten years and then some have been destroyed.
While many retail and food-service workers might be hired back once their employers reopen, there's still no guarantee that many of these employers will reopen.
No matter how you slice it, "economic and financial realities" of the post-corona world are too uncertain to justify anything close to the ~30% rally we've seen this month. Whatever happens with the unemployment rate, it's not going to just bounce back right away.
“We’re going to have a very long grind here, trying to get these people back to work," Bass said, referring to service-economy workers who represent the bulk of those who have lost their jobs.
"I don’t believe people are going to immediately go back to where we once were, I think it’s going to take a lot of time,” Bass said of the service economy.
Furthermore, once we reopen, there's plenty of reason to suspect that businesses won't bounce back, and won't have the wherewithal to re-hire staff, especially if public officials adhere to overly draconian social distancing requirements, even as new surveillance data suggests that as many as 40% of the population in the Bronx, part of one of the biggest hot spots in the country, might already be infected.
As Bass pointed out, the economic model for most shops and restaurants simply won't work if they can only have half the maximum number of customers at a time.
"Not at 25% or 50%," Bass said, bringing up something that economists and talking heads have bizarrely glossed over: The American economy simply can't sustain social distancing for more than a few months.
And as companies like the Los Angeles Lakers continue to gobble up much of the funding that was supposed to go to small businesses, much of the stimulus - both fiscal and monetary - might simply flow straight to the top of the pyramid, leaving everybody else worse off than they were before.
"In a perfect world maybe we’ll be back to 7-10% unemployment," Bass said.
Bass bet big against the yuan and other southeast Asian currencies (including the Hong Kong dollar, which remains pegged to the dollar despite all the tumult that unfolded in the city last year) last year, a trade that has probably paid off nicely for him as the dollar has continued to strengthen. If it wasn't for the Fed "kitchen sinking" its asset purchases, Bass suspects the market would be in a much different place.
“The Fed has come in and done everything that it possibly could and then some,” he added. “The Fed’s buying everything but equities."
And if things don't improve quickly enough, as Bass suspects, pretty soon, the Fed might start buying equities, too - even if Secretary Mnuchin thinks that's "highly unlikely."