Coronavirus

[jobyts]

Apparently, the video is popularized by the exiled Chinese billionaire and the far right groups. The video looks genuine, unless they staged the whole thing, who knows.

 

https://www.politifact.com/factchecks/2020/feb/26/facebook-posts/chinese-billionaire-floats-conspiracy-about-corona/

 

 

[Sharad]

I think many people are looking at rates of infection and morbidity rates, which won't give us the true picture of the impact to the global economy and to the stock market, which is (crudely) for which many of us are looking for answers.

 

My take:

 

The virus likely has a much lower morbidity rate than the 2% in Wuhan, but the cases were never identified and reported correctly, and they sent people home or people avoided leaving home to deal with it themselves (h/t muscleman for some insight as well). Anyone at the beginning of the crisis that died of pneumonia like symptoms probably was ruled as a death from other sources. Regardless the morbidity rate at the beginning was skewed by the hospital cases, similar to the morbidity rates for people hospitalized for the flu in the US (8-12%, per CDC).

 

This spiked up morbidity rate clearly spooked the world, and the unknown nature of this virus is enough to scare everyone, so everyone freaked..but the market remained sanguine for two reasons...one, the Fed is in the midst of a massive asset buying spree, the repo markets are wide open, and liquidity has pushed markets into a blow-off top since Powell declared, for all intents and purposes, that the Fed has the markets' back during his Fed press conference in September. China also clamped down hard on the virus, trying to contain it, and, through surprising transparency, shared a lot of data with counterparts in the US, Canada, Europe and Australia, where the first full mapping of the virus' RNA was completed within a few days of receiving the virus sample itself.

 

While the markets drank the Fed Kool Aid, the tanker and dry bulk markets showed a different story. Rates plummeted, even in the face of IMO 2020 standards for tankers, which basically docked a large percentage of "dirty" tankers, to be upgraded with scrubbers that would reduce sulfur (?) emissions during their travels with petroleum products in a bid for global trade. This should have been the perfect recipe for a massive breakout from a 12 year bear market for rates, and the stocks soared from September to January in anticipation of it. Coronavirus clamped that down. China wasn't receiving their deliveries. The country shut down, stockpiles have built up, and demand for petroleum products declined 25% plus.

 

The market factored all these things in, and banked on a huge stimulus in China to keep the party going. South Korea dented those prospects, but Iran, and especially Italy, broke the whole thesis down. The moment a bunch of villages near Milan became a prime cluster outside China, all bets of containment were off. In the meantime, we have seen the market reach the apex of a massive blow-off top after a nearly 11 year bull market from the March 6, 2009 bottom. The last 4-5 years have resulted in P/E valuations doubling (or more) for the biggest companies in the S&P 500 (https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-ratio), the massive move to index investing (https://www.cnbc.com/2019/03/19/passive-investing-now-controls-nearly-half-the-us-stock-market.html), and the retail investor returning to the market over the last couple of years (see the increased interest in Bitcoin, Tesla, r/wsb, etc.).

 

We were likely due for a large market decline when Powell pulled the plug on asset purchses (he declared mid Q2 2020, so let's say April), and that would have likely pushed us down 20%, like the Fed pivot of 2018. Once you factor in the coronavirus, how much further could we fall? Not only should we see the "p" of the p/e ratio fall, but we will also see the "e" fall too (see MSFT today).

 

Bottom line: IMHO, this is only the beginning. I was holding out hope, but that Italian outbreak changed it all. The Greek fashion designer who contracted it during her time at Milan Fashion Week means that cases will likely pop up everywhere, especially larger markets.

 

Anyways, I think people shouldn't be evaluating this from the morbidity rates, etc (I am guilty of doing this when we were transfixed by what was happening in China, and far from everywhere else). They should evaluate the destruction of capital flows and trade, and how much wealth that destroys. The destruction of wealth could mean a steeper decline. But the banks are better capitalized, so the upswing should be equally dramatic, whenever that will be. This is going to get much more ugly (consider if the Olympics are cancelled), and I think S&P 2,500 could be in the cards...but I could also see a massive upswing in the summer, when coordinated global stimulus pushes things higher, faster. We shouldn't be comparing this crisis to SARS or any other modern pandemic threat. This should be compared to the 1918 influenza outbreak and the subsequent 1919-1921 market crash and depression.

 

 

If you are looking for investments, consider NYSE:NVO (their products are probably the least sensitive to the virus) and Nasdaq:GRVY (Gravity Co Ltd, as South Korean gaming company: SK gaming culture is amongst the most profitable in the world and what the hell else are they going to do there now?).

 

Sorry for the long response. I was hoping it would help people see the broader picture of the market's moves ahead of the coronavirus, and the moves within the "guts" of the economy at the same time.

[Guest cherzeca]

as I write this 2/27 early morning futures on S/P are down such that we may hit during the trading day a 10% correction from the recent high.  I am edging in now buying this dip.  I do this from a position of strength, cash over 50%, but I think anyone who has a horizon that looks out 2-5 years (and believes we wont go into a socialist cesspool) might want to buy into this dip as well if you have dry tinder.  likely will give fed cover to drop rates as well.  just my two cents. 

[Liberty]

The cases that make it to the hospital or are diagnosed clinically are the worst ones. So 2% of those isn't 2% of ALL cases. A lot of people get a mild form, stay home with a fever, and recover. Not all those will get diagnosed and counted.

[Castanza]

Apparently, the video is popularized by the exiled Chinese billionaire and the far right groups. The video looks genuine, unless they staged the whole thing, who knows.

 

https://www.politifact.com/factchecks/2020/feb/26/facebook-posts/chinese-billionaire-floats-conspiracy-about-corona/

 

It's certainly not out of the realm of possibility. I mean a brief look at China's past will show many sick things done to their own populations. But conspiracy theories are often a bunch of conjecture and convenient motives, outcomes, and boogiemen being strung together.

 

But I will say this......those Hong Kong protests have basically halted.

[Gregmal]

as I write this 2/27 early morning futures on S/P are down such that we may hit during the trading day a 10% correction from the recent high.  I am edging in now buying this dip.  I do this from a position of strength, cash over 50%, but I think anyone who has a horizon that looks out 2-5 years (and believes we wont go into a socialist cesspool) might want to buy into this dip as well if you have dry tinder.  likely will give fed cover to drop rates as well.  just my two cents.

 

On this note, I found the following pretty funny and a good summary of most folks

 

 

Everyone is always "waiting to buy on a pullback" but quite frequently when they get it, sit on their hands rife with paralysis.

 

Some stuff is currently absurdly cheap. A lot of stuff was already a bit out of hand and probably becomes attractive again with the next 5-10% off the SPY.

 

 

[zippy1]

Apparently, the video is popularized by the exiled Chinese billionaire and the far right groups. The video looks genuine, unless they staged the whole thing, who knows.

 

https://www.politifact.com/factchecks/2020/feb/26/facebook-posts/chinese-billionaire-floats-conspiracy-about-corona/

It is a bit funny that the so called "fact checker" does not know the last name (Surname) of this Chinese billionaire is Guo instead of Wengui, which is his given name.  ::)

[BG2008]

as I write this 2/27 early morning futures on S/P are down such that we may hit during the trading day a 10% correction from the recent high.  I am edging in now buying this dip.  I do this from a position of strength, cash over 50%, but I think anyone who has a horizon that looks out 2-5 years (and believes we wont go into a socialist cesspool) might want to buy into this dip as well if you have dry tinder.  likely will give fed cover to drop rates as well.  just my two cents.

 

On this note, I found the following pretty funny and a good summary of most folks

 

 

Everyone is always "waiting to buy on a pullback" but quite frequently when they get it, sit on their hands rife with paralysis.

 

Some stuff is currently absurdly cheap. A lot of stuff was already a bit out of hand and probably becomes attractive again with the next 5-10% off the SPY.

 

Guys,

 

I value this community a great deal as I particularly thank this thread for heightening my awareness of the potential impact from the Corona Virus.  It is interesting to note that Microsoft, PayPal, and Mastercard have all issued revenue warnings.  These are "rails" of the economy.  Particularly Mastercard as it is likely a leading indicator of future spending, be it purchases, travel, hotel rooms etc.  So We are getting a glimp of the Q1 earnings.  I feel that whatever number that comes out of China will likely be altered.  Whatever the US multinationals report will actually be the real numbers.  Q1 is likely going to be a bloodbath. 

 

I started buying a lot of puts in Mid Jan (thanks to this thread) and I look like an idiot for about a month.  These SPY, RACE, PLD, etc puts are allowing me to become more greedy.  So, I don't think this is buy another dip.  The reaction to an outbreak is to shut everything down.  This will likely hit the GDP pretty hard.  Just my crappy opinion. 

 

[Gregmal]

as I write this 2/27 early morning futures on S/P are down such that we may hit during the trading day a 10% correction from the recent high.  I am edging in now buying this dip.  I do this from a position of strength, cash over 50%, but I think anyone who has a horizon that looks out 2-5 years (and believes we wont go into a socialist cesspool) might want to buy into this dip as well if you have dry tinder.  likely will give fed cover to drop rates as well.  just my two cents.

 

On this note, I found the following pretty funny and a good summary of most folks

 

 

Everyone is always "waiting to buy on a pullback" but quite frequently when they get it, sit on their hands rife with paralysis.

 

Some stuff is currently absurdly cheap. A lot of stuff was already a bit out of hand and probably becomes attractive again with the next 5-10% off the SPY.

 

Guys,

 

I value this community a great deal as I particularly thank this thread for heightening my awareness of the potential impact from the Corona Virus.  It is interesting to note that Microsoft, PayPal, and Mastercard have all issued revenue warnings.  These are "rails" of the economy.  Particularly Mastercard as it is likely a leading indicator of future spending, be it purchases, travel, hotel rooms etc.  So We are getting a glimp of the Q1 earnings.  I feel that whatever number that comes out of China will likely be altered.  Whatever the US multinationals report will actually be the real numbers.  Q1 is likely going to be a bloodbath. 

 

I started buying a lot of puts in Mid Jan (thanks to this thread) and I look like an idiot for about a month.  These SPY, RACE, PLD, etc puts are allowing me to become more greedy.  So, I don't think this is buy another dip.  The reaction to an outbreak is to shut everything down.  This will likely hit the GDP pretty hard.  Just my crappy opinion.

 

I dont disagree with your thoughts. I was actually a bit surprised by the feedback Ive been getting from people on the ground in the NY/CA areas. But at the same time, any way you cut this, its a temporary issue. If its not, well, you better have gold and guns and nothing else will matter. So if its temporary, what the appropriate price/discount to apply for a couple quarters/maybe a year of depressed earning from great businesses?

 

Im more than pleased with the opportunities as my negativity(much like yours in January) was starting to make me question myself. Only real mistake was probably buying a little to much BRK, but hopefully Warren is compensating me for that. Otherwise its a simple decision, gold/guns, or great businesses xx% off their highs? Lock and load.

[elliott]

I think this virus will certainly have a noticeable economic impact, although I tend to think it will only be temporal. That said, buy the dip? Me, I am not into that game - for the last 2 years, I have only bought 1 stock per year - but, even if I were, I would think twice in the case of indices and the like. The economic impact may be short lived and minor, but who says hyped stocks will reflate to the same craze multiples?

[ERICOPOLY]

BAC has lost $49B in market cap over the past 5 days.  I doubt their discounted earnings come in $49B lighter due to a virus.

 

How about just calling this a selloff with Coronavirus being the fuse?

[BG2008]

BAC has lost $49B in market cap over the past 5 days.  I doubt their earnings come in $49B lighter due to a virus.

 

How about just calling this a selloff with Coronavirus being the fuse?

 

Eric,

 

You always have a good way of putting things into the right perspective.  Market has been nutz for sometime. I can't count how many value investors are saying "well interest rate is 2%, so 3% FCF yield on a great business is cheap in the long"  It's probably true over 10 years for the right companies.  But it seems to be applied to every company.  I think Coronavirus is the fuse that lit this market on fire.  The Wallstreetbets people was kind of the top tick. 

[Gamecock-YT]

BAC has lost $49B in market cap over the past 5 days.  I doubt their earnings come in $49B lighter due to a virus.

 

How about just calling this a selloff with Coronavirus being the fuse?

 

I think Coronavirus is the fuse that lit this market on fire. 

 

Especially how levered the corporates are. Weak earnings, tightening standards, unable to rollover debts. Bankruptcies. Could be the Minsky Moment.

[Liberty]

Probably already posted, but if not:

 

https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html

[Guest]

BAC has lost $49B in market cap over the past 5 days.  I doubt their earnings come in $49B lighter due to a virus.

 

How about just calling this a selloff with Coronavirus being the fuse?

 

I think Coronavirus is the fuse that lit this market on fire. 

 

Especially how levered the corporates are. Weak earnings, tightening standards, unable to rollover debts. Bankruptcies. Could be the Minsky Moment.

 

I don't know what the market will do but this creating a big liquidity event is the big issue here. I would expect the Fed to announce further easing but we'll see.

[Liberty]

 

"WASHINGTON — The White House moved on Thursday to tighten control of coronavirus messaging by government health officials and scientists, directing them to clear all statements and public appearance with the office of Vice President Mike Pence .."

 

Presidents Reagan, Bush, Clinton, Bush and Obama trusted Tony Fauci to be their top adviser on infectious disease, and the nation's most trusted communicator to the public.  If Trump is changing that, it is a threat to public health and safety.

 

[ERICOPOLY]

 

"WASHINGTON — The White House moved on Thursday to tighten control of coronavirus messaging by government health officials and scientists, directing them to clear all statements and public appearance with the office of Vice President Mike Pence .."

 

Presidents Reagan, Bush, Clinton, Bush and Obama trusted Tony Fauci to be their top adviser on infectious disease, and the nation's most trusted communicator to the public.  If Trump is changing that, it is a threat to public health and safety.

 

 

 

Postscript: During a panic-stricken breakdown over the Ebola threat in 2014, Trump lashed out at then-President Barack Obama for appointing Ron Klain to oversee the federal response. The Republican argued at the time via Twitter, "Obama just appointed an Ebola Czar with zero experience in the medical area and zero experience in infectious disease control. A TOTAL JOKE!"

 

Five-and-a-half years later, we know two things. First, Klain was the right person for the job and he handled the emergency perfectly. Second, Trump just appointed a coronavirus czar who has "zero experience in the medical area and zero experience in infectious disease control."

 

https://www.msnbc.com/rachel-maddow-show/why-pence-unfortunate-choice-oversee-coronavirus-response-n1144021

[writser]

I'm sure Mike Pence will pray the virus away.

[Jurgis]

I'm sure Mike Pence will pray the virus away.

 

The decision to put Mr. Pence in charge was made on Wednesday after the president told some people that the vice president didn’t “have anything else to do,” according to people familiar with the president’s comments.

[Liberty]

I'm sure Mike Pence will pray the virus away.

 

Yeah, guy who said around 2000 that smoking doesn't kill, and let an AIDS situation get out of hand in his state, likely because of his anti-science views... Just the guy to put in charge.

[mcliu]

Uh oh. Time to move to politics?  ::)

[Guest]

Uh oh. Time to move to politics?  ::)

 

Yes, their hate is starting to show. ;)

[Liberty]

Uh oh. Time to move to politics?  ::)

 

Yes, their hate is starting to show. ;)

 

Can't point out that the coronavirus czar is incompetent in the coronavirus thread because it's inconvenient to your politics? You're the one looking at this through a political lens.

We're looking at it through a scientific one.

[Casey]

I read it as Trump putting someone on virus who he doesnt mind "taking the fall" for it, because we don't seem particularly well prepared.

[Guest]

Uh oh. Time to move to politics?  ::)

 

Yes, their hate is starting to show. ;)

 

Can't point out that the coronavirus czar is incompetent in the coronavirus thread because it's inconvenient to your politics? You're the one looking at this through a political lens.

We're looking at it through a scientific one.

 

I didn't vote nor do i like Trump. But, you have a lot of anti-Trump posts.