Faltering Friday – Weak Week Ends in a Whimper

What happened to our highs?

We had a nice rally Wednesday and Thursday, after the Fed Minutes but that's gone now and we're back where we were on the 10th – two wasted weeks in the market.  You can blame the virus or blame Bernie Sanders (who Leon Cooperman says is worse than the virus) or blame Donald Trump (the list is endless) but, for whatever reason, we're having trouble going significantly higher than we were on Jan 15th (3,320), before we fell back to 3,200 when the virus first broke out.

NOW we have some guidance and, generally, it's not good.  Obviously, no one is saying the virus is going to be a boon to business – outside of mask makers and a few Pharmecutical Companies hoping to have a treatment of vaccine.  BUT, on the other hand, the Coronavirus is costing the Airline Sector $30Bn and $30Bn is A LOT of money – even these days.  In 2003, SARS cost the Airlines $7Bn so – inflation.  Losing $30Bn, however, when you are trading at 15x earnings means you are losing $450Bn in market cap or 0.5% of the entire global market.  

The 5 Biggest Automotive Companies In The World’s Largest Car Market 2And, while we don't have the exact figures, I know when I go on a trip, the airfare is generally less than 1/3 of what I spend overall so we can assume another $1Tn of capitalization damage to the travel, entertainment and restaurant sectors so now we're chopping 1.5% off the Global Markets.  China's auto sales dropped 92% in the first half of February in the World's largest car market, accounting for 25% of global sales.  

We're getting horror stories from manufacturers all over the World, including Apple (AAPL) and Proctor and Gamble (PG), the World's two largest consumer products companies. 

"China is our second largest market – sales and profit," PG's COO Moeller said in a statement that was also included in an 8-K filing. "Store traffic is down considerably, with many stores closed or operating with reduced hours."


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Thrilling Thursday – The View From the Top of the Market

Image result for Well , here's another nice mess you've gotten me intoEverything is fine.

Hubaei (center of the virus outbreak) has asked firms not to resume work until March 11th.  It's Feb 20th so that's only 3 weeks from now – why should that concern anyone?  I'm sure things are fine.  Chinese companies (as I predicted, thank you) have been unable to pay their workers, delaying paychecks and cutting salaries.  That's fine.  Shopping malls and restaurants are empty; amusement parks and theaters are closed; non-essential travel is all but forbidden.  Fine.  

“A week of unpaid leave is very painful,” said Jason Lam, 32, who was furloughed from his job as a chef in a high-end restaurant in Hong Kong’s Tsim Sha Tsui neighborhood. “I don’t have enough income to cover my spending this month.”

He's fine.  “The coronavirus may hit Chinese consumption harder than SARS 17 years ago,” said Chang Shu, Chief Asia Economist for Bloomberg Intelligence. “And SARS walloped consumption.”  That's fine.  Without full, regular paychecks and few places to spend them these days anyway, Chinese consumers could cut spending in some categories to zero, said Shu. And it may not bounce back: For example, she said, if you skip your daily latte for two months, you’re not likely to make up for those missed drinks later in the year.  SBUX is fine.  

Rick Zeng, deputy general manager at the Lionsgate theme park in Zhuhai, said they’ve been shut down on government orders since the end of January. Starting next week, some staff will need to go on unpaid leave.  In the southeastern city of Fuzhou, hotel manager Robert Zhang said all but two or three of his 100 rooms are vacant on average nights. Two-thirds of the employees are effectively on furlough, getting some salary but not as much as they’re used to.  They're fine. 

South Korea's number of virus cases went from 31 yesterday to 104 this morning (up 235% in a day) and they had their first death from the virus this morning. 
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Wild Wednesday – More China Stimulus Brings Back the Highs

Virus, what virus?

75,282 infected, 2,012 dead, 15,030 recovered and last Wednesday we were at 45,204 infected, 1,116 dead, 5,085 recovered and the Wednesday before that it was 24,607 infected, 494 dead and 988 recovered so, in the past two weeks infections jumped 83.7% and 66.5% and deaths jumped 126% and 80% and recoveries surged 414% and 195%.  Overall then, it does look like we're SLOWLY getting things under control but even "just" 33% more infections next week brings us over 100,000 – I would not say we're out of the woods by any means.  

Nonetheless, if more infections is bullish for the markets, we need to learn to play the market that way, right?  So far, the more people are infected, the more stimulus China provides and that's what's lifting stocks this morning as China’s Ministry of Industry and Information Technology said the government would connect factories with technology companies to identify weak links in their supply chains

What does that actually mean?  No one knows but it SOUNDS good and that's all it takes these days to rally the markets.  “There will always be someone to save us’--that is the outlook from investors at the moment,” said Lewis Grant, a portfolio manager at Hermes Investment Management.  That seems to be the typical attitude of people who are managing other people's money – just keep buying!

The Nasdaq (/NQ) Futures are back at 9,680 and 9,687.5 was our high on Monday and, in our Live Member Chat Room yesterday afternoon, I said:

That's why I went flat earlier but time to short 2 /NQ again at 9,638.  We fell from 9,675 on Friday and I'm happy to DD if we test 9,700 to average around 9,660 on 4 short.  But yes, shorting is a fool's game in this market.

As you can see, we're down $1,685 so far (can't win them all) and it's very tempting to double down here at 9,680 but that makes the commitment too heavy ahead of the Fed minutes this afternoon so we'll stick with the plan and patiently wait for 9,700 and we'll see how things are going this afternoon, when we have our Live Trading Webinar at 1pm.  

We'll be reviewing our Member Portfolios this week and
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Turn Back Tuesday – Virus Fears Heat Up over the Weekend

Now Apple (AAPL) has warned they will miss on revenues.

We went from 64,456, 1,384 and 7,115 Friday morning to 73,336, 1,874, 13,054 so that's 13.7% more infected (that ship is a nightmare), 35.4% more dead (we knew that was coming) and 83.4% more recovered – there's a bright spot but almost 2,000 dead is certainly not.  SARS killed only 744 in a much longer period of time.  

At some point, investors are going to start taking this seriously, I think.  130+ S&P 500 companies have mentioned Coronavirus as affecting them somehow but only 40 guided down over the issue but now AAPL is one of them so it's making things interesting.  Fortunately, in Friday morning's PSW Report (which you can subscribe to here), we shorted the index futures over the weekend and that was good for a total gain of $6,622.50 – a great way to start the week! 

We're done with them for now as we expected the indexes to snap back a bit into the open (I called that in this morning's Live Member Chat Room) but we'll either look to re-load or add some more index shorts to our options portfolios later today as there's no reasn not to have protection in this volatile evironment.

Germany looks like they are heading into a Recession and now Japan is at the brink with 9 out of 14 Economists seeing the economy shrinking in Q1, after already shrinking sharply in Q4.  As we were discussing last week, Japan is about 300% of their GDP in debt and if we combine that with a shrinking economy, we can get Greece 2008 on steroids.  

Economists now see the virus preventing a rebound this quarter and keeping the economy in reverse. The immediate impact of the epidemic has been to stop hundreds of thousands of Chinese visitors to Japan, the biggest source of tourist income. The outbreak could also further curtail dismal spending by Japanese consumers, as they avoid crowded places after reports of some infections in Japan’s biggest cities.

Japan, in fact, had a huge jump in infections over the past week, from 28 last Wednesday to 66 this morning – that's…
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Valentine’s Day Virus – Dow has 30,000 in Site

Happy Valentine's Day!

64,456 people are now infected, 1,384 are dead, 7,155 (11.1%) have recovered in the month since this virus began.  There are over 8,000 people hospitalized in "serious" condition, that's almost 15% of those infected – especially if you include the dead, who were probably considered "serious" at some point as well.  Still, the markets are generally ignoring not only the actual virus but the effects it is having on the global economy

The Nasdaq is, in fact, 5% higher than it was before the virus oubreak and 7.5% higher than it was when it sold off on that news.  I guess you can say it simply resumed it's climb, now up almost 20% since December because, you know, that's how the stock market works now.

Unfortunately, that's also how viruses work and I'm not going to bore you with any doom and gloom stuff other than to point out that we are heading into a 3-day weekend in the US (President's Day on Monday) and, even if we are only adding 4,000 new cases per day, that means we'll be at about 80,000 on Tuesday and around 100,000 by next Friday so I'm still very concerned about next week – as people tend to freak out about 6-digit numbers.  

Last Friday, there were 31,523 (1/2) infected, 638 (1/2) dead and 30 in Singapore (1/2), 25 in Thailand (.75), 25 in Hong Kong (1/2), 25 in Japan (.86) and 24 in South Korea (.86).  That's what we have to watch closely as Singapore and Hong Kong are a huge worry with a 100% gain in a week and, of course, you can see how 100,000 by next Friday is OPTIMISTIC as we're projecting a 50% slowdown from the current pace of the spread.  

Even as the virus is mostly contained to Japan, the economic impact is already spreading across the globe with Germany reporting ZERO (0) GDP growth in Q4 and, due to the virus, possible NEGATIVE GDP in Q1 – pretty much a recession with 2 non-positive quarters.  

"The impact from the coronavirus on the


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$10,000 Thursday – Hedging Pays off – Again!

60,329 infected, 1,369 dead.

Yes, that's up 33% from YESTERDAY due to a "reclassification" of certain patients (from alive to dead?) or some would say it's the unraveling of a cover-up in China, where conditions are significantly worse than we have been led to believe by the Mainstream Media – whose primary goal is to keep us shopping at all costs...

Fortuntately, our paranioa is paying off and the Nasdaq (/NQ) hedges we suggested in yesterday morning's PSW Report (and reiterated in our Live Trading Webinar, of course) are already up over $7,000 and the S&P 500 (/ES) hedges are up $4,550 as of 7:30 AM.  We'll put a stop on the set at $10,000 (3,350 on /ES and 9,550 on /NQ) to lock in those gains and we'll just add it to our CASH!!! pile because, as I said in the Webinar – I don't want to run out and buy things until next week, when we will hopefully have a clearer picture of what's going on in China.  

Unfortunately, the picture we have today is NOT GOOD:

Let's just say that uptick on the chart is "disturbing" but I'm more disturbed by the very slow climb in recoveries (green) as that's a very long slope, between infection and recovery and 6,017 recovered and 1,369 dead is not the best survival percentage (81.5%).  If the common flu was only 80% survivable – do you think you would change your habits?  Again, I don't like to be an alarmist but no one else seemed to be alarmed this week so my concerns sounded alarmist – but I'm just being CONSERVATIVE – which I hear is quite in fashion these days…

My other concern in China, as I noted yesterday as well, is their looming debt bomb and Bloomberg picked up on my theme and wrote a good article summarizing the situation but I think this chart says it all – WORSE THAN JAPAN!

300% of their GDP is debt and half of it has been added since the Financial Crisis (10 years) so we're talking about $23
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Worry-Free Wednesday?

Image result for money printing central banks45,204 infected, 1,116 dead, 5,085 recovered.

Not much point in even tracking the virus, which is now called Covid-19, since it doesn't seem to be able to affect the markets or, as Powell said yesterday, whatever economic damage is done, China will make it up with stimuls because – STIMULUS FIXES EVERYTHING!!!  At least that seems to be the 21st Century's answer to all economic ills, why worry about anything when we can just print more money?  

As you can see from the chart above, the real virus that's infecting the World is FREE MONEY and just the Big Four Central Banksters have printed $25 TRILLION in the past 10 years and you know China, India, Australia and others were not slacking off at their printing presses either.  Overall, roughly 5% of the entire Global GDP for the past decade has come from Central Bank printing presses – all designed to make you think your Government is doing its job and growing the economy – even though it's really just growing the balance sheets of the Central Banks, which is really a hidden form of debt.

Image result for global debt chartThe non-hidden forms of debt have jumped up $50,000,000,000,000 in the past decade and that's another 5% of Global GDP added in debt each year as well so of course it FEELS like we're doing great – just like your children feel like you are doing great when you put a trip to Disneyland on the credit card – it's the time of their lives for them and you have to deal with the bills when you get home.  

Of course the great thing about adding $100Tn in debt to prop up the Global Economy is that EVERYBODY's doing it and no one is paying the bill.  With no responsible adults in the room, we are all partying like it's 1999 – only 150% more in debt than we were then.  Japan is, in fact, over 250% of their GDP in debt so it does seem like there's no actual limit to how much debt a country can go into – as they still seem to function.


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Take Off Tuesday – Crisis, What Crisis?

43,138 infected and the Nasdaq don't care.  

It's more like the Nasdaq is excited about the Coronavirus.  It did care for a minute, back in January but, after two whole days of going down, right back up and then one more down day to end the month but everything has been coming up roses in February, so far.  

It's kind of strange as Senator Tom Cotton (R-Ark) is on CNBC right now telling viewers that this virus is a threat to our American way of life and was, in fact a Chinese Bio-Weapon that was being developed in a lab in Wuhan and he should know – because he's on the Senate Intelligence Committee (you can find that under the term "oxymoron").  

You know it's true because Tom Cotton has now CHALLENGED "The Chinese" to prove him wrong and, guess what?  They haven't!  That's certainly guilty enough for me and you, right?  

And why are we rusing to villify China for having a bug when the Swine Flu started in the US and no one accused us of doing anything other than catching a cold?  Well, China is a fantastic scapegoat that plays well with the Republican base and they need a villain to rile up support in an election year and Joe Biden's son didn't work out so well, so on to China! 

Blaming China gives Trump another reason to keep his Slush Fund (tariffs) going during the election year so he can hand out goodies to his pals – like Tom Cotton of Arkansas!  Trump already picked Tom Cotton to head the CIA and his own party rejected the idea as too crazy – even for Trump.  But that was back in 2017 – I wonder what would happen if Trump nominated him today?

Image result for tom cotton cartoonTom Cotton says we could win a war with Iran with just "two strikes, the first and the last" – like he seems to think we did in Iraq (where we still are, 17 years later).  Cotton has called his potentially fellow CIA department heads "insolent and obstructive" and he KNOWS the Ukraine interfered with the 2016 election, not
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Monday Market Movement – 40,000 Infection, Almost 1,000 Dead – Why Worry?

Yep, we're still talking about the virus.  

The good news is, 3,500 people have now recovered and "only" 37,000 people remain ill.  Oops, 36,000 – the other 1,000 are dead but hey – why should that worry the US Stock Market, which has the ability to ignore everything, it seems…  I HATE to be an alarmist but I am alarmed and not many other people seem to be so I'm going to bring it up – just to maintain awareness until it's really not a worry.

As you can see from the chart, China has hardly been completely covered over with virus hot-spots and I can still see most of the word "Tokyo" (because it's out in the ocean and no one is affected there yet) and only MAJOR cities in the US have the virus so far – why would anyone worry about that?  Last Monday, there were 17,400 people infected and 364 people dead so one could argue that this is more and one could say that green line on the chart, representing Global Infections, has begun to take off – after being flat all month while we "got it under control" but not me – I'm NOT an alarmist….

The Monday before that (Jan 27th), we were at 3,000 people and hardly anyone was dead but I predicted fighting the virus would cost hundreds of Billions of Dollars and knock $400Bn (2.8%) off China's GDP which, of course, would bleed through and affect other economies – all that remains to be seen, of course.  

Image result for spanish flu animated gifLast week, the markets got a pop on word there was a "cure" (viruses are not cured) and a vaccine (vaccines take months to create and more months to manufacture) in China and both turned out to be BS but, as we have learned in the age of Trump, it doesn't matter if something is true or not – as long as it works.  In fact, just this weekend, we got this cheery note:

A cluster of cases


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TGIF – Stop the Rally, We Want to Get Off!

Holy cow, what a week!

Though the Futures are down a bit this morning, we're back to our late January highs, before the Coronavirus was a known threat and before Donald Trump began to publically compile an enemies list and promise retribution in 2020.  None of that seems to matter as Central Banksters around the World promise financial retribution in the form of MORE FREE MONEY – because money fixes everything, doesn't it?

The virus is proving hard to "fix" as a cruise ship in Japan now has 61 cases of the virus, more than any other country outside of China and there are 3,700 very scared people on that ship with 41 new cases since yesterday and they caught it from a man who got off the ship on Jan 25th, causing the ship to be quarantined on Feb 3rd (Monday), when one case was known to be on the ship.  8 people on another ship are now infected in Hong Kong, that ship has been quarantined since Wednesday with 3,600 people on board.  5,000 additional passengers on 3 cruises may have crossed with the other infected passengers – not to mention all the ports they docked at.  

So this virus definitely is not over until it's over 

 

IN PROGRESS