What catches the eye this morning is the headline on Yahoo! Finance, "Recession odds haven't been this low in 15 months."
That's remarkable for any number of reasons, chief among them the idea that somebody actually calculates odds on whether or not the US GDP is going to go negative for two consecutive quarters (the classic definition of a recession) and the idea that these odds are so low.
The article goes on to tell that it's JP Morgan making the odds, as their quantitative model of the US economy is in a very positive state. The firm makes odds at 3:1 that the US economy will enter a recession this year. So, anyone wishing to plunk down a shekel, drachma, euro, or yen on JP Morgan's table would get three back if the economy tanks. It would not be too much of an assumption to think that Morgan would hold the bet, put it in an interest-bearing account and make a few bucks in the interim as the earliest this could possibly pay out would be well after the end of the second quarter, like August, or, in the event that a recession occurred in the thrid and fourth quarter, the firm could be holding the dough until well into 2021.
Anyone of the belief that the US economy will not turn down, gets short-ended to the tune of 1:3, putting up three units to make one. Morgan would surely like that wager, being that they'd be holding - and investing - three times the amount of the potential payout. It's always good for the house that punters like favorites. It's also well known amongst the brotherhood of gamblers that favorites only pay out 1/3 of the time at race tracks and less than half the time on flat wagers on say, sporting events.
Unless one has a doom and gloom attitude toward investing, the favored play would be the short side, even though the payout will be minimal. According to the boys at Morgan, this is about as sure a thing as Muhammad Ali in a 15-rounder against a 120-pond nun.
We'll pass. Oddsmakers are notorious for being wrong. Just ask Joe Namath, quarterback of the 1969 Jets, who went into Super Bowl III as a 15-point underdog, guaranteed a victory and managed to beat the heavily favored Baltimore Colts, 16-7. It's almost a sure thing that the analysts at JP Morgan are equally clueless about putting up ridiculous numbers on the chance of recession when the real issue is how long the continued depression will carry forward.
According to James Rickards, famous gold investor, the US economy has been in a depression at least since 2008, when the entire global economic structure came within 23 trillion dollars of complete meltdown. Those 23 trill were supplied after the fact by our friends at the Federal Reserve and their friends at other central banks. Rickards' assertion is that the US economy suffered a near-death experience in 2008 and economic activity, though not negative for long, has been sub-par, which qualifies, in his mind, as a depression.
He's got plenty of evidence to back up his claim, notably the Great Depression of the 1930s, in which GDP mostly grew year-over-year, but at a snails pace, not keeping up with population growth or inflation. Today's situation is different, in that population growth in the US is pretty much stagnant, but GDP growth since then has been bolstered by changes in definition and plenty of funny money printed up by the Fed. The 2-2.5 percent growth that has been the hallmark of the past 12 years has not kept pace with inflation, the official numbers be damned.
With evidence piling up that coronavirus will continue to spread and that industrial production and unemployment may have peaked, there's at least a distinct possibility that US GDP will slow to about 1.5 to 1.7 percent for 2020. While there may not be a recession, the economy is almost certain to struggle with slack demand caused by fear of catching something worse than the flu. People can't be blamed for not wanting to get sick or dying, but they will be, with certain segments of the population eschewing the occasional night out on the town, attending a sporting event or generally avoiding close human contact.
When the coronavirus (COVID-19) claims a few lives in the US, watch the panic. It's already well underway in China, with Japan, South Korea and Hong Kong about to be sharing the sentiment. The virus will plague the US and many other nations, particularly those in Europe, already on the brink of an actual recession, because quarantines have not been sufficiently enforced on most travel, particularly by air.
The virus has shown to have an incubation period of anywhere from five to 24 days, so there are likely multiple carriers everywhere. In a few weeks time, the number of reported cases will begin to spike in non-Asian countries and then it will be too late. The big hope is that warmer weather will slow the spread, as it usually does with these kinds of infectious diseases.
We'll see. But, if you're looking for better odds, better head to the race track. Long shots often arrive at the wire in time.
At the Close, Thursday, February 20, 2020:
Dow Jones Industrial Average: 29,219.98, -128.05 (-0.44%)
NASDAQ: 9,750.96, -66.21 (-0.67%)
S&P 500: 3,373.23, -12.92 (-0.38%)
NYSE: 14,061.48, -25.65 (-0.18%)
Friday, February 21, 2020
Thursday, February 20, 2020
Europe Is Sick and Dying
Coronavirus notwithstanding, investors appear confident about the US economy going forward, approaching record highs on a near-daily basis.
Over in Europe, however, the attitude is not the same. Following the nearly three-year Brexit disaster, the euro has fallen in value against the mighty US dollar, which, despite protestations from the Middle and Far East, continues to be the dominant currency of the planet.
Now featuring a 1.07+ handle in relation to the dollar, the euro has lost ground since the start of 2020, especially after Great Britain formally left the EU on January 31. The currency is at a 34 month low, ad is approaching its five-year low from December 2016 of 1.04. Dollar strength combined with euro weakness is making the two currencies approach parity, an unwelcome condition for millions within the EU, as the buying power of their currency declines.
This is a condition that was probably inevitable, and one that doesn't necessarily halt at an even exchange of euros for dollars. It's very likely that the euro could continue to decline in value against the dollar and other currencies, to a point at which the populations of the various countries in the EU will demand a better representation from their self-appointed overlords in Brussels.
As a political body, the European Commission is a poor representation of the will of the people of Europe. Armed with vast powers to legislate any manner of outrageous, capital-destroying laws, rules, and regulations, the Commission oversees a union that is disintegrating right before their jaded eyes.
Ruling over countries that have been battered by negative interest rates, migrant immigration that has overturned the values of the native countries, and a restive population that is ready for change and actively seeking a better way forward.
Europe is failing in many ways, but it will continue to fail so long as nameless, faceless, unaccountable bureaucrats rule over once-free populations.
At the Close, Wednesday, February 19, 2020:
Dow Jones Industrial Average: 29,348.03, +115.84 (+0.40%)
NASDAQ: 9,817.18, +84.44 (+0.87%)
S&P 500: 3,386.15, +15.86 (+0.47%)
NYSE: 14,087.13, +48.11 (+0.34%)
Over in Europe, however, the attitude is not the same. Following the nearly three-year Brexit disaster, the euro has fallen in value against the mighty US dollar, which, despite protestations from the Middle and Far East, continues to be the dominant currency of the planet.
Now featuring a 1.07+ handle in relation to the dollar, the euro has lost ground since the start of 2020, especially after Great Britain formally left the EU on January 31. The currency is at a 34 month low, ad is approaching its five-year low from December 2016 of 1.04. Dollar strength combined with euro weakness is making the two currencies approach parity, an unwelcome condition for millions within the EU, as the buying power of their currency declines.
This is a condition that was probably inevitable, and one that doesn't necessarily halt at an even exchange of euros for dollars. It's very likely that the euro could continue to decline in value against the dollar and other currencies, to a point at which the populations of the various countries in the EU will demand a better representation from their self-appointed overlords in Brussels.
As a political body, the European Commission is a poor representation of the will of the people of Europe. Armed with vast powers to legislate any manner of outrageous, capital-destroying laws, rules, and regulations, the Commission oversees a union that is disintegrating right before their jaded eyes.
Ruling over countries that have been battered by negative interest rates, migrant immigration that has overturned the values of the native countries, and a restive population that is ready for change and actively seeking a better way forward.
Europe is failing in many ways, but it will continue to fail so long as nameless, faceless, unaccountable bureaucrats rule over once-free populations.
At the Close, Wednesday, February 19, 2020:
Dow Jones Industrial Average: 29,348.03, +115.84 (+0.40%)
NASDAQ: 9,817.18, +84.44 (+0.87%)
S&P 500: 3,386.15, +15.86 (+0.47%)
NYSE: 14,087.13, +48.11 (+0.34%)
Wednesday, February 19, 2020
Current Predictions On COVID-19's Market Effects Are Probably Unreliable
Predicting the future is a fool's errand.
There are some things about the future - depending upon the time span we're using - that are likely, probable, and some, almost certain to happen. The sun will rise and set, your car will start in the morning, sporting events will be played as scheduled, trains, boats, and planes will arrive and depart more or less on time, and so on with the more mundane, routine activities of day-to-day living.
What we're talking about are the more obtuse and difficult expectations and predictions about stocks rising or falling, which teams are going to make the playoffs, who's going to win certain political contests. Those kinds of events and occurrences are subject to more variables, some known, more unknown.
Six months ago, nobody was predicting that China would quarantine half of its population due to an outbreak of an infectious virus, such as COVID-19. Without factoring in the knock-on effects due to sickness, disease, and the Chinese government's efforts to contain it, prognostications concerning what is happening or will happen in coming days, weeks, and months will almost certainly be far off the mark.
Even today, with advanced predictive tools and advancements in medical understanding, extrapolation from the known has been made more difficult by questioning the veracity of data, the intentions of the people keeping score, and other factors that haven't even emerged as of yet.
Adding to the confusion is the quickened flow of information, much of which is nothing more than idle hyperbole or nothing less than outright lies. even less is known about where the virus started (still under investigation and likely to be never verified 100%), how fast and haw far it will spread and to what degree it will affect people's lives in countries and cultures as distinct as night and day. Information from various scientific sources still range across the spectrum in terms of the transmission rate, mortality rate, makeup of the virus, and potential for vaccines or cures.
All of this is making it difficult for investors and fund managers to gauge the downstream. Variables, upon which predictions could be made, aren't even in place, so most of what's being bantered about is just so much hot air and steam. Some people are scared to death of the virus; others believe that it's only about as harmful as the ordinary flu.
Enter the human condition. Rationality and emotion are playing tug-of-war in the macro as well as the micro sense. Nobody can be much more than 50% certain about anything a month, two months, six months or a year out.
What we've been able to discern already is a sense that the virus is not going to cause widespread disease and death of the magnitude of a Spanish Flu, Bubonic Plague or any other major pandemic. While there's widespread consensus that COVID-19 is unlikely to bloom into a massive killer, that does not mean that it won't, nor does it factor in other outside influences which are presently not apparent.
Thus far, merely a month into the coronavirus event, stocks have shown an incredible ability to withstand downside pressure while bonds have catalyzed into the safety play. The 10-year-note has rallied. From January 17 to February 18, the yield has fallen from 1.84% to 1.55%, a decline of 15.76 percent, a pretty good move under any circumstances.
Gold and silver had been less uniform in their price movement, with notable ups and downs. Spot gold has increased from 1557.60 on 1/17 to 15.89.85 on the 2/18. Silver, on the same span of time, began at 18.06 and finished at 17.89. Those are spot prices; action on the paper exchanges has been more volatile, though not significantly aroused.
On the surface, the market effect from COVID-19 appears to be not very eventful, but there are sure to be other variables coming into play which may make for an uneven ride into and through the future.
At the Close, Tuesday, February 18, 2020:
Dow Jones Industrial Average: 29,232.19, -165.91 (-0.56%)
NASDAQ: 9,732.74, +1.56 (+0.02%)
S&P 500: 3,370.29, -9.87 (-0.29%)
NYSE: 14,039.01, -58.29 (-0.41%)
There are some things about the future - depending upon the time span we're using - that are likely, probable, and some, almost certain to happen. The sun will rise and set, your car will start in the morning, sporting events will be played as scheduled, trains, boats, and planes will arrive and depart more or less on time, and so on with the more mundane, routine activities of day-to-day living.
What we're talking about are the more obtuse and difficult expectations and predictions about stocks rising or falling, which teams are going to make the playoffs, who's going to win certain political contests. Those kinds of events and occurrences are subject to more variables, some known, more unknown.
Six months ago, nobody was predicting that China would quarantine half of its population due to an outbreak of an infectious virus, such as COVID-19. Without factoring in the knock-on effects due to sickness, disease, and the Chinese government's efforts to contain it, prognostications concerning what is happening or will happen in coming days, weeks, and months will almost certainly be far off the mark.
Even today, with advanced predictive tools and advancements in medical understanding, extrapolation from the known has been made more difficult by questioning the veracity of data, the intentions of the people keeping score, and other factors that haven't even emerged as of yet.
Adding to the confusion is the quickened flow of information, much of which is nothing more than idle hyperbole or nothing less than outright lies. even less is known about where the virus started (still under investigation and likely to be never verified 100%), how fast and haw far it will spread and to what degree it will affect people's lives in countries and cultures as distinct as night and day. Information from various scientific sources still range across the spectrum in terms of the transmission rate, mortality rate, makeup of the virus, and potential for vaccines or cures.
All of this is making it difficult for investors and fund managers to gauge the downstream. Variables, upon which predictions could be made, aren't even in place, so most of what's being bantered about is just so much hot air and steam. Some people are scared to death of the virus; others believe that it's only about as harmful as the ordinary flu.
Enter the human condition. Rationality and emotion are playing tug-of-war in the macro as well as the micro sense. Nobody can be much more than 50% certain about anything a month, two months, six months or a year out.
What we've been able to discern already is a sense that the virus is not going to cause widespread disease and death of the magnitude of a Spanish Flu, Bubonic Plague or any other major pandemic. While there's widespread consensus that COVID-19 is unlikely to bloom into a massive killer, that does not mean that it won't, nor does it factor in other outside influences which are presently not apparent.
Thus far, merely a month into the coronavirus event, stocks have shown an incredible ability to withstand downside pressure while bonds have catalyzed into the safety play. The 10-year-note has rallied. From January 17 to February 18, the yield has fallen from 1.84% to 1.55%, a decline of 15.76 percent, a pretty good move under any circumstances.
Gold and silver had been less uniform in their price movement, with notable ups and downs. Spot gold has increased from 1557.60 on 1/17 to 15.89.85 on the 2/18. Silver, on the same span of time, began at 18.06 and finished at 17.89. Those are spot prices; action on the paper exchanges has been more volatile, though not significantly aroused.
On the surface, the market effect from COVID-19 appears to be not very eventful, but there are sure to be other variables coming into play which may make for an uneven ride into and through the future.
At the Close, Tuesday, February 18, 2020:
Dow Jones Industrial Average: 29,232.19, -165.91 (-0.56%)
NASDAQ: 9,732.74, +1.56 (+0.02%)
S&P 500: 3,370.29, -9.87 (-0.29%)
NYSE: 14,039.01, -58.29 (-0.41%)
Tuesday, February 18, 2020
WEEKEND WRAP: No Panic in Markets As COVID-19 Story Unfolds
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.
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.
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%)
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