Morning Briefings
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Three Coins in the Fountain
(1) Spooky bond market. (2) Nostalgia. (3) Coronavirus math: What if lots more people are infected but with mild symptoms? (4) Coronavirus worldometer. (5) The relevance of Tom Hanks, Kelly Clarkson, and Clint Eastwood. (6) Putting subjective probabilities on the Good, the Bad, and the Ugly: 65%/25%/10%. (7) Good: Panic Attack #66 ends soon as pandemic of fear recedes too—65%. (8) Stocks are cheap compared to bonds. (9) S&P 500 forward revenues and earnings remain amazingly resilient at record highs. (10) Bad: Excessively high Fear Factor causes a recession and a bear market—25%. (11) Ugly: Zombie Apocalypse—10%; to avert, the Fed will ZIRP and QE again, and rev up the monetary helicopters. (12) Movie review: “The Invisible Man” (+).
‘We Are Very Much Alive!’
(1) COVID-19 pushes scientists to find solutions fast. (2) Big money is being thrown at the problem. (3) Novel vaccines using mRNA are being tested. (4) Mice helping out. (5) Chinese using CTs and blood tests to better diagnose the illness. (6) Gilead’s drug, remdesivir, is being tested as a treatment. (7) Health care stocks celebrate Biden’s Super Tuesday win. (8) Moderate Dems lining up like good soldiers. (9) Health care sector stocks have underperformed while still delivering earnings.
The BS Virus
(1) Investors prefer Biden over Sanders. (2) Centrists uniting against Sanders in Democratic party. (3) Socialism is a virus that won’t go away. (4) From Rousseau and Robespierre to Castro and Sanders. (5) Fed’s medicine cabinet doesn’t include any vaccines for viruses. (6) Analysts chopping Q1 and Q2 earnings estimates. (7) Lots more earnings warnings coming soon. (8) No sign of a pickup in inflation.
Back to Business
(1) Viral lyrics: Getting to know you, getting to know all about you. (2) May or may not be highly contagious, lethal, and seasonal. (3) Mild symptoms might be undercounted, exaggerating the death rate. (4) Time to consider extreme measures to stop auto accidents? (5) Tech to the rescue? (6) Shaving GDP outlook. (7) Virus bad for capital spending and exports, good for residential investment. (8) M-PMI around 50 corresponds to 2.1% real GDP growth, but also to low-single-digits S&P 500 revenues growth. (9) Truck tonnage index in record-high territory, but truck sales taking a dive recently. (10) Growth in railcar loadings of containers is still weak, reflecting Trump’s deescalated trade wars. (11) Now global health crisis is infecting global trade. (12) Swedes leading the way in e-currency.
COVID-19: The Plot Sickens
(1) We are all virologists now. (2) Most of us can breathe easy. (3) Staying healthy. (4) P/E-led meltup followed by P/E-led meltdown. (5) The previous four seven-day freefalls occurred in bear markets. (6) No longer overbought. (7) FAANGMs cheaper, but not cheap. (8) A bad week for Stay Home as people stay home. (9) Lowering our earnings estimates, but the sun will come out later this year. (10) Industry analysts still too optimistic about earnings. (11) Extreme measures may contain virus while depressing global growth. (12) Really ugly Chinese PMIs. (13) Powell ready to provide a shock-and-awe rate cut? Would it help or hurt? (14) Let’s hope cover-story curse kills COVID-19 as it did previous viruses.
Damage Assessment
(1) Flu vs COVID-19: More alike than different. (2) Keep your distance, don’t touch your face, and wash your hands. (3) COVID-19 less deadly than flu so far, based on number of deaths. (4) S&P 500 down, but not yet in correction territory. (5) Travel-related stocks hit hardest. (6) Valuations getting more reasonable. (7) Beware of cuts to earnings that may be in the near future. (8) Bonds and oil not convinced all the bad news is out.
Government Measures To Stop COVID-19 Triggering Pandemic of Fear
(1) Updating our assessment of COVID-19 crisis. (2) Government actions and warnings to stem virus making Panic Attack #66 the most fearsome of them all. (3) Quarantines and fears of quarantines around the world raising risk of global recession and bear market in stocks. (4) In US, CDC official warns public to prepare for school closings even though she says virus risk is low! (5) Government measures should stop virus, but risk killing us with fear. (6) Flu kills people of all ages, while COVID-19 kills old people (numerous in China) and has spared children younger than 10 so far. (7) Sick happens. (8) COVID-19 can be spread by people with no symptoms. (9) US consumers have nothing to fear but fear about COVID-19 coming to our neighborhoods.
Anatomy of a Virus
(1) Panic Attack #66 hit investors hard yesterday. (2) A viral panic attack. (3) In the spring, there should be healthier weather. (4) Counting on the flu model. (5) Travel and tourism industries are sick. (6) P/E-led correction following P/E-led meltup. (7) The man from WHO isn’t ready to call it a pandemic despite spread to Iran, Italy, and Korea. (8) Getting harder to breathe for millions of small businesses. (9) Fed may need to deliver a couple more rate cuts to keep US economy in a good place. (10) Wuhan Institute of Virology may be China’s Chernobyl.
Snorting vs Sneezing Bull
(1) Known unknown and known knowns. (2) Fed’s policy report mentions COVID-19 as a risk, but Clarida says US economy remains strong and uninfected. (3) China is a weak link in global supply chains. (4) Impressive rebound in February’s manufacturing activity according to NY & Philly Fed surveys. (5) US factories getting a boost from strong housing starts. (6) Consumer optimism lifted by lots of jobs. (7) LEI and CESI confirm economy still expanding. (8) February’s flash PMIs weakened in US and Japan, improved in Eurozone. (9) Bull sneezed on Friday. (10) Investors reaching for yield in bond and stock markets. (11) Tech accounts for nearly half of capital spending. (12) Outperforming stocks include those of the Stay Home, LargeCap, and Growth varieties. (13) Movie review: “The Traitor” (+ + +).
Small World
(1) China’s quarantine disrupts global supply chains. (2) Chinese factory workers are staying home. (3) Coronavirus hits Apple’s demand for phones and supplies of parts. (4) Some auto companies facing parts shortages too. (5) Flying parts on jets. (6) At new highs, stocks still taking it all in stride. (7) Global MSCI forward earnings and revenue estimates holding up. (8) However, industry analysts are starting to cut their S&P 500 earnings estimates for Q1-Q3. (9) Musk’s hyperloop getting bored toward reality in Vegas.
In a Good Place?
(1) Some light reading. (2) From good to very good. (3) Beware of Fed mantras. (4) US beats China currently in the health department. (5) Soft patch in US manufacturing not worrying Fed. (6) Powell is pleased to see labor force participation rate rising. (7) Housing and consumer spending looking good, while capital spending is not so good. (8) Advanced economies should advance as trade tensions ease. (9) Fed worrying more about subdued inflation than feverish virus. (10) Submerging emerging economies are a concern. (11) China’s virus mentioned several times in Fed’s report. (12) Lots of risky businesses in the corporate debt markets. (13) Running out of room to lower interest rates.
Valentine’s Day: Investors Still Love Stocks
(1) Love (for stocks) conquers all (including viruses). (2) Our 3500 target on S&P 500 is 3.5% from here. (3) SuperCaps leading the way. (4) Latest weekly proxies show revenues and earnings growth picking up—but that was before the virus outbreak. (5) Stocks remain on a liquidity diet catered by the major central banks. (6) Fed’s balance sheet expanding again. (7) GDPNow still tracking north of 2.0% for Q1. (8) Consumers may be stuffed with stuff. (9) Online shopping accounting for over a third of GAFO sales. (10) More single than married people in US. (11) Consumers are saving more.
US Stocks With Immunity
(1) Markets feeling better after shaking off the coronavirus. (2) Even the most sickly industries bounced on Wednesday. (3) Investors still loving FAANGMs and LargeCap Growth stocks. (4) Look, Ma, no steering wheel! Feds give first approval for autonomous car. (5) Nuro and many other players fighting for the autonomous vehicle delivery business. (6) Waymo’s AV taxi service offering limited rides around Phoenix. (7) GM and Ford have a long road ahead. (8) Musk says AV coming, but playing defense on Autopilot crashes. (9) Chinese food prices soaring, while retail sales may fall to Earth.
Powell’s Vaccine
(1) So far, coronavirus is a minor panic attack for stocks. (2) Investors betting virus will soon go away or that Fed will inject liquidity if it infects global economic growth. (3) Powell is “closely monitoring” the situation. (4) No sign of virus in forward revenues or earnings, yet. (5) Industry analysts are cutting Q1-Q3 earnings, but boosting Q4. (6) FAANGMs remain immune to the virus and have been leading the meltup. (7) FAANGMs are not immune to government regulation. (8) There’s no place like S&P 500 Homebuilders during the coronavirus outbreak. (9) Millennials starting to turn into homeowners.
China’s Chernobyl?
(1) Three Mile Island, Chernobyl, and China’s syndromes. (2) The collapse of corrupt regimes. (3) Will Dr. Li’s death lead to the China Spring? (4) Autocrats are sickening. (5) Another reason to leave China. (6) The Great Quarantine of China. (7) Signs of life in global PMIs during January, just before the virus made headline news. (8) Eurozone sentiment may have bottomed, though German auto production has not. (9) US productivity growth is moving in the right direction.
Hysteria vs Hysteresis
(1) Pessimism vs optimism. (2) Timeline of the viral impact on DJIA. (3) A major known unknown. (4) Online dashboard showing rising body count. (5) Monitoring financial markets for clues. (6) Chinese stocks, copper/gold price ratio, and bond yield signaling risk-off. (7) S&P 500 Energy and Materials have been infected. (8) Stay Home again until virus crisis blows over. (9) Homebuilders and video games outperforming cruise lines, casinos, hotels, and air freight. (10) The US labor market is hot, yet wage inflation is not. (11) Powell says there is room to run as long as labor force participation rate continues to rise.
Social Insurance Is Inflating
(1) Comparing and contrasting. (2) Ford vs Tesla. (3) Insurance brokers vs insurance companies. (4) Rising premiums help the top line. (5) Low interest rates are a drag. (6) Social inflation translation: juries on the war path and attorneys on the hunt. (7) Anti-solar panels generate electricity while the moon shines.
Central Bankers Agonistes
(1) The sun is shining brighter in the US still. (2) Healthier to Stay Home during coronavirus outbreak. (3) Stocks aren’t cheap in the US compared to elsewhere in the world. (4) US revenues and earnings fundamentals look better than elsewhere in the world. (5) Fed is on hold for now, but the next rate move might be lower rather than higher. (6) inflation remains stubbornly below central bankers’ 2.0% target. (7) Powell’s list of six major uncertainties. (8) ECB and BOJ sticking with negative official interest rates, while buying more assets. (9) PBOC injecting liquidity to combat the virus. (10) Waiting on Fed and ECB reviews of their monetary policies.
The NABNAB Scenario
(1) Taking a break from the virus, and DC too. (2) The secret formula is NABNAB 2-2-2. (3) Failing to stall. (4) The Trauma of 2008 is still boosting profit margins today. (5) Productivity could be a game changer. (6) Consumers continue to spend, especially on health care. (7) Real wages at record high and rising along a trend line of 1.2% real annual growth. (8) Capital-spending growth falls along with CEO confidence. (9) Tech-related capital spending at record high. (10) Some evidence of Millennials turning from renters to homeowners. (11) Other possible sources of GDP strength in 2020: defense, infrastructure, and trade.
Made in China
(1) On the road again. (2) Unmasked man. (3) Coronavirus going viral. (4) Not as bad as the flu? (5) Great Quarantine of China. (6) Wet markets full of weird and tainted meats. (7) Coronavirus makes it into the Panic Attacks record book as #66. (8) Before the virus hit the tape, forward revenues and forward earnings rose to new record highs. (9) LargeCaps dropping less than SMidCaps. (10) Why is Growth beating Value again? (11) Stay Home beating Go Global during health crisis. (12) Movie review: “Little Women” (+).
Content Wars
(1) Crowded streaming market makes grabbing eyeballs harder. (2) Netflix growing fastest but spending more cash than it has. (3) Netflix says good-bye to departing Friends and relocating Office. (4) Competitors start hoarding content; Netflix responds by developing its own. (5) Comcast proud of Peacock; AT&T bets on HBO Now. (6) UK bids adieu to EU, now has lots to do. (7) UK’s stock market lags other countries’ in price performance and valuation.
Climate for a Change
(1) LargeCap’s forward revenues & earnings beat the SMidCaps. (2) Profit margins lower for stocks of all sizes. (3) No new high for SmallCap index price. (4) Valuation for SMidCaps worsened compared to LargeCap. (5) Coronavirus fears spread through markets. (6) FAANGMs causing P/E divergence between LargeCap and SMidCaps. (7) Global elite and youth activists debate climate change in Davos. (8) Global prosperity linked to carbon emissions? (9) IPCC says eight years left before planet gets too hot. (10) Corporate CEOs focused on sustainability for good. (11) Capital reallocated to sustainable investments.
Something To Fear
(1) When wishes come true. (2) P/E-led meltup increases risk of correction. (3) From nothing to fear to fearing a pandemic. (4) We are all virologists now. (5) China’s autocrats: part of the solution or part of the problem? (6) China syndrome: a major health crisis has been waiting to happen. (7) Has technical picture been too bullish? (8) Too many winners? (9) Valuation models: different strokes for different folks. (10) Misery Adjusted P/E is neutral. (11) Sticking with 3500 S&P 500 target by year-end.
Going Viral?
(1) Panic attacks vs bear markets. (2) Going for a ride with the Blue Angels. (3) Will latest virus outbreak be Panic Attack #66, or something much worse? (4) SARS, MERS, EVD, and now nCoV. (5) We are all virologists now. (6) Bad start to the Year of the Rat in China. (7) Signs of global life in commodity prices and flash M-PMIs. (8) Housing-led growth in US during 2020? (9) US leading indicators may have run out of room to signal economic expansion. (10) Railcar loadings are depressing, while truck tonnage is upbeat. (11) Neither boom nor bust in global forward revenues and earnings. (12) What’s the message from the bond market? (13) Movie review: Jojo Rabbit (+).
Staying Defensive in a World of Danger
(1) Dangerous world means more defense spending. (2) Boeing shares grounded, but most other aerospace & defense stocks flying high. (3) Mergers, spending on aircraft, missile defense, and space all help. (4) If Dems win Oval Office, there may be trouble for defense stocks ahead. (5) Venture capital funding a bit soft in Q4 but strong for 2019 as a whole. (6) Internet companies are receiving the most funding, especially software as a service.