Author Archive for Zero Hedge

Could The Coronavirus Epidemic Be The Tipping Point In Supply Chain Leaving China?

Courtesy of ZeroHedge View original post here.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects.

So the media's focus is the first-order consequences: the number of infected people and fatalities, government responses such as quarantines, and so on. The general expectation is these first-order consequences will dissipate shortly and life will return to its pre-epidemic status with virtually no significant changes.

Second-order effects caution: not so fast. Second-order consequences may play out for months or even years even if the epidemic ends as quickly as the consensus expects.

The under-appreciated dynamic here is the tipping point, the imprecise point at which a decision to make fundamental changes tips from "maybe" to "yes."

These tipping points are often influenced by exhaustion or frustration. Take a small business that's been hit with tax increases, additional fees, more regulatory compliance requirements, etc. When the next fee increase arrives, the onlooker might declare that the sum is relatively modest and the business owner can afford to pay it, but the onlooker is only considering first-order effects: the size of the fee and and the owner's ability to pay it.

To the surprise of the onlooker focusing only on first-order effects, the second-order effect is the owner closes the business and moves away. Invisible to everyone focusing solely on first-order effects, the owner's sense of powerlessness and weakening resolve to continue despite soaring costs and declining profits has slowly been moving up to a tipping point.

Beneath the surface, every new fee, every tax increase and every new regulation has pushed the owner closer to "I've had it, I'm out."

When the owner shuts the business, onlookers can't understand how one little extra fee could trigger such a fundamental change. The observer is only looking at the new fee as a single cause with a single consequence. In the real world, each new fee, tax increase and regulation was another link in a causal chain of consequences generating consequences.

Turning to the possible second-order effects of the epidemic in China, let's start with the decision to keep supply chains in China. The reasons to keep supply chains


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Many Planes Actually Made It Out Of Wuhan Yesterday And Today

Courtesy of ZeroHedge View original post here.

Update (1300ET): The Toronto Sun reports Coronavirus control at airports is pretty much a leap of faith.

Just like that, more than 1,000 people on three flights from China walked into Canada without medical screening.

If the coronavirus happens to be incubating in any one of those passengers who arrived at Pearson International Airport’s Terminal 3 on Monday, they are now mingling with Canadian residents.

“I was asked when we got to the Canada Custom’s inspection point if I had been in Wuhan in the past 14 days or if I had a fever,” said Jerry, who with his wife, travelled from Shanghai.

“I said no.”

That one-word answer got him through.

*  *  *

As MishTalk's Mike Shedlock detailed earlier, many planes managed to get out of Wuhan over the past few days. Let's take a look as to where.

Wuhan to San Francisco Today

Wuhan to San Francisco 00:00-06:00 - No Flights

Wuhan to San Francisco 06:00-12:00 - No Flights

Wuhan to San Francisco 12:00-18:00 - Three Flights to San Francisco (China South, American, Delta) are listed as "Scheduled".

Wuhan to San Francisco 18:00-00:00 - No Flights

The huge problem with Flightstats is you have to click on every flight to see if it is scheduled, cancelled, unknown, landed, or in the air. There are thousands of flights per day from some Chinese cities.

I do not believe those SFO scheduled flight left or ever will. See Addendum.

All Departures from Wuhan Monday, January 27

I pieced that together from Wuhan Tianhe International Airport WUH Departures for 2020-01-27.

I only showed confirmed landings.

All Departures from Wuhan Tuesday, January 28

Escape From Wuhan

This post is an update to Hundreds of Virus Carrying Planes Headed for US, London, Paris,


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Coronavirus Could Shock World Into Recession, Stephen Roach Warns

Courtesy of ZeroHedge View original post here.

Former Morgan Stanley Asia chairman Stephen Roach published an op-ed on Monday (Jan. 27) via Project Syndicate and also appeared on CNBC's "Trading Nation" to warn about how the global economy could already be in a period of vulnerability, where an exogenous shock, such as the coronavirus, could be the trigger for the next worldwide recession.

Roch reminds us that a shock of some sort is usually the cause of most recessions that propagates through the economy. For several years, the Federal Reserve's tightening, which started in late 2017 and ended in the summer of 2019, slowed the global economy. Then the trade war blew up complex supply chains and weakened developed and emerging economies even more, from 1Q18 through 3Q19. These two forces opened a cycle of vulnerability for the global economy that would make it susceptible to a shock. However, it was anyone's guess what that shock would be until now.  

"With the world economy operating dangerously close to stall speed, the confluence of ever-present shocks and a sharply diminished trade cushion raises serious questions about financial markets' increasingly optimistic view of global economic prospects," Roach said via his op-ed in Project Syndicate.

On Trading Nation, Roach said, "big shocks for weak economies" could trigger a recession.

He cautioned that coronavirus could remain a problem in the months ahead.

"It's a frightening outbreak, especially when it spreads this rapidly," he said.

So far, more than a dozen Chinese cities are locked down, tens of millions of people are confined to their homes, and factories and businesses are closed, as the world's second-largest economy grinds to a halt. 

And perhaps Roach has found the root cause of the next global recession: coronavirus.

As he ominously concludes, it won't take much to knock this over the edge:

Historically, the rapid expansion of cross-border trade has been an important part of the global growth cushion that shields the world economy from all-too-frequent shocks.


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“It’s Like A Sinking Ship” – American In Wuhan Refuses Evacuation To Stay Behind With Girlfriend

Courtesy of ZeroHedge View original post here.

Cue the "Arrested Development" clips of Gob admitting he's "made a huge mistake."

As the US prepares to begin the emergency evacuation of more than 200 Americans living in Wuhan, several Americans have refused seats on the flight to stay behind and stick out the "devil virus" outbreak with loved ones, family and friends.

As we reported yesterday, the Boeing 767, with about 230 seats, is preparing to depart from Wuhan Tianhe International Airport on Tuesday (though ironically it's set to land in California, the state with the most confirmed coronavirus cases in the US). It's expected to be the first of several evacuation flights as the US government moves to get all of its citizens out of the virus-plagued city.

However, there are a handful of Americans who are refusing the evacuation, mostly because they have Chinese spouses or children who wouldn't be allowed on the flight, or because they're reporters covering the situation on the ground.

But the AP found one American in Wuhan who, despite not having a family or any professional reason to stay, has decided to hunker down and stick it out with his Chinese girlfriend.

Doug Perez

As the death toll in the city surpasses 100, San Francisco native Doug Perez says he's staying behind, despite harboring serious concerns for his safety. Over the past week, Perez, 28, and his girlfriend have hunkered down in their apartment, only leaving to pick up supplies.

Recently, Perez and his gf got into a heated argument about whether they should visit a local supermarket, or just order food. She won, but unfortunately it appears that food deliveries have been cut off.

When he tried to leave his apartment compound last week, Perez said a guard stopped him and made him turn back, making him feel like a prisoner in his own home.

"It’s like a sinking ship," Perez said.

The day the lockdown was announced, Perez and his girlfriend got in a fight – “a plate was destroyed” – over


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Freeport-McMoRan CEO Fears “Global Black Swan” As “Devil”-Virus Sparks Record Copper Collapse

Courtesy of ZeroHedge View original post here.

Freeport-McMoRan's shares are on the cusp of a bear market as the world's largest copper producer warned about plunging copper prices on concerns coronavirus has severely impacted China's economy, reported Reuters

Chief Executive Richard Adkerson said in an interview on Tuesday that the outbreak of coronavirus in China is a "real black swan event" for the global economy.

China is the largest buyer of the industrial metal in the world, and with large swaths of its industrial sector shut down because of the virus and holiday, demand has collapsed, sending prices lower for the past ten sessions, the longest losing streak since 1986.

This is the worst 9-day drop since early 2015's global growth scare…

Copper is regarded by many in the investment community as a bellwether of the global economy. With dozens of Chinese cities locked down and tens of millions of people confined to their homes, the second-largest economy in the world has ground to a halt.

"Chinese demand accounts for about 50% of the majority of base metals and looking at the latest data regarding the coronavirus, it's now spread quite widely," said analyst Timothy Wood-Dow at BMO Capital in London.

Back in 2003, the SARS outbreak led to a 10% decline of Goldman Sachs Commodity Price index and fully recovered months later.

Adkerson's warning of a "black swan" event for the global economy is because China is one of the largest drivers of growth in the world. If, for whatever reason, their industries or consumers go offline, it would create a massive shock that could tilt the global economy into recession. 

Maybe Dr. Copper is suggesting what's next for stocks… 

Paging Jay Powell!

 





Apple Surges On Record Revenue And Stellar Guidance Despite Service Revenue Miss

Courtesy of ZeroHedge View original post here.

Five quarters ago, Apple stunned investors when it said it would no longer disclose the number of iPhones it was selling – a clear signal that selling had slowed dramatically. Investors sold off the stock… then bought the dip with gusto sending AAPL sharply higher with the narrative changing that Apple was pivoting from a product to a service company.

Then four quarters ago, on January 3 2019, Apple once again shocked the market when it slashed its revenue guidance by 8% for only the first time since this century (naturally, blaming China). As AAPL stock tumbled, it reveberated across all capital markets, and even prompted a flash crash cascade in various currency pairs, especially the pound, lira and yen. However, just like a quarter earlier, Apple's "shock" was quickly overcome, and the after hours plunge actually marked the max pain for longs, with the stock surging 130% since then as its PE multiple rose from 13x to 23X. And to think all it had to do was slash guidance.

Three quarter ago, as largely expected, Apple reported that iPhone sales had indeed slumped, but the reason why the market kept bidding up the stock, was the company's effervescent outlook, which while declining on a year over year basis, was well above sellside consensus, dispelling fears of a growth slump and boosting hopes that Apple is successfully transitioning to a services company. Of course, Apple's then brand new $75 billion stock buyback repurchase authorization only helped with the agressive multiple expansion

Then two quarters agi, Apple stock surged once again, when not even the company's disappointing iPhone sales and service revenue miss was enough to impact its solid earnings and stellar guidance. As a result, quickly regained its status as the world's most valuable company amid expectations that not only service revenues (especially with the company's $4.99 Apple TV launch on deck) continued to rise, but amid renewed optimism for higher unit sales after the iPhone 11's launch in September, despite the phone's not having major upgrades beyond an additional camera on the back.

Finally, last quarter, the stock now on autopilot, accelerated higher as the company beat both top and bottom line expectations, and more importantly, indicated that it sees no adverse


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25 Virus-Linked Deaths Reported In Hubei As Confirmed Cases Surpass 5,500

Courtesy of ZeroHedge View original post here.

Summary:

  • Japan, Germany confirm human-to-human transmission
  • US, UK warn citizens to avoid all non-essential travel to China
  • 5,571 cases confirmed; 131 deaths
  • President Xi said China is taking the "devil virus" very seriously and will contain it
  • Governors and mayors across US bracing for viral outbreaks
  • Reports that China has refused US offer of assistance, and that Beijing is withholding data from CDC

* * *

Update (1710ET): Minutes ago, as dawn nears in China, state-controlled TV station CCTV reported 25 new deaths in Hubei, and another 840 new confirmed cases (and this time only 315 were in Wuhan). Of the dead, 19 died in Wuhan, 2 in Xiaogan, and 1 each in Jingmen, Ezhou, Huanggang, and Tianmen.

Per CCTV, 3349 patients have been hospitalized in the province. More than 20,000 are still under medical observation.

When we look back on the coronavirus outbreak, Tuesday might be the day people remember as the jumping off point for the pandemic. more than 1,000 new cases were confirmed today. And today, the death toll jumped above 100 for the first time, and possibly featured the first death from the virus outside China.

Across China, the tensions of the LNY cancellations, the holiday extension and the travel bans, and lockdowns, combined with a general sense of hysteria, are leading to civil unrest in some areas.

American officials confirmed that the first flight evacuating diplomats and other Americans from Wuhan took off without a hitch. Tuesday is also the day that officials confirmed, without a doubt, that the virus is spreading from human to human outside of China. We imagine we'll get another dump of confirmed cases out of China around midnight, or around midday in Asia.


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This Is How Screwed-Up The US Pension System Is

Courtesy of ZeroHedge View original post here.

Authored by Simon Black via SovereignMan.com,

Late last year, the investment management giant Morningstar published a report concluding that most people can either save money for retirement, or save money for their kids’ education… but NOT both.

They make the economic realities very clear: parents have to choose between their own future, or their children’s future.

And one of the report’s lead authors went on to say that the RIGHT choice – the ONLY choice – is to choose your retirement over your kids:

If you sacrifice your retirement savings to send your child to college, you’re making a huge mistake.”

That’s a pretty sad statement. But it’s unfortunately true for most people.

University education is already -very- expensive, and tuition fees are rising much faster than wages and income.

According to Federal Reserve data, university tuition has risen an average of 4.5% per year since 2000 (meaning that university is twice as expensive as it was at the turn of the century).

This ‘inflation rate’ in tuition is more than TWICE as much as the growth in median household income (which has averaged just 2.2% annual growth since 2000).

This means that, for the past two decades, university education has become more and more out of reach. And it’s no surprise that student debt levels are at a record high as a result.

But on the other side of the coin, retirement is also incredibly expensive. And uncertain.

People are living longer than ever before… and they want to ensure that they have enough money to last.

You used to be able to save money for your retirement in easy, low-risk investments like government savings bonds that paid a healthy rate of return.

In 1986, for example, the inflation rate in the United States was just 1.86%. But a 10-year government bond paid as much as 9%.

This was a wonderful investment for retirees who could safely earn a strong return without having to take any significant risk. And this was the case throughout the 1980s and 1990s.

But for


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FICO Changes To Dramatically Affect Credit Scores In Effort To Reduce Defaults

Courtesy of ZeroHedge View original post here.

Fair Isaac, the company behind FICO credit scores, announced the rollout of a new scoring method that will dramatically shift credit scores for millions of Americans in either direction.

In a nutshell – 'FICO Score 10 Suite' is supposedly better at identifying potential deadbeats from those who can pay, and claims to be able to reduce defaults by as much as 10% among new credit cards, and nine percent on new auto loans.

Around 40 million people with already 'high' scores (above 680) are likely to see their credit rise, while those with scores at or below 600 could see a dramatic drop.

According to Fair Isaac, around 110 million people will see their scores swing an average of 20 points in either direction.

"Consumers that have been managing their credit well … paying bills on time, keeping their balances in check are likely going to see a gain in score," said Dave Shellenberger, VP of product management scores.

The changes come as consumers are accumulating record levels of debt that has worried some economists but has shown no sign of slowing amid a strong economy. Consumers are putting more on their credit cards and taking out more personal loans. Personal loan balances over $30,000 have jumped 15 percent in the past five years, Experian recently  found. -Washington Post

That said, according to WalletHub, delinquency rates are in much better shape than they were a decade ago, with 6% of consumers late on a payment in 2019 vs. around 15% in 2009. Meanwhile, the average FICO score went from bottoming out at 686 in October of 2009 to an average of 706 in September of 2019.

As we noted in October, FICO has been talking about recalculating credit scores for some time now. According to the Wall Street Journal, anyone with "at least several hundred dollars" in their bank account and who don't overdraw are also likely to see their scores rise. Specifically, anybody with an average balance of $400 in their bank accounts without an overdraft history over the last three months would likely get a boost. 

And with non-revolving debt such as student and auto loans recently rising by $14.9 billion, identifying potential deadbeats is more important than ever.

 

 





Number Of Coronavirus Cases Surpasses SARS As China Holds 60k Under ‘Observation’

Courtesy of ZeroHedge View original post here.

Summary:

  • Japan, Germany confirm human-to-human transmission
  • US, UK warn citizens to avoid all non-essential travel to China
  • 6,049 cases confirmed; 131 deaths
  • President Xi said China is taking the "devil virus" very seriously and will contain it
  • Governors and mayors across US bracing for viral outbreaks
  • Reports that China has refused US offer of assistance, and that Beijing is withholding data from CDC
  • Thailand reports 6 new cases, bringing total number to 14

* * *

Update (1915ET): It's only 8:15 am in Beijing and health officials have already confirmed more than 840 new cases in Hubei Province.

That brings the toll to  6,049, including 263 cases deemed "severe." The death toll has climbed to 132, according to SCMP.

Those who have been closely comparing this outbreak with the 2003 SARS outbreak may notice that the coronavirus has achieved an important milestone. Barely a week into global response to the outbreak, the number of confirmed cases has already passed the number of SARS cases reported during the entire monthslong ordeal.

Sars infected 5,327 people in mainland China in nine months and killed 349 people, according to the World Health Organisation (WHO).

Another 60k people are said to be under observation across China, with 20k in Hubei alone.

Zhong Nanshan, a respiratory diseases expert who spoke with the SCMP on Tuesday, the outbreak hasn't yet reached its peak, though he thinks the number of new cases will plateau within the next ten days.

Back in the US, the Trump Administration is denying reports that it's considering a total ban on passenger travel between the US and China.

Will the fact that the coronavirus has already surpassed SARS – and is on track to achieve some of the more dire projections shared by epidemiologists – shake the market's confidence?

Or will a few soothing words from Jerome Powell save the day?

* * *

Update (1824ET): Adding additional pressure to American airlines, CNBC just reported that the White House warned


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Kimble Charting Solutions

Will Junk Bonds Continue To Send A Positive Message To Stocks?

Courtesy of Chris Kimble

If the saying “So goes Junk Bonds, So goes stocks” is true, what Junk bonds do in the next couple of weeks could send an important message to stocks!

Junk bond ETF (JNK) has created a series of higher lows since June of last year. When JNK moves higher like this, historically it sends a positive message to stocks.

JNK has declined a very small percentage in the past two weeks, which has it testing rising support at (1).

So far JNK is not sending a negative divergence to stocks.

If JNK holds at support and rallies off (1), they continue to send a ...



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Zero Hedge

Could The Coronavirus Epidemic Be The Tipping Point In Supply Chain Leaving China?

Courtesy of ZeroHedge View original post here.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects.

So the media's focus is the first-order consequences: the number of infecte...



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Insider Scoop

A Peek Into The Markets: US Stock Futures Up; Fed Decision In Focus

Courtesy of Benzinga

Pre-open movers

U.S. stock futures traded higher in early pre-market trade, ahead of earnings from McDonald's Corporation (NYSE: MCD), General Electric Company (NYSE: GE), AT&T Inc. (NYSE: T) and Th...



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Phil's Favorites

When will there be a coronavirus vaccine? 5 questions answered

Reminder: We are available to chat with Members, comments are found below each post.

 

When will there be a coronavirus vaccine? 5 questions answered

A security guard wears a mask as she keeps watch at arriving passengers at Manila’s international airport in the Philippines on Jan. 23, 2020, as part of efforts to contain the coronavirus. Aaron Favila/AP Photo

Courtesy of Aubree Gordon, University of Michigan and Florian Krammer, ...



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Biotech

When will there be a coronavirus vaccine? 5 questions answered

Reminder: We are available to chat with Members, comments are found below each post.

 

When will there be a coronavirus vaccine? 5 questions answered

A security guard wears a mask as she keeps watch at arriving passengers at Manila’s international airport in the Philippines on Jan. 23, 2020, as part of efforts to contain the coronavirus. Aaron Favila/AP Photo

Courtesy of Aubree Gordon, University of Michigan and Florian Krammer, ...



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Chart School

Top Patterns for Retail Investors

Courtesy of Read the Ticker

Retail investors are last in line for market leading research, no matter, the retail investor can profit from these secret sauce patterns..

Well not so secret now, the main point is you do not have to climb Mount Everest to be called a mountain climber, there are many other hills to climb to make your mark. Just like stocks.

You do not have to battle with the high frequency traders to win in the markets, there are long and slow methods to do just as well.  

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The Technical Traders

The Wuhan Wipeout - Could It Happen?

Courtesy of Technical Traders

News is traveling fast about the Corona Virus that originated in Wuhan, China. Two new confirmed cases in the US, one in Europe and hundreds in China. As we learn more about thispotential pandemic outbreak, we are learning that China did very little to contain this problem from the start. Now, quarantining two cities and trying to control the potential
outbreak, may become a futile effort.

In most of Asia, the Chinese New Year is already in full swing.  Hong Kong, China, Singapore, Malaysia, India and a host of other countries are already starting to celebrate the 7 to 10 day long New Year.  Millions of people have already traveled hundreds of thousands of miles to visit family...



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Members' Corner

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

The War on All Fact People 

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Digital Currencies

Cryptos Have Surged Since Soleimani Death, Bitcoin Tops $8,000

Courtesy of ZeroHedge View original post here.

Bitcoin is up over 15% since the assassination of Iran General Soleimani...

Source: Bloomberg

...topping $8,000 for the first time since before Thanksgiving...

Source: Bloomberg

Testing its key 100-day moving-average for the first time since October...

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How IPOs Are Priced

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Funny but probably true:

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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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