Economic implications of a SARS/Coronavirus outbreak

[qldfrog]

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.

you would be right if "rules" of economics were to apply, but they do not; there is a massive voluntary transfer of wealth toward the .01%
stimulus and stimulus, not so much for the corner stores or sacked workers doing it hard but for the master of the universes, paid by debt to be repaid by the losers: you know the 99.9 we all belong;
Under the guise of helping the street and protecting the 80+olds from ever dying, the biggest wealth transfer we have even seen and i would bet it will not end nicely, not by basic economics..like $ value collapse etc, all that would only work in a free market, which we are not.

SO whether you like it or not, your best bet is to join the robbers, knowing very well that your chances are small to win when the masters will decide to stop the market, release or stop a pandemic or seize assets with a long list of good reasons and a pretext of robbing the richs to distribute to the poor.
reduce your liabilities: fixed assets, individual bank accounts move to crypto and gold, and play the game following Mr Ducati or Mr Over9k
probably no radical drama to expect until next year..July August when holidays are priorities in the Northern hemisphere and legislative framework will be in place.
I expect this to be true in both Europe and US and so for the rest of us : July 2021 deadline..let's see

 

[qldfrog]

in the meantime, on the Aussie front, while everyone is oblivious and cashing JobKeeper to get the latest XBOX:

China says coal imports failed environment standards amid stalled Australian shipments

When asked about Australian coal stalled at Chinese ports, foreign ministry spokesman Zhao Lijian said "we found that many coal imports have failed to meet environmental standards".

www.brisbanetimes.com.au

 

[over9k]

How about retail? We're heading into thanksgiving/black friday/cyber monday, so let's take a look.


Adobe analytics are unsurprisingly forecasting a massive increase in online sales, way above trend this year, of a 33% increase year-on-year vs the 15%-ish it had been trending at:



Which is obviously pretty unsurprising. What will be interesting will be to see if the spoils of e-tail all go to the winner like we've seen in the other markets like the fangs, energy with big oil etc etc. Historically, the little guys actually get a bigger bump over this period than the large players do:




So it'll be interesting to see if that still happens this year on account of the virus/lockdowns/social distancing/everything now being online etc etc curveball.

If anyone wants to read the full report, you can find it here: https://www.adobe.com/content/dam/www/us/en/adi/2020/pdfs/Adobe_Holiday_Forecast_Press.pdf

 

[qldfrog]

How about retail? We're heading into thanksgiving/black friday/cyber monday, so let's take a look.


Adobe analytics are unsurprisingly forecasting a massive increase in online sales, way above trend this year, of a 33% increase year-on-year vs the 15%-ish it had been trending at:

View attachment 115342

Which is obviously pretty unsurprising. What will be interesting will be to see if the spoils of e-tail all go to the winner like we've seen in the other markets like the fangs, energy with big oil etc etc. Historically, the little guys actually get a bigger bump over this period than the large players do:


View attachment 115343

So it'll be interesting to see if that still happens this year on account of the virus/lockdowns/social distancing/everything now being online etc etc curveball.

If anyone wants to read the full report, you can find it here: https://www.adobe.com/content/dam/www/us/en/adi/2020/pdfs/Adobe_Holiday_Forecast_Press.pdf

I noted the fact many want to favor smaller retailers, basically avoid Amazon...
So should Amazon be a loser?
NO as they win on all side, their AWS platform and cloud solution is omnipresent and manages most of the smaller retailers online sale sites..
amazon... amazing....

 

[sptrawler]

By the way @over9k thanks for all this great info.

 

[sptrawler]

I noted the fact many want to favor smaller retailers, basically avoid Amazon...
So should Amazon be a loser?
NO as they win on all side, their AWS platform and cloud solution is omnipresent and manages most of the smaller retailers online sale sites..
amazon... amazing....

Uber eats for shopping, but it seems to be more focused than eBay, by also having the warehouse model incorporated.

 

[over9k]

trawler - No problem at all. If there's an oil trader on here I can bounce an idea off of it'd be great if they could sing out - I'm watching a couple of movements in the oil market and if they haven't normalised themselves by next week I'm going to be thoroughly confused/in need of an explanation so I'll post it all here if things don't do what I (had) expected.

 

[over9k]

Just saw some more info on retail - looks like there's been a massive increase in "curbside pickup" (what we might know as click-and-collect) this year and this is what smaller retailers, bricks & mortar guys etc etc are expecting to see on black friday/cyber monday rather than the traditional crowds.

Marks & spencer have just announced that they're not even going to open on boxing day - they'll still have the traditional boxing day sale, but it'll be entirely online and you just buy online and either pick your item(s) up over the coming few days or get them posted to you.

In other words, even the businesses themselves have pretty much given up on traditional bricks & mortar/buy in person retail at this point.


I bought UPS , FEDEX & International paper aaaaages ago in anticipation of nothing getting back to anywhere near normal for way way longer than everyone were expecting (nor ever returning to "normal") and they've been rockstars so far:



I still hold all three, with no plans to sell, and still think all three are a buy even now.

 

[over9k]

More bad news on the jobs/virus front as crowd-dependent businesses have now realised the barrel they are staring down.

With the realisation that winter this year is going to shut the country down in a similiar fashion (probably worse) to how things were back in march, disney has just laid off another 4,000 people. They were planning for 28,000 to go and have revised the number to 32,000:

Disney increases number of planned layoffs to 32,000 employees

Walt Disney Co. is planning to shed 32,000 employees by the end of March — 4,000 more than previously announced — as the coronavirus pandemic continues to hammer its parks and resorts business.

edition.cnn.com

To be fair to the company, this year they've lost $2.8 billion and counting, but with the stimulus payments for unemployment etc running out on the 31st, if the politicians don't get something done within the next four weeks, these people (and many others like them) are absolutely f***ed.

The only ray of hope they seem to have is that this winter looks like it's going to be a relatively mild one:



And so numbers/lockdowns might subside slightly earlier than you might otherwise think. Sadly, there's going to be plenty more news like this in the coming days/weeks.

 

[over9k]

Alright I think I figured my oil problem out.


Remember when I was talking about how all the tankers are just anchored off the coast with nowhere to put their oil as all the storage tanks are full (and have been for months) etc etc?

Well for a brief moment, they weren't:



And boy for the life of me I could not figure out why. I mean ok, we've had the election plus three vaccine announcements in a row and so energy and the oil price itself has been on an absolute tear, spiking on the day, then flatlining (or subsiding slightly) for a few days before just spiking all over again every time a vaccine gets announced, just like much of the rest of the market has.

So oil futures just running and running and running and running (in parallel with much of the rest of the market, especially energy) pricing future expectations in made sense:



But the actual drop of inventories (so the burning of oil itself) has had me completely stumped. I mean, we even had more lockdowns just announced after the virus numbers reached a threshold so wouldn't that mean LESS oil consumption?

I mean, surely the miniscule bounce in air travel for thanksgiving wouldn't be enough to effect crude stockpiles? Or at worst, it would have been offset by the fresh round of lockdowns now in place?

I checked the data & everything. There's been sweet f**k all uptick in travellers really, I mean ok the headline talked about a million or so extra people travelling by air this week but that's actually nothing in context compared to a normal year:



So I mean, what gives?

Well it turns out that the previous post/headline about americans just not giving a f**k and still travelling for thanksgiving was actually correct. The actual number of people travelling for thanksgiving is almost as high as it was last year.

The difference is that whilst people have avoided air travel (because, you know, crowds at airports plus lots of people crammed into a relatively small space in an aeroplane) they've had absolutely no issue with travelling by car (for what I would think are obvious reasons) and so they've done exactly that with just an estimated 4% reduction compared to last year:

https://newsroom.aaa.com/2020/11/fewer-americans-traveling-this-thanksgiving-amid-pandemic/



And so an awful lot of fuel tanks have been brimmed this week/we've seen a very similiar spike in oil consumption this week as compared to all the other weeks of this time of year. Total number of travellers air & road combined is only down about 10% or so compared to last year, and that's where the big increase in oil consumption has come from.

This is actually kind of good as we now know that all those people are going to burn the same amount of fuel driving home again and absent some pretty big lockdown measures like the closure of state borders or something (and as if that's going to happen) we can also expect christmas travel (and therefore oil burning) to be about 90% of it was last year as well.


If I've got this right, with a roughly two week lead time from infection to positive test, we should see a drop in oil about two weeks after thanksgiving as virus numbers spike and trigger more lockdowns and then another bounce shortly after, i.e about a week or so before christmas.

There's also new year's eve a week after that but I suspect NYE's going to be pretty subdued this year (and I don't think a lot of oil gets burned because of NYE anyway).


If this is all correct, the only curveball that remains is what the new year is going to bring. I have to wonder if we're not going to see a pretty serious rally in a kind of pricing in of "we're on the home stretch and freedom is just a few months away" kind of thing combined with the fact that vaccine deployment is scheduled to have well & truly started by then.

So if I've got all that correct, the time to bet on oil/the oil companies is in a trough about two-ish weeks from now. And wouldn't you know it, with a spike in oil price and the vaccines all announced, leveraged oil etf's have literally just been put back on the market ready for silly people like me to do silly things with them:




But if there's an oil trader out there that thinks I've completely missed something here then don't hesitate to say so, I absolutely want any/all input I can get.

 

[over9k]

BREAKING: ASTRAZENECA f***ed THEIR VACCINE TRIAL UP




Remember the post about the people who got 1+1 dose vs 1+0.5 dose? Well the 1+0.5 wasn't supposed to happen. It was a manufacturing error.

AstraZeneca manufacturing error clouds vaccine study results

“You’ve taken two studies for which different doses were used and come up with a composite that doesn’t represent either of the doses," an expert said.

www.nbcnews.com

Not only that, but they then took the 62% effectiveness of the 1+1 dose and averaged it with the 90% of the 1+0.5 to get the 70% effectiveness rate. And, the amount of people (sample size) that received the 1+0.5 method is so low as to be invalid for scientific verification/approval to take to market purposes.

Doubts have quite rightly now been raised about the entire study and the people involved are all being grilled about it right now. In fact, it looks like they're going to have to do another whole study again as only the 62% number is actually scientifically valid:



And this has obviously added god knows how much time to the approval for deployment:



Unbelievable.

 

[Smurf1976]

So I mean, what gives?

There's also the reality that oil wells deplete.

They don't suddenly stop flowing in the way that a light is turned off but they do gradually slow down - much like a torch getting dimmer as the battery runs flat.

With the 2019 level of drilling, production was growing only slightly. That is, most new development was simply offsetting decline in existing fields.

With the collapse in drilling it is thus a fair assumption that the world's oil extraction capacity now lower than it was as of February 2020. At the very least it won't be what it would have been without the pandemic.

I haven't tried to put a precise figure on it but oil extraction capacity is much like fitness. Stop exercising and you don't become unfit overnight but the gradual decline does start pretty much immediately. Same if drilling stops - the existing wells are still losing pressure, they're still losing flow rate or increasing the water cut.

 

[qldfrog]

There's also the reality that oil wells deplete.

They don't suddenly stop flowing in the way that a light is turned off but they do gradually slow down - much like a torch getting dimmer as the battery runs flat.

With the 2019 level of drilling, production was growing only slightly. That is, most new development was simply offsetting decline in existing fields.

With the collapse in drilling it is thus a fair assumption that the world's oil extraction capacity now lower than it was as of February 2020. At the very least it won't be what it would have been without the pandemic.

I haven't tried to put a precise figure on it but oil extraction capacity is much like fitness. Stop exercising and you don't become unfit overnight but the gradual decline does start pretty much immediately. Same if drilling stops - the existing wells are still losing pressure, they're still losing flow rate or increasing the water cut.

Even worse, some wells shut down while not empty yet will never be able to be reopened unless major expense..it is not like a switch on/off.
It would be interesting but probably impossible to get that figure: oil lost yet not consumed by absence of flows, all missed maintenance, aging, volatiles and leaks...would be substantial after nearly a year

 

[qldfrog]

BREAKING: ASTRAZENECA f***ed THEIR VACCINE TRIAL UP




Remember the post about the people who got 1+1 dose vs 1+0.5 dose? Well the 1+0.5 wasn't supposed to happen. It was a manufacturing error.

AstraZeneca manufacturing error clouds vaccine study results

“You’ve taken two studies for which different doses were used and come up with a composite that doesn’t represent either of the doses," an expert said.

www.nbcnews.com

Not only that, but they then took the 62% effectiveness of the 1+1 dose and averaged it with the 90% of the 1+0.5 to get the 70% effectiveness rate. And, the amount of people (sample size) that received the 1+0.5 method is so low as to be invalid for scientific verification/approval to take to market purposes.

Doubts have quite rightly now been raised about the entire study and the people involved are all being grilled about it right now. In fact, it looks like they're going to have to do another whole study again as only the 62% number is actually scientifically valid:

View attachment 115366

And this has obviously added god knows how much time to the approval for deployment:

View attachment 115367

Unbelievable.

Very believable
When 70% of people affected by the virus have no noticeable symptoms ( i believe this is agreed on medically), injecting the virus would give you a better result
Some side effects: headache potentially slight fever etc then recovery and immunity, obviously with my vaccine under 1% could die but if i select my test population right, i can get pretty good results: why should i risk frail and sick people in a vaccine test? That would be evil.
If you know anyone with a few billions and a batch of infected blood, i can do my Australian made vaccine and we can share results release date to ensure the extra cash bonus
Would be farcical if not tragic.
One point to take into account in your forecast and analysis is that slowly, the proportion of infected and immunised people in growing.as most people are not sick, many did not get tested yet will not be vector
Figures around 25% seemed to be reached in Europe.
That epidemy has an end date, vaccine or not, except here and in NZ?

 

[over9k]

Alright so the big story today is obviously retail and, to be honest, I could have updated it before the session even started:



Black friday would normally see lines around the block before sunrise. Instead, it's a wasteland.

The other thing that's been pointed out is that whilst medium & high end stuff has been ordered literally by the boatload, low end stuff hasn't on account of the fact that it's low income people that have been hit by this pandemic the hardest (you know, people in service jobs and that kind of thing) and so they simply don't have the cash to splash this year.



Copper's still on a tear, because semiconductors (electronic goods) are still on a tear:



Because, well, everyone are still stuck at home on tv, youtube, minecraft, call of duty, playing the xbox, so on and so forth and are going to be for quite some time yet.

 

[over9k]

Other economically sensitive info: Vaccine use authorisation data.

Coronavirus (COVID-19) Update: FDA Announces Advisory Committee Meeting to Discuss COVID-19 Vaccine Candidate

FDA’s VRBPAC will meet on Dec. 10, 2020, to discuss Pfizer and BioNtech’s emergency use authorization request for a COVID-19 vaccine.

www.fda.gov

.

The U.S. Food and Drug Administration has scheduled a meeting of its Vaccines and Related Biological Products Advisory Committee (VRBPAC) on Dec. 10 to discuss the request for emergency use authorization (EUA) of a COVID-19 vaccine from Pfizer, Inc. in partnership with BioNTech Manufacturing GmbH.

“The FDA has been preparing for the review of EUAs for COVID-19 vaccines for several months and stands ready to do so as soon as an EUA request is submitted. While we cannot predict how long the FDA’s review will take, the FDA will review the request as expeditiously as possible, while still doing so in a thorough and science-based manner, so that we can help make available a vaccine that the American people deserve as soon as possible".

The FDA intends to make background materials available to the public, including the meeting agenda and committee roster, no later than two business days prior to the meeting.



So the meeting is on the 10th, all the data will be public by the 8th at the latest. Will undoubtedly whipsaw markets. I'll post it here as soon as it's out. Energy cannot make its mind up what it wants to do. I was thinking this probably means to sell on the friday before but we'll see.

They meet for the same thing for the moderna vaccine a week later on the 17th.

 

[over9k]

Boring day. Exactly the same as all the other fridays/end of weeks:



A rotation into big tech, the r2k being the 2nd best on the defensive days vs the best on the speculative, barbell spread holds.

Fangs, zoom, semiconductors all pulled hard just as expected, and ERY did exactly what it's done every other week too: Plummet on monday, then slowly increase/correct into week end.



Post-vaccine tells the real story though. Check them out since the bottom-out after the pfizer vaccine was announced:



Roughly 30% runs since their bottom. Of particular note is zoom - the rest are triple leveraged but zoom is just zoom.


Finally, my (so far) ill-fated energy bet. Remember me saying how it's opened at some wild number each monday, then slowly corrected in a dull parabola for the rest of the week?



It looks like stairs. All a week apart, because the vaccines were all just so conveniently announced exactly a week apart from one another.


I've actually added to it today (though with some insurance this time) and continued to hold everything else so you can all be sure that we're going to get another vaccine announcement this weekend or early monday morning to wipe me out for a 4th time.



Jokes aside, the FDA meeting in a fortnight and the public data released week after next will obviously whipsaw energy again so the plan is to sell next friday and convert whatever the final figure ends up being into a bet on energy.

Every other week it was reversing itself into week-end until we just got another vaccine announced over the weekend, then another... surely there can't be a fourth one out this weekend, can there?

CAN THERE?

 

[over9k]

Other strange patterns in graphs:

Virus data.



Note how there seems to be two graphs in one? One line of peaks slightly lower than another? As if there's two datasets paralleling each other?

Well there actually kind of is. Look closely, note how one curve is of five spikes in a row and the other curve is of two dips in a row.


This is because we have a five day work week and a two day weekend, and people are staying indoors of weekend but still have to go to work during the week. Contact tracing revealed a while ago that the vast vast vast majority of infections are being contracted by people at work and the data's reflecting that in a pair of 5 on/2 off waves perfectly.

With that in mind, you can see how the next 5 days of data are going to be way worse than the previous two. In other words, don't mistake the past couple of days as some kind of turning of the corner or what have you. They need to be compared to the other two trough days a week ago, and you can see that they're significantly higher.


The other thing we can glean from the data is that the trough days are always sundays & mondays, so with the previous estimates of a roughly two week lead time from infection to data point, it looks like it takes 15 days from infection to positive test.

With thanksgiving being on the 26th and people obviously getting home a day or two before then, we can therefore expect the thanksgiving "superspread" to show up in case spikes around the 10th-11th (maybe 9th) of december - exactly when the FDA is meeting to decide on approving the pfizer vaccine for emergency use (the meeting is on the 10th) and just a couple of days after the latest point at which they'll make the full study results publicly available (which is the 8th).

Talk about timing...


We can therefore assume that week after next, particularly later in the week after next, to be volatile beyond belief as the virus data goes stratospheric while we get the study results/emergency approval meeting to yank the market back in the other direction at almost the exact same time. Just to add further uncertainty to this, the meeting on the 10th is only a discussion meeting, not the day that they're going to actually decide to approve it or not. With that being said, markets are obviously going to massively react to an overall positive meeting which I think it is pretty clearly going to be.

It'll obviously pay to be watching the news like a hawk as this image of zoom's stock price on the day that the new york lockdowns were triggered:



Shows just how quickly and just how significantly markets reacted to even that.



And this is before we even start on the meeting for emergency approval of the moderna vaccine a week later on the 17th and then the mother of all superspreader events, christmas, on the 25th.

We could (probably will) get emergency use authorisation of both vaccines right in the window between the superspreader numbers hitting the data around the 10th-ish of december and the 9th-ish of january, with all four events whipsawing the market in complete opposite directions, with absolutely no way of actually positioning in anticipation of the superspread numbers despite our ability to predict when they're going to occur, because we have no idea when the emergency approval will actually happen.

You could make a fortune if you knew even roughly when the vaccines are likely to get their emergency use authorisations, but because we don't (yet), the only real play available is to bet that we won't get them before mid january (as we DO know that virus data is just going to run and run and run until at least then), and we have no idea when we'll actually get the authorisation.


I'm currently doing a lot of digging trying to find a typical emergency use authorisation timeline but so far I've found absolute donuts. If anyone happens to know (or has found out) then that would be a very, very handy bit of information.


In the meantime, we've seen how the R2K index has pulled basically either the hardest on positive virus news days (e.g vaccines) or the 2nd hardest on negative ones, so we absolutely keep the light end of our barbell spread. The question becomes when the right time to nuke the heavy end (with megatech etc) and the stuck-at-home stuff like zoom is. If we could be sure we aren't going to get emergency vaccine use authorisation beforehand, that time would be about mid january just after the xmas spread hits the data and we're over the hill of winter, but without knowing when we're likely to get said authorisation, that play becomes a total stab in the dark.

If I can't find that info and at least make *some* kind of estimate, by the end of next week it'll probably be time to move a lot of positions into index ETF's and just be overweight on the r2k with them.

At least we know that r2k, moderna, and semiconductors are solid bets.

 

[sptrawler]

In the meantime, quantitative easing has to be withdrawn and those businesses that really were destroyed finally collapse?

 

[over9k]

The stimulus payments stop on the 31st, but the government shuts down on the 11th too (remember back in the obama era when the government ran out of money and all the public servants were on leave without pay because congress/senate wouldn't approve any more deficits to pay them with?).

You'd really like to think that the politicians can get their acts together by then, even just approving a stop-gap package until april or whenever it is they estimate everyone will actually be vaccinated, but we all know politicians...