Economic implications of a SARS/Coronavirus outbreak

USA vs Europe:


The consensus among the talking heads is that the U.S is about two-ish weeks behind europe at the moment, so let's take a look at where europe is now and see if we can extrapolate that to the U.S a couple of weeks from now.


In short, the lockdowns are having the exact effect you'd expect. Virus numbers have subsided/turned the corner:



But economically speaking, it's a bloodbath, shown by new PMI data out today:



Result? Even the talking heads can see that europe's heading for another slump:





The one major difference is that the yanks do thanksgiving whereas europe does not. Thanksgiving will be the mother of all superspreader events, so whilst we might have numbers in the U.S subside slightly, we can expect a huge bounce after thanksgiving/just before christmas.

The U.S and Europe obviously both do christmas though, and so both are going to see major spikes after that. The difference is that the yanks are likely to be starting from a much higher level on account of thanksgiving and so will have much worse post-christmas numbers.

The futures for all the indices are in the green at the moment, but we all saw what happened the other two weeks until another vaccine was then announced.


More updates later.

Biden's been allowed "transition access" or words to that effect. A tacit admission by trump that he's lost.




Big curveball, but a good one. Markets are loving it. But it does mean that today isn't comparable to the last two tuesdays.

I mentioned in a previous post about how quickly markets are reacting to shutdown & virus news now, and I've noted through this afternoon that futures, after going nuts in response to trump allowing biden to begin the process (so a tacit concession of losing) and check out this comparo to the futures in the previous post above:



All the premarket has been nothing but virus news:






And we're already seeing a solid move in the nasdaq and a drop in the other indices (though with the r2k still on top). It'll be interesting to see if this trend continues throughout the session and I'll obviously post the close numbers once it's over.

I would be interested to know more about the reaction to the virus outside the great reset target countries: aka western and se asia
Eastern block?, africa, latin america/india..kind of ,and China..well the later fuel the movement but as far as i can see except a few shows for the west, china is back 100pc

qldfrog said:

I would be interested to know more about the reaction to the virus outside the great reset target countries: aka western and se asia
Eastern block?, africa, latin america/india..kind of ,and China..well the later fuel the movement but as far as i can see except a few shows for the west, china is back 100pc

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Interesting economic figures ahead.

Alright so it was an interesting day. Here are the close numbers:



Three things to note: First, the r2k was yet again the play of the day like it has been every day since the vaccine announcement bar one. It's on track to crack a 20% run by the end of the month.

Secondly, I noted in the previous post how after the biden transition announcement madness, futures had trended towards tech once again, and just take a look at the nasdaq numbers compared to the transition announcement period - 0.3% vs 1.3, or over 4x what they were at that time.

Finally, it was also the first day in quite some time that the S&P actually beat the dow, meaning that industrials AND tech were (relatively) worse off and other sectors (like energy and the banks) screamed. Banks are particularly sensitive to uncertainty for what I would hope are obvious reasons and so that makes sense when markets get some in the form of biden beginning the transition.

But after all this madness, well, we saw a pretty serious move into big tech. After being negative, the fangs trended up ever since the biden announcement madness had subsided and ended deep into the green, beating even the r2k:



The only area that didn't see some love was stay/work from home like zoom, but that went green in aftermarket trading and I've held onto that on account of their earnings being released in a few days.

As of 4hrs after market close, all the futures are in the green with the nasdaq being the highest - so we're seeing yet another repeat of the week of monday the 9th: Madness on monday, then back on trend.

Microcaps are still the overwhelmingly best place to be. I wonder if we'll get a 4th vaccine next monday to blow half my position(s) out yet again.

More airlines news:



And the data behind the headline:

Alright meaty post coming up:

The headache we've had is that we've had three vaccine announcements in a row, which has obviously thrown three huge spanners in the works one after another after another and the U.S election just a few days before they started as well just to really rub the salt in. Markets were (and have kept doing so on days other than monday) positioning for a pretty bleak winter period and if we take a look at the fangs, that hasn't actually changed:



As you can see, the megatech has been on a solid uptrend ever since its bottom-out after the first vaccine was announced. Sure it dropped a bit here & there after the other two vaccines but it's not like it's kept dropping (or just flatlined) at at time when the whole rest of the market has been going bonkers.

Yes, there have been better places to be on account of the completely unpredictable reality of three vaccines being announced in a row (and hey, if you bought after the first one & then held despite all the virus data, state governors telling you lockdowns are coming etc etc telling you not to then you've been very lucky and good for you) but we can see that the megatech is anything but done for.

Point is, if there was anything that was going to finish big tech off, you'd think that three vaccines in a row would do it, but that's not what we find. If we look at things on a slightly longer time frame, after the first vaccine announcement, the second two haven't actually done anything to the trend whatsoever. This is a good sign and is why I have continued to hold my position because even if we get a fourth vaccine next monday, megatech's still been a great bet.

I know I keep saying what should happen after monday every week and then getting smashed by another vaccine announcement on the weekend, but what I'm pointing out here is that the additional vaccines haven't been bad news for big tech. In fact, they haven't effected it at all - it's kept on both a post-vaccine-bottomout trend and longer term (since the march bottom-out) trend the whole time:



Which is in stark contrast to the regular tech index, which after a post-bottomout-rebound, has gone absolutely nowhere:



The regular tech sector looks like it's going to flatline in a market that will have run near 25% for the month, making it an absolutely moronic investment.


The key takeaway here is to remember that tech, and megatech, are not the same thing. Remember when I talked about the barbell spread, I was talking about positioning based on company market cap, not sector. That seemed like a subtle distinction, but it wasn't.

For a simple example of the reality of how we're now in a winner-take-all type of market everywhere, let's take a look at what's changed the most since the first vaccine announcement: Energy.


And here it is:



NRGU is a triple leveraged "big oil" etf and ERX is the triple leveraged energy sector etf. As you can see, big oil has run over twice what the energy sector as a whole has since the vaccine announcement on the weekend after the 6th.

Looking at this data we can see how the barbell spread applies to industries other than tech on account of the aforementioned winner-take-all nature of the market we are now in. Remember, the barbell spread is determined by market cap, not sector.

To put things another way, what the vaccine news has done is not change what type (by market cap) of companies are getting the spoils, but rather, simply which industries the winners are taking everything in, which is a very different thing.

We will obviously need to keep this in mind when it comes time to reposition for a post-vaccine/post-winter play, which isn't too far off. NRGU's looking very good at this stage

I wonder if there's a sweden inverse etf. Hmm.

over9k said:

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I wonder if there's a sweden inverse etf. Hmm.

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global punishment to the kid not playing the game; facts are still bloody good, better being Sweddish than any other European...
figures just figures...not headline, but you are right over9k, headlines are more important to the market: remember: psyche than science or numbers as you know as well after the vaccines news releases, etc so yes probably better to short them and go into a US heading for lockdown, or better the french lockdowned one...

qldfrog said:

global punishment to the kid not playing the game; facts are still bloody good, better being Sweddish than any other European...
figures just figures...not headline, but you are right over9k, headlines are more important to the market: remember: psyche than science or numbers as you know as well after the vaccines news releases, etc so yes probably better to short them and go into a US heading for lockdown, or better the french lockdowned one...

Click to expand...

Yeah but whatever's in the past is in the past frog - we only need to ask what's going to happen from here on out. The countries that were doing the best might have the most to fall for example.

Alright I'll start with the day and then get to the data etc to put it all in context.

Here's the day:



Only the nasdaq ended the day in the green with big tech screaming (along with zoom and the other stay-at-home plays). The r2k plummeted on open and then spent the whole day recovering and ended above the dow.

But the day was basically completely defensive. Almost everything was massacred just like on all the other defensive days we've had until yet another vaccine gets announced and the whole thing goes bonkers again (or trump finally admits he's lost).

But there were a few notable exceptions and those exceptions are the telling ones.

First, megatech pulled and pulled hard, making the nasdaq the only major index in the green:



Zoom, docusign etc flew:



And the market seems to have more than made its mind up that it will be the moderna vaccine that gets rolled out and so that's more than off to the races, well over 10% above its post-announcement peak:


And astrazeneca thus dropping:



Pfizer also dropped but I think we all knew that was never going to get rolled out unless we had no other choice.


But of course, one day does not a trend make. Here's the megatech and zoom post-vaccine-bottomout:



Steady hands have been rewarded here and futures suggest they are going to continue to be with the trends I identified for the day continuing into the futures numbers 6hrs after market close:



And I'll explain why in the next post.

Ok so a whole bunch of bad economic and bad virus data was dumped just before open.

The most easily demonstrable one is here:







If you take a look back to my other posts, the world cracked the 50 million mark on the 12th of november. So that's ten million cases in a fortnight.

Result?



U.S hospitalisations were 30% above their previous peaks a week ago (60,000 vs 80,000 and counting). Remember, the virus is ripping through the medical personnel on the front lines of this stuff so we have an increase in virus numbers at the same time as a decrease in medical personnel numbers. I should hope the consequences of which would be obvious.

If the yanks aren't worried, they should be. And the econonomic data dumped shows that they actually are:

The economic data was sobering. Jobless claims have just broken a flattening out and have in fact now changed trajectory:




And consumer confidence is, honestly, exactly where it should be. Even the general public are starting to get worried:



And it's little wonder with 30 states and counting now having cancelled school:



All of which we can expect to see get worse as the virus continues to spread.

I have kept my small bet against energy. I'm actually considering adding to it now that energy is at a little peak after three vaccine announcements on the trot.

Ok now for semiconductors, because we got some economic data that explains what's going on there.

I've mentioned quite a few times how semiconductors have just pulled and pulled and pulled and pulled through this pandemic, even on vaccine announcements, and I should hope the reason why would be pretty obvious: People stuck at home buying all kinds of electronic goods to keep themselves occupied: TV's, computers, thermomixes, playstations, so on and so forth.

Well we have a bit of data on this now.

For starters, it's one of the few things that the yanks actually import a bit of (pretty much entirely from asia), so the balance of trade has been thrown waaaaay off normal, which is only logical - an increase in demand for something you import:



Gets you a trade deficit in it:



But of course, nobody's actually going out and physically buying, well, anything any more are they?

Result:



And, of course, someone has to actually produce (mine) all the stuff that goes into those circuit boards, so metals (copper in particular) are doing very well at three-year highs:





Result of all this?

The U.S west coast, the port/places of entry for microchips/tech/gadgets for most of the rest of the country (on account of asia being, you know, across the pacific, not the atlantic) cannot unload the ships fast enough:





And so we're now seeing flotillas of container ships now joining the oil tanker flotillas which have been backed up for weeks with nowhere to actually put their oil on account of the storage tanks etc we spoke about earlier all being full. A flotilla of almost a dozen cargo vessels sits anchored just south of Los Angeles this weekend, waiting for berth space. Around the twin ports of L.A. and Long Beach, shipping containers are already stacked five and six high -- the maximum the fire department will allow.






Back in april-march-june when the saudi's just bought up/leased every tanker they could find tanker rates cracked $250,000 a day.

Found the smoking gun for the moderna surge:

https://www.reuters.com/article/hea...ses-of-moderna-covid-19-vaccine-idUSKBN2841GE

EU's ordered 160 million doses. Undoubtedly more will follow around the world. I hold, won't be selling.

I don't know how I missed this. I want to say I was too engrossed in all the economic data that was dumped just beforehand. Sorry everyone.



Also, just checked the jobless claim data, it's the worst in 5 weeks. They've well & truly turned the corner.


Hospitalisations are now at 89,000, 1.5x their previous peak of 60,000. Deaths now at record highs at nearly 2,200 a day.

I have to say, we are living in probably the most fascinating economic time of my entire life.

There is a pandemic raging across the USA (and the world), infecting tens of thousands of people every day, with around 270,000 dead in the USA as a result (1.4 million globally), a plethora of critical industries and sectors have been decimated, the US unemployment rate is up from 3.5% in January to 6.9% last month (after hitting 14.7% in April).... and the DJIA is currently at all time highs.

It just doesn't add up. I understand that people are betting on a vaccine and better economic times to come, but it just seems to me that caution has been thrown to the wind.

greggles said:

I have to say, we are living in probably the most fascinating economic time of my entire life.

There is a pandemic raging across the USA (and the world), infecting tens of thousands of people every day, with around 270,000 dead in the USA as a result (1.4 million globally), a plethora of critical industries and sectors have been decimated, the US unemployment rate is up from 3.5% in January to 6.9% last month (after hitting 14.7% in April).... and the DJIA is currently at all time highs.

It just doesn't add up. I understand that people are betting on a vaccine and better economic times to come, but it just seems to me that caution has been thrown to the wind.

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Ok greggles I can actually answer that one for you pretty quickly:

Markets had a big selloff before the election on the 3rd as we all know what happened last time and nobody wanted to take the risk. So markets went into the start of november loooooow.

Then the election on the 3rd. Markets took off like a gunshot. Then a vaccine on the 9th sent them soaring further. Then another one a week later. Then another one a week after that. All four events took a market that had sold off in late october and sent it absolutely stratospheric.

If not for the election, it wouldn't have looked nearly as impressive. Remember, the pre-election selloff gave the market a very low base to take off from.


Longer term, remember that main street has been slaughtered whilst wall street has survived and taken the spoils. In other words, there has been a marketshare/wealth transfer from main street (which obviously has nothing to do with the stock market) to wall street, so the stock market soars whilst mum & dad businesses etc get massacred.

I have no doubt that the net effect is probably negative or zero-sum at best, but because a lot of the wealth lost by main street has been collected by wall street, the stock market soars.


There's also the fact that interest rates are so low with no sign of changing, allowing (enabling... requiring) stocks to be bid up to ridiculous p/e levels on account of the fact that returns only need to be tiny in order to service debt now.


I hope all of this makes sense? Let me know if there's anything you need clarifying, I'm more than happy to help

over9k said:

Ok greggles I can actually answer that one for you pretty quickly:

Markets had a big selloff before the election on the 3rd as we all know what happened last time and nobody wanted to take the risk. So markets went into the start of november loooooow.

Then the election on the 3rd. Markets took off like a gunshot. Then a vaccine on the 9th sent them soaring further. Then another one a week later. Then another one a week after that. All four events took a market that had sold off in late october and sent it absolutely stratospheric.

If not for the election, it wouldn't have looked nearly as impressive. Remember, the pre-election selloff gave the market a very low base to take off from.


Longer term, remember that main street has been slaughtered whilst wall street has survived and taken the spoils. In other words, there has been a marketshare/wealth transfer from main street (which obviously has nothing to do with the stock market) to wall street, so the stock market soars whilst mum & dad businesses etc get massacred.

I have no doubt that the net effect is probably negative or zero-sum at best, but because a lot of the wealth lost by main street has been collected by wall street, the stock market soars.


There's also the fact that interest rates are so low with no sign of changing, allowing (enabling... requiring) stocks to be bid up to ridiculous p/e levels on account of the fact that returns only need to be tiny in order to service debt now.


I hope all of this makes sense? Let me know if there's anything you need clarifying, I'm more than happy to help

Click to expand...

I understand what you are saying, and I appreciate that wealth has just been transferred from one group of people to another, but it seems to me that there are other factors at play.

Those Wall Street people had jobs before and they have jobs now. Those Mums and Dads who owned businesses had jobs before and don't now. They're probably on unemployment benefits with a mortgage they can no longer pay. This must be happening all across the country en masse and eventually the chickens will come home to roost.

I just don't feel that this is a time for celebration and running up the stock market. The true economic effects of this pandemic are yet to be fully felt in my view.

There is a real economic cost to be paid for all these destroyed industries and small businesses and I think that the market is not currently figuring that into the equation. It seems to me to be irrational exuberance. We are not out of the woods yet, far from it.

This V-shaped recovery seems to be out of step with reality and I think the market has overshot the mark by a significant margin.

Time will tell of course, but I remain pessimistic.

Here's some data for the P/E ratio's by the way




Also, lol, I knew I forgot something before greggles:

Stimulus.

Markets have been overwhelmingly reliant on stimulus and boy has there been a lot of it. Without more money, the government shuts down on the 11th of december and the stimulus program ends on the 31st just for everyone's information:


I'd like to think that a new package will finally get agreed on before then, but hey, we all know politicians.


If the yanks have the winter virus wave we all know they're going to and combine that with no stimulus package, dear god...