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$10,000 Thursday – Hedging Pays off – Again!

60,329 infected, 1,369 dead.

Yes, that's up 33% from YESTERDAY due to a "reclassification" of certain patients (from alive to dead?) or some would say it's the unraveling of a cover-up in China, where conditions are significantly worse than we have been led to believe by the Mainstream Media – whose primary goal is to keep us shopping at all costs...

Fortuntately, our paranioa is paying off and the Nasdaq (/NQ) hedges we suggested in yesterday morning's PSW Report (and reiterated in our Live Trading Webinar, of course) are already up over $7,000 and the S&P 500 (/ES) hedges are up $4,550 as of 7:30 AM.  We'll put a stop on the set at $10,000 (3,350 on /ES and 9,550 on /NQ) to lock in those gains and we'll just add it to our CASH!!! pile because, as I said in the Webinar – I don't want to run out and buy things until next week, when we will hopefully have a clearer picture of what's going on in China.  

Unfortunately, the picture we have today is NOT GOOD:

Let's just say that uptick on the chart is "disturbing" but I'm more disturbed by the very slow climb in recoveries (green) as that's a very long slope, between infection and recovery and 6,017 recovered and 1,369 dead is not the best survival percentage (81.5%).  If the common flu was only 80% survivable – do you think you would change your habits?  Again, I don't like to be an alarmist but no one else seemed to be alarmed this week so my concerns sounded alarmist – but I'm just being CONSERVATIVE – which I hear is quite in fashion these days…

My other concern in China, as I noted yesterday as well, is their looming debt bomb and Bloomberg picked up on my theme and wrote a good article summarizing the situation but I think this chart says it all – WORSE THAN JAPAN!

300% of their GDP is debt and half of it has been added since the Financial Crisis (10 years) so we're talking about $23 TRILLION in debt added in 10 years, which is about 15% of China's GDP added in debt each year to hit their 7% growth targets.  Is that sustainable?  Sure, the same way you can take the family to Disney every week and stay in fancy hotels and eat in great restaurants – as long as your credit card companies don't cut you off and as long as you don't mind going home and seeing the bill.

Of course, Disney is closed in China and so are most movie theaters and malls and restaurants and schools… Yet we are all happily pretending that it will not have a big effect on their economy – let alone ours!  

You're going to see that bad loan chart spike up like Corona cases very soon – over $500Bn in bad loans is more than enough to topple any banking system – enough to topple the global banking system, in fact.  It's about the same as what Greece owed back in 2008 – and they never actually defaulted.  At the moment, it is believed China will bail out all this bad debt but China's economy is half the size of ours and you know what it took for the US to arrange $700Bn in TARP funding back in the day – our entire economy was collapsing before the Government was willing to take that step – hopefully China acts this month or it may be too late.  

Meanwhile, The virus risks further damping the outlook for European economic growth.  The ECB is already on alert over the newly emerged threats. Spanish policy maker Pablo Hernandez de Cos added to the chorus of officials, saying the coronavirus is compounding risks for the region after some earlier signs of stabilization. Chief Economist Philip Lane said on Wednesday the economy could experience a “pretty serious short-term hit.”

World fuel consumption – which had previously been expected to grow by 800,000 barrels a day during the three-month period, compared with a year earlier – will instead contract by 435,000 a day, the IEA said in its monthly oil market reportCar sales in China plunged to fresh lows in January as the coronavirus kept buyers away from showrooms, intensifying the gloom hanging over the industry.  Sales to dealerships fell 20% to 1.61 million cars last month, the China Association of Automobile Manufacturers said. That’s the biggest monthly drop since January 2012.

You can see from this chart that EVERYBODY is being affected by interruptions in deliveries of Chinese auto parts and you can build 99% of a car but YOU STILL CAN'T SELL IT WITHOUT THAT LAST PART – keep that in mind…

A security guard stands outside the empty Yuyuan Bazaar in Shanghai, Feb. 7.

That's Shanghai, by the way, not Wuhan.  24M people live in Shanghai and there's just one guy on the street.  Again, I don't want to be all doom and gloom but this is serious people and I know it sucks to miss a rally but I'd rather miss a rally than get caught in a massive sell-offs because it's the sell-offs that kill your lifetime portfolio performance – not the gains you miss out on.  We had a whole decade of gains wiped out in 3 months in 2008 and here we are again, at the top of a rally that's "never going to stop" because "this time is different" and the Financial Media is playing the same old song:

If this nonesense sounds familiar to you when you are watching the Financial Media today – be afraid – be very afraid! 

 


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  1. Good Morning!?


  2. Good morning?  is right!

    Amazingly, the Futures are rising again.  Still red but about 1/3 of the losses taken back (strong bounce).

    The index shorts stopped out and we stopped out of the commodity longs so all flat now but I will certainly re-establish a couple of Futures shorts for the weekend. 

    Can play /NKD long at 23,650 for the bounce as it's lagging but very tight stops below.


  3. Good morning, All! The webinar replay is now available!

    https://youtu.be/f1BkmEpeiU8

    Or also available on BitChute here: https://www.bitchute.com/video/JNhtQmKf3cMh/


  4. REPOs $78.85Bn yesterday.  

    Image

    Image result for move along nothing to see here

    Trump Twitter Archive is a fun read:

    According to data from the Trump Twitter Archive, Donald Trump has insulted Democrats 100 times more than he’s promoted social programs that help Americans. That may sound like an exaggeration, but it’s not. Trump has tweeted (and retweeted) the word “Democrats” a total of 1,317 times since he was inaugurated.

    The words Medicare, Medicaid, and Social Security were tweeted or retweeted just 13 times.

    In other tweets from lunatics:

    "It doesn't make sense to raise money because we expect to generate cash despite this growth level." – Elon Reeve Musk, fourteen (14) days ago

    Today:

    Tesla hits the capital raise button

    • The company plans to offer about $2B in stock, along with a $300M greenshoe option for the underwriters.
    • Elon Musk plans to purchase up to $10M of the offering, and board member Larry Ellison up to $1M.
    • Source: Press Release
    • TSLA -3.8% premarket

    Tesla discloses new subpoena

    • Tesla (NASDAQ:TSLA) is down 4.47% in premarket trading as investors take in not only the highly-anticipated capital raise, but important details from the 10-K filed by the EV automaker.
    • Those details include an update on SEC activity that contains some good news and potentially bad news.
    • "On December 4, 2019, the SEC (i) closed the investigation into the projections and other public statements regarding Model 3 production rates and (ii) issued a subpoena seeking information concerning certain financial data and contracts including Tesla's regular financing arrangements. Separately, the DOJ had also asked us to voluntarily provide it with information about the above matters related to taking Tesla private and Model 3 production rates."
    • Tesla sleuths are bound to find some other nuggets in the new filing throughout the day.


  5. Phil / SPWR – thoughts on earnings?


  6. Phil, anyone else,

    Lot of issues with thinkorswim on ATT Uverse in Boynton Beach , FL…..Anyone else in this area have issues? TOS keeps freezing up. Bloomberg thru fidelity seems fine!





  7. Phil's comment today in deed makes a lot of sense. Hedging yes, but what I did this morning and during the day, weeding my short puts, especially the once showing already a nice profit,
    The in any case sick once and if in doubt buy half back.
    Here in Europe it smells a bit, like large shows, Barcelona, Industrial show in Frankfurt closing, this will cost some people a great part of cash, hotels, exhibitors, side shows etc. this will hurt down the road no doubt. If they cannot turn that switch on Corona, and I mean not the Mexican beer, then we looking very funny. I hope I am wrong.


  8. JCB cuts working hours for 4,000 UK employees as coronavirus hits suppliers
    http://news.sky.com/story/jcb-cuts-working-hours-for-4000-uk-employees-as-coronavirus-hits-suppliers-11933212


  9. Yup. Totally fine. It's not as if JCB and CAT underpin the global economy or anything. 


  10. SPWR/Batman – The reaction is a little harsh, I think.  

    SunPower (NASDAQ:SPWR): Q4 Non-GAAP EPS of $0.23 in-line; GAAP EPS of $0.03 beats by $0.15.

    Revenue of $607M (+15.5% Y/Y) misses by $7.98M.

    Press Release

    SunPower (NASDAQ:SPWR-5.8% after-hours after slightly missing expectations for both Q4 earnings and revenues and issuing in-line guidance for FY 2020 revenues.

    Q4 residential revenue rose to a record with 27% MW growth vs. the year-ago quarter, and global shipment volumes gained more than 80% Y/Y to a record.

    SunPower sees full-year revenues of $2.1B-$2.3B vs. $2.28B analyst consensus estimate; for Q1, the company forecasts revenues of $435M-$470M vs. $409M consensus, as well as gross margin of 9%-12%, adjusted EBITDA flat to negative 15M and MW deployed of 520-570 MW.

    As a result of the restructuring of its commercial direct business, SunPower forecasts FY 2020 adjusted EBITDA of $125M-$175M.

    SPWR is at $1.5Bn at $9 so 10x 2020 earnings is not something I'd throw away.  Not every company is like TSLA and fudges the books to make every quarter look great.  If SPWR thought they'd deliver a $20M project ($500M/qtr in sales) by Dec 31st and it got delayed until Jan 15th – then they take a sales hit but it doesn't impact their long-term growth trends.  

    Year End 30th Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Total Revenue
    $m

    2,507 3,027 1,576 2,553 1,794 1,726 1,717 2,010 2,257 -7.19%
    Operating Profit
    $m

    159 251 -206 -372 -1,025 -849 -256      
    Net Profit
    $m

    95.6 246 -187 -449 -929 -811 -141 -45.0 22.9  
    EPS Reported
    $

    0.688 1.55 -1.39 -3.25 -4.49 -5.76 -1.13      
    EPS Normalised
    $

    0.701 1.62 -1.36 -2.57 -1.48 -3.15 -1.10 -0.307 0.140  
    EPS Growth
    %

      +131                
    PE Ratio
    x

                    78.1  
    PEG
     

                    0.514  
    Profitability

    SPWR split back in 2015, it's not like they lost revenues, they pursued a different path and have been growing well since reorganizing in 2017 and they remain on track. It's not a company we expect to take off like a rocket – just one we'd like to own for many years as they grow.  That's why we only sold 2022 $8 puts (for $3.10) in the Money Talk Portfolio – the net $4.90 entry is all we were looking for. 

    Since we can get $2.50 now for the 2022 $8 puts and since that's pretty much free money, let's sell 10 in the Future is Now Porfolio ($2,500) and, for the LTP, let's:

    • Sell 20 SPWR 2022 $8 puts for $2.50 ($5,000) 
    • Buy 40 SPWR 2022 5 calls for $5.15 ($20,600)
    • Sell 40 SPWR 2022 $12 calls for $2.40 ($9,600) 

    That's net $6,000 on the $28,000 spread that's $16,000 in the money to start with $22,000 (366%) upside potential at $12 in two years.   I don't mind waiting for that and our worst case is owning 2,000 shares at net $22,000 or $11/share so even if SPWR is down at $5, if we bought 2,000 more for $10,000 our average would be $8 (less than it is now) for 4,000 shares and we could sell $5 puts and calls to drop our basis.  I would almost prefer that to making the $16,000!

    Issues/Jasu – I'm not having them in Delray but I HATE Uverse's DVR system.    Actually, I take it back, things were slow earlier.  I had to reboot my IPad.

    Europe/Yodi – I see a lot of numbers turning sour but, even now, US markets shaking it off.  

    And what Malsg said.  

    Wow, I did not think we'd be able to reload at the same prices but…  

    I'm going short on /NQ (2) at 9,615 and 2 /RTY at 1,690 and I'll add 2 more if they go higher but also looking for 2 more short /ES at 3,380 – these are for the weekend, but so was yesterday but then they make $10K so screw that!


  11. I'm up 10.5% over the past month so I'm going "risk off" for little bit… I won't mind admitting I'm wrong in a few weeks but I'm concerned that we're going to hit some big numbers on the coronavirus. If the numbers coming out of China were correct, people would be going about their business. Even 60,000 is only 0.004% of the population or 1 in 25,000. Something smells. I hope I'm wrong and we see NQ 10,000 soon but I'd rather be looking at a pile of cash right now.


  12. TSLA I guess the buyback trumps the subpoena 



  13. Coronavirus Is a Data Time Bomb


  14. The Bug – interesting writeup by a young "data scientist" (still not sure just what that is): https://medium.com/swlh/the-reported-mortality-rate-of-coronavirus-is-not-important-369989c8d912


  15. Phil can you explain why the market is acting so bullish to the TSLA offering 


  16. Something wrong with Td. Not processing trades. 


  17. TSLA,  in my opinion, that is strengthening the cash position and allows them to go on with future projects.without worries, is logic also to offer stock avoiding a hard crash in the process, the opposite effect of the company buying stock in the market to support price.  


  18. Wow. Trade went through but no order screen came up. Hmmmm.


  19. China/Dawg – Well, they have essentially locked down the country, which is (it seems) keeping the virus in check, minimizing the spread.  Even so, it's still infecting a lot of people so it's got to be very contagious.  That means that any single instance of the virus getting out somewhere else can lead to thousands more infections and China is unique in their ability to lock it down like they have.  

    Damn, missed 29,500 for a /YM short but got the other 3 so I'm happy.

    TSLA/Coulter – The media spin was a frenzy, it's completely blocked out the SEC stuff (as planned, I'm sure).  This is the danger of activist Billionaires in our society – Musk can give 20 reporters $100,000 to write positive articles about him today and that becomes 90% of what you read today and he can threaten to sue anyone who tries to run a negative article (they have to call him for response before printing) so he keeps those down to a minimum and we have a population who is trained to believe (and a Supreme Court that agrees) that whoever makes the most noise wins – and there you have it…

    Bug/Snow – My understanding is there's about 8,000 people who are considered seriously ill and the main reason they reclassified 15,000 people as "infected" is to keep the mortality rate (1,000+) from crossing the very alarming 2% threshold and to keep the public from realizing that close to 20% of those infected got sick enough to require hospitalization and, so far, 1/8th (12.5%) of those being hospitalized have died.  If you do the math on those numbers – you will not get a happy outcome! 

    As I was saying yesterday in the Webinar, you don't see that kind of response (mass spraying of streets) for something that's under control.  That is FEAR at ground zero.  Fear that the markets are oblivious to.

    Image result for virus trucks spraying fleet

    Image result for wuhan trucks spraying fleet

    Image result for wuhan virus spraying

    Image result for wuhan virus spraying

    TD/Pirate – Futures are filling OK.


  20. And why does China even have a fleet of anti-viral-spraying trucks in the first place?  





  21. China AV trucks – for all we know they pulled the de-icing trucks off the airport and are telling the sheeple – hey look we've got this under control as they spray de-icing fluid all over the streets.


  22. Phil any love for UPS, its lagged just about every stock I follow, even XOM over the past 3 months.

    JCB, on the subject, I purchased a JD backhoe last week to clear property in Loxahatchee Groves FL, used and got it at a steep discount from asking price. I def see weakness in heavy equipment, I had 3 offers on the table and all where accepted.. Obviously not related to corvirus, but there is weakness in the market over the prior few months.
     


  23. /NQ / Phil – Seems like you and I are too early to the shorting party, clearly they're hell bent on 10K which based on recent progress will happen on or around 2/26. That's probably the time to go megashort…


  24. Spraying/Phil – dawgdaddy is closer to it than you are. That sort of theater is very common; used to be for mosquito spraying. I can show you reams of similar photos, hazmat suits and all, from the 2015 MERS outbreak in Korea. You really are going overboard with this, Phil, but you didn't ask me so I'll keep quiet.


  25. Wow, Dawg, so distrusting!  cheeky

    Holy cow, another pop higher.  

    Incredible…

    People are hitting the housing piggy bank to keep things going:

    First American Financial Q4 closed title orders jump 27%

    • First American Financial (NYSE:FAF) rises 3.9% after Q4 results beat expectations and the company announced a $350M acquisition.
    • Q4 EPS, excluding net realized investment gains/losses, of $1.80 beats the average analyst estimate of $1.47 and rose from $1.28 in the year-ago quarter.
    • Q4 total revenue of $1.73B, exceeding $1.66B consensus, increased 22% from $1.42B a year ago.
    • During the quarter, closed title orders rose 27%, driven by a 131% increase in refinance orders and average revenue per order declined 8% due to a shift to refinance transactions.
    • Net realized gains of $23.8M compares with net realized investment losses of $67.5M in Q4 2018.
    • FAF agrees to buy Docutech for $350M, move that will improve capabilities for end-to-end digital mortgage and settlement services.
    • Q4 Title Insurance and Services pretax income of $283.8M increased from $136.4M in the year-ago quarter; pretax margin of 17.8% vs. 10.4%.
    • Q4 Specialty Insurance pretax income of $22.0M improved from $0.8M a year ago; pretax margin of 16.7% vs. 0.7%.
    • Previously: First American Financial EPS beats by $0.33, beats on revenue (Feb. 13)

    Stocks recover after WHO explains new virus cases

    • U.S. stocks erase most of their earlier losses after the World Health Organization says that the spike in coronavirus cases reported by China aren't all new cases of the disease.
    • Nasdaq and S&P 500 are roughly flat, and the Dow pares its loss to -0.2% vs. -0.7% earlier.
    • 10-year Treasury yield slips 1 basis point to 1.61%.
    • The spike in new Covid-19 cases reflects more of a change in how China is reporting them and doesn't represent "a significant change in the trajectory of the outbreak," said Dr. Michael Ryan, executive director of WHO Health Emergencies Program.
    • Traditionally defensive sectors real estate (+0.6%) and utilities (+0.5%) are outperforming S&P 500 industry sectors, while industrials (-0.4%) and energy (-0.4%) trail the broader market.
    • Crude oil rises 0.8% to $51.57 per barrel; gold +0.5% to $1,579.10 per ounce.
    • In European markets, the Stoxx Europe 600 and Germany's DAX ended the session roughly flat; the U.K.'s FTSE 100 closed down 1.1% after the U.K. Treasury chief quit; France's CAC 40 fell 0.2%.
    • The U.S. Dollar Index is little changed at 99.08.

    I know I view it as a charity:

    The New York Times raises prices — and what to do about it

    • The New York Times (NYSE:NYT) has rolled out a mass email campaign to its digital subscribers to inform them of a price increase of 13.3%, from $15 to $17 every four weeks. The new price is equivalent to $221 per year.
    • The NYT's email invites subscribers to view their payment almost as a charitable donation, rather than payment for a commercial service: "These rates will help us sustain and strengthen our coverage at a time when independent journalism is under great pressure. Your support allows us to go wherever the story is, no matter the danger, hardship or cost… That would not be possible without subscribers like you.  Thank you again for supporting The Times in our pursuit of the truth, without fear or favor."
    • The NYT announced that it began raising prices on its February 6th earnings call, following release of its quarterly results. Since then, the stock has risen sharply on expectations of increased profits. Not exactly a case of "independent journalism under great pressure" or "hardship and cost"…
    • From the NYT earnings call: "We have begun to phase in a price increase for many of our more tenured digital new subscriptions with those currently paying $15 per billing cycle moving to $17. We expect the phase-in to consist of a handful of tranches with the largest tranche of subscriptions effective beginning with their March bill. We expect approximately 750,000 domestic subscriptions to see a price rise by the end of 2020."
    • On the call, CFO Roland Caputo stated that the NYT had successfully tested low, long introductory prices for new subscribers, and that the price increases would be rolled out first to the subscribers with the longest tenure: "you apply the price increase to subscriptions that have just hit that tenure criteria. Those that have hit that many moons ago and everyone in between."
    • Perhaps that information gives subscribers who are willing to cancel and then resubscribe after a short time a strategy for delaying the price increase or averting it altogether.
    • Who knew that reading earnings call transcripts (and Seeking Alpha) could be so worthwhile?

    Alibaba warns of coronavirus impact

    • On the earnings call, Alibaba (NYSE:BABA) CEO Daniel Zhang outlines the impact of the coronavirus outbreak.
    • Zhang says the extended Lunar New Year holiday has caused problems for merchants and fulfilling orders.
    • Food delivery orders are down Y/Y due to restaurant closures, and there is a limited delivery capacity for the Hema supermarkets.
    • Alibaba says that its businesses that rely on physical goods will likely see revenue declines in the current quarter.
    • BABA shares are down 1.1% to $221.90.

    Caterpillar posts broad losses in retail machine sales

    • Caterpillar (CAT -0.3%) reports a 7% decline in worldwide retail machine sales for the rolling three-month period ending in January, following a 5% drop in December.
    • All regions fell: North American sales slumped 11% following a 4% drop in December, Asia-Pacific fell 2% for the period vs. a December decline of 5%, the Europe-Africa-Middle East region slipped 5% for January after also dropping 5% the prior month, and Latin America fell 2% after a 12% drop in December.
    • Resource industries three-month retail machine sales fell 7% for the January period after declining 10% in December, construction industries three-month retail sales slid 6% after declining 3% in the prior period, and energy and transportation retail sales edged 2% lower in January after falling 3% in the December rolling period.

    Virus outbreak knocks four Asia-bound LNG tankers off course – Reuters

    • Four liquefied natural gas tankers bound for north Asia have changed destination or diverted after the coronavirus outbreak slammed gas demand in China, Reuters reports.
    • Also, 15 LNG tankers globally have been flagged as "floating storage," with 11 of them scattered across Asia, according to the report.
    • Two of the four LNG tankers originally bound for the Far East now will arrive at the U.K.'s South Hook terminal, while another made a U-turn in the Arabian Sea and is heading back to the Persian Gulf, according to data intelligence firm Kpler.
    • Top Chinese LNG buyer Cnooc (NYSE:CEO) reportedly has invoked force majeure to suspend contracts with at least three LNG suppliers.

    How has coronavirus impacted companies?

    BUYBUYBUY, I guess….


  26. UPS/Kustomz – I'm too worried about how much AMZN's private package service will hurt them so mostly a "stay away" for now.  AMZN is about 10% of UPS's business and FDX has cut ties to AMZN, I think completely.  So UPS actually benefited this holiday season from picking up FDX's slack and that probably masks the overall decline as AMZN weans themselves off UPS.  

    There is an "on the other hand" that AMZN's business was crap for UPS and maybe they are better off without that low-margin BS but it's still a painful transition to downsize and it's not like UPS is suddenly going to discover some other customer to make up the 10% and then you have to consider FDX is planning to aggressively go after UPS to make up for their own AMZN losses so, on the whole, not a pretty sector to play  in.  

    And then there's the virus messing up Q1.

    Year End 31st Dec 2014 2015 2016 2017 2018 2019 2020E 2021E CAGR / Avg
    Total Revenue
    $m

    58,232 58,363 61,610 66,585 71,861 74,094 77,570 81,110 4.94%
    Operating Profit
    $m

    4,968 7,668 7,688 7,529 7,024 7,798     9.44%
    Net Profit
    $m

    3,032 4,844 3,422 4,905 4,791 4,440 6,809 7,292 7.93%
    EPS Reported
    $

    3.28 5.35 3.86 5.31 5.51 5.11     9.26%
    EPS Normalised
    $

    3.28 5.35 3.86 5.31 5.84 5.34 7.88 8.50 10.2%
    EPS Growth
    %

    -28.8 +62.9 -27.8 +37.7 +9.89 -8.49 +47.5 +7.96  
    PE Ratio
    x

              19.8 13.4 12.4  
    PEG
     

              0.416 1.68 1.77  
     

    I don't believe they'll hit those growth numbers without AMZN.   Still, the whole company is $90Bn at this price and I will be interested in them once they settle down.  

    FDX, by comparison, does $70Bn in sales, so same as UPS with about $3Bn in profit and you can buy that whole company for $41.4Bn at $161, so hard to justify paying $90Bn for UPS by comparison.

    I would like FDX but I simply can't get my head around their prices these days – it's just ridiculous.  

    Image result for fedex pricing

    These were the 2014 prices:

    Image result for fedex pricing

    Shorting/MrM – I was too early yesterday too, down $5,000 before being up $10,000.  Would have been nice to have timed it perfectly and made $15,000 but I can live with 2/3.

    Theater/Snow – I'll take your word for it but, so far, the worst case keeps proving out.  I am only pointing out reasons to be cautious into a long weekend when yes, things might get better and level off (like it looked like they were going to yesterday morning) but if you weren't shocked by those adjustments – no matter what the reason – then go right ahead and buy equities at record-high prices without hedging.   I simply have to respectfully disagree with that call given the FACTS (not speculation) we have so far.  

    Image result for virus update

    There is ONE ship that had ONE patient with the virus 2 weeks ago and now there are 218 infected people out of 3,500.  3 of 12 (25%) Canadians infected on the ship have required hospitalization.  44 new cases since yesterday and that's only because they are only able to test 300 people per day!

    Officials saying they can only process 300 people a day, but hope eventually to expand this to 1,000.

    This attitude is what's wrong with the whole market these days – you shouldn't need PROOF that it's not a good time to invest.  Even a hint that it MIGHT not be a good time to invest should be enough to have you guarding your capital carefully!  This Fear of Missing Out is worse than the virus – people have this mania that they need to buy stocks – this is the kind of madness you get in late-stage bubbles and, despite the fact that we had a huge crash in 2000 and 2008, no one seems to believe it can happen in 2020 because why – have we all "evolved" suddenly?  


  27. COVID-19 (I love how they gave it a numerical name instead of something like Chinese Pneumonia) – clearly 20,000 people didn't all of a sudden get infected, but the new number puts the trajectory back on about a 15% per day increase. If we're above 100,000 Tuesday at the open then… "Houston, we have a problem."


  28. Well, I'm off to a meeting in Miami and tomorrow am I'm off to Orlando.

    I expect to put up a post in the AM but will leave right around the open and then, hopefully, check in from Orlando in the afternoon.  

    Monday the market is closed, Tuesday I'll post from Orlando in the am and then hopefully back in the command center Tuesday afternoon.  

    That's the plan, anyway…


  29. Thanks Phil, safe travels.


  30. Phil/reaction Ummmm, "buy equities at record-high prices without hedging"? When did I ever say or even imply that? I'd disagree with someone who said or thought that, too.


  31. I didn't say you did – I just object to the generally cavalier attitude that 90% of the people on TV seem to have about this thing.  


  32. CMG – I gave up trying to short CMG more than 200 points ago.  However, shorting the June 1000 calls for  $ 23 looks intriguing. …..  hmm.


  33. Phil / NG — long at the pivot? $1.832

     

    thanks


  34. Coronavirus – Receptor targets appear to be much more available in lungs exposed to pollutants (chronic poor air quality and/or smoking). This may explain a lot of China's exponential case rate and spread versus the rest of the world as well as resulting complications and deaths. Also, there's a large lag time between infection and flu-like symptoms to fatal pneumonia which is weird. It behaves a lot like HIV that way, that is you get sick, but then the virus goes to work on your lymphocytes. The count for these should be going through the roof and instead clinically the opposite is being seen. It has a lot of HIV code in it too, strangely, and retrovirals seem to work on it (also strange). It's an RNA virus anyhow, once it gets past the cytoplasm, you're onto replication-city, no turning back there. 

    Investing –  it's hard to see how near lock-down of a dozen major cities in China, the world's second biggest economy, and now including 20M people in Beijing, doesn't have a ripple effect into the global economy. Regardless of whether it's justified, remedial action or simply panic at this point, it's still happening all the same.


  35. BDC:  Its also why older men tend to be more affected because more men tend to be smokers (especially in China). Women and children have healthier lungs. 

    There is no doubt that this bug is contagious. Just like SARS, people in Hong Kong are catching Covid19 through the sewage pipes and bathrooms because the virus is prevalent in the feces. And you have the "super-spreader" guy in England who spread it to like 10 other people BEFORE he started showing symptoms.  There were also two people here in Japan who were evacuated from Wuhan who initially tested negative for the virus but returned at a later date and tested positive (perhaps more false negatives in the early stages of incubation).  Hard to contain this one.  Fortunately 80% of people recover without serious complications, but can't imagine the strain on our medical systems if 20% of the population get pneumonia and need hospitalization and oxygen.


  36. /NG/Potter – A bit scary after they hit $1.76 on Tuesday but sure, I'd play $1.82 bullish with tight stops below.

    64,436 is up 4,000 (6.66%) since yesterday but also 60 new cases outside of China is up 15% but only 14 more dead vs 800 recovered is good.  Not sure if that will be the final morning numbers, of course.

    CMG/Albo – Hmmmm…

    I agree BDC, the damage is done economically, 1% off the World economy probably 2-3% off China itself.

    That pollution/smoking link is important and could explain a lot of the data points so hopefully that's true and the virus will be less likely to spread outside of China though what about the way it's ripping through the cruise ship passengers?


  37. Phil/CovID19:  There is this study out of the Los Alamos National Laboratory here:  https://www.medrxiv.org/content/10.1101/2020.02.07.20021154v1.full.pdf+html

    that has a much bleaker outlook on the virus.  It estimates the R0 to be somewhere from 4.7 to 6.6 as opposed to previous estimates of around 2-3. It also estimates a doubling rate of 2.4 days(!) before quarantine and control measures.  Even AFTER the draconian measures applied on Wuhan, the paper estimates only around a 50% decrease in infections leaving it at an R0 of around 2.5. Considering just how draconian the quarantine in Wuhan is, it is not very encouraging since most developed countries would not be willing to enact such brutal control over such a large population of people.


  38. The Bug/Kinki – it looks like they have data through the end of January, and claim to have unusual, more reliable data outside Hubei. The thing to look for is as always case definition – have they counted people with just this bug, or are there a lot of false positive, i.e. people with other nasty viruses. That's not clear from the paper. Also, calculated R0 is always higher early in an outbreak, then drops as time goes on and more accurate data are accumulated.


  39. Good morning!

    Virus/Kinki – That's why it baffles me that the US markets are acting like nothing is wrong.  This is for sure worse than SARS already and we're only halfway through an optimistic containment period.  While Wuhan changed their method of counting, the rest of China did not so there may be a lot more unreported cases lurking.  

    On Friday, it was revealed that 1,716 healthcare workers nationwide had been infected by the virus, six of whom had died, according to China's National Health Commission (NHC). Nearly 90% (87.5%) of those medics came from Hubei province, of which Wuhan is the capital.

    The Wuhan government has acknowledged the shortage of medical supplies, such as specialist N95 respiratory masks, goggles and protective suits. Hospitals across Wuhan have pleaded for help repeatedly on social media, calling for more donations of the protective gear, which are vital in protecting frontline staff from catching the virus from patients.

    "Basically, medical staff should be wearing N95 masks, goggles or face shields, and protective suits not only in isolation wards, but also at emergency departments and medical wards — basically anywhere that one might get in touch with coronavirus patients," he said.

    In the Wuhan Mental Health Center, the largest psychiatric hospital in Hubei province which is not supposed to treat coronavirus patients, 50 patients and 30 medical staff have been diagnosed with the novel coronavirus after being cross-infected inside the hospital, the state-run China Newsweek announced last week, citing multiple sources at the hospital.

    Meanwhile, the virus has spread to every region in mainland China, including the far western frontier of Xinjiang and the remote region of Tibet. Authorities in Beijing and the provinces of Guangxi, Jiangxi and Hainan have all reported individual cases of infection among hospital staff, amounting to two dozens people.

    Japan’s Economy Set for Biggest Hit Since 2014 Ahead of Virus.

    China Woes Go Global, Japan’s Slump, U.K. in Disarray: Eco Day

    Coronavirus live updates: China’s Hubei province reports 116 more deaths, 4,823 new cases.

    China Has Ground To A Halt: "On The Ground" Indicators Confirm Worst-Case Scenario. 

    Fed Liquidity Drain Spoils Virus-Surge-Inspired Stock Buying-Panic. 

    Outbreak Slams Iran’s Embattled Economy

    Germany entered 2020 with a flatlining economy and manufacturers in distress, leaving it ill prepared for continued trade uncertainty and the new coronavirus threat.

    Europe’s largest economy has been battered by multiple forces that have turned it from a growth engine to one of the region’s weakest performers. Expansion last year was just 0.6% and 2020 may be little better. The euro-area economy grew 1.2% in 2019, though the pace was just 0.1% in the fourth quarter.

    Party on! 


  40. snow: I pray you are right. For the first time in I am thankful for global warming because we are in for a very early spring here in Japan and the warm weather is supposed to slow down the spread.


  41. The Bug/kinki – Mind, I'm not saying there's nothing to worry about; far from it. What I'm saying is that most of the reports are based on very flimsy data where it's hard to tell what's going on. Reports of cases and deaths very likely include both the Wuhan virus and lots of other diseases that symptomatically are similar, the false positives. There are plenty of reports of shortages of testing kits, for example. So as an epidemiologist I have to be cautious, and it appears, from the NEJM article I posted a couple of days ago, that Chinese CDC people are skilled and have a grasp on matters. But a lot of Western media reporting is hyperbolic, and I have to wonder about that.

    Phil's perspective, though, is not that of an epidemiologist, but is of an investor and advisor worried about effects on economy, and that's more valuable than my viewpoint here. Where we differ (I think…) is that I believe the hype in the Western MSM is to some extent deliberate with an intent of making China look bad.


  42. Thanks for the education.  I'm actually at the point where I don't really care about the markets in regards to this.


  43. Oh I totally agree there's a propaganda campaign going on to make China a new enemy Trump can bash on during the elections.  Any mention of Russia now will be deflected with "what about China?"  Still, there's a reality to China's missteps (no worse then CDC during SARS or FEMA during anything) in getting information out, classifying the illness, getting resources, etc. – no country is really prepared for this sort of thing and that's what I worry about – it's already not contained in China and it only takes one more patient zero to push this crisis into another major country.