Federal Reserve just poured $120-billion into the repo market. Light ’em up, markets!
Facts and Folly
The late Dr. Carl Sagan summed it up best in the book titled “The Demon-Haunted World: Science as a Candle in the Dark.”
Our problem today is we are living in an asylum populated by addicts hooked on a sick socio-economic paradigm who are anxious to turn everything into a partisan event.
Bugs don’t care about politics. Corporations do.
Fact #1: The Data Sucks
Here’s how it lays out today: 105 Cases in the USA and 6-dead. And for the global view?
The big data picture is cases going up almost 11% in five days and the death count is going up 11.18% so the numbers are tracking. Will we make big bets on there being 20,000 global dead by Memorial Day? No, but we wouldn’t bet against that, either.
Fact #2: Data Management is Likely
Hyper-complexity – which is the “big paradigm of the World” comes with a few responsibilities. One of them is Global Panic is a very, very bad thing. So bad, in fact, that it could reduce human population dramatically if panic gets out of control.
Ergo, it falls to governments to a) act in a responsible way and b) protect as many people as they can.
Importantly, these are not partisan (party) political issues. They are Global – as in we could all (or lots of us) die if we f*ck this up. Government will do what they must in order to muddle-through.
An example the Data: On the John’s Hopkins GIS site, the 5-dead in Seattle/King County, Washington are reported separately from the one death in Snohomish County, Washington.
A lot of people (clamoring for attention) will spin this six-ways-to-Sunday. “Government’s spreading the data out so it won’t be so apparent that things are out of control...” This will resonate with people because yes, our government has indeed lied about all kinds of things and this is what they reap for past lack of candor.
On the other hand, scientists need to have disease outbreak data down to the zip code level that can be traced back to population characteristics and so forth. Snohomish County much is less dense than Seattle/King County so as cases evolve, the spread gradients can be modeled, and resources allocated.
As for conspiracy talk and bioweapons? Little late to even waste processor clicks on history, don’t you think?
Fact #3: Going Political is Stupid
Both political parties are led by politicians. Fact is, politicians are what? Self-Serving. That is, they only seem to represent people in the hours and days before an election. Like today’s Super-Tuesday. The minute the votes in, they’re out of control, again.
Democrats kept the Mexico border open and they persist in sanctuary city lawbreaking. They own that. Trump didn’t shutdown all international air travel in January. He owns that. Everyone has dirty hands.
But to look to any of the clowns in office as specifically causative? Would you blame an earthquake on one party, or the other? So why would people do othat with the virus outbreak?
Back to B.F.Skinner and some “operant conditioning.” Monetizing the news (NY Times, Bloomberg, the Networks, etc) has resulted in a phenomenon I call “Broken News.” News has evolved into a financialization, not a service.
And here’s a side-pointer for you: If you listen to anything more than 15-minutes of news a day, you’re a partisan/news addict…which pushes you toweard the idiot column. Cowboy-up and lead a life; don’t be pulled around by “someone else’s game.”
Fact #4: A MCHVE is Likely in Progress
Behind the scenes – a further market melt-down lurks for technical reasons. For those not schooled in economics, that would be a Massively Correlated Hyper-Volatility Event.
Look at what has happened in the charts:
Because of this massive decline, we have fallen outside of “normal” standard deviations that may be used in derivatives pricing models. When this happens, derivatives begin to break. When that happens, big banks get in trouble. Care to geuss who’s going to get that bill?
One German bank in particular is on our watch list because it has pretty much just crap left on its derivatives book. While it’s not our intent to smear anyone’s reputation, perhaps a careful read of the Financial Times story “UK regulator warns Deutsche over repeated compliance failings” And then connecting the dots with Brian Sozzi’s Yahoo Finance article “Coronavirus could spiral the stock market down another 30%: Deutsche Bank” will set your thinking right.
All of the Big Bank people are smart as whips, but when the second leg of this sucker comes, we figure it will about match the 48% overall decline of the Great Depression’s Crash. More – and projections on timing in tomorrow’s Peoplenomics report.
Fact #5: Jobs Data Could Be Good
We will get the ADP job number tomorrow, Challenger job cuts Thursday and Federal data Friday. The really short-term, and likely reason why we could see the market rally to our expected levels for the week would be we’re in something of a wave-crest between troughs.
In the first wave down, which at it’s worst was around 15% from all-time highs, there was initial fear and whispers of panic. Now? Pollyanna types abound. Rally on.
But, when the next leg down comes along, we would expect the Deutsche fellow will be right and that we will be down more than 30% – bcut that’s basis the “bounce high” which would be to maybe 7% down from the ATH.
In other words, think in terms of 33% down from 7% down – and you see where our 40+% decline worries come from. Oh, and yeah, this is how we replay 1929. Bring your own Locusts, too.
For now, there’s enough global inventory and goods moving, but out 2-3 weeks? I wouldn’t place a lot of bets. Spot shortages of certain goods are already being reported.
Fact #6: Shortages are Self-Perpetuating
As soon as there’s a whisper of something going into short supply, out comes the buyers en masse and that causes a shortage, even if there wasn’t one in the first place.
The reason is we no longer have a distribution-based supply system. In times of old, suppliers held inventory, not manufacturers. And, as a result, there was a lot of “flex” in the supply chain. Then came the financial engineers. “Hey! That inventory is money at rest! Let’s skinny-up on inventory and put the money in hedge funds so we can all get bigger bonuses!!!! Whee!!!!” Stock buy-backs! Whee!
Result? Stories like:
- “Coronavirus fears spark ‘panic buying’ of toilet paper, water, hand sanitizer. Here’s why we all need to calm down.“
- Coronavirus Outbreak Will Lead To More Drug Shortages In The U.S., Including Antibiotics .
- Coronavirus may create wedding dress shortage if outbreak persists
Same dynamic as new Apple iPhone releases and bank runs. If you’d been reading Urban back in January, you’d be comfortably set by now.
Fact #7: You More Likely to Die of Something Else
Motor vehicle accidents kill about 40-thousand people a year. And, an article in Lancet in December cited “Seasonal flu kills 291,000 to 646,000 people worldwide each year, according to a new estimate that’s higher than the previous one of 250,000 to 500,000 deaths a year.”
You may get the flu and feel like crap, but it may not be corona virus.
And here’s one more to put in your pipe: A doc I was talking to raised an absolutely fascinating question this week: “Maybe there has been a global pool of corona viruses we didn’t know about because we never really went looking and counting before…”
For us, lots of vitamin C, rest, pneumonia shots and common sense, seems like the best approach.
Oh, and if you want come over to visit? Forgetaboutit.
Fact #8: Entertainment May Change
Go to a theater? Sit behind that coughing couple? Er….n o thanks! As a result of such fears: Bond fans ask for No Time to Die delay due to coronavirus.
We’re literate and not stupid. No handshakes or hugs…and minimal public exposure. And Hibi-clens and….if you get a cold, don’t freak out.
Worthy of Mention
Spring is when Tornado Alley lights up. And sure enough, At least 8 killed after powerful tornado slams Tennessee. N ashville area.
With corona fears, we wonder about the future of pro sports, in general. Still, football’s a biggie and with billions at stake, here’s what’s holding up the NFL’s collective bargaining agreement.
How soon will we all be chipped? What is Clearview AI and why is it raising so many privacy red flags?
And we have a chance today to again assess the double-digit brainpower of average Americans in the fiasco called Super Tuesday. Typical stories include Biden gets big Super Tuesday boost from former rivals. Spare us, please.
Will there be a home version for Christmas? As Honeywell sees path to world’s most powerful quantum computer in 3 months.
If that’s out of your budget, send me one of these bad boys: Bentley unveils $2 million roofless car with trim made from 5,000 year-old wood.
Peoplenomics tomorrow for subscribers…more here on Thursday.
Write when you get rich,