Coronavirus

[ERICOPOLY]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

[Viking]

The Corona virus outbreak will very likely cause a deep recession in Europe, Asia and quite possibly in NA. Depending on how well it is handled, it could well influence the outcome of the election.

 

I mentioned this in the “what did you sell today thread”, but I made a market timing call and sold a substantial part of my equity holdings during short lived bounce today. I did not do so during the 2018 fall/winter downturn, but the current situation  is different (I think) and at vastly higher equity valuations, I think we are very vulnerable to further correction and possibly a liquidity event.

 

I sincerely hope I am wrong.

 

Wow. Big moves :-) The light bulb for me went off on Monday. Tuesday and Wed I was mostly selling; raised cash position to 80%. Was a big buyer of BRK today at the close. This will take some time to play out. I need to be patient on the buy side...

[LC]

The Corona virus outbreak will very likely cause a deep recession in Europe, Asia and quite possibly in NA. Depending on how well it is handled, it could well influence the outcome of the election.

 

I mentioned this in the “what did you sell today thread”, but I made a market timing call and sold a substantial part of my equity holdings during short lived bounce today. I did not do so during the 2018 fall/winter downturn, but the current situation  is different (I think) and at vastly higher equity valuations, I think we are very vulnerable to further correction and possibly a liquidity event.

 

I sincerely hope I am wrong.

 

I too hope you are wrong.

 

I will say, on the other side of the argument: COVID 19 does not change the underlying cause of high asset prices: very low interest rates globally. It may hurt the productivity side of the equation - low activity, low top and bottom lines. But (if things work out for human society - an optimistic view) this is a temporary problem until normal activity resumes.

 

It has historically paid better to be on the optimistic side of human progress. The alternative is we hole up in bunkers with canned foods and burn worthless paper certificates for heat. I am hoping we somehow make it through this - globally.

[Castanza]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

 

Honestly I think you guys are overreacting. There isn’t a President past, present, nor future who wouldn’t have some type of media control. Out of fairness I agree that Pence (and Trump) probably are not the best to handle this situation. But who is? You’re dealing with the unknown and I trust Pence to punt to individuals who know what they’re doing. Donny isn’t going to take this back under his wing (until it’s almost solved and he’s looking for credit)  :P

 

Also you’re being a bit dishonest with what Pence said regarding tobacco.

 

https://www.snopes.com/fact-check/mike-pence-smoking/

 

Back to the corona virus....I think the key metric everyone wants to know is mortality rate...my guess is that’s driving the majority of the fear. Especially when you hear and see videos of “people being burned alive.” 

 

The truth probably lies somewhere in the middle. Worse than what China reported, but I’m personally doubtful of the bubonic plague hysteria. If it turns out to be as bad as some say, well I’ll be at the family cabin

[ERICOPOLY]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

 

Honestly I think you guys are overreacting. There isn’t a President past, present, nor future who wouldn’t have some type of media control. Out of fairness I agree that Pence (and Trump) probably are not the best to handle this situation. But who is? You’re dealing with the unknown and I trust Pence to punt to individuals who know what they’re doing. Donny isn’t going to take this back under his wing (until it’s almost solved and he’s looking for credit)  :P

 

Also you’re being a bit dishonest with what Pence said regarding tobacco.

 

https://www.snopes.com/fact-check/mike-pence-smoking/

 

Back to the corona virus....I think the key metric everyone wants to know is mortality rate...my guess is that’s driving the majority of the fear. Especially when you hear and see videos of “people being burned alive.” 

 

The truth probably lies somewhere in the middle. Worse than what China reported, but I’m personally doubtful of the bubonic plague hysteria. If it turns out to be as bad as some say, well I’ll be at the family cabin

 

The Snopes article says this:

Although Pence did state that “smoking doesn’t kill,” he buttressed his argument by saying that only a third of smokers died of smoking-related illnesses

 

Similarly, using the same reasoning, it could be said that Coronavirus doesn't kill because most people survive it. 

And handguns don't kill because 80% of people shot by handguns survive.

 

Anyways, Pence was appointed seemingly at the same time as Trump was contradicting the CDC on coronavirus.  So it's a bad omen IMO that an official filter has been put into place (The White House).  It appears to be a direct response to what the CDC said.

 

https://www.msnbc.com/msnbc/watch/trump-gives-incoherent-briefing-on-coronavirus-contradicts-cdc-79522373801

 

[Gregmal]

The Corona virus outbreak will very likely cause a deep recession in Europe, Asia and quite possibly in NA. Depending on how well it is handled, it could well influence the outcome of the election.

 

I mentioned this in the “what did you sell today thread”, but I made a market timing call and sold a substantial part of my equity holdings during short lived bounce today. I did not do so during the 2018 fall/winter downturn, but the current situation  is different (I think) and at vastly higher equity valuations, I think we are very vulnerable to further correction and possibly a liquidity event.

 

I sincerely hope I am wrong.

 

I too hope you are wrong.

 

I will say, on the other side of the argument: COVID 19 does not change the underlying cause of high asset prices: very low interest rates globally. It may hurt the productivity side of the equation - low activity, low top and bottom lines. But (if things work out for human society - an optimistic view) this is a temporary problem until normal activity resumes.

 

It has historically paid better to be on the optimistic side of human progress. The alternative is we hole up in bunkers with canned foods and burn worthless paper certificates for heat. I am hoping we somehow make it through this - globally.

 

That is essentially it. Who knows where it finds calm, but at the end of the day, theres a bunch of cheap stocks right now and theres a bunch of still expensive ones. "The market" as in the S&P is currently trading a few percent over 2018 levels. Obviously, "the market" consists of different things and some dont make a whole lot of sense. But the baby is getting thrown out with the bathwater. Income Realty for instance, which basically tracks with bonds, off 8% today. Its indiscriminate. Amazing how a week ago everyone(generally speaking) loved stocks, and today everyone hates them(although again, after basically 3, separate 1000 point drops in 4 days, its understandable).

 

But rates are low and only getting lower. People will recoup from the PTSD, and then be faced with a dilemma of where to put their money. As has been the case prior, with every market meltdown Ive ever witnessed, people find a way to figure shit out. And if not, the government fixes the problem with stimulus or backstops. Its incompatible that people will put their money in negative rate instruments or bonds yielding 1%, but they won't touch stocks with significantly greater profiles because the next 6-12 months might get disrupted before it goes back to normal.

 

Whatever the fear is, its more likely than not temporary, especially given the fact that China is already heading back to normal. I think the market just got out of hand the past few months, and as ERICOPOLY stated, just needed a reason to adjust. Good assets will remain such unless its armageddon. In which case there are definitely better doomsday kamikaze trades out there to make a fortune betting on failure. Its really just panic. As I wrote this Dow futures just dropped 200 points....

 

 

[Castanza]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

 

Honestly I think you guys are overreacting. There isn’t a President past, present, nor future who wouldn’t have some type of media control. Out of fairness I agree that Pence (and Trump) probably are not the best to handle this situation. But who is? You’re dealing with the unknown and I trust Pence to punt to individuals who know what they’re doing. Donny isn’t going to take this back under his wing (until it’s almost solved and he’s looking for credit)  :P

 

Also you’re being a bit dishonest with what Pence said regarding tobacco.

 

https://www.snopes.com/fact-check/mike-pence-smoking/

 

Back to the corona virus....I think the key metric everyone wants to know is mortality rate...my guess is that’s driving the majority of the fear. Especially when you hear and see videos of “people being burned alive.” 

 

The truth probably lies somewhere in the middle. Worse than what China reported, but I’m personally doubtful of the bubonic plague hysteria. If it turns out to be as bad as some say, well I’ll be at the family cabin

 

The Snopes article says this:

Although Pence did state that “smoking doesn’t kill,” he buttressed his argument by saying that only a third of smokers died of smoking-related illnesses

 

Similarly, using the same reasoning, it could be said that Coronavirus doesn't kill because most people survive it. 

And handguns don't kill because 80% of people shot by handguns survive.

 

Anyways, Pence was appointed seemingly at the same time as Trump was contradicting the CDC on coronavirus.  So it's a bad omen IMO that an official filter has been put into place (The White House).  It appears to be a direct response to what the CDC said.

 

https://www.msnbc.com/msnbc/watch/trump-gives-incoherent-briefing-on-coronavirus-contradicts-cdc-79522373801

Yes and it goes on to say Pence was using accurate statistics for the time. It also says that the article was not primarily for the discussion of whether smoking is or isn’t dangerous. Rather it was for the legality and the preservation of the freedom to choose to smoke.

 

All I’m saying regarding Pence and Trump is give it a week or so. They haven’t even done anything yet but apparently they are doing it wrong....putting the cart before the horse.

 

Regardless it looks like the market was wanting an excuse for a sell off. LC, Spek, and Greg hit the nail on the head in this an other threads.

[LC]

Don’t toot my horn - I’m down these last few days. Emotionally the objective is to stay even keeled.

 

There is a spectrum. On one side we have national pandemic and fear totally gripping the US markets, massive sell downs. On the other side, the CDC finds a vaccine in two weeks, and whatever market rebound that possibly entails.

 

The future is unknown but right now everyone is focused on the former and cannot even imagine the latter being a possibility. Guesstimate the odds of each and use that to discount your valuations and amount of dry powder to hold. That’s my goal at least, I’ll prob end up in the poor house voting for Bernie.

[Viking]

 

Back to the corona virus....I think the key metric everyone wants to know is mortality rate...my guess is that’s driving the majority of the fear. Especially when you hear and see videos of “people being burned alive.” 

 

The truth probably lies somewhere in the middle. Worse than what China reported, but I’m personally doubtful of the bubonic plague hysteria. If it turns out to be as bad as some say, well I’ll be at the family cabin

 

What I am also trying to understand is potential to slow / damage the economy. Not just the direct effects but also the secondary. What will GDP look like in Q1, Q2, Q3, Q4 and the year (which is what ultimately drives corporate earnings)? Will the virus take China, Europe and parts of Asia into a recession in 1H? Does the US and Canada also slip into a recession? If so, is it shallow?

 

How low do financial markets go in the near term? And how fast? At what point does the disruption in financial markets start to bleed into the larger economy? Does lending start to freeze up to 'out of favour' sectors (tourism/travel, oil and gas, companies with exposure to China supply chain, companies with too much debt etc)?

 

And what are the policy responses by the government? Do we get another injection of liquidity from the Fed? If so, will it help? What else can the government do to help?

 

Hopefully in a couple of weeks I can look at my post and ask "What on earth was he thinking!" :-)

 

PS: Citigroup, Goldman, JPMorgan Slash Earnings Estimates for Stocks

- https://finance.yahoo.com/news/citigroup-goldman-jpmorgan-slash-earnings-032720946.html

 

(Bloomberg) -- Citigroup Inc. now expects zero growth in global earnings for 2020 as the coronavirus throttles economic growth. And it warns even the new forecast may prove too optimistic. The bank’s call on earnings per share follows moves Thursday by Wall Street peers Goldman Sachs Group Inc. and JPMorgan Chase & Co. to cut profit estimates on U.S. companies. Goldman expects no earnings gain for American firms this year.

[Kaegi2011]

 

What I am also trying to understand is potential to slow / damage the economy. Not just the direct effects but also the secondary. What will GDP look like in Q1, Q2, Q3, Q4 and the year (which is what ultimately drives corporate earnings)? Will the virus take China, Europe and parts of Asia into a recession in 1H? Does the US and Canada also slip into a recession? If so, is it shallow?

 

How low do financial markets go in the near term? And how fast? At what point does the disruption in financial markets start to bleed into the larger economy? Does lending start to freeze up to 'out of favour' sectors (tourism/travel, oil and gas, companies with exposure to China supply chain, companies with too much debt etc)?

 

And what are the policy responses by the government? Do we get another injection of liquidity from the Fed? If so, will it help? What else can the government do to help?

 

 

All great questions that I think nobody can answer.  I think the wild card is that there's no way to really narrow down the possibilities of outcomes.  We can try, and maybe feel better about it, but inside a company what do you do when you can't travel to meet customers, or meet suppliers, or when consumers are potentially bunkered down?  Imagine being an airline, or a hotel, or a chemical manufacturer right now - how do you plan Q2?  Do you try to right size the cost structure or not?  Better yet, what are the ranges of outcomes that you need to plan for - down 80% to +10%?  In some ways the tourism industry has it easy in the sense that their products are temporal.  If you're in a manufacturing sector and potentially has to deal with the snap back in demand in Q2 or Q3 or Q4 - how will you do it?  Do you build inventory now in anticipation?  Do you cut the employees or keep them on despite really low utilization?  How do you coordinate along the supply chain?  I don't have a clue the cascading impacts. 

 

The one hope I think is on the horizon is that warmer weather is coming soon(ish).  THat should cut down dramatically on the disease, but even then it's not clear that it holds for Covid19 since it's new and we don't know its seasonal patterns yet.   

[Guest cherzeca]

 

What I am also trying to understand is potential to slow / damage the economy. Not just the direct effects but also the secondary. What will GDP look like in Q1, Q2, Q3, Q4 and the year (which is what ultimately drives corporate earnings)? Will the virus take China, Europe and parts of Asia into a recession in 1H? Does the US and Canada also slip into a recession? If so, is it shallow?

 

How low do financial markets go in the near term? And how fast? At what point does the disruption in financial markets start to bleed into the larger economy? Does lending start to freeze up to 'out of favour' sectors (tourism/travel, oil and gas, companies with exposure to China supply chain, companies with too much debt etc)?

 

And what are the policy responses by the government? Do we get another injection of liquidity from the Fed? If so, will it help? What else can the government do to help?

 

 

All great questions that I think nobody can answer.  I think the wild card is that there's no way to really narrow down the possibilities of outcomes.  We can try, and maybe feel better about it, but inside a company what do you do when you can't travel to meet customers, or meet suppliers, or when consumers are potentially bunkered down?  Imagine being an airline, or a hotel, or a chemical manufacturer right now - how do you plan Q2?  Do you try to right size the cost structure or not?  Better yet, what are the ranges of outcomes that you need to plan for - down 80% to +10%?  In some ways the tourism industry has it easy in the sense that their products are temporal.  If you're in a manufacturing sector and potentially has to deal with the snap back in demand in Q2 or Q3 or Q4 - how will you do it?  Do you build inventory now in anticipation?  Do you cut the employees or keep them on despite really low utilization?  How do you coordinate along the supply chain?  I don't have a clue the cascading impacts. 

 

The one hope I think is on the horizon is that warmer weather is coming soon(ish).  THat should cut down dramatically on the disease, but even then it's not clear that it holds for Covid19 since it's new and we don't know its seasonal patterns yet. 

 

you raise good planning questions for a business and correctly point out that viral infections proliferate in the winter and not the summer.  South America where it is summer has very few cases (Brazil has 1). Australia has cases but likely due to travel proximity to china.  and recent viral infections have both a geometric increase and decrease in rates over their course.  I tend to think a correction in the markets was needed and this was as good as any cause for the correction, but this will be a temporal matter that will run its course in a not more than 6 months, at which point there may be a rather quick snapback to build the inventories etc that you point out may very well run down in the short term.

 

edit:  since SARS and MERS, genomic analysis has come a long way and there may be a vaccine sooner than many people expect.  see eg https://www.jpost.com/HEALTH-SCIENCE/Israeli-scientists-In-three-weeks-we-will-have-coronavirus-vaccine-619101

[kab60]

Obviously the market as a whole isn't cheap due to a quick 10 pct. drop, but boy do I think people are overreacting. Obviously there will be shocks to supply chains, obviously there will be Companies that'll have a bad year. But how much does 1 year matter? Haven't seen anything to suggest this is anything but temporary. Now, I'm not saying things won't keep going down - who knows, probably lots of momentum guys and milennials that can't stomach the vol - but companies that were already beaten up suddenly seem very attractive if one has a longer term view. When this round of Chinese flu is over, rates will still be rock bottom.

 

As for feb 15, CDC estimates 29 mio. people in the US have been ill with influenza. 13 mio. have been to a physician. 280.000 have been hospitalized, and at least 16.000 have died: https://twitter.com/dr_rwt/status/1232959423989112832/photo/1

 

Very much seems like a case of high uncertainty, low risk.

 

[rolling]

Obviously the market as a whole isn't cheap due to a quick 10 pct. drop, but boy do I think people are overreacting. Obviously there will be shocks to supply chains, obviously there will be Companies that'll have a bad year. But how much does 1 year matter? Haven't seen anything to suggest this is anything but temporary. Now, I'm not saying things won't keep going down - who knows, probably lots of momentum guys and milennials that can't stomach the vol - but companies that were already beaten up suddenly seem very attractive if one has a longer term view. When this round of Chinese flu is over, rates will still be rock bottom.

 

As for feb 15, CDC estimates 29 mio. people in the US have been ill with influenza. 13 mio. have been to a physician. 280.000 have been hospitalized, and at least 16.000 have died: https://twitter.com/dr_rwt/status/1232959423989112832/photo/1

 

Very much seems like a case of high uncertainty, low risk.

about the influenza comparison: what if 2.900.000 to 5.000.000 had died, instead of those 16.000. Would the economic impact be the same? Or do you think many governments would need to shut down almost everything to try and delay this until a vaccine or treatment is available (both of which are available to influenza by the way)?

[kab60]

That would obviously be a different scenario, but it doesn't seem grounded in facts but fear. Anecdotally, but I talked with the CEO of Company with 60.000 people and ops in China yesterday. Said things are normalizing there. Just received this from a Chinese friend of mine that works as a consultant (excuse the poor English):

 

Situation in provinces out of China is getting better and better.  My home province Sichuan, nearly Hubei, has reported 538 cases cumulatively so far. It is a kindly of under control as only two four new cases reported in the past of 48hours. You got to know, there more than 100 million people in my province. What I said doesn't mean that you don't need to worry about it at all, but just don't be panic.

 

Sure, that's just anecdotes, but most else I read and hear supports those comments.

 

The experts I've seen comment on the subject also advice people to take a chill.

 

Obviously, the market is freaked, and I have no idea where the bottom is. But I hardly thing great businesses are impaired due to a Chinese flu. Actually, great Companies might come out stronger if they're able to secure work from those that are hit harder.

[rb]

Obviously the market as a whole isn't cheap due to a quick 10 pct. drop, but boy do I think people are overreacting. Obviously there will be shocks to supply chains, obviously there will be Companies that'll have a bad year. But how much does 1 year matter? Haven't seen anything to suggest this is anything but temporary. Now, I'm not saying things won't keep going down - who knows, probably lots of momentum guys and milennials that can't stomach the vol - but companies that were already beaten up suddenly seem very attractive if one has a longer term view. When this round of Chinese flu is over, rates will still be rock bottom.

 

As for feb 15, CDC estimates 29 mio. people in the US have been ill with influenza. 13 mio. have been to a physician. 280.000 have been hospitalized, and at least 16.000 have died: https://twitter.com/dr_rwt/status/1232959423989112832/photo/1

 

Very much seems like a case of high uncertainty, low risk.

The comparison to influenza is total bull. It's not about how many people the virus end killing. It's the economic impact. Simply put, the flu does not shut down supply chains. Unless you get a season of something resembling the 1918 Spanish Flu, the systems we have in place work very well in dealing with the flu and the economic disruption is basically non-existent despite a human cost that is surprisingly high in this day and age.

 

The coronavirus, despite having killed not that many people seems to have had a much, much greater economic impact. The profit warning from BUD yesterday was HUGE. A lot of companies are still mum of the effects. But if BUD is not an outlier then Q1 and Q2 earnings are gonna be a shitshow.

 

I also agree with what others are saying that things were pretty expensive and the economy not very robust so the virus may have just been the spark for a selloff. Look at what treasuries were doing for a while now while the stock market was whistling its way ever higher. You couldn't square the two. The bond market was flashing red and the stock market didn't have a care in the world. One of them had to be wrong. I'm just sorry that I didn't buy S&P puts when I was thinking about it a couple of weeks ago.

 

Additionally, from trading patterns it looks like we have indexing working in reverse now, taking things down indiscriminately. There's a line in Ford v Ferrari were the car starts going really fast and a guy goes like "This is where the uninitiated tend to soil themselves.". If you've never seen a 1000 point drop in your life it's really scary stuff when it happens. If you've never seen a 1000 point drop in your like and you see 3 in a week well... it's soiling time. This is stock market education.

[kab60]

Obviously the market as a whole isn't cheap due to a quick 10 pct. drop, but boy do I think people are overreacting. Obviously there will be shocks to supply chains, obviously there will be Companies that'll have a bad year. But how much does 1 year matter? Haven't seen anything to suggest this is anything but temporary. Now, I'm not saying things won't keep going down - who knows, probably lots of momentum guys and milennials that can't stomach the vol - but companies that were already beaten up suddenly seem very attractive if one has a longer term view. When this round of Chinese flu is over, rates will still be rock bottom.

 

As for feb 15, CDC estimates 29 mio. people in the US have been ill with influenza. 13 mio. have been to a physician. 280.000 have been hospitalized, and at least 16.000 have died: https://twitter.com/dr_rwt/status/1232959423989112832/photo/1

 

Very much seems like a case of high uncertainty, low risk.

The comparison to influenza is total bull. It's not about how many people the virus end killing. It's the economic impact. Simply put, the flu does not shut down supply chains. Unless you get a season of something resembling the 1918 Spanish Flu, the systems we have in place work very well in dealing with the flu and the economic disruption is basically non-existent despite a human cost that is surprisingly high in this day and age.

 

The coronavirus, despite having killed not that many people seems to have had a much, much greater economic impact. The profit warning from BUD yesterday was HUGE. A lot of companies are still mum of the effects. But if BUD is not an outlier then Q1 and Q2 earnings are gonna be a shitshow.

 

I also agree with what others are saying that things were pretty expensive and the economy not very robust so the virus may have just been the spark for a selloff. Look at what treasuries were doing for a while now while the stock market was whistling its way ever higher. You couldn't square the two. The bond market was flashing red and the stock market didn't have a care in the world. One of them had to be wrong. I'm just sorry that I didn't buy S&P puts when I was thinking about it a couple of weeks ago.

 

Additionally, from trading patterns it looks like we have indexing working in reverse now, taking things down indiscriminately. There's a line in Ford v Ferrari were the car starts going really fast and a guy goes like "This is where the uninitiated tend to soil themselves.". If you've never seen a 1000 point drop in your life it's really scary stuff when it happens. If you've never seen a 1000 point drop in your like and you see 3 in a week well... it's soiling time. This is stock market education.

Of course the economic impact is bigger, there's a high degree of uncertainty and fear, but it already seems to be getting somewhat under control in China. I haven't seen anything to suggest this is anything more than a temporary issue, which can obviously be bad if you're overlevered, dependent on capital markets etc, but I also think the baby is being thrown out with the bathwater.

 

Sure, the backdrop is probably ripe for some heavy, broadbased selling, but few here are probably buying indexes.

 

Again, anecdotal, but here is the latest comment from Rolls-Royce:

 

East said the coronavirus may hurt air-traffic growth in the near term but that long-term trends most affecting Rolls-Royce remain intact. Some suppliers in China did briefly close, but Rolls was able to rely on existing inventory, and those are now back up and running, he said.

[rb]

Sure, if the underlying fundamentals are ok then it's a temporary issue. Things suck for you for a couple of quarters then things get back to normal. Maybe there's even a great quarter as pent up demand gets released.

 

But, if the underlying economic fundamentals aren't as great as it's suggested by the bond market then this can become a more permanent issue. Say that things didn't look so rosy before. Now you get the shock and decide that maybe this is a good time to cut some capacity. You were thinking about it before and now you got the shove. Then it becomes permanent and a bigger economic issue that has nothing to do with the outbreak anymore.

[Guest]

https://www.forbes.com/2007/05/17/bernanke-subprime-speech-markets-equity-cx_er_0516markets02.html#2dcf4b5b10e1

 

 

https://www.politico.com/news/2020/02/25/kudlow-white-house-coronavirus-117402

 

Subprime was "contained."

 

Virus is "contained."

 

Highly levered companies, black swan events, history doesn't repeat but it does rhyme.

 

Like I said, the main cause of concern is not the virus itself. It's the knock on effects. The world is so highly connected now that I think fear can be (doesn't mean will) be a bigger factor than it has in the past. I'm mostly invested but do have some cash and Berkshire.

 

The past several years, it's been easy it is for poorly rated companies to issue debt, PIK and all of that (which I only have a very (very) basic understanding of). I'm not saying it's going to get super ugly but I can see how it could.

[watsa_is_a_randian_hero]

boy do I think people are overreacting

 

this is capturing the sentiment of most out there...but is missing the point

 

people were UNDER reacting in Jan.  this is not "just the flu".  there is no herd immunity from natural antibodies or vaccine, and its about 100x more lethal when you look at conditional probabilities.   

 

That said, the real point is, the market was extremely inflated, and now there are no buyers.  The market had kept chugging along under momentum, but all value players had stopped being net buyers long ago.  The only buyers were momentum.  And all it took was something to change the direction of the momentum, and there are literally no buyers now.  The market will continue falling until it reaches a level enticing rational buyers to step in, and there was previously a big gap between current market prices and rational prices. 

 

As of last Friday, the market was trading at top 2-3 percentile of dividend yields; now it has regressed to 51st percentile in 5 days.  Is it unreasonable to think it could fall to 90th percentile (implying another 10% down from here)?  97th percentile (28% down from here)?  With momentum traders now on the other side, this thing will keep falling until it is clear coronavirus is contained. 

[kab60]

Sure, if the underlying fundamentals are ok then it's a temporary issue. Things suck for you for a couple of quarters then things get back to normal. Maybe there's even a great quarter as pent up demand gets released.

 

But, if the underlying economic fundamentals aren't as great as it's suggested by the bond market then this can become a more permanent issue. Say that things didn't look so rosy before. Now you get the shock and decide that maybe this is a good time to cut some capacity. You were thinking about it before and now you got the shove. Then it becomes permanent and a bigger economic issue that has nothing to do with the outbreak anymore.

Sure, makes sense. Just have no Idea about the probability of that. And the many macro bear cases almost always seem rational. Dalio sad cash was trash the other day, no? I mean, he seems like a pompous douche, but I'd venture he makes more informed macro forecasts than I and he looks like a complete idiot now. Seems easier to identify good businesses selling for cheap that can weather most of what will get thrown at it. But sure, not much is cheap.

[Kaegi2011]

Right or wrong, people are panicking.  Try to find a face mask anywhere these days.  A lot of my friends, who are highly educated, are stockpiling stuff like there's no tomorrow (as if that's going to really save them if shit hits the fan...)  ;)

 

That's where the impact and the cascading impacts could be quite severe.  People forget that manufacturing was already close to (if not in) a minor recession prior to the virus.  A few delays along the chain that takes out the inventory buffer could be quite painful.  And if anyone comparing to China and saying that it'll (only) be a 3-4 week disruption is being delusional.  No self respecting, gun wielding 'Murican is going to not leave their home for weeks at a time if there's a real outbreak.  Let's get real.

 

Regardless if the market was overvalued or why, the market is going to be unpredictable because the outcomes are unpredictable.  IMHO anyone who thinks they know how this will play out with any level of certainty is not thinking through all the possibilities. 

 

Edit - Also, if you look at govvies yields it's pretty clear that it's not just the equities markets that is concerned. 

 

If you haven't refi'ed in a while, time to look it up!!

[Castanza]

If we never heard of the common flu and it suddenly came on the scene society would be reacting the same. The flu vaccine is only 50-60% effective for healthy individuals 18-64. So even if we get an effective vaccine for C-19 it's probably not going to be much better than that.

 

Unpopular opinion: And I don't want to make light of individuals deaths or sickness as it's a serious thing. But the sooner this thing hits countries like the US the quicker we understand the real numbers and the real risks.

 

 

[rkbabang]

The Snopes article says this:

Although Pence did state that “smoking doesn’t kill,” he buttressed his argument by saying that only a third of smokers died of smoking-related illnesses

 

I wonder if he'd play Russian Roulette with 2 rounds in the cylinder?  Only a 1/3rd chance of dying.

 

Anyway.  I'm sure he's the best guy for the job.

 

 

https://www.theguardian.com/us-news/2017/jul/08/mike-pence-touches-nasa-equipment-right-next-to-do-not-touch-sign

 

[Liberty]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

 

This is what a competent response looks like:

 

https://www.cnbc.com/2020/02/28/trump-chief-of-staff-mulvaney-suggests-people-ignore-coronavirus-news-to-calm-markets.html

 

White House chief of staff Mick Mulvaney on Friday suggested that Americans should ignore media reports about the coronavirus amid fears of the deadly disease spreading into the U.S.

 

Mulvaney, who also heads the Office of Management and Budget, also said that there will “probably” be school closures and transportation issues due to the impact of the virus.

 

Mulvaney claimed that the media has only started paying close attention to the coronavirus because “they think this is going to be what brings down” President Trump.

[Jurgis]

Health officials, scientists must get statements vetted by White House:  https://www.msnbc.com/deadline-white-house/watch/report-white-house-locking-down-messaging-from-federal-government-on-coronavirus-79563845972

 

Doesn't the Chinese government also do this?

 

So Pence becomes the filter through which information must flow, and Pence is the guy who penned an article stating that tobacco doesn't really kill people as claimed by the left wing media.

 

This is what a competent response looks like:

 

https://www.cnbc.com/2020/02/28/trump-chief-of-staff-mulvaney-suggests-people-ignore-coronavirus-news-to-calm-markets.html

 

White House chief of staff Mick Mulvaney on Friday suggested that Americans should ignore media reports about the coronavirus amid fears of the deadly disease spreading into the U.S.

 

Mulvaney, who also heads the Office of Management and Budget, also said that there will “probably” be school closures and transportation issues due to the impact of the virus.

 

Mulvaney claimed that the media has only started paying close attention to the coronavirus because “they think this is going to be what brings down” President Trump.

 

Coronavirus is not the reason to panic. More deadly is brain rot virus that has taken over the world with numerous cases reported in Washington, D.C., Moscow, and other capitals. What's worst, it's spreading over Internet! The only way to be safe is to unplug your ......................................................................................