Economic implications of a SARS/Coronavirus outbreak

What is very interesting is the reaction by China regarding Australia, they are using muscle to gain leverage.
I would be very surprised if this doesn't backfire big time, they criticised Trump for tariffs, yet impose them on us.
It wont end well, there has been many on here that cheer on China, but I feel the loyalty door only swings one way, at the moment.
Time will tell, the first world brought China out of the wilderness, unless they engage it wont end well IMO.

.

Thinking about it, even if the stimulus money runs out, businesses which can operate from home have obviously managed to stay in business and thus haven't been directly reliant on stimulus, so even if the market itself slumps, zoom etc would still be the best of a bad bunch.

That is predicated on no vaccine authorisation though.

Source: TTMYGH

Yeah they learned in the GFC that you can't mess about with this kind of thing. They were being told that in the GFC too, but didn't listen then.

over9k said:

Yeah they learned in the GFC that you can't mess about with this kind of thing. They were being told that in the GFC too, but didn't listen then.

Click to expand...

Funny,
My interpretation is:
Yeah they learned in the GFC that you can mess about with this kind of thing....

Dona Ferentes said:

View attachment 115524
Source: TTMYGH

Click to expand...

Following Dona interesting data, i thought about the bad boy Sweden who initially did not play the game
From data i got doing basic searches
in post gfc they used 1 billion USD on stimulus but used it properly with great recoveryhttps://www.washingtonpost.com/busi...f-the-recovery/2011/06/21/AGyuJ3iH_story.html
For the current reset, make no mistake,they participate:
$30 billion initially and extra $12 billions in September budget
So $1 billion gfc to $42 billions covid...

27 October 2020

Encouraging sign.

Alright so it's an hour before open and futures basically look almost the same as they did every other weekend this month before a(nother) vaccine was announced:



With all the "oh dear we still have winter to get through" stocks well into the green premarket while almost everything else is in the red:



I tripled my bet against energy on friday (albeit with some insurance now) so we can obviously expect another vaccine to be announced in the next hour.


Jokes aside, this week might actually finally play out how I'd predicted all the other weeks to before the 2nd & 3rd vaccines were announced so hopefully I can stop getting things only half correct for everyone.

Moderna has just released the full results of their trial (94.5% effective) and is planning to file for EUA today but this (for a change) hasn't sent the market beserk so that's actually a good sign for ERY & my other positions.

Alright gotta be quick today as I'm clocking out early again so I'll cover the big stuff & do some far more detailed stuff tonight.

Here's the close numbers, which I'd been expecting basically every monday of this month but we kept getting new vaccines every monday, trump loss admissions etc so they never happened:



With that being said, it's also the end of the month and so a whole ton of options will have expired and/or been executed today and the froth taken off the month so like every other end of the month day it's a bit of an anomaly.

Here's the month's numbers for context:



Futures are right back to the deep in the green post-vaccine "normal" four hours after close with big & small cap leading the way once again:



And semiconductors flew yet again despite everything being in the red and I'll explain why and everything related to it later tonight:




I'm going to do a series of much meatier posts later in the evening covering market segments (semiconductors and what they've effected, oil and what's effecting that, vaccine info, virus/lockdown stats and actions, macro economic figures, the works) so if you recheck this thread a bit before bed this evening I should have updated it.

In the meantime, I need to sleep!

Alright so let's start with semiconductors because they have absolutely been the play of the year so far and they're also quite easy to explain.

Here's the numbers for both yesterday, premarket today, and the year as a whole:



And, well, this image that came up in my facebook feed yesterday really explains it perfectly:



Fact is that semiconductors (microchips) have absolutely flown off the (digital) shelves constantly this year because people have been stuck at home and needed something to do - that means playing videogames, watching tv, watching youtube, etc etc. Not complex in the slightest.

The year has also coincided with a new generation of graphics cards being released by both of the major producers (nvidia and amd) as well as both of the new generations of the playstation & xbox being released. This has created, well, the perfect storm for chip demand.

Now, much of the world's semiconductors are actually manufactured in taiwan by taiwanese semiconductor manufacturing corp (tsmc) and samsung (obviously in south korea). nvidia & amd, the two producers of graphics chips (gpu's) bought up all of tsmc's existing manufacturing capacity way back in april: https://www.gizchina.com/2020/04/27/nvidia-and-amd-bought-up-all-excess-capacity-at-tsmc/

And the fact is that as a result, most of the world's microchip manufacturing capacity has been running at 100% for months and yet chips are still on back order until Q2 next year.

However, TSMC have been wanting to build a new manufacturing plant in the united states for quite a while to get on the better side of both logistical (I've already shown how container ships are backed up at the ports by the dozen) and political risk from china, but these things are immensely complex as they need to be about 10,000 times cleaner than a hospital operating room and so can't just be built in a couple of months. However, TSMC just a couple of weeks ago finally received approval from the arizona state government to build a new $12 billion plant in arizona: https://www.tomshardware.com/news/tsmc-arizona-fab-investment

Which was obviously a massive boon for their stock price on account of the fact that this is going to increase their ability to supply chips (and thus make money) massively.

But if new generations of gpu's from both companies as well as new generations of gaming consoles being released at the same time wasn't enough of a storm, well, apple released a new iphone generation in mid october (at the same time) as well - another product selling by the literal tens of millions and on backorder for months.

So all this has combined into the perfect storm for microchip demand. Any one of these events would have upped demand significantly, but put all of them together, and you get the aforementioned flotilla's of container ships that the U.S literally cannot unload fast enough that I showed in a previous post.

The side effects of this are 1: transport/logistics companies like fedex & ups being at all time highs and literally unable to get enough vans, drivers etc to actually deliver stuff in a timely manner and 2: the copper price absolutely screaming now well past its 3 year peak and on a 7 year high with futures still climbing:






The reason why copper in particular has done so well (and aluminium has done well too) is because it is overwhelmingly copper (with aluminium also/instead used in some products) which is used to cool all these microchips.

A decent pc or gaming console can draw several hundred watts of power and that power, as known from the first law of thermodynamics, converts perfectly into heat, heat which must be dissipated.

So, the chips are cooled using heatsinks - which are literally big chunks of copper which come in all kinds of shapes and sizes which conduct the heat off the chip and then usually have air blown through them with fans to dissipate said heat:

As you can imagine, this record level of demand for microchips has been quite the boon for basically everyone that has anything to do with it (copper producers, chip producers, shipping companies which move the materials to their place of manufacture before then moving the final product to the end user, so on and so forth) and these are overwhelmingly the "emerging economies" of the world which have obviously been hit by the virus far harder than we here in the first world have, and I'll cover what's happened with them in the next post.

Disclosure: I hold SOXL and with a lot of microchip-including products on backorder until Q2 next year, I have no intention to sell.

Alright so just like how it's always the poorest states and people in a country that are hit the hardest by any kind of national economic downturn or disaster, it's also generally the poorest countries which are hit the hardest by a global downturn (or in this case, depression).

It also stands to reason that absent the depression being some kind of knockout blow to an industry or country already in structural decline (e.g bricks & mortar retail), the people, the industries, and the countries hit hardest by a depression probably also have the most to rise once the recovery begins (e.g aviation).

So, with a U.S election and three vaccines announced this month, you can imagine that just like how all the beaten down sectors like aviation saw massive inflows and thus gains this month, so too did emerging markets:



However, like most things like this, the devil is in the details.

What I'm trying to say here, and as you've probably suspected from my previous post, is that "emerging markets" are not created equal. "Emerging market" is really an incredibly broad term, and to understand what's gone on, like with all economic analysis, we need to get more granular.


I spent the whole previous post talking about how the production lines, factories etc throughout the world's tech industry have basically just been running flat out all year and I suspect you've probably guessed where I'm going with this post, because hey, most of asia (and its several billion inhabitants) is actually still an emerging market (and people, including me, forget this all the time).

As a result, when we take a closer look at emerging markets, they actually look like this:



As you can see, it's asia that is the standout performer here (on account of all the tech the rest of us have been ordering literally by the shipload) and also thus the emerging market which has both driven basically all of the emerging market gains we've seen since march:



But actually gained the least (it was obviously still a lot, as it was for everything) from the vaccine news we've seen this month:



What this tells us is that if we want to bet on a post-vaccine "rebound" region, we actually want to avoid asia and focus on latin america (LatAm) or even better, europe, the middle-east, and africa (EMEA).


Unfortunately, MSCI does not yet do an etf for their latam & emea region-specific emerging market indexes, but ishares (blackrock) do one for "emerging markets asia" (remember that not all of asia is an emerging market) and the ticker is EEMA.

There are, however, dozens of region-specific etf's (including leveraged ones) which are obviously pretty easy to find if you just type "broad latin america" or "broad asia" etc into etfdb's search bar. LBJ will triple lever you into latin america for example.


But if you want to bet on their emerging market indexes as a whole, there are lots of etf's for that, including leveraged, inverse, and leveraged inverse:

Alright so in virus news, wouldn't you know it, the yanks are basically doing everything they can to avoid lockdowns again, doing all kinds of absolutely retarded things (like changing from number of positive tests to positive test rate) to avoid doing so:





But the lockdowns they are imposing are milquetoast at best:



And so we see data like this:



And let's not kid ourselves here - how many businesses actually reopened their offices? Vanishingly few. Fact is that people are now largely voluntarily staying home etc and so the lockdowns really aren't changing that much.

But the fact is that the real key metric here is this one:



Fact is that the real number which will bring the country to its knees is hospitalisations. Not only that, but medical staff numbers off work sick is increasing at the same time as hospitalisations are, so the healthcare system is very seriously looking like buckling under the strain.

At least the authorities, incompetent as they are, are starting to recognise this though.

I also mentioned a little while ago about how we're in winner-take-all scenario's in almost all markets (hence the barbell spread for our trading/investing) and how wall st is getting the spoils of main street getting slaughtered.

Well, it's also happening on a larger scale on wall st, as companies go bust basically just in order of previous market cap and their bigger competitors then swoop in and buy them up for peanuts.


"Companies have announced $760 billion of acquisitions so far in the fourth quarter, the highest for this point in the period since 2016, according to data compiled by Bloomberg.

November was the busiest month of the year by number of deals, the data show. The tally got a boost Monday with financial data giant S&P Global Inc.’s takeover of IHS Markit Ltd. for about $39 billion in stock, the year’s second-biggest transaction.

The latest series of megadeals, added to the record third-quarter haul of $993 billion, is helping volumes recover after the Covid-19 crisis triggered a steep decline in the first half of the year".

And the authorities haven't been able to do a damn thing to stop it:



Despite the national debt now looking like this:



The really depressing part is that the U.S's debt is actually pretty good compared to most of the first world.

At least there's some light at the end of the tunnel:



The FDA meets to discuss emergency approval of the pfizer vaccine on the 10th and moderna's on the 17th. Pfizer's is the -70 one, moderna's is the normal freezer temp one. The moderna one is the one that most of us are undoubtedly going to get for those reasons, though hospitals and research facilities with their cold storage will be able to roll some of the pfizer ones out to their own staff until we can begin the mass vaccination process with the moderna one.

Looks like it'll be time to torch a few positions pretty soon.

Meanwhile, manhattan office space vacancy rates crack their 2003 peak after 9/11:

https://www.bloomberg.com/news/arti...nt-in-manhattan-hits-highest-level-since-2003

Many of which will never return thanks to the work-from-home revolution.

over9k said:

Alright so in virus news, wouldn't you know it, the yanks are basically doing everything they can to avoid lockdowns again, doing all kinds of absolutely retarded things (like changing from number of positive tests to positive test rate) to avoid doing so:

View attachment 115674

View attachment 115672

But the lockdowns they are imposing are milquetoast at best:

View attachment 115673

And so we see data like this:

View attachment 115677

And let's not kid ourselves here - how many businesses actually reopened their offices? Vanishingly few. Fact is that people are now largely voluntarily staying home etc and so the lockdowns really aren't changing that much.

But the fact is that the real key metric here is this one:

View attachment 115675

Fact is that the real number which will bring the country to its knees is hospitalisations. Not only that, but medical staff numbers off work sick is increasing at the same time as hospitalisations are, so the healthcare system is very seriously looking like buckling under the strain.

At least the authorities, incompetent as they are, are starting to recognise this though.

View attachment 115676

Click to expand...

lockdowns in the US would be as useless as it has been in Europe: just slowing the inevitable: smooth the curve..slow not reduce numbers
Unless you believe in vaccine suddenly really working..yes I know....it is just a political and economic move with severe impacts should I say efficiency? in slaughtering mean street as you have noted many time: the triumph of big corporatism
So with Biden and more expected lock-down, it is soon time to short again the small part of the market

over9k said:

Alright so just like how it's always the poorest states and people in a country that are hit the hardest by any kind of national economic downturn or disaster, it's also generally the poorest countries which are hit the hardest by a global downturn (or in this case, depression).

It also stands to reason that absent the depression being some kind of knockout blow to an industry or country already in structural decline (e.g bricks & mortar retail), the people, the industries, and the countries hit hardest by a depression probably also have the most to rise once the recovery begins (e.g aviation).

So, with a U.S election and three vaccines announced this month, you can imagine that just like how all the beaten down sectors like aviation saw massive inflows and thus gains this month, so too did emerging markets:

View attachment 115662

However, like most things like this, the devil is in the details.

What I'm trying to say here, and as you've probably suspected from my previous post, is that "emerging markets" are not created equal. "Emerging market" is really an incredibly broad term, and to understand what's gone on, like with all economic analysis, we need to get more granular.


I spent the whole previous post talking about how the production lines, factories etc throughout the world's tech industry have basically just been running flat out all year and I suspect you've probably guessed where I'm going with this post, because hey, most of asia (and its several billion inhabitants) is actually still an emerging market (and people, including me, forget this all the time).

As a result, when we take a closer look at emerging markets, they actually look like this:

View attachment 115663

As you can see, it's asia that is the standout performer here (on account of all the tech the rest of us have been ordering literally by the shipload) and also thus the emerging market which has both driven basically all of the emerging market gains we've seen since march:

View attachment 115664

But actually gained the least (it was obviously still a lot, as it was for everything) from the vaccine news we've seen this month:

View attachment 115665

What this tells us is that if we want to bet on a post-vaccine "rebound" region, we actually want to avoid asia and focus on latin america (LatAm) or even better, europe, the middle-east, and africa (EMEA).


Unfortunately, MSCI does not yet do an etf for their latam & emea region-specific emerging market indexes, but ishares (blackrock) do one for "emerging markets asia" (remember that not all of asia is an emerging market) and the ticker is EEMA.

There are, however, dozens of region-specific etf's (including leveraged ones) which are obviously pretty easy to find if you just type "broad latin america" or "broad asia" etc into etfdb's search bar. LBJ will triple lever you into latin america for example.


But if you want to bet on their emerging market indexes as a whole, there are lots of etf's for that, including leveraged, inverse, and leveraged inverse:

View attachment 115666

Click to expand...

about EEMA, just a warning, there is not much emergent market in the portfolio:
I would place Thailand, Vietnam, Cambodia, etc in an Asian emerging market, but EEMA is mostly established China superstars:
see for yourself:

and samsung or tencent/alibaba as emerging market is, as you pointed out an elastic notion

Yes I would have thought that looking into an etf's holdings before buying it goes without saying frog lol.

I'm obviously quite exposed to everything you listed through SOXL & FNGU, both of which have been rockstars all year

Good post by frog - remember to take a look at the holdings of etf's first as you might find you can get exposed to a nicer basket of stocks from another direction like I have with FNGU & SOXL.

Alright so it was a WILD day.



And it ended like this:



So our barbell spread comes 1st & 3rd on the day. It's been 1 & 2 or 1 & 3 pretty much every day since the first vaccine announcement bar a couple of days. Still absolutely the way to go.

So with the nasdaq the highest, we know that the fangs would have pulled the hardest, and they did:


And even though today & yesterday were wildly different days, soxl pulled a solid 5-6% on both:




But today had a whole heap of major events occur, not all of which anything to do with the virus.

First, congress agreed to audit every single chinese company listed on the NYSE, so every chinese company, especially the red-hot electric vehicle stocks that everyone have been raving about, was slaughtered. This is actually good for the right ones in the long run because let's not kid ourselves here, there's going to be no shortage of dodgy accounting exposed. However, confidence in the companies (that didn't do anything dodgy) will obviously soar once they clear the audit.

I hold NIO but no others. No plans to sell.

Second, the treasury secretary was grilled by one of their committees and that went well, and after his comments/advice to the politicians (he basically told them the market is totally reliant on stimulus so we're all f***ed if they don't get their act together and we'll see a repeat of march if they don't), indication of what he's going to do and a few political comments, a "skinny stimulus" of "only" 900 billion or so looks all but agreed upon, so it looks like there will be stimulus to get the market through the next quarter (remember that the original one back in march was 4 trillion so the actual per-day level of the stimulus isn't a great deal different).

Third, the meeting to decide on emergency use of the pfizer vaccine has been brought forward to after market close today, so a stimulus almost certainty with a vaccine deployment almost certainty gives us a market pricing in both of these and in doing so, sending much of the market soaring whilst the stay-at-home stuff was pasted.

Result? Nirvana for the market as a whole, but armageddon for some individual sectors and stocks.

Moderna was slaughtered after opening well into the green again as the FDA don't meet for the moderna vaccine until the 17th, so it's going to miss the first wave of deployments. I've kept holding because fact is that -70 vaccines are not going to be rolled out by the billion in the next couple of weeks and I think it fair to say that if they've brought the pfizer meeting forward, they're going to bring the moderna one forward too. Moderna's the long play on the vaccines IMO.

Chinese companies were all massacred.

Stuck-at-home companies were all massacred.


Combine announcements of both compulsory audits of chinese companies and a bringing forward of vaccine deployment on the same day and zoom, being both a chinese company and a stuck-at-home one, plummeted over 15% just on the day, wiping most of its post-vaccine gains out just at opening price. The big curveball is how it keeps doing after the pandemic and fact is it posted earnings after close yesterday and actually beat the +300% estimates or whatever they were reporting something like +330%. Considering it had already plummeted by open I just held on account of those beatings-of-estimates and it didn't move much over the course of the rest of the day.

Fact is that zoom is going to be a hell of a bargain at some point as the work-from-home revolution is not going to go away after the pandemic. When that point is is obviously the hard part as we're going to undoubtedly have plenty more lockdowns and virus spread yet.

I was planning on taking profits on friday (zoom has been on both a consistent uptrend and spiked every friday this month on account of the whole virus numbers & risk thing for the weekend) before the vaccine emergency use authorisation meeting scheduled for next week so that being brought forward has KO'd me almost entirely there.


Told you something "bad" would happen!