In the US, a long weekend offered the opportunity to assess and reassess positions, but, from Friday afternoon through Tuesday morning, nothing substantially changed in the macro picture of global markets.
COVID-19 continues to dominate headlines, though attention has begun to focus on the spread of the virus outside of mainland China. Johns Hopkins, which provides the most unbiased numbers available, shows 898 reported cases worldwide. For perspective, that number compares to 343 reported on February 8, just 10 days prior.
While there are plenty of alarmists touting this infectious variant as the second coming of the Spanish flu, the available evidence purports to something less deadly. While the mortality rate has remained in the neighborhood of 2-3 percent in China, only a handful of deaths (four) have been directly attributable to infection from the coronavirus.
Wall Street appears to share the view that the virus is not a deadly killing machine, having put together a solid week, however, realization of knock-on effects from the mass quarantines in China are beginning to strike home.
It's been about a month now since the outbreak became apparent in China and efforts to stop the spread of information about it turned to efforts to actually contain the virus itself. Mainland factories have been shuttered and many are not soon to open to full capacity just yet. That's causing disruptions in various supply chains, the effects being noted throughout the global marketplace.
Looking forward, stocks, still at or near record prices, are almost certain to come under some pressure in the coming short week.
Oil has rebounded slightly as the world comes to grips with a glut of crude on the market. WTI continues to trade just above $50 per barrel.
The US treasury bond curve remains flat, with the 10-year note closing out the week at 1.59 percent.
There's unlikely to be any more clarity within the next few days or even weeks as the situation involving the virus is still evolving. Investors looking for a reason to exit have a reasonable excuse to do so.
At the Close, Friday, February 14, 2020:
Dow Jones Industrial Average: 29,398.08, -25.22 (-0.09%)
NASDAQ: 9,731.18, +19.21 (+0.20%)
S&P 500: 3,380.16, +6.22 (+0.18%)
NYSE: 14,097.34, -1.66 (-0.01%)
For the Week:
Dow: +295.57 (+1.02%)
NASDAQ: +210.66 (+2.21%)
S&P 500: +52.45 (+1.58%)
NYSE: +165.41 (+1.19%)
Correction: In earlier posts this January, Money Daily had mentioned that Yum Brands owned KFC and Pizza Hut locations through out China. That is incorrect. Yum's China properties were spun off in 2016. We regret being in error.
Tuesday, February 18, 2020
Friday, February 14, 2020
China Raises 108 Coronavirus (COVID-19) Victims From the Dead
Roughly five weeks into the coronavirus (COVID-19) story and really nothing much has materialized. Stocks are making new all-time highs, gold and silver have barely budged, though bonds have rallied in recent days.
Much of the stagnation or up-and-down noise from the equity markets is probably tied to China's somewhat opaque rendering of figures relating to the virus. While the death rate to the number of reported cases has remained fairly constant around 2.1-2.5%, there are no footnotes on the data, nor is there any means by which to verify their accounting.
Additionally, after upping the total number of cases and deaths dramatically on Wednesday, China took some back on Thursday, essentially raising 108 people from the dead by what they dubbed "double counting."
This fumbling, feeble excuse and the fact that the Chinese government won't allow teams from the US CDC into the country to help, the obvious takeaway is that their numbers are wholly unreliable, most likely under-reported.
The media, along with the experts at WHO are about as in the dark as they can be, and are reporting from their backsides with information that is either inaccurate, misleading, or just plain lies.
With each passing day it becomes more and more apparent that ordinary people in this world are on their own when it comes to determining how to react and respond to this supposedly pandemic, deadly threat.
At the Close, Thursday, February 13, 2020:
Dow Jones Industrial Average: 29,423.31, -128.11 (-0.43%)
NASDAQ: 9,711.97, -13.99 (-0.14%)
S&P 500: 3,373.94, -5.51 (-0.16%)
NYSE: 14,099.04, -37.94 (-0.27%)
Much of the stagnation or up-and-down noise from the equity markets is probably tied to China's somewhat opaque rendering of figures relating to the virus. While the death rate to the number of reported cases has remained fairly constant around 2.1-2.5%, there are no footnotes on the data, nor is there any means by which to verify their accounting.
Additionally, after upping the total number of cases and deaths dramatically on Wednesday, China took some back on Thursday, essentially raising 108 people from the dead by what they dubbed "double counting."
This fumbling, feeble excuse and the fact that the Chinese government won't allow teams from the US CDC into the country to help, the obvious takeaway is that their numbers are wholly unreliable, most likely under-reported.
The media, along with the experts at WHO are about as in the dark as they can be, and are reporting from their backsides with information that is either inaccurate, misleading, or just plain lies.
With each passing day it becomes more and more apparent that ordinary people in this world are on their own when it comes to determining how to react and respond to this supposedly pandemic, deadly threat.
At the Close, Thursday, February 13, 2020:
Dow Jones Industrial Average: 29,423.31, -128.11 (-0.43%)
NASDAQ: 9,711.97, -13.99 (-0.14%)
S&P 500: 3,373.94, -5.51 (-0.16%)
NYSE: 14,099.04, -37.94 (-0.27%)
Thursday, February 13, 2020
China Announces Massive Increase In Number of New Cases of COVID-19 (coronavirus, Wuhan Flu, WuFlu)
Money Daily claims no special powers, but, just by coincidence, after yesterday's post cried out to the Chinese for transparency, some actually was delivered.
Coming too late to affect the meteoric rise in US stocks on Wednesday, China's official propaganda wing may be coming to its senses, albeit quite late in the game.
The new totals are being reported with some differences, but John Hopkins' usually-reliable counts have mainland China at 59,822, with worldwide reported cases at 60,349. There are 527 confirmed cases outside of China and a total of 1,370 deaths, all but two occurring in China.
These are alarming numbers, only now shedding some light on just how widespread the viral infection has gone on mainland China, and just how deeply Chinese officials have been trying to cover up the carnage. It's one thing to fudge economic numbers, which China does regularly and gratuitously, but quite another when human lives are at stake.
Revelation of the virus spreading faster, affecting more people by orders of magnitude and killing more than double the numbers previously reported raised eyebrows around the world, sending markets into reverse, though not to any alarming degree. Asian and European markets staged orderly retreats of less than one percent.
Hoping to avoid complete panic, international indices are being buoyed by central banks, no doubt furiously buying behind the scenes as the severity of the condition in China becomes more apparent. Supply chains already have broken down and this is only the beginning. With China looking to be out of commission for the better part of this and next month - possibly longer - the disruption to global trade and manufacturing cannot and should not be understated.
Being the global hub for manufacturing, China, by being late in its attempts to contain the spread of COVID-19 and then attempting to downplay the severity of the crisis it faces has put its own economy and that of the globalized world in jeopardy.
This story continues to evolve and the implications just became much more serious than the Chinese government, the WHO and health officials in other countries are admitting.
Money Daily will attempt to stay atop current developments on a daily, if not more frequent, basis.
At the Close, Wednesday, February 12, 2020:
Dow Jones Industrial Average: 29,551.42, +275.12 (+0.94%)
NASDAQ: 9,725.96, +87.02 (+0.90%)
S&P 500: 3,379.45, +21.70 (+0.65%)
NYSE: 14,136.98, +82.88 (+0.59%)
Coming too late to affect the meteoric rise in US stocks on Wednesday, China's official propaganda wing may be coming to its senses, albeit quite late in the game.
Late Wednesday, instead of the usual 2500-3000 new reported cases and 90-100 fresh deaths from the newly-named COVID-19, China's Ministry of Truth instead announced 14,840 new cases and 242 deaths.
The new totals are being reported with some differences, but John Hopkins' usually-reliable counts have mainland China at 59,822, with worldwide reported cases at 60,349. There are 527 confirmed cases outside of China and a total of 1,370 deaths, all but two occurring in China.
These are alarming numbers, only now shedding some light on just how widespread the viral infection has gone on mainland China, and just how deeply Chinese officials have been trying to cover up the carnage. It's one thing to fudge economic numbers, which China does regularly and gratuitously, but quite another when human lives are at stake.
Revelation of the virus spreading faster, affecting more people by orders of magnitude and killing more than double the numbers previously reported raised eyebrows around the world, sending markets into reverse, though not to any alarming degree. Asian and European markets staged orderly retreats of less than one percent.
Hoping to avoid complete panic, international indices are being buoyed by central banks, no doubt furiously buying behind the scenes as the severity of the condition in China becomes more apparent. Supply chains already have broken down and this is only the beginning. With China looking to be out of commission for the better part of this and next month - possibly longer - the disruption to global trade and manufacturing cannot and should not be understated.
Being the global hub for manufacturing, China, by being late in its attempts to contain the spread of COVID-19 and then attempting to downplay the severity of the crisis it faces has put its own economy and that of the globalized world in jeopardy.
This story continues to evolve and the implications just became much more serious than the Chinese government, the WHO and health officials in other countries are admitting.
Money Daily will attempt to stay atop current developments on a daily, if not more frequent, basis.
At the Close, Wednesday, February 12, 2020:
Dow Jones Industrial Average: 29,551.42, +275.12 (+0.94%)
NASDAQ: 9,725.96, +87.02 (+0.90%)
S&P 500: 3,379.45, +21.70 (+0.65%)
NYSE: 14,136.98, +82.88 (+0.59%)
Wednesday, February 12, 2020
Wall Street Plays Wait-and-See On Coronavirus (WuHan Flu)
Without a source more trustworthy than the Communist Party of China (CPC) for accurate data on the coronavirus (Wuhan Flu), it's difficult to make an assessment of the threat from the disease which has spread to 25 countries and two cruise ships, but has so far resulted in only 517 confirmed cases and two deaths, one in Hong Kong and another in the Philippines.
Inside mainland China, it's apparently a different story, what with 44,685 confirmed cases and 1114 deaths, the government is trying to maintain the people's spirit, but, with something on the order of 400 million people under quarantine orders, theres little doubt that patience is wearing thin.
Wall Street has, for the most part, faded the fallout from the virus's effect on China's economy and its part in the global supply chain until yesterday, when stocks slumped after an initial upside burst, leaving the Dow on the downside and the other indices hanging onto marginal gains. Notable was the NYSE, which led all the averages percentage-wise, an outlier occurrence, and possibly the beginning of a shift into small cap stocks.
Commodities were flat, with gold and silver barely budging from unchanged and oil settling around the $50 mark for WTI crude.
US treasuries escaped from inversion, with the 10-year note finishing at 1.59% yield and bills with maturities of less than a year all lower than that, albeit by only a few basis points. The 30-year bond is sitting precariously on a yield of just 2.05%.
China, notorious for supplying information that is either corrupted, massaged, or goal-sought to the pleasure of the Party, is difficult to gauge in terms of what it's telling the rest of the world. Are there 1100 dead from the virus or 11,000? Have over 4000 recovered, or more, or less? And what were the treatments involved?
None of this information is readily available as China is keeping a tight lid on the details. One thing is for sure: plants that were closed first because of the Lunar New Year holiday and had their closures extended by the threat of the virus are still closed, even though many were supposed to reopen on Monday, February 10. That's a worry Wall Street cannot overlook for long. With companies supplying component parts from everything from automobiles to washing machines, the effect of their closure will be felt up the chain. Car-makers outside of China, Nissan, Tesla, Kia, and others have already announced plant closures due to supply disruption. The longer the Chinese factories remain shuttered, the worse it is not only for the Chinese economy, but the global condition as well.
The overarching theme from the public start of the virus in early January to today has been one of questions about the virulence of the virus, the length of its incubation, the mortality rates. These questions have been answered in roundabout manners, but the big one, where does this all end? remains a mystery. China says the spread of the virus is slowing; the WHO says a global heightening of risk is on the horizon.
For the time being, everybody is playing a wait-and-see game.
At the Close, Tuesday, February 11, 2020:
Dow Jones Industrial Average: 29,276.34, -0.48 (-0.00%)
NASDAQ: 9,638.94, +10.55 (+0.11%)
S&P 500: 3,357.75, +5.66 (+0.17%)
NYSE: 14,054.08, +69.60 (+0.50%)
Inside mainland China, it's apparently a different story, what with 44,685 confirmed cases and 1114 deaths, the government is trying to maintain the people's spirit, but, with something on the order of 400 million people under quarantine orders, theres little doubt that patience is wearing thin.
Wall Street has, for the most part, faded the fallout from the virus's effect on China's economy and its part in the global supply chain until yesterday, when stocks slumped after an initial upside burst, leaving the Dow on the downside and the other indices hanging onto marginal gains. Notable was the NYSE, which led all the averages percentage-wise, an outlier occurrence, and possibly the beginning of a shift into small cap stocks.
Commodities were flat, with gold and silver barely budging from unchanged and oil settling around the $50 mark for WTI crude.
US treasuries escaped from inversion, with the 10-year note finishing at 1.59% yield and bills with maturities of less than a year all lower than that, albeit by only a few basis points. The 30-year bond is sitting precariously on a yield of just 2.05%.
China, notorious for supplying information that is either corrupted, massaged, or goal-sought to the pleasure of the Party, is difficult to gauge in terms of what it's telling the rest of the world. Are there 1100 dead from the virus or 11,000? Have over 4000 recovered, or more, or less? And what were the treatments involved?
None of this information is readily available as China is keeping a tight lid on the details. One thing is for sure: plants that were closed first because of the Lunar New Year holiday and had their closures extended by the threat of the virus are still closed, even though many were supposed to reopen on Monday, February 10. That's a worry Wall Street cannot overlook for long. With companies supplying component parts from everything from automobiles to washing machines, the effect of their closure will be felt up the chain. Car-makers outside of China, Nissan, Tesla, Kia, and others have already announced plant closures due to supply disruption. The longer the Chinese factories remain shuttered, the worse it is not only for the Chinese economy, but the global condition as well.
The overarching theme from the public start of the virus in early January to today has been one of questions about the virulence of the virus, the length of its incubation, the mortality rates. These questions have been answered in roundabout manners, but the big one, where does this all end? remains a mystery. China says the spread of the virus is slowing; the WHO says a global heightening of risk is on the horizon.
For the time being, everybody is playing a wait-and-see game.
At the Close, Tuesday, February 11, 2020:
Dow Jones Industrial Average: 29,276.34, -0.48 (-0.00%)
NASDAQ: 9,638.94, +10.55 (+0.11%)
S&P 500: 3,357.75, +5.66 (+0.17%)
NYSE: 14,054.08, +69.60 (+0.50%)
Tuesday, February 11, 2020
Bridgewater's Ray Dalio Thinks Coronavirus Fears Exaggerated; China Likely To Suffer Recession
Led by the NASDAQ's 1.13% rise, stocks on US indices ramped higher to open the week as fears of the spreading Wuhan Flu seemed diminished, at least in the Western Hemisphere.
Ray Dalio, founder of the world's biggest hedge fund, Bridgewater Associates, told an audience at a conference in Abu Dhabi on Monday that the impact from coronavirus (aka Wuhan Flu, WuFlu) is likely to be short-lived and won't have a lasting impact on the global economy.
Sorry, but Mr. Dalio sounds a little retarded here, telling people to be more concerned about wealth gaps and political gaps when most of China - the world's second-largest economy - has been shut down now for almost a month and will be for even longer. China is taking a huge gamble if they're going to send people back to work under these conditions, as the virus has yet to peak. All they'd need is an outbreak at an active factory and that would shut everything down for another month at least. Dalio is right to be concerned about gaps, like the ones in his thought process and the one between his ears. He's way off base here, probably talking this way to discourage a mass exodus out of his fund.
Dalio's fund lost money for the first time since 2000 last year, ironic, since US markets were up broadly, with the S&P sporting a 29% gain.
Let's try some math on Mr. Dalio's thesis. China is currently - how shall we put it - "screwed," which is probably the least-offensive descriptor. Consider that their GDP is probably going to come in at a zero at best for the first quarter of 2020, and probably come in as a negative number.
A third of the country is shut down and has been for more than two weeks, including all of Hubei province, a manufacturing hub. It's likely to remain that way for another month, with other cities and provinces falling under quarantine orders from now until April. That's going to put a severe dent in first quarter GDP. For instructional purposes, let's just say China's GDP for the first quarter of 2020 is going to be cut by a quarter, and that may be a generous assessment. That's a growth rate of -25%. Yes, that's right, minus twenty-five percent.
Let's assume they produce a miracle of some kind and get back to business in the second quarter. Will it be positive, compared to 2019. Unlikely, unless, as the Chinese are wont to do, they double and triple up production and totally kick butt. Let's give them a zero for the second quarter and an optimistic 5% gain in the third and 8% in the fourth, as they recover.
Add those up - -25, 0, +5, +8 - and you're still at -12, divided by four gives China a 2020 GDP growth rate of minus three percent (-3.0%). Again, that's just an example. Reality is likely to be worse than that. China will have a recession and a disruption of anywhere from two weeks to three months (maybe longer) in the global supply chain is going to produce adverse effects elsewhere. Some countries will be crushed, others just bruised, but, the overall picture is one with significant downside, not the roses and champagne scenario outlined by Ray Dalio.
Tracking other markets, crude oil futures continue their long descent as an outgrowth from reduced demand due to coronavirus in China. WTI crude fell below $50 per barrel on Monday. Despite renewed calls for production cuts from the OPEC+ nations, there seems to be little to stem the tide unless China gets a handle on their problem within days or weeks, a scenario that seems unlikely. If the virus spread in China is replicated elsewhere, oil, along with stocks and every other asset class, is likely to crater. Oil at anywhere from $45 to $35 a barrel is not out of the question.
Interest rates are also sounding an alarm, in deference to the sustained giddiness in stocks. The 10-year note dropped to 1.56% yield on Monday, just five basis points from its 2020 low of 1.51% (January 31), while the shortest-maturing bills all were higher, inverting the 1, 2, 3, and 6-month bills against the 10-year note. The 30-year bond is yielding 2.03%. Generally speaking, the yield curve is flat to inverted and looks like a complete, untamed disaster waiting to happen.
What looks to be a panacea for precious metals investors could be developing. Fear is rising, traders at JP Morgan Chase have been charged with rigging the gold and silver markets, and the effect from coronavirus is still unknown.
According to an article on FXStreet, not only have JP Morgan's traders been indicted, but the company itself is being probed, and the Justice Department is treating it as a criminal investigation, using RICO laws to investigate the bank as a criminal enterprise.
Coming days, weeks, and months appear to be headed toward more confusion, consternation, and discontent. The Democrat primary season is just heating up, and despite President Trump having just been cleared from impeachment by the Senate, there's little doubt Democrats in congress and even inside Trump's White House are still scheming against him.
Fed Chairman Powell is slated for a pair of engagements on Capitol Hill. On Tuesday, he will face the House Financial Services Committee and the Senate Banking Committees on Wednesday.
And, BTW, the words "retard" and "retarded" have been flagged in Yahoo Finance as unacceptable, despite one definition of the word retard is "to slow, delay." Peak Stupid has been achieved, again.
At the Close, Monday, February 10, 2020:
Dow Jones Industrial Average: 29,276.82, +174.31 (+0.60%)
NASDAQ: 9,628.39, +107.88 (+1.13%)
S&P 500: 3,352.09, +24.38 (+0.73%)
NYSE: 13,984.48, +52.56 (+0.38%)
Ray Dalio, founder of the world's biggest hedge fund, Bridgewater Associates, told an audience at a conference in Abu Dhabi on Monday that the impact from coronavirus (aka Wuhan Flu, WuFlu) is likely to be short-lived and won't have a lasting impact on the global economy.
Sorry, but Mr. Dalio sounds a little retarded here, telling people to be more concerned about wealth gaps and political gaps when most of China - the world's second-largest economy - has been shut down now for almost a month and will be for even longer. China is taking a huge gamble if they're going to send people back to work under these conditions, as the virus has yet to peak. All they'd need is an outbreak at an active factory and that would shut everything down for another month at least. Dalio is right to be concerned about gaps, like the ones in his thought process and the one between his ears. He's way off base here, probably talking this way to discourage a mass exodus out of his fund.
Dalio's fund lost money for the first time since 2000 last year, ironic, since US markets were up broadly, with the S&P sporting a 29% gain.
Let's try some math on Mr. Dalio's thesis. China is currently - how shall we put it - "screwed," which is probably the least-offensive descriptor. Consider that their GDP is probably going to come in at a zero at best for the first quarter of 2020, and probably come in as a negative number.
A third of the country is shut down and has been for more than two weeks, including all of Hubei province, a manufacturing hub. It's likely to remain that way for another month, with other cities and provinces falling under quarantine orders from now until April. That's going to put a severe dent in first quarter GDP. For instructional purposes, let's just say China's GDP for the first quarter of 2020 is going to be cut by a quarter, and that may be a generous assessment. That's a growth rate of -25%. Yes, that's right, minus twenty-five percent.
Let's assume they produce a miracle of some kind and get back to business in the second quarter. Will it be positive, compared to 2019. Unlikely, unless, as the Chinese are wont to do, they double and triple up production and totally kick butt. Let's give them a zero for the second quarter and an optimistic 5% gain in the third and 8% in the fourth, as they recover.
Add those up - -25, 0, +5, +8 - and you're still at -12, divided by four gives China a 2020 GDP growth rate of minus three percent (-3.0%). Again, that's just an example. Reality is likely to be worse than that. China will have a recession and a disruption of anywhere from two weeks to three months (maybe longer) in the global supply chain is going to produce adverse effects elsewhere. Some countries will be crushed, others just bruised, but, the overall picture is one with significant downside, not the roses and champagne scenario outlined by Ray Dalio.
Tracking other markets, crude oil futures continue their long descent as an outgrowth from reduced demand due to coronavirus in China. WTI crude fell below $50 per barrel on Monday. Despite renewed calls for production cuts from the OPEC+ nations, there seems to be little to stem the tide unless China gets a handle on their problem within days or weeks, a scenario that seems unlikely. If the virus spread in China is replicated elsewhere, oil, along with stocks and every other asset class, is likely to crater. Oil at anywhere from $45 to $35 a barrel is not out of the question.
Interest rates are also sounding an alarm, in deference to the sustained giddiness in stocks. The 10-year note dropped to 1.56% yield on Monday, just five basis points from its 2020 low of 1.51% (January 31), while the shortest-maturing bills all were higher, inverting the 1, 2, 3, and 6-month bills against the 10-year note. The 30-year bond is yielding 2.03%. Generally speaking, the yield curve is flat to inverted and looks like a complete, untamed disaster waiting to happen.
What looks to be a panacea for precious metals investors could be developing. Fear is rising, traders at JP Morgan Chase have been charged with rigging the gold and silver markets, and the effect from coronavirus is still unknown.
According to an article on FXStreet, not only have JP Morgan's traders been indicted, but the company itself is being probed, and the Justice Department is treating it as a criminal investigation, using RICO laws to investigate the bank as a criminal enterprise.
Coming days, weeks, and months appear to be headed toward more confusion, consternation, and discontent. The Democrat primary season is just heating up, and despite President Trump having just been cleared from impeachment by the Senate, there's little doubt Democrats in congress and even inside Trump's White House are still scheming against him.
Fed Chairman Powell is slated for a pair of engagements on Capitol Hill. On Tuesday, he will face the House Financial Services Committee and the Senate Banking Committees on Wednesday.
And, BTW, the words "retard" and "retarded" have been flagged in Yahoo Finance as unacceptable, despite one definition of the word retard is "to slow, delay." Peak Stupid has been achieved, again.
At the Close, Monday, February 10, 2020:
Dow Jones Industrial Average: 29,276.82, +174.31 (+0.60%)
NASDAQ: 9,628.39, +107.88 (+1.13%)
S&P 500: 3,352.09, +24.38 (+0.73%)
NYSE: 13,984.48, +52.56 (+0.38%)
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