Economic implications of a SARS/Coronavirus outbreak

[Smurf1976]

Problem is that energy is already loooooooow as it is. It bounced on the vaccine news obviously, but there's really not a great deal less to drop compared to a year ago.

I'm still mulling it over - would love to hear anyone else's input.

Something to consider is that if we go back a very long way then the present oil price is on the high side of normal.

Prior to 1973 when OPEC flexed its muscle, anything much over $25 in inflation adjusted 2020 $ (USD) would have been seen as high and today's $40 would be borderline crisis territory. Crisis as in too high not too low.

From the 1986 price crash when OPEC lost control amidst rising production from the North Sea and elsewhere combined with aggressive measures to curb consumption (eg the French nuclear plants were mostly built for that reason) through to 2003 we saw prices generally in the $20 to $50 range in 2020 $ inflation adjusted.

Prices sustained above $50 (inflation adjusted) have not been normal throughout most of the history of oil going back to the beginning of the modern oil industry, that is drilling as distinct from collecting oil from natural seeps, in 1859.

On the other hand, supporting prices is the reality that the cheaply extractable oil is no longer available in sufficient quantity to meet demand. That's no conspiracy, it's just business - the most easily extracted sources were tapped first and in that context things like Canadian tar sands, US shale or drilling in ultradeep water are most certainly not "easy" or "cheap" when compared to an onshore well drilled cheaply and easily back in 1950 which flowed under its own pressure. As the best is used up, the marginal cost to produce goes up.

On the flip side technology and radical finance pushes in the other direction. To the extent geologists and others worried about future supplies decades ago made a blunder, it's that they assumed nobody would ever lend money at anywhere near today's low interest rates. That cheap money makes a lot of otherwise unviable oil fields profitable and pushes down the cost of production.

 

[Dona Ferentes]

Rationally I agree but cinemas have been remarkably resilient thus far.

TV was going to wipe them out in the 1950's then when that didn't happen VCR's were sure to kill them off in the early 1980's. Then it was going to be large flat screen TV's and surround sound.

That past resilience makes me very cautious in proclaiming any death of cinemas. They've been killed off a few times already but always bounced back.

I never bought the plasma TV for $5k in the early days, when 'home entertainment' was all the rage. Rather, the trip to movies a couple of times a week was experience enough, and then by the time flat screens were $500, I'd reckon I was well ahead, and had a better time along the way.

Now of course, the gaming industry is HUGE. Depends on what source, but gaming eclipses movies and other entertainment

The video game industry raked in a whopping 43.4 billion dollars in revenue. This is about four times the money that was made by the top one hundred movies of 2018....

or

According to the latest figures, the video game business is now larger than both the movie and music industries combined, making it a major industry in entertainment. This year, the global games market is estimated to generate US$152.1 billion from 2.5 billion gamers around the world...

 

[over9k]

Rationally I agree but cinemas have been remarkably resilient thus far.

TV was going to wipe them out in the 1950's then when that didn't happen VCR's were sure to kill them off in the early 1980's. Then it was going to be large flat screen TV's and surround sound.

That past resilience makes me very cautious in proclaiming any death of cinemas. They've been killed off a few times already but always bounced back.

VHS etc had the time element though - no release on video and so forth until they'd milked us all in the cinemas first. VHS, DVD etc releases weren't done at the same time as the cinema release. You don't reckon the ability to *immediately* stream changes things this time?

When "The Irishman" was on netflix very shortly after the cinema release all the cinemas were absolutely seething. I would have thought that a good (or bad, depending on your perspective) sign?

Something to consider is that if we go back a very long way then the present oil price is on the high side of normal.

Prior to 1973 when OPEC flexed its muscle, anything much over $25 in inflation adjusted 2020 $ (USD) would have been seen as high and today's $40 would be borderline crisis territory. Crisis as in too high not too low.

From the 1986 price crash when OPEC lost control amidst rising production from the North Sea and elsewhere combined with aggressive measures to curb consumption (eg the French nuclear plants were mostly built for that reason) through to 2003 we saw prices generally in the $20 to $50 range in 2020 $ inflation adjusted.

Prices sustained above $50 (inflation adjusted) have not been normal throughout most of the history of oil going back to the beginning of the modern oil industry, that is drilling as distinct from collecting oil from natural seeps, in 1859.

On the other hand, supporting prices is the reality that the cheaply extractable oil is no longer available in sufficient quantity to meet demand. That's no conspiracy, it's just business - the most easily extracted sources were tapped first and in that context things like Canadian tar sands, US shale or drilling in ultradeep water are most certainly not "easy" or "cheap" when compared to an onshore well drilled cheaply and easily back in 1950 which flowed under its own pressure. As the best is used up, the marginal cost to produce goes up.

On the flip side technology and radical finance pushes in the other direction. To the extent geologists and others worried about future supplies decades ago made a blunder, it's that they assumed nobody would ever lend money at anywhere near today's low interest rates. That cheap money makes a lot of otherwise unviable oil fields profitable and pushes down the cost of production.

True. The major curveball now though is shale oil and consumption being waaay low.

I'm basically wondering how many more companies are going to the financial wall as all the low hanging fruit has already been picked and with a vaccine actually coming, a ton of capital has been raised by all those still standing, which obviously allows them to weather the storm a lot better.

With that being said, there's a hell of a storm coming. I've taken out a tiny position in ERY - if it goes to its march peak, it'll be a 6 bagger, so even if we get halfway to where march was, that's still a nice triple.

I'll keep everyone updated.

 

[over9k]

Quick shout out to you @over9k ...... Whether people agree/disagree/don't care etc, you have put a lot of time/effort into presenting lots of information on this thread .....

I'm only just catching up on the last few days, but well done!

If you like what you see, subscribe to my onlyfans at...



I kid, I kid. This is no problem at all. I'm a long time lurker but only started posting this year as I quit my normie job & business (actually just before coronavirus his) and am now trading full time whilst I complete a fin planning qualification so I can actually set up my own show. I already manage a bit of capital for a few mates of mine, hoping to actually turn this garage setup I currently have into a proper gig.

 

[cutz]

If you like what you see, subscribe to my onlyfans at...



I kid, I kid. This is no problem at all. I'm a long time lurker but only started posting this year as I quit my normie job & business (actually just before coronavirus his) and am now trading full time whilst I complete a fin planning qualification so I can actually set up my own show. I already manage a bit of capital for a few mates of mine, hoping to actually turn this garage setup I currently have into a proper gig.

Good on you mate, all the best for your gig, keep up the good work..

 

[Smurf1976]

You don't reckon the ability to *immediately* stream changes things this time?

I'm unconvinced either way but I'm seeing cinemas as plausibly somewhat like restaurants, cafes or pubs.

From a strictly rational perspective, eating at a restaurant is a ludicrous idea. You're paying a huge price for the food and the whole experience takes considerable time. As a means of putting kilojoules into your body it's expensive in every way. Even worse for those restaurants which serve up portions barely large enough to feed a mouse.

Likewise alcohol is far cheaper bought from a bottle shop than a pub and there's nothing sold at a cafe that can't be bought far more cheaply somewhere else.

Those things all still exist though, indeed there's a lot more cafes especially around now than there were not too long ago, and the whole thing is embedded in society in a way that's mostly not about simply feeding yourself.

I'm seeing cinemas as somewhat similar to that. A significant number of people may still go even if the movie is available online a month earlier at a fraction of the price. The whole "going to the cinema" thing is cultural and not just about watching the actual movie despite that being the point of it.

I'm thus unconvinced on that one. Streaming is a thing certainly but I'm not convinced that cinemas are about to be rendered obsolete. Time will tell.

 

[qldfrog]

Rationally I agree but cinemas have been remarkably resilient thus far.

TV was going to wipe them out in the 1950's then when that didn't happen VCR's were sure to kill them off in the early 1980's. Then it was going to be large flat screen TV's and surround sound.

That past resilience makes me very cautious in proclaiming any death of cinemas. They've been killed off a few times already but always bounced back.

They could fight technology advance but will not fight regulations
Cinemas are places where people can share feelings and in a way express feelings by laughter booing etc or even attendance numbers
A way for individuals to realise their opinions which may not be allowed to be expressed may be shared:
in a word movie theaters can be subversive and potentially thought making.
As such, they have to go as do plays, libraries and bookshops.
Once fully digital, content can be changed, access removed or made difficult, step by step we are moving into a dictatorship and economically,you can find the winners and loosers.
May seen paranoiac?
But a few posts back:

We need to harden up as a nation. Accept orders

Maybe right for Ebola, not for that flu.

 

[over9k]

Quick breakdown of the year so far:







You can see how value shot up on the vaccine announcement at the end there before almost immediately going NOPE and reversing - not so for r2000 and emerging markets.

IWM is the r2000 etf and IEM is the emerging markets one. TNA to triple lever into the r2000, EDC to triple lever into emerging markets. Yes I hold.

 

[over9k]

Sweden used "No response, the virus is nothing to worry about and people will do the right thing":



It's not very effective!


Jokes aside, the weekend was pretty quiet. A whole ton of "gee, you think?" analysis & news:





There's a whole bunch of announcements of or just calls for more stimulus for europe as more & more & more headlines talking about "might have to extend lockdowns" or "travel bubble will need to be postponed" or other similiar stuff is posted every other minute, but all that is is confirming this segment from a couple of weeks ago:

View attachment 114244

Translation: Europe is boned and markets will be totally reliant on stimulus.

Like I said, europe's boned and totally reliant on stimulus, just like the U.S, though the yanks have already passed a massive package earlier in the year and that's not actually depleted yet, which is in stark contrast to europe's that is still being thrashed out whilst the current package remains veto'd by poland & hungary.

For those who don't know how the EU works - with the big stuff, any (every) member nation has veto power, so big stuff can only get done with unanimous support, making necessary action incredibly difficult. It had the same problem in the GFC.


Asia has similiar stuff going on with things like travel bubbles being "delayed":



And then shelved entirely:



But as I said before, literally none of this was unexpected, and it's going to get a lot worse yet. Position yourselves accordingly.


You know, NOT like this height of stupidity:




But for the aforementioned reasons and the following:



I'm feeling cautiously optimistic about my bet against energy, and futures are looking good for the barbell spread still:



I'll obviously update with any more relevant info for tonight/today if I see any. So far, everything's just exactly what you would have expected.

 

[over9k]

Endless headlines like this now, even the talking heads have finally figured things out:



On account of, you know, this kind of data:



Consequence? Everyone are bricking it:



And you know the markets are especially worried when gold's trajectory changes:



Chinese bond yields next:



See how they took off when the vaccine was announced on the 6th as everyone went risk-on and debtors had to cough up more to get a loan and then reversed trajectory a few days ago when everyone realised that winter is absolutely coming and thus we're still all f***ed?



Finally, for all the newbies, econ 101 kids just starting out etc, we have a great little thought exercise on what data you SHOULDN'T pay attention to/shouldn't care about.

At this particular moment, why shouldn't you pay attention to data (and sensationalist headlines) like this?



Answer: Because interest rates are so low. Remember, ignoring economic cost, risk, and expectations of future earnings growth, if you can borrow money at 0% interest then you only need a dividend yield of 0.1% (or a P/E of 1000) to be able to make literal free money. If the interest rate is 1%, you'd need to yield 1.1%, so on and so forth.

Hence why if you dump the interest rate down to nothing, stocks will be bid up to somewhere near where their dividend yield matches whatever the interest rate is (again, without factoring in economic cost, risk, expectations for the future etc), and so that's exactly what's happened virtually everywhere in the world as virtually everyone have dumped their interest rates.

And remember, the inverse is true too, so even ignoring risk of getting a dividend lower than expected, currency risk, economic cost of alternatives etc etc, if you were going to borrow cash to pump it into a dividend stock, you'd want to be very sure your lending (interest) rate isn't going to increase or the stock will be sold off until it matches a yield of whatever your new interest rate is, most likely wiping your gains out.

In case anyone's wondering why you often see stocks which are trading at huuuuge price/earnings ratios (so with tiny yields) and yet still growing, this occurs when the market is pricing in (that's the literal term for it, pricing in) expectations of the earnings being higher in the future than they are now. So you might take a 0.9% yield this year in the expectation that you get 1.2% next year, putting you at 2.1% total, which is higher than the combined 2% you'd be paying in interest over that period. Make sense?

And again, the inverse is true too - markets will want a pretty serious dividend now if they're doubtful they're going to get it next year and the year after and so forth as the money received now needs to make up for the lack of money received later. You can take a look at GEO's huge dividend yield at the moment to see what I mean.

 

[over9k]

Astrazeneca data is out. 70% effective. Different dosing regimen was 90% effective but little info on that. Nobody's talking about it so it might be a waaaay higher dose (meaning diminishing "returns per dose" as you up the dose).


The fact that all three vaccine results have been released before open on monday seems like a hell of a coincidence to me. Futures have obviously all gone bonkers, everything's in the green, but this will be another great comparo to make to the previous two releases. The others took just a day to flip trajectory after vaccine reactions, so we'll see how this one does. This was supposed to be the one that was going to be rolled out to the poor countries so now the politics game begins.



They still haven't even approved the pfizer -70 one for emergency use I don't think so let's not go thinking this actually changes anything medium-term.

 

[qldfrog]

View attachment 115118View attachment 115119

Astrazeneca data is out. 70% effective. Different dosing regimen was 90% effective but little info on that. Nobody's talking about it so it might be a waaaay higher dose (meaning diminishing "returns per dose" as you up the dose).


The fact that all three vaccine results have been released before open on monday seems like a hell of a coincidence to me. Futures have obviously all gone bonkers, everything's in the green, but this will be another great comparo to make to the previous two releases. The others took just a day to flip trajectory after vaccine reactions, so we'll see how this one does. This was supposed to be the one that was going to be rolled out to the poor countries so now the politics game begins.

View attachment 115120

They still haven't even approved the pfizer -70 one for emergency use I don't think so let's not go thinking this actually changes anything medium-term.

actually I think it does, no one really care about vaccine working or not, all what is important is that the powers have decided
we have vaccine announcements so we have a de facto political decision to restart the economy in 3 to 6 months: the time to release this so called vaccine and start plunging needles
France is back in lockdown, infection rate was falling before the lockdown..who cares..lockdown anyway:
the more data, the more it is a conspiracy and under that light, it has been decided to restart in 3 to 6 month..not before, we need to show more deaths this winter, there is no autocracy without fear;
So make sure you get ready for this slow confirmation of economic restart under new rules once we have had a last lockdown..probably US
so nyse down then restart after xmas/february

 

[over9k]

Yeah I'll be nuking a few positions just before xmas frog

 

[over9k]

So you've all heard about the zombie companies that are hanging by a thread, so here's some data on them:





$1.4 trillion in junk debt being burned through that could go bust before the recovery. It's going to be a hell of a firesale when some of them inevitably don't make it.

Here are the futures 2hrs before open on a vaccine-day:



As we can see, the r2k looks to be the overwhelming beneficiary yet again. Today's kind of a write off (anomaly) on account of the vaccine, it's the other four days of the week that are going to be telling. The past two weeks the r2k has been the best place to be on the other days as well, so I'll be holding again.

 

[over9k]

Here we go:



I have no idea why a 1+0.5 dose would be better than a 1+1, but I'm not an immunologist. Astrazeneca's stock price is actually down for some reason. This was co-developed with oxford, so I suspect it's not one they're able to make bank from, unlike the others which were privately developed. It's also the one that the poor countries want and will be paid by the first world so I suspect the negotiations have all been for at-cost purchases.

MRNA is up 6% premarket, AZN is down 2%.

 

[qldfrog]

Here we go:

View attachment 115130

I have no idea why a 1+0.5 dose would be better than a 1+1, but I'm not an immunologist. Astrazeneca's stock price is actually down for some reason. This was co-developed with oxford, so I suspect it's not one they're able to make bank from, unlike the others which were privately developed. It's also the one that the poor countries want and will be paid by the first world so I suspect the negotiations have all been for at-cost purchases.

MRNA is up 6% premarket, AZN is down 2%.

Difference between 2 doses and 1+0.5..?
The amount of BS is unprecedented..it means 2 injections.
Funny how similar to just getting exposed..
70% success rate too
But this has been decided, billions more to prepare the greatest show on earth the marshall plan of sgiipping refrigerated containers everywhere etc i already imagine the tv news
During that time, in the real world,while old people and sick people are still dying..damned virus., we have added debt and real economic impact:

Desperate Eastern Cape residents are resorting to eating grass to survive | You

Homelessness, poverty, starvation: that’s the grim fallout of lockdown in the Eastern Cape where desperate residents are resorting to eating grass and tortoises to survive.

www.news24.com

And https://www.ucanews.com/news/hunger-rife-among-thai-poor-as-covid-19-batters-economy/89639

All relative isn't it.
and zoom is not saving them

 

[over9k]

Alright gang I've gotta clock off early today so I'll update everyone with a big post this afternoon, but for now, here's how things went:



As you can see, it's just the last two mondays all over again. Same goes with everything else - airlines up, energy up, tech massacred etc etc. If things follow the same pattern as the last two weeks, this is all going to all but reverse itself within a few days. I haven't even sold my small bet against energy despite it being slaughtered today.

 

[over9k]

Airline news & data:

So we've all heard about how qantas is going to require a vaccination before it lets you fly on its jets. Not surprising in the slightest:

Qantas will ban travellers who don't have the COVID vaccine — can other businesses follow suit?

Luggage, plane tickets … vaccine passport. Travellers may soon have to carry around proof they've been vaccinated against COVID-19, but could that rule be extended to other sectors as well?

www.abc.net.au

The question is of course how they're going to actually implement such a policy. Well, wouldn't you know it, qantas isn't the only company thinking this way. In fact, the entire industry is working on this problem. The global airline lobby, the International Airline Travel Association (IATA) is working on an app type system:

Bloomberg - Are you a robot?

But the unfortunate reality is that this simply isn't going to be enough for a lot of airlines. Airlines are the absolute definition of the "zombie companies" we keep hearing about (not alive, but not dead either) as they're not operational but are making payroll, rent etc with stimulus packages (or debt raising) and the like.

I posted this image before with the opinion that this rally was way, way, way too premature/optimistic:



And here's why:



In short, plenty more are forecast to go because they now have seasonality on both travel and the virus (meaning more lockdowns) to contend with.

Bloomberg - Are you a robot?

"While a late-summer rebound in flights has limited airline failures in the past few months, a new wave of Covid-19 lockdowns combined with the usual winter slump in traffic will push more toward the brink", Hatcher said.

Fact is that many more just aren't going to make it.

 

[over9k]

Movie theaters are also another zombie business that is boned for the foreseeable future. They literally require crowds to operate, so are always first on the restriction/lockdown chopping block whenever new lockdowns are announced.

ROKU is surging as a result.

 

[over9k]

Alright so your workplace might have casual fridays, well, this market has vaccine announcement mondays!

Jokes aside, astrazeneca announced a successful vaccine that can be stored at normal fridge temperature and is 70% effective. Here's how the three successful vaccines compare now:




It's better in that it's easier to store/transport, but it's worse in that it's not as effective as the alternatives. In other words, if you can get/use the moderna vaccine, you will choose it over the astrazeneca one.

Now, the market reaction? Well it was almost identical to the previous two mondays, with the r2k being the overwhelmingly best place to be:



Energy going bonkers but tech getting smashed:



And all the reopening dependent stocks like cinemas, airlines, shopping centres etc etc all quite predictably also went mad, just like on the previous announcements:



All of which is pretty predictable/exactly what you'd expect.

Semiconductors were also a great place to be yet again, showing they run on both vaccine and non-vaccine days alike:



What wasn't as you'd expect, however, was the actual vaccine stock price changes. Whilst the market overall was (today at least) very happy with this announcement, vaccine/medicinal stock traders were NOT.

Check this out, astrazeneca actually DROPPED (along with pfizer) whilst moderna GAINED:



And, moderna has absolutely been the pick of the vaccine stocks:



Which tells us that the people who are in the know with this stuff are NOT impressed with the astrazeneca vaccine (or the pfizer one) and absolutely consider the moderna one to be the best of the bunch. In fact, even though it's a much easier to store & transport vaccine, I suspect that a 70% success rate simply *isn't* good enough.

This tells us we're all most likely to get the moderna one here in the first world/that it's the best product to date. This confirmed my gut instinct when I bought some moderna so my wallet is very happy with this.

But the fact is that not even the original pfizer one has actually even received emergency approval for rollout yet, and so despite all the exuberance of today (and last monday, and the one before that), virus numbers continue to skyrocket with modelling predicting another 30,000 people to go just before christmas, let alone after:



And I actually think it's going to be worse than that as we have thanksgiving, which along with christmas is the mother of all spreader events, just a couple of days away.

But despite all of this, the americans just don't seem to care. Authorities are advising people to skip thanksgiving:



And the american public simply couldn't care less:



Everything I've seen shows a roughly two week lead time between infection and positive test result, so if that's correct, we can expect a pretty serious spike in cases mid december and with the reality that there is no way they're going to cancel christmas, the same thing occurring in mid january as well.

For these reasons, I have held my bet against energy despite it getting massacred today.