COVID-19 continues to rage, and on Monday, it took a bite out of global markets, especially in Europe and the Americas, with stock indices falling in a range around 3.5% on the day.
For the Dow Jones Industrial Average, it was the biggest decline in two years and the third biggest point drop in the history of the index, closing just short of the #2 all-time drop, −1,032.89 on February 8, 2018 a decline of 4.15%. Monday's rip was a 3.65% decline.
The S&P's 111.89-point loss was the second-worst ever on that index, nearly topping a 113.19 loss, also from February 8, 2018. The NASDAQ's 355.31-point decline was the second biggest on record. The worst day for the NASDAQ was on April 14, 2000, when the index plummeted nine percent, posting a loss of 355.49, kicking off what would be known as the dotcom bust.
There's a general theme around these kinds of outsized losses. Usually, there's follow-up, but it doesn't always come the very next day. It's usually another day later. That's likely because investors have become so accustomed to "buying the dip" that any major loss is seen as a buying opportunity, and this may well be, but it's probably going to be better to sit and watch on Tuesday and be ready to jump in (or out) on Wednesday or Thursday.
Another wave will come, and it's not going to be pretty. as pointed out in our Weekend Wrap, investors aren't concerned with the spread of the coronavirus per se, they're worried about the effect it is going to have on businesses, particularly, in this case, those with supply chains emanating out of mainland China, and there are plenty of them in addition to the airlines and cruise ship companies which have already been hard hit by the tail of the virus.
The after-effects from COVID-19 aren't going to emerge for months. Less than two months into the pandemic, the virus has yet to unleash its most virulent strain upon a host of countries outside China, but the list of countries seeing the number of new infections growing is getting larger. Italy, South Korea, Iran, Hong Kong, and Japan are the current hotspots, with cases doubling every day or two.
It will take some months for this to slow down and eventually be contained, but it's going to be very disruptive to the normal flow of business for some time. This is definitely not a time to be bullish, though the second half of the year may be.
With stocks battered around the world, bonds rallied, with yield on the 10-year note dropping eight basis points, from 1.46% to 1.38%. The 30-year bond hit another all-time low yield at 1.84%.
The yield curve remains inverted at the short to middle, with 1, 2, 3, and 6-month bills all posting yields higher than the 10-year, though the 2s-10s remained constant at a 12 basis point difference, the 2-year ending the day at 1.26. The curve is nearly flat, with 1.60% at one end (1-month) and 1.84% at the other, on the 30-year. A soft underbelly in the middle, with a 1.21% yield on the 3s and 5s, makes the entire trip one of just 63 basis points, or just more than one half of a percent. That's FLAT!
Oil hit the skids, with WTI dropping to 51.43 per barrel, though that's still higher than what is likely coming in months ahead, especially if widespread quarantines become fashionable in developed countries, particularly speaking of Europe and the USA.
Gold and silver were well bid, but smashed down at the end of the day. It's not yet the time for the almighty dollar to suffer. The yen and euro must submit first, along with China's yuan. When these fiat currencies are exposed, when negative interest rates are more an essential element than an experimental one, then the metals will soar. The world isn't there yet and nobody will be adequately prepared when that eventuality occurs, which could be six months from now or six years. It's looking like it may be closer to the latter, as the global machinery of finance isn't as fragile as it may appear on the surface.
Keeping a sharp eye out for emerging hotspots and especially on the US mainland, stocks ripe for shorting may be in the entertainment, hospitality, and dining segments.
At the Close, Monday, February 24, 2020:
Dow Jones Industrial Average: 27,960.80, -1,031.61 (-3.56%)
NASDAQ: 9,221.28, -355.31, (-3.71%)
S&P 500: 3,225.89, -111.86 (-3.35%)
NYSE: 13,534.12, -441.66 (-3.16%)
Tuesday, February 25, 2020
Monday, February 24, 2020
WEEKEND WRAP: Coronavirus (COVID-19) Providing Effective Cover For Profit Taking In Stocks; Bonds Rallying; Gold, Silver Flying
Making new all-time highs during the week were the NASDAQ and S&P, while the NYSE and Dow lagged, despite having reached a similar pinnacle earlier this year.
Market news is abuzz with coronavirus as the culprit for this week of losses, as stocks turned south mid-week. While the virus has yet to kill or infect significant numbers outside mainland China - less than 20 deaths worldwide, sans the red nation - it's the damage to supply chains and earnings that most bothers the money mavens of lower Manhattan.
Seriously, the people working the computers, phones, tickers, and squawk boxes could care less about 75,000 sick Chinese people or even the 2500 dead from the virus. They're much more concerned that critical parts in a just-in-time (JIT) production process won't be arriving from across the Pacific. The wheels of enterprise and consumerism need to be kept turning, and essential parts not being delivered puts a severe kink in those plans.
While much of China is under quarantine, some segments have gotten back to work, though the timeline continues to shift. Originally, communities under quarantine were supposed to get back to work in early February. As the virus spread and the severity of the situation sank in, those dates continued to be moved back later and later. Presently, many companies in China won't be getting back to full production before the second week of March.
Stocks haven't really suffered amid all the fear, uncertainty, and doubt (FUD), but they are likely to in the immediate future. As of Monday morning of February 24, a global blood-letting is underway. Asian stocks were down in a range of one to two percent, but Europe is taking it harder, with indices in Germany, France, England, and elsewhere down more than three percent, making for one of the biggest one-day drops this century.
The US markets, set to open within the hour, are showing futures off by staggering amounts, indicating a serious decline at the opening bell. Indications are that the Dow could be down nearly 1000 points, while the NASDAQ may shed more than 300. Both would qualify as among the largest declines in history.
If markets panic, which appears to be what they're setting up for, a mixed message is going to be sent. While the money managers are concerned primarily with business disruption, the general population will read the message quite differently, assuming from the massive drops on Wall Street that the virus is a killer and is coming to a neighborhood or household near you, and soon.
This is the height of cognitive dissonance and what anyone with half a wit would like to avoid. Widespread public panic over a virus that has claimed ZERO deaths in the United States and far less infections than the ordinary flu is not a condition conducive to a functioning society. Further fears could be stoked by officials at the WHO and CDC, who readily dropped the ball on the virus from the start and are now becoming the leading cheerleaders for what is likely to be largely unwarranted despair.
What the virus represents is more a threat to sanity than one's physical health. Even taking the total number of cases including those in China, the chances of contracting COVID-19 are not even as good as getting into a traffic accident. People in America are more likely to suffer injury from slipping in a bathtub, falling off a ladder, or cutting themselves with a kitchen knife than catching Wuhan Flu.
So, when stocks crash on Monday, bear in mind that they were wildly overvalued and COVID-19 and its associated panic is providing a friendly cover for profit-taking. A rout is what this market is badly in need of, and, if stocks head into bear territory (a place they're not even close to approaching at this time), it's not likely to last much longer than the time it takes for coronavirus to spread worldwide, inflict disease and death, and finally peter out by June.
First quarter results for China are going to be horrendous, with GDP growth probably plummeting by 35-50 percent. In Europe, a quarter that avoids a negative number would be a surprise, while the US is likely to print something on the order of a onesie, in the range of 0.6 to 1.5 percent gain.
It's far too early to predict how the second quarter shapes up, but there's plenty of evidence that the first quarter is going to come in positive. Feeding that data into the political landscape, it suggests that even if the US does fall into a recession, it's not going to be confirmed until near the end of October, just in time to have an effect on US elections, as GDP would have to decline for two consecutive quarters.
There's a risk that the second quarter will be in the red, but prospects for the third are better if the virus carries along the same pathway as other similar infectious strains such as SARS and MERS. Warm weather and humidity are virus-killers.
It's getting interesting, though the fears of widespread infections are currently oversold.
Bonds have been and continue to take the situation with all due seriousness. The 30-year bond ripped lower on Friday to an all-time low yield of 1.90% and the 10-year is chasing it down, closing out the week at 1.45%, perilously close to its all-time low. The 10-year note yielded 1.37 on 07/05/16, and again on 07/08/16. That level could be tested this week and a sustained drop into the 1.15 to 1.25% range would not be unwarranted during a panic condition.
The curve, however, remains nearly flat for the 2s-10s, which are holding up a 12-basis point difference (2s at 1.34%), but the shortest duration paper, 1, 2, 3, and 6-month bills are all sporting yields higher than 10-year, so concern is evident that the US economy is vulnerable to a major shock.
Gold and silver made significant gains over the course of the week, as the flight to true safety accelerated. Gold ended at a seven-year high, at 1643.00 the ounce. Silver closed out on Friday at 18.45 per ounce. A good start to a real rally, but far away from a breakout point. Both are up sharply early Monday morning.
Crude oil had a relatively good week, though the price for WTI crude in Monday morning's futures are looking rather grim, down more than three percent and approaching the Maginot line of $50 per barrel. It's unlikely to hold that level. Speculators are currently eyeing the $45-48 range and the next support level.
All of this points to a near-term washout in stocks. While there's currently not any markers being set down for a sustained rout, it is possible, though considered unlikely, as is the case for what some call "the great reset" where markets crumble like in 2008 and the entire global financial edifice is blown asunder.
No serious person is calling for anything more than a short-term correction, though markets have a unique way of making everybody look like fools.
Stay informed, stay calm, prepare.
At the Close, Friday, February 21, 2020:
Dow Jones Industrial Average: 28,992.41, -227.59 (-0.78%)
NASDAQ: 9,576.59, -174.37 (-1.79%)
S&P 500: 3,337.75, -35.48 (-1.05%)
NYSE: 13,975.78, -85.72 (-0.61%)
For the Week:
Dow: -405.67 (-1.38%)
NASDAQ: -174.38 (-1.79%)
S&P 500: -42.41 (-1.25%)
NYSE: -121.56 (-0.86%)
Market news is abuzz with coronavirus as the culprit for this week of losses, as stocks turned south mid-week. While the virus has yet to kill or infect significant numbers outside mainland China - less than 20 deaths worldwide, sans the red nation - it's the damage to supply chains and earnings that most bothers the money mavens of lower Manhattan.
Seriously, the people working the computers, phones, tickers, and squawk boxes could care less about 75,000 sick Chinese people or even the 2500 dead from the virus. They're much more concerned that critical parts in a just-in-time (JIT) production process won't be arriving from across the Pacific. The wheels of enterprise and consumerism need to be kept turning, and essential parts not being delivered puts a severe kink in those plans.
While much of China is under quarantine, some segments have gotten back to work, though the timeline continues to shift. Originally, communities under quarantine were supposed to get back to work in early February. As the virus spread and the severity of the situation sank in, those dates continued to be moved back later and later. Presently, many companies in China won't be getting back to full production before the second week of March.
Stocks haven't really suffered amid all the fear, uncertainty, and doubt (FUD), but they are likely to in the immediate future. As of Monday morning of February 24, a global blood-letting is underway. Asian stocks were down in a range of one to two percent, but Europe is taking it harder, with indices in Germany, France, England, and elsewhere down more than three percent, making for one of the biggest one-day drops this century.
The US markets, set to open within the hour, are showing futures off by staggering amounts, indicating a serious decline at the opening bell. Indications are that the Dow could be down nearly 1000 points, while the NASDAQ may shed more than 300. Both would qualify as among the largest declines in history.
If markets panic, which appears to be what they're setting up for, a mixed message is going to be sent. While the money managers are concerned primarily with business disruption, the general population will read the message quite differently, assuming from the massive drops on Wall Street that the virus is a killer and is coming to a neighborhood or household near you, and soon.
This is the height of cognitive dissonance and what anyone with half a wit would like to avoid. Widespread public panic over a virus that has claimed ZERO deaths in the United States and far less infections than the ordinary flu is not a condition conducive to a functioning society. Further fears could be stoked by officials at the WHO and CDC, who readily dropped the ball on the virus from the start and are now becoming the leading cheerleaders for what is likely to be largely unwarranted despair.
What the virus represents is more a threat to sanity than one's physical health. Even taking the total number of cases including those in China, the chances of contracting COVID-19 are not even as good as getting into a traffic accident. People in America are more likely to suffer injury from slipping in a bathtub, falling off a ladder, or cutting themselves with a kitchen knife than catching Wuhan Flu.
So, when stocks crash on Monday, bear in mind that they were wildly overvalued and COVID-19 and its associated panic is providing a friendly cover for profit-taking. A rout is what this market is badly in need of, and, if stocks head into bear territory (a place they're not even close to approaching at this time), it's not likely to last much longer than the time it takes for coronavirus to spread worldwide, inflict disease and death, and finally peter out by June.
First quarter results for China are going to be horrendous, with GDP growth probably plummeting by 35-50 percent. In Europe, a quarter that avoids a negative number would be a surprise, while the US is likely to print something on the order of a onesie, in the range of 0.6 to 1.5 percent gain.
It's far too early to predict how the second quarter shapes up, but there's plenty of evidence that the first quarter is going to come in positive. Feeding that data into the political landscape, it suggests that even if the US does fall into a recession, it's not going to be confirmed until near the end of October, just in time to have an effect on US elections, as GDP would have to decline for two consecutive quarters.
There's a risk that the second quarter will be in the red, but prospects for the third are better if the virus carries along the same pathway as other similar infectious strains such as SARS and MERS. Warm weather and humidity are virus-killers.
It's getting interesting, though the fears of widespread infections are currently oversold.
Bonds have been and continue to take the situation with all due seriousness. The 30-year bond ripped lower on Friday to an all-time low yield of 1.90% and the 10-year is chasing it down, closing out the week at 1.45%, perilously close to its all-time low. The 10-year note yielded 1.37 on 07/05/16, and again on 07/08/16. That level could be tested this week and a sustained drop into the 1.15 to 1.25% range would not be unwarranted during a panic condition.
The curve, however, remains nearly flat for the 2s-10s, which are holding up a 12-basis point difference (2s at 1.34%), but the shortest duration paper, 1, 2, 3, and 6-month bills are all sporting yields higher than 10-year, so concern is evident that the US economy is vulnerable to a major shock.
Gold and silver made significant gains over the course of the week, as the flight to true safety accelerated. Gold ended at a seven-year high, at 1643.00 the ounce. Silver closed out on Friday at 18.45 per ounce. A good start to a real rally, but far away from a breakout point. Both are up sharply early Monday morning.
Crude oil had a relatively good week, though the price for WTI crude in Monday morning's futures are looking rather grim, down more than three percent and approaching the Maginot line of $50 per barrel. It's unlikely to hold that level. Speculators are currently eyeing the $45-48 range and the next support level.
All of this points to a near-term washout in stocks. While there's currently not any markers being set down for a sustained rout, it is possible, though considered unlikely, as is the case for what some call "the great reset" where markets crumble like in 2008 and the entire global financial edifice is blown asunder.
No serious person is calling for anything more than a short-term correction, though markets have a unique way of making everybody look like fools.
Stay informed, stay calm, prepare.
At the Close, Friday, February 21, 2020:
Dow Jones Industrial Average: 28,992.41, -227.59 (-0.78%)
NASDAQ: 9,576.59, -174.37 (-1.79%)
S&P 500: 3,337.75, -35.48 (-1.05%)
NYSE: 13,975.78, -85.72 (-0.61%)
For the Week:
Dow: -405.67 (-1.38%)
NASDAQ: -174.38 (-1.79%)
S&P 500: -42.41 (-1.25%)
NYSE: -121.56 (-0.86%)
Friday, February 21, 2020
JP Morgan Says No Recession This Year; Professional Handicappers Likely To Want Some of That Action
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%)
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%)
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%)
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