You have permission to be confused.  Not just a little bit, but totally  totally awed by how much denial, misdirectioin, and partial truth is afoot in the world.  Too early to label as the opening round of the Decline of Civilization, but the indicators are murky, at best.  Could be…

On the Plus Side

MarketWatch had a real interesting story cross Monday:  “Goldman Sachs says impact of coronavirus will be ‘limited,’ and these are the stocks to buy if it’s right .”

That left my  consigliere and me wondering by late Monday afternoon if someone wasn’t “talking their book” – a technique where major players sometimes say one thing (we’re heading higher ahead) while unloading (distribution) stock holdings to remaining “greater fools.”  No conclusions, but we do have serious suspicions.

Then there’s Bitcoin which kissed $10,000 Monday but which is back down to $9,872 as of click-time this morning.  Wuham is being used as a marketing gimmick now by this digital tulip sales-types.

Just out in time for coffee #2 is this press release:

WASHINGTON, D.C. (Feb. 11, 2020) — The small business Optimism Index started the New Year in the top 10% of all readings in the 46-year history of the survey, rising 1.6 points to 104.3 in the month of January. Six of the 10 Index components improved, two declined, and two were unchanged, with the Uncertainty Index edging up slightly. Owners expecting better business conditions dipped slightly, but sales expectations and earnings trends improved significantly. As was reported last week, actual job creation surged in January.

The market put on another good (unjustified, but that’s what blow-off mega-tops are about)  run Monday.  We expect a large portion of that may be due to the massive injections of repo and reverse-repo dough from the NY Fed Trading desk.

The idea of a repo (big picturing a bit) is that I give you a sack full of somewhat illiquid financial assets (want a bag of sub-prime CMO’s?) and you give me cash.  I dump that into the market, forcing it to go up, at which point I sell, then “buy-back” the sack of illiquid assets.  Whee!  Rinse, repeat, repeat…repeat…and eventually buy the whole freaking Universe!

At some point, this means of keeping the market up will run out of steam.  But, since Fed Boss J Powell says it’s “game-on to April” we aren’t too worried about the bottom falling out until then.  See if he stays with that in his talking points this week.

There IS  Major Risk!

The risk is that smart people (readers of this column, mostly) will figure out that Wuhan is on the verge of taking down the World Economy.  Consider what we have seen so far:

  • Many borders are terribly limited – most closed to China – isn’t Hong Kong down to only 2 open?
  • What about the Cruise Ships that are in mass quarantines and they’ve been locked up for coming up on 2-1/2 weeks.  You’d think the authorities could at leastr throw a load of Budnker C intoi the bilge so these victims could get back into toning up their tans, right?  (Washie-washie?)  For those with fuel? Carnival cruise ship is running out of ports after 4 nations block entry on coronavirus fears.
  • The death toll screamed into 4-digits overnight:  43,128 confirmed cases and 1,018 dead (and climbing).

I received a small package of electronics from China last night (parts for the time machine project, eh?) and, suddenly, the investment in lots of nitrile gloves, bleach, and that super high-powered ozone generator didn’t seem at all silly.  Nor does the investment in Hibi-clens soap and many of the other extreme precautions we suggested as “mental grist and purchase) two weeks back when the MSM was still trying to portray “calm in government.”

That’s b ecause we sensed governments in  utter panic than no one want to be the first to mention anything.  Brings back the “Emperor’s New Clothes” tale, in many ways.  The WHO today calls the crisis “grave.”  My, what a choice of words…

MoR: The “Moment of Recognition”

Most people don’t think like me.  Probably a good thing.  Because, if they did, they’d be in an extremely  defensive posture,  blowing off playing the long side of any markets right now and remaining in cash and equivalents.

We have two MASSIVE Recognition Moments in the wings and all that remains is a “triggering event” for either to “become Real” at which point, you are either on the right side of personal strategic planning, or you’re screwed.

Remember, we quietly laid-in some additional bleach in early January when word of Wuhan began to circulate.  If you consider yourself so wise, count up how many N100 masks, and how many cartons of nitrile gloves are on hand.  There’s your scorecard, like it or not.

The First Moment of Recognition (MoR)

Obviously, it’s Wuhan-corona.  For now, outfits like Amazon are continuing to soar.  But, let me wonder how long before the supply chain from places like China begin to get a bit thin?  Could Wuhan lead to a massive shift in the global economy?

One model is that goods from Asia could be “contaminated” – of course, we are not saying they are, but how long is the virus able to persist at room temperature?  Lots of “estimates” but would you bet your life on “estimates?”  We think that’s poor decision-making, if you do.   We like science – and the more the merrier right now.

A hiccup in Amazon’s supply chain may not be orequired.  How many of the cruise lines will be around in a year if this thing “gets legs” out of China.  Or, for that matter, what is the ripple if people notice Boeing filing for bankruptcy due to people getting less interested in spending 3-hours in “germ tubes?”  Or, what happens when the first hotel chain, rental car company or….large event marketing company (we have some May concert tickets, don’t forget!) has to cancel an event over reasonable caution to contain spread?

We never had a SARS MoR that damaged markets much, so the mechanics of how it will hatch, germinate, and begin to spread panic is somewhat unknown.  But we will be fascinated to see how the Fed Boss walks the linguistic tightrope later today.

The headline Under Armour Shares Crash, Blames China is “the pits” – but it could begin a wave.  And the wave is good-bye.

MoR #2 Could Federal Showdown Over Sanctuaries

Like MoR #1 pending, the most recent data we have on MoR of a deeply divided nation dates back to the mid 1850’s when the US was moving into a Civil War.

The difference between slavery (very bad) and open borders (also very bad) may not seem of similar scale, but in terms of behavioral economics they may be.

Just as the South built a business model on suppression of people’s rights and exploitation of a racial minority, the same could also be said of liberalista states.  Which have been, in my view, exploiting illegal immigrants to cover-up excessive government and sky-high tax rates.  If population can be forced up, guess what the empire builders in  government get?  Big Empires!!!  Green star for you!

The German Model (involving Muslim mass immigration from the Middle East) was to embrace them because of the clear short-term benefit to consumptionEveryone eats, needs a house and so forth.

What has changed in the past day is that U.S. Attorney General William “Barr Announces ‘Significant Escalation’ Efforts to Combat Sanctuary Policies.

Again, the problem we have with Sanctuary governments is that they have strayed from Everyone is Equal policies.  If an American Citizen were to sneak in over a border, do you think a state of do-gooders, running an Anglo-European version (in their own minds) of a latter-day Underground Railroad would lobby for more white people enerting America? Voting?  No?  Well, that’s institutional racism, then.  It’s also a violation of equal protection and it supports the drug cartels.

I could go on and on about dangers – inequalities and illegalities – sponsored by left-wing social/online revolutionaries, but as Elon Musk has wisely instructed #DeleteFacebook.  We’d like to see social manipulation turned into a felony, while we’re at it.

On the political front, Pete Buttigieg is pleasantly in a dead-heat with Bernie Sanders on the old socialist’s home turf. Pete’s more reasonable that the Bernunist, as we figure it.

Which ought to tell you something about how blow-back against radicals is beginning to surface.  No doubt, Barr’s “getting hard” on sanctuaries will not be popular – especially amongst Trump-haters.  Who value their hate, more than evenly and uniformly applied laws.

The bottom line?  The MoR of AmRev2 doesn’t seem close at hand if you’re white and ignoring the noise and hate, calls for insurrection, and half-truths spewing from the barricade bunch.  But the spinning of Trump-hate into calls of racism and then moving hate-blinded supporters towards civil insurrection is a familiar track, well trodden by two-bit dicks and dictators throughout history.  Oh, and on both sides of the aisle, politically,

Can the FedGov defuse this long-running mess – a left-behind gift basket from the street-corner agitator’s Administration – in time?  Or, is the communist takeover of America now a fait accompli?   We’ll have to  get back you on that.

Trackable Trends

Blinded by the rise: CoreLogic Reports U.S. Overall Delinquency Rate Lowest for a November in at Least 20 Years.  Best times since the 1990’s say some.

US Futures Soar To New Record Highs On “Coronavirus Optimism” Ahead Of Powell Testimony – that NFIB report didn’t hurt.  Futures are up another hunsky on the Dowe as markets play “pass the crack pipe” and how close to the brick wall can we get?

CNBC reports that Hasbro shares soar as ‘Star Wars,’ ‘Frozen 2’ toys fueled holiday sales.  But we have to ask: “Where are they made, people?”

Whee!!!  $67.915 in free-po’s today.  And they tossed in $830 million after lunch yesterday.  We shouldn ‘t be surprised at more by lunch time…This bull’s gotta eat.

Has a voracious appetite for  sound economics.

Write when you get rich,