Sunday, May 17, 2020

And I'll be takin' care of business (every day)...

Bachman Turner Overdrive (what a band name!), Takin' Care of Business
Markets and Economy:
There has been almost no reaction overseas to more Fed Chairman Powell's appearance on 60 Minutes (side note: I grew up on 60 Minutes and to watch that show turn into a PR machine is just sad.  There is a need for a modern version of 60 Minutes where smart reporters can ask difficult questions).  Interestingly, in the Powell interview he said that he felt unemployment could peak over 30%, but magically, that was edited out of the interview #SMH.

The US markets are currently up and the witching hour - midnight to 3am when most gains are made - might prove especially volatile tonight (since I wrote this markets have continued to power higher - stocks only move when you're asleep).  

*** Update #2: There were 2 large futures trades at 3am and 4:45am which fueled a run in the pre-market.  Then, one of the countless companies working on a COVID vaccine released preliminary phase 1 data of 8 patients and said they appeared to be creating antibodies (despite the fact that we don't know if antibodies do any good).  That's all it took - markets soared in the pre-market and are now at a key technical point. If they stay up here, they may retest the highs.  Good thing everyone is laid off and can just day trade, it's so much easier than working.

There certainly is a good vibe in the stock market right now.  I suspect the "re-opening" of America has something to do with it as traders were able to get a haircut and go to Costco for flank steak again.  However, I find that reaction odd because no one expected the lock downs to go on indefinitely, but I think the bigger question is what does reopening look like.  Businesses will certainly tout the big bounce from opening and you will see lots of headlines like "Starbucks sales jumped 500% last week" or something.  The reality is if you had a store selling $100 of goods/day, that fell to $5/day during the lock down, it might bounce back to $25 and yeah, that is up 500%, but you're still down $75/day.  

My point is that there remains a wide disconnect between what Wall Street and Washington believes and what is happening in the real world.  Real businesses are planning for a recession far worse than 2008.  When I talk to people in the service/manufacturing section of the economy (ie, not Wall Street), they see bankruptcies, massive waves of unemployment, second and third derivative impacts that no one has factored in to any forecasts.  This makes me think that we are not at the beginning of the end, but rather at the END OF THE BEGINNING of the COVID Economic Crisis.  

Other stats:
The St. Louis Fed Q2 GDP forecast is now at -48%.  That's not missing a decimal point.... -48%!
Quote of the Day:
Reality check:
By the time this is all over the poor will be poorer, the middle class smaller, the country horrifically in debt, unemployment much higher than before and the top 1% will be largely fine.

Do not underestimate the long term impacts of this ever increasing divide.
I'm going to summarize a thread from @jeremykonyndyk which really makes it easier to understand why we've taken the precautions we have and where we are falling short....

1) Imagine it is summer swim season and some child has an "accident" in your local community pool.  What happens next?  The lifeguards clear the pool, the low man on the totem pole has to remove the offending matter, they shock the pool and everyone waits 30 minutes to return to the water.

2) However, what if the lifeguards clear the pool, but don't remove the offending fecal matter? No one can return to the water, right? Whose fault is it that you can't return to the water? 

3) What if the lifeguards told you "Look, just get back in the pool.  Be a warrior."?

4) Right now, the US is a giant pool with an accident floating around.  Leadership is telling you to get back in the pool rather than focusing on fixing the issue.  They are on TV telling you every day, that the problem is that all of these soft people just won't jump in a bacteria filled pool.

5) The shift in narrative is to focus on those that don't want to swim with fecal matter instead of focusing on the people who didn't get rid of the fecal matter.

6) Everyone wants to get back in the pool (re-open the country) but we'd just like to make sure it's free of fecal matter first, okay?

Sorry, I promise that will be the last discussion of fecal matter on this blog :)

The new death rate line may tilt upward this week and will bear watching.

Daily Dose of Humor:

via @jillboard
My ears are currently carrying sunglasses, headphones, and a face mask. 

Ears are a purse.

via @aotakeo
our toddler called my wife “chunky” and none of us will survive this

via @RiotGrlErin
I wonder what kind of stuff the person who figured out you can make cake in a mug in the microwave was going through.


Tuesday, May 12, 2020

Just the stats, ma'am

Since it's been a few days I'm just going to share a bunch of quotes and data that I've read recently. 
It's been a busy period in the markets, trading right back up to the 61.8% retracement line (don't worry, this stuff is voodoo nonsense but it drives the majority of program trading so we have to be aware of it).  When the S&P 500 soared for a week it hit 2940-2945 and stalled. This afternoon two stories hit the market, the Senate proposing new sanctions on China (ostensibly for human rights violations, but we know they are doing it to appear anti-China in re-election campaigns) and news that Los Angeles County does not expect to lift their shelter in place for 3 months. The rapid rise of the market had shaken out shorts and there were no natural buyers as stocks fell the next few days could get interesting. 
COVID Update:
* “We’re not reopening based on science,” said Dr. Thomas R. Frieden, a former director of the C.D.C. in the Obama administration. “We’re reopening based on politics, ideology and public pressure. And I think it’s going to end badly.”

Since a lot of people have asked my opinion, I have an evolving position.  I believe we should open sections of the economy that can be operated safely.  The US should send 20 masks to every address in the US Post Office Database and social distancing will be the rule for at least the next year. Large voluntary gatherings (think sports, concerts, festivals, weddings) are off the table for 2020.  Close-quartered activities like some manufacturing will have to be limited.  Restaurants, bars, retail will be scaled way back.  I understand the individual desire to risk your own life but this virus isn't likely to hurt you (if you're under 60 in decent health) it is the other Americans that you may kill through your actions.  In that way, COVID should be treated like driving under the influence.  Hey, you might get home okay after 2 beers or you might plow into a grandma at an intersection.  You might catch COVID and be fine, but you might kill my daughter's grandmother because you needed your Sonic Milkshake.

While we are on the subject of infection rates it is important to note that as the country starts to open up cases in the US (ex, NY and NJ) are actually increasing not decreasing.  My fear is that we will have a false open in May/June and as deaths spike, we have shutdown AGAIN in July.  Psychologically, that would be very hard for the country.

Read this full report - this is some of the best analysis I've read on COVID19.

"Just to see how simple infection-chains can be, this is a real story from Chicago. The name is fake. Bob was infected but didn't know. Bob shared a takeout meal, served from common serving dishes, with 2 family members. The dinner lasted 3 hours. The next day, Bob attended a funeral, hugging family members and others in attendance to express condolences. Within 4 days, both family members who shared the meal are sick. A third family member, who hugged Bob at the funeral became sick. But Bob wasn't done. Bob attended a birthday party with 9 other people. They hugged and shared food at the 3 hour party. Seven of those people became ill. Over the next few days Bob became sick, he was hospitalized, ventilated, and died.

But Bob's legacy lived on. Three of the people Bob infected at the birthday went to church, where they sang, passed the tithing dish etc. Members of that church became sick. In all, Bob was directly responsible for infecting 16 people between the ages of 5 and 86. Three of those 16 died. 

The spread of the virus within the household and back out into the community through funerals, birthdays, and church gatherings is believed to be responsible for the broader transmission of COVID-19 in Chicago."

* Some of these stats are a little stale now after today's dip, but ""While the S&P 500 index trades 13% below its Feb 19 all-time high, the median stocks trades at a more substantial 23% below its high. 

FaceBook (+3%), Apple (+6%), Amazon (+29%), Microsoft (+17%), and Google (+3%) have each posted positive returns while the index has returned -9%."  Everyone loves to call these the Tech giants, but think about what they are - 

Facebook is advertising
Apple sells very expensive tech toys
Amazon ships Walmart quality products (and runs the internet via AWS)
Microsoft is a tech company (and runs the rest of the internet through Azure)
Google sells ads that fund its tech adventures

* US Public Pensions went all in on stocks in November 2019 hitting their highest allocations since the Great Financial Crisis.  Pensions then suffered a 13% decline in Q1 as stocks fell.  Imagine.

* There is currently 165 million barrels of oil floating in oil tankers around the world (that's a lot).

* via @convertbond and Guggenheim - I had this conversation with a friend today.  Remember when Ross Perot got Bill Clinton elected by accurately detailing our insane national debt levels in 1992?  Do you know what the total national debt was then?  $4.5 trillion.  

We are going to issue more debt in 2020 than we accumulated from 1776 to 1992 or 216 years.  These numbers might have to be updated to look even worse because the House is talking about another $3 TRILLION stimulus package and the April revenues vs. spending numbers were staggering (basically the Federal government took in $240 billion and spend $980 billion)

US Treasury Debt Issuance 

2021: $4.10T
2020: $5.20T
2019: $1.10T
2018: $1.20T
2017: $0.60T
2016: $0.60T
2015: $0.65T
2014: $0.70T
2013: $0.80T
2012: $1.10T
2011: $1.1T
2010: $1.6T
2009: $1.5T

Net Marketable Treasury Issuance, Guggenheim

* People wonder why I never get any sleep - this chart shows the percentage of gains in the stock market that happen during regular hours (9:30-4pm EST) and overnight in futures trading (generally like 12am to 6am EST).

I pays to be a trader based in Eastern Europe :)


 via @not_jim_cramer

Daily Dose of Humor:

via @sixfootcandy
Kid: I want a piƱata for my birthday.

Me: *handing him a stick* I’m pretty sure your dad has some candy in his pockets.

via @cheesedaydreams
The first 37 years of dieting are definitely the hardest.

via @bartandsoul
A book club, only we eat pizza and do shots until we pass out


Thursday, May 07, 2020

Another 7 months like this....

and the entire country can be unemployed by Christmas, but hey, at least stocks will be at record levels....
By now you've probably heard the news that weekly jobless claims came in at 3.2 million.  Again, just 5 times higher than the previous ALL-TIME high and bringing the COVID 7 week total to 33.5 million.  So, that only leaves about 120 million Americans working, the rest of us are day trading apparently.

However, as has been the game for the past month, the overnight trading spiked stocks - I'm not a conspiracy theorist but it's pretty obvious when the same buyer comes into the market at 12:55am and 1:55am every single night - that triggers program trades to buy more (in their most simplistic form when people are sleeping there are programs designed to buy if stocks are up x%) which triggers more buying etc.  Everyone on CNBC bemoans the program trading on the way down, but seems to forget the way it's artificially supporting stocks here. 

**** Not advice ****
The markets are caught in a no no man's land right now.  The bears want to short a little higher (like 2% higher) and the bulls want to buy about 10-20% lower.  So, it doesn't take much to swing markets around. 

I'll follow-up with a more thorough post tonight. 


Tuesday, May 05, 2020

Why can't we not be sober.....

I just want to start this over.

Tool - Sober
Confusing double negative aside, the tone of this song strikes me as appropriate.  By the end of this decade the US might be running a debt of $30 trillion which makes one wonder - if debt doesn't matter, why did we ever pay taxes? Why not just run $5 trillion deficits forever? Oh, because eventually your currency becomes worthless and you end up like Venezuela or Zimbabwe.

I just want to go back to 2000 and start this over.  Fewer interventions after the dotcom bubble, fewer interventions after the Great Recession, smaller deficits during the "recovery years" of 2012-2017 and of course, fewer bailouts during the COVID19 crisis.
Wealth inequality is very real and becoming worse in the United States. After rising throughout the 90's during the bull market, the share of wealth held by the richest 1% of Americans (if you have to ask you aren't in this category) plateaued around 27-28% in 1998 and stayed fairly flat through the recovery 2012-13 (rising to around 29% at the end of the first Obama term). 

This was when the economy should have hit a natural air pocket (in 2013 and 2015 in my opinion) but the Federal Reserve kept extraordinary measures in place to support the markets.  The result was rising in equality from 2012 to 2016 which led to the rise of candidates Bernie Sanders and Donald Trump.  This inequality has only worsened in the past 3 years and will likely be at an all-time peak by the time of the November elections. :/
via @hermmohawk

The rising wealth of the 1% has come at the expense of the middle class.
via @rudyhavenstein

Flying in the era of COVID19: This is one airline's approach to flying safely....well as safe as it can be putting humans in a metal tube and hurling them through the sky at 550mph.
You might ask "How can airlines that need all of our bailout money, operate at 50% of capacity?".  My guess will be price hikes - 100%-200% right off the bat.  Airlines will hope business customers will keep them afloat, but what business is going to voluntarily overpay for travel expenses right now?  A few will, but I think this is a dangerous game for the airlines to play.  After an initial bounce from the open, they might see the impact that Zoom (or whatever video conference software becomes the de facto market leader) has had on marginal travel.

Since Day 1 when discussing COVID19, I've said that the US would have a tough time with the virus because we struggle with individual rights vs. doing something for the good of society. The US represents 4% of the world's population but 33% of confirmed and REPORTED cases.  Obviously, not all testing and reporting is the same but that is a failure of epic proportions.

The markets shrugged off a 4% decline overseas on Monday and soared back toward that magic 2900 number again on the S&P 500.  This isn't advice but the markets feel very directionless here.  Most sharp investors want to short between 2925 and 3000 or buy between 2600 and 2700.  Sitting in the middle of that range means that the market is prone to unexplained swings.

I know valuations no longer matter because that's not how we measure stocks but consider the fact that the median estimate for 2020 earnings is now 110, stocks are trading at 26 times earnings which is more expensive than their 2020 peak.  If you use Goldman's WORST CASE scenario of $70 stocks are trading 41 times earnings.  Remember, stocks are traditionally considered cheap around 10 times earnings.  Hmmm, 10 x $70 is a lot less than 2870 (like 75% less).... something to ponder.
Quote of the Day:
"My conservative friends don’t think states and cities deserve help. My progressive friends think certain businesses don’t deserve help. And my libertarian friends don’t want anyone to get help. These are the seeds of long, slow, painful recoveries."
Daily Dose of Humor:

via @mom_tho
Marriage is having separate tubes of toothpaste because your spouse squeezes it wrong

via @darlainky
I quit watching How to Get Away With Murder a few seasons back because I didn’t feel like I was learning anything.

via @portmanteauface
How quintessentially American is it that a nation of adults who struggle with tenth grade math spontaneously and collectively learned the ancient art of breadmaking just to avoid the risk of going one single day without eating carbs


Sunday, May 03, 2020

Give Me Liberty or Death....

Aww, *$@& it, just give me death (and murder hornets).

Motionless in White - Brand New Numb
This seems to sum up the consensus after 6 weeks of lock down for 40% of Americans.  We have smart people trying to save American lives while protecting as many jobs as possible but Karen and Kevin are asking to speak to the manager because the can't go shopping at the mall.

1) COVID19 - Well, it's a good thing COVID19 is behind us and we can open up... wait, what's that? We had a new peak in deaths on FRIDAY?!?!


Yes, we know the data is complicated to analyze but as I've pointed out before, the risk is not that we are attributing too many deaths to COVID19 but rather too few. 

2) Flight polls - I saw an informal, unscientific poll circulate on the internet this weekend but it went around to a lot of people in my industry (15,000 responses).  The question was - when we open up when will you fly again? The top choice with 30% of responses was "Over 1 year".  Followed by 6-12 months at 27% and immediately at 25%.  It's hard to predict how people will respond to the opening but I do feel that the way other countries have re-opened reflects this reality.  Those expecting a sharp economic recovery are going to be stunned by how long it takes some industries to recover.

via @etmross -  Los Angeles Airport at 2pm Sunday 5/3

3) Random scary fact of the day - Chicago has had more murders in 2020 through May 3 than they had for all of 2019.  Is social unrest a cause? Drug supply chain disruptions?

4) Random MUCH SCARIER quote of the day - via @therealfly - World Food Program executive director David Beasley says that an emerging “hunger pandemic” could result in 300,000 deaths per day globally. The aid organisation estimates that the number of people suffering acute hunger could increase from 135m to 265m by year end.  

This is not like the news you'll start seeing of poultry, beef, pork, egg shortages in US grocery stores.  That story is one that will get clicks - Is your Memorial Day bbq cooked by COVID? - but that's a temporary disruption of meat processing plants.  In Africa and Asia the disruption of the food supply chain is very real and many people live on the edge of acute hunger.  This will be something to monitor closely.

5) China playing 4D Chess - the US outsources all manufacturing to China.  We then need masks to protect our healthcare workers and citizens.  Buy masks from China and find out....via @deltaone



6) Quote of the Day - “In a solvency crisis, companies can’t survive no matter how much they can borrow: they need more revenue. The Fed can’t solve that.” Greg Ip, @WSJ

7) Remember scale matters when you hear your government toss around numbers in millions, billions and trillions.....

A million seconds - 11.6 days
A billion seconds - 31.7 years (I was in high school)
A trillion seconds - 31,700 years ago.  The last ice age was just starting.

The point is that $4 trillion dollars is a lot of money.
Markets - This going to be a very interesting week for the markets.  Without getting too far in the weeds, the big bounce from March 23rd ran straight into technical resistance on Wednesday of last week (the day I introduced my family to all of the really bad words that I learned while working on a Wall Street trading desk). Breaking through that resistance was the key to further gains, but the market tagged and rejected that line.  May and June will continue to be a battle for headlines in the markets - record interventions vs. a record economic collapse. 

At some point this will resolve itself over the coming two months and I suspect by July 4th we will have a clear understanding which direction we are heading in long-term.
Daily Dose of Humor:

via @mastrap84
Kids don't care what their parents do or have done in life. I could cure cancer and my kids would be like LET ME TALK TO YOU ABOUT MINECRAFT, PEASANT

via @comicshey
netflix: are you still there?
me: i'm literally not allowed to leave

via @aikiwomannc
Me: I'll take "WTF now?" For $1000
Alex Trebek: The answer is "murder hornets"
Me: What is Dear God it's only May 3rd and we still have hurricane season and the election from hell in November -- where is that damn planet ending meteor already?
Alex Trebek: Correct.


Thursday, April 30, 2020

We live behind the lines

That they are keeping us inside...

Fever 333 - Burn it
Tonight I just wanted to take a couple moments to highlight some of the ways that gross incompetence has become institutionalized in our nation.  These are all stories that I came across just TODAY.

1) As I mentioned before, we need an army of contact tracers in the US to safely reopen.  Probably 300,000-400,000 people to actively monitor our interactions and quickly identify the sick and their contact points.  This requires nationwide coordination to be efficient and smart about the data collection. 

However, efficient and smart are not words associated with Washington, so instead we are going to use the least efficient, most expensive option - hire a bunch of private contractors with no experience in public health working with different systems in different states.

Without any expertise leading this charge, the government is just throwing money at various solutions with no collaboration between providers. 

2) The Justice Department sees ample evidence of fraud in the Small Business Administration's Paycheck Protection Program.  Imagine that - throwing a trillion dollars at the banks without any strings seems to have brought fraudsters out of the woodwork #SMH

3) I don't even know how to explain this but apparently the Federal government is looking into ways to "make China pay" for the damage done to the US economy.  The options allegedly include - removing sovereign protection so citizens could sue China directly (no mention of suing our own government for incompetence) or cancelling debt owed to China by the US. 

I've half-joked that China might just make a meme to circulate that says - Nice internet and electric grid you have there.  Shame if anything happened to it. 

4) The Federal Reserve said it was going to expand its "Main Street" lending program (that name is ridiculous) to include companies with up to 15,000 employees and $5 billion in sales.  You know small town, mom & pop businesses with $4.99 billion in sales and 14,999 employees.

5) This Buzzfeed story needs to be on the front page of every paper and website.  This random guy with 70 followers on Twitter sent a tweet to the White House saying he could build ventilators.  A few days later New York wrote a check to this cell phone engineer (with no apparent expertise in building ventilators) for $69 million or almost 3 times the average price of a top of the line ventilators.  New York has since cancelled the contract but they won't say how much money, if any, that we've been able to get back.  

I'll buy the pitchforks if anyone wants to protest this in Albany or DC.
Fact of the day:

30 million Americans have now filed unemployment claims - roughly 1 in 5 working age adults - and yet, April was the best month for US stocks since 1987. 

As someone wrote today, the first 30 million unemployed seemed to be good for stocks.  The second 30 million may not be as good.
I haven't discussed the pension systems much because it tends to be a little wonky but read this honest assessment on why politicians consistently under fund pensions in favor of areas of government spending.

Daily dose of humor:

via @homewithpeanut
Me, before kids: It might be cool to be famous.

Me, after kids: It might be cool to be one of those Dateline dads who fakes his own death.

via @sophielou
Today's Zoom meeting: Team No Pants vs. Team Muumuu Dress

via @difficultpatty
Quarantine meals: What am I gonna melt cheese on this time?


Wednesday, April 29, 2020

No the drugs don't work anymore

Grandson - Overdose
COVID19 Update:
Today as the collapse of first quarter GDP was announced, the government also released preliminary data on a rushed study of the Gilead drug Remdesivir.  Headlines read "Remdesivir study shows positive results for treating COVID19" and I think many people have really misinterpreted what "positive results" means.  I'll ignore the fact that scientifically, one study of 1,000 people is not significant enough to draw any meaningful opinions, but since we live in a fact free world now, let's move on.

What are the positive results?  Well, in people who didn't die (8% of people on Remdesivir still died) the recovery time on average was shortened from 15 days to 11 days.  That's nice, but the net/net is you still got COVID19 and were hospitalized for 11 days if you didn't die.  I think the media has misrepresented this "treatment" as a magic bullet which it clearly is not.

In a related story, I've been asking various sources to track total deaths in the US whether they are labeled COVID19 or not because it has been my suspicion that many people are dying of the disease or related complications but they are not being labeled as COVID19 deaths. 

Well, the NYTimes finally pulled this information together and it's pretty stark.  If you have an account (free to sign up) you can read the full study here.

Even if you don't look at the full article consider the charts below.  What I suspected is very evident - the number deaths/week is VERY consistent every year.  Obviously 2020 jumps out as an outlier as a result of COVID19, but what is interesting is the gap between INCREASED deaths and reported COVID19 deaths.  For example, in New Jersey they have recorded 5,200 "excess deaths" beyond what would be expected.  However, they've only reported 2,200 COVID19 deaths.  So, what caused an extra 3,000 NJ residents to die this year? I'm sure it could any number of factors but obviously COVID19 should be suspect #1.

source @nytimes

And a reminder as the country starts getting ready to open for business - yesterday 2,470 Americans died of COVID19, the fifth highest total of the crisis.  Today another 2,390 Americans died, making it the 6 highest total that we've seen.  48 hours and more Americans died than died on 9/11, but the narrative is that "we're moving forward", so you'll have to grin behind your mask and remember to wash your hands.
Markets and the Economy: 
The markets can get summed up in a couple of photos.


* 22 million+ Americans have lost their jobs, the economy fell 4.8% in the first quarter and the NASDAQ is 3% higher than it was on January 1, 2020. #SMH

* Hertz stock traded up for the first part of the day despite news that they were likely to file for bankruptcy (eventually closed down 20%).

This is the year over year change in passengers screened by the TSA - for the past week the number of passengers has held around 110k/day, down 94% from last year.

via @dthedgeye

A couple of days ago, I mentioned that we as American's like to focus on scary deaths vs chronic or preventable deaths.  The shift in the narrative is to get you to just accept that COVID19 is part of our world - like cancer/heart disease and there's nothing you can do about it.  This isn't true, we could do something, but we will elect not to do anything after mid-May.

Anyway, I think I've shared this before because it highlights the discrepancy between what really kills us - Heart Disease (food, smoking, old age) - vs what the media covers Terrorism.

via @cmdr_hadfield

Also, if you recall earlier this week, I mentioned that commercial office space may be the first big casualty of the post-COVID world. 

Today the CEO of Barclays Bank said "putting 7,000 people in a building may be a thing of the past".

Also, the CEO of Discover Card said today in "25 years, I've never so much distress for the US consumer."
Daily Dose of Humor

via @amandajpanda
The longer this goes on, the more I look like a proud toddler who picked out her own outfit.

via @picklerudd
No, the poptart on my nightstand is my midnight snack. The poptart under my pillow is my emotional support poptart.

via @chhappiness
I bought a Roomba to save an hour on vacuuming, now I’m spending two hours staring at Roomba vacuuming


Q1 GDP falls 4.8%

Economy and Markets
For some time I've been telling you that the US stock market is completely separated from economic reality.  If you look around the globe you see a more normalized view where equities should be priced heading into a global recession or depression.  In the US we reported that GDP (a measure of all the goods and services produced by our country) shrank by 4.8% in the first quarter and stocks are soaring. 

US stocks are a video game and not a representation of economic activity.  The way to look at the stock market is if your kid plays Madden 2020 and wins the Superbowl as the Cincinnati Bengals, it doesn't mean the Bengals won a Superbowl in the real world.  Stocks going up no longer reflects anything other than stocks going up.

The decline of Q1 GDP is really shocking when you consider that a large portion of the US was still open for business as late as the end of March.  By March 15th most of NY State had decided to close, but 80% of the country was open through the 22nd.  The implications for Q2 GDP are unfathomable - will the economy shrink by 20%, 30%, 35%? If the initial indications out of China are any indication, reopening the economy will not lead to a sudden snap back in demand.  Yes, GDP will be up "BIGLY" in Q3 right before the election, but that's only because it will be coming off such a low base. 

Bear with me for a second to demonstrate how this works because some people are going to try to trick you with math later this year....

1) Assume US GDP is 100 for ease of calculations.  When GDP fell 4.8% in the first quarter, that makes GDP 95.2

2) Now let's assume GDP falls another 25% in the second quarter. I have no idea what the number will be but that's the mid-point of some estimates.  Now GDP is 71.4.

3) By the third quarter everyone is back at Panera and Chipotle so the economy perks up and they report a massive GDP jump of 15%!! Someone (not naming names but it rhymes with Frump) will go on TV telling you about the biggest jump in the economy ever! EVAHHHHH!  But, GDP is now just 82.1.

4) In the fourth quarter after the election, maybe GDP settles down a bit but still grows a staggering 8%!!! All of the way to 88.7. Huh, so people will tell you about growth, but the reality is that, in this scenario, the economy is still 11.3% smaller than it was at the end of 2019.


Tuesday, April 28, 2020

I just don't want to live in District 12

Who knew the Hunger Games would be non-fiction?  For the uninitiated, the Hunger Games is dystopian tale of a dark future when North America has been divided up into 12 districts and while they are all still governed by the elites, those elites have very little compassion for their fellow citizens from other Districts.

Fast forward to the great RE-OPENING of 2020. We have a Northeast coalition (NY, NJ, PA, CT, MA), we have the West Coast (OR, CA, WA), Western States (NV, TX, NM, OK), etc, etc. 

Each "district" is forming their own rules on re-opening - in the Northeast manufacturing and construction might re-open on 5/15 if social distancing can be enforced.  In Texas, bars and restaurants are opening on 5/15.  The rugged individualism that certain states value more than our collective health is going to lead to further calamity in the US down the road. 

Consider the case of China, where they have been open for business for about a month in Beijing.

1) Traffic is back to 60% of normal.
2) Public transportation is only about 30% of normal use.
3) Retail has no idea how to operate, some shops are open, some require curbside pick up, and many remain closed. 
4) All gyms and athletic facilities that were opened 2 weeks ago had to be closed this week over fears of the virus re-emerging.
5) Consumption is focused on bare minimums there has not been a return to normal.

So, this is the experience in a state with complete control of its citizens.  People follow the rules in China, for better or for worse.

In my limited adventures into the outside world during our lock down, I've seen a flagrant disregard for the "rules" at every turn in NYS which has been the hardest hit by the virus (at least that's the narrative, I'll write something about that later).

Maybe 65% of people wearing masks in NY (I asked for other reports from around the US - I was told 20% in Texas, 35% in Georgia), social distancing in a retail setting is non-existent, people are gathering in large numbers socially, etc.

As Americans we are captivated by scary things we can see and we like to disregard silent, real threats all around us.  A tornado rips through Texas so every thunderstorm in the Northeast causes fear of a tornado.  A terrorist on a scripted CBS show scares people into sending more tax dollars to Washington, while people eat and drink themselves to death slowly at Sonic and the Cheesecake Factory.  

My point is that you aren't going to see people get sick and drop dead like they did in the movie "Contagion", so there will be little initial fear in the streets after the re-opening.  This virus is still everywhere in the US and as we re-open we need to adhere to strict guidelines or else. 

Ask yourself, how likely is it that someone in Louisiana (where things are still closed through 5/15) will drive to Texas to get their hair or nails done?  How likely is it that when Myrtle Beach opens EVERY other license plate will be from NY? 

However, none of it may matter because the narrative has shifted - from a nation that once wanted to protect all of it's citizens equally - to a nation that wants to  protect the citizens of the Capitol first and let the other districts fight for survival. We will have clusters emerge across the US and 1,000 Americans a day will continue to die from COVID19 but the narrative will become "Karen got her haircut today, so GOD BLESS AMERICA".

The narrative will become much that much like other preventable forms of death - heart disease or lung cancer from smoking - that COVID19 is just part of life -- "Well, we lost some people but wasn't that steak at Texas Roadhouse spectacular?"

if you think the country should reopen meme

Daily Dose of Humor:

via @portmanteauface
*listening to the theme song from Dexter on repeat as I make my breakfast* I wouldn't say any of this has changed me.

via @ghostkirsten
People i like:

1. Your dog.

via @jannakillhimnik
Todays parenting level -

IDGAF burn the house down


Sunday, April 26, 2020

The future of work in a post COVID19 world

We are all caught up in the immediate impacts on our lives as a result of the COVID19 pandemic.

The basics and the mundane:
Do we have enough food/water?
When can I get a haircut?
Can we protect others by wearing a mask if we do go out?
How do I stay mentally/physicall fit in 2 months of isolation?

And then there are some much more meaningful questions:
Will I have a job after the pandemic?
What does it mean for pensions/retirement?
What does the US Debt to GDP soaring to 18% mean?
Can the economy recover?
Is work from home a permanent part of our future?

I want to take some time to focus on that last question - working from home.

It is clear that working from home is not a perfect solution and many people can't wait to get back to the office full-time.  However, when listening to Governor Cuomo's press conference today, going back to "normal" is not likely to resemble the workplace of February 2020.  Going back to work, if you can at all, is going to require safe social distancing.  For some businesses, this can be accomplished through measures like extending an assembly line or eliminating communal eating areas (see this photo from a Chinese auto assembly plant's cafeteria).

For some Chinese businesses, no going back to pre-coronavirus ways

However, how does a bar or restaurant enforce these new rules? How can a million people safely commute into New York City every day while staying 6 feet away from EVERYONE? The simple answer is that you can not, so the traditional model of work that we new 2 months ago is unlikely to return. 

As part of the next wave of impacts from the pandemic, I expect a fairly large round of corporate right-sizing/downsizing/layoffs of white collar positions.
One of the things that corporations (and employees) have realized is that there are a lot of hours in the work day that are wasted.  While corporations have to walk a fine line to avoid appearing callous, it's clear that they could be more efficient and many will take this opportunity to achieve that efficiency.

On the flip side there is a strain on employees who can never disconnect from work.  Finding a long-term healthy work-life balance, when all work is done in your home, is a serious challenge.

Not every job is eligible for WFH - emergency hospital staff, physical therapists  - but many positions previously thought to be "office jobs" may never return to an office.  Consider some of the fastest growing jobs categories - Finance/Accounting, software engineering, operations or market research, marketing, data analysis, etc., many of these can largely be done from home. 

However, the pure work from home model is flawed because it lacks the office experience, the feeling of belonging to an organization and the accountability that comes from arriving at an office.

Prediction #1: Demand for Commercial Real Estate tumbles
The failure of WeWork might actually pave the way to a new type of hybrid Work From Home/Office model. I've seen this model work first hand but I think it will spread across various industries and cities around the US.  In the past if you had a company of 200 employees, you budgeted a floor plan for 230 people to allow for growth. That will no longer be the case - maybe you plan for 30% of your staff to be in the office full-time, 20% work from home and 50% floaters who come in on alternating weeks (similar to the WeWork model where you don't have an "office" but a randomly assigned desk). This means your total space needs go from 230 people at 150 sq ft/person or 34,500 sq feet to - 60 permanent staff + 50 floaters + 15% excess = roughly 19,000 sq feet.

So who does this impact? Obviously, Commercial Office Space in the US.  All of those sprawling corporate parks around the country and gleaming office towers in cities? Yeah, some will become ghost towns. Coupled with the accelerated retail apocalypse and a restaurant glut in the US commercial real estate could be in for a very, very rough patch.  The commercial real estate market is tied to the banking industry as most large scale real estate projects are significantly leveraged.  So, the next bank bailout might be triggered by more people working from home.

If you're in the market for a used car, the next 3 - 6 months might be your sweet spot.  Staggering job losses will spark a return of jingle mail (when people just mail the keys back to their lenders) and a spike in work from home employees will drastically reduce the number of cars needed in each household.

If prices come down a bit more I might even taking some trading profits and upgrade my vehicle to one of these (just checking to see if my better half is still reading).

Prediction 2: Lower Employment in the US in the long-run
In the 1990's, companies adopted a model of outsourcing their customer service to a variety of call centers around the US.  By the beginning of the 21st Century the companies providing these services realized that all of their employees were either sitting at home or commuting to old department stores in North Dakota.  Since there was no physical need for the call center to be in the US, once tax breaks had been fully utilized, these companies aggressively began moving this work to lower cost parts of the world. 

Yeah, but that's low-end work, right? Yes, but here is the question I want everyone to think about - if you've done your job over the last month as a work from home employee, imagine a world where corporations get another 5 years to perfect this model.  Now, they might go one of two ways - take full-time jobs to part-time (further reducing wages/healthcare costs because do you really need 40 hours to do your job?) and/or moving these jobs to lower parts of the world.  Need a graphic designer?? Maybe you don't pay $52,000 to a new college graduate in the US, instead you hire someone in Poland for $14,000 and 5 years of experience.

Prediction 3: Reduced demand housing in suburbia
If predictions 1 & 2 play out, think about the way the US is built.  Cities to work in and suburban areas for us to sleep in.  However, how many people really want to live on postage stamp lots, so they can sit in traffic for 38 minutes to go 4 miles to Costco (okay, people in New Jersey do, but they don't even pump their own gas)?

We have dramatically over built housing in suburbs around NY, Boston, DC, Atlanta, Dallas, Chicago, Seattle, etc, etc.  A long-term trend of the WFH movement could be significantly reduced demand for housing near cities.  Bailout number 4 for the banks might be tied to the 2028 housing collapse :)

Daily Dose of Humor:

via @Mommaunfiltered
It’s 11 o’clock I should eat a can of Pringles.

via @WilliamAder
I continue to mow my lawn just like the band continued to play on the Titanic.

via @lmegordon
Happy hour starts at 4 now and nobody is ever happy.
Biggest obstacle to brushing my teeth right now is finding a solid hour when I don't plan on eating.


Thursday, April 23, 2020

You say you want a revolution...

Well, you know
We all want to change the world"

The Beatles - Revolution
You'll probably remember that earlier this week I noted that the $350 Billion Paycheck Protection Program lasted a mere 3 weeks. Shocking no one, banks funneled the money to their largest customers because they want to ensure the those companies benefited and it was the easiest way to earn their commission.  Well, I was disappointed but didn't have much hope that anything could be done. 

Ruth's Chris Steakhouse already had the $20 million. 

Shake Shak already had the $10 million. 

A number of diligent people started compiling lists of public companies who had received funding through the PPP.  Shockingly, this news started to spread across the internet and it reached some reporters with clout.

Soon another list emerged that showed 32 public companies who had paid their CEOs in excess of $1 million and had taken funding from the PPP.  The backlash was too much for even politicians to defend and late Thursday the program was amended to bar public companies from participating and roughly $650 million from public companies will return to the fund. 

The problem is that is a tiny fraction of the money that went to large companies.  We only know about the large PUBLIC companies who took funding.  There are likely large PRIVATE firms who ate up the rest of the billions of dollars and we'll never be able to track that money. Either way, this is a small win for the little guy and it demonstrated the power of crowd-sourced information.

via @hedgeyeDJ "Capitalism without bankruptcy is like hockey without a penalty box"
Economy & Markets:
Just another week where new jobless claims were more than 6 TIMES THE PRE-COVID19 ALL-TIME record at 4.4 million. 

Some of this is a function of the type of jobs created since the mid-2000s.  I've argued (unsuccessfully) that we should be looking at the "quality" of jobs not just the quantity of jobs.  The Bureau of Labor Statistics views a new full-stack software engineer the same way it views a worker at Dunkin Donuts.  Our society has had a lot more of the later in the past decade and those jobs are the first to be eliminated in a downturn. 

This might be the most shocking chart you'll see. If you take the total of all jobs lost now in the past 6 weeks - 26.5 million jobs (16% of the workforce) - you realized we are back at 1998 levels of employment.  Every job created from 1998-2020 - poof, wiped out in 5 weeks.  As I've said before many of these jobs will come back immediately when service businesses return but it's still a staggering representation of the damage that has been done to our economy. Also, I'm going to try to remember to write something on the way the economy will bounce back when we look at the Chinese experience over the past 6 weeks.

Markets went nowhere again today and they remain stuck at the 2800 level.  The next 3-4 weeks will be pretty telling for what the next move in the market will be up to 2900 and beyond or a break down below 2650.

Compare our President's UV light & Lysol approach to Chancellor Merkel of Germany "Nobody likes to hear this but it is the truth. We are not living through the final phase of this crisis, we are still at its beginning. We will still have to live with this virus for a long time.”

Australia has elected keep its borders closed for another 3 days, check that 3 weeks, wait, is that right 3 months??? Huh. Sounds like they are not joining us in the grand reopening.

Also, people are starting to talk about what happens in a best case in the fall 2020.  I'm seeing forecasts showing daily infection rates in the fall of about 1/3rd of what the peak infection rates will be this Spring.  However, I don't know if that takes into account any further lock downs.  I would say that a weaker resurgence in the fall is the most likely scenario but I don't think we can rule out an aggressive return of the virus and potential fall shutdowns (though I think the odds are very low - backlash against states that shutdown again would be huge).
Daily Dose of Humor

via @thealexnevil
Give the gift of sarcasm to a child and receive it back tenfold.

via @johnlyontweets
I watched my girlfriend use a disinfectant wipe to disinfect a package of disinfectant wipes and I think she may have created a rift in the space-time continuum.

via @unclebob56
They say a glass of water before meals helps curb your appetite. I've found donuts also work very well.


Wednesday, April 22, 2020

Some folks inherit star-spangled eyes,

They send you down to war.
When you ask them "How much should we give?"
The only answer is "More, more, more...."

CCR - Fortunate Son
What's become the norm for the stock market a 2% bounce today occurred on virtually no news.  I wish I could provide more color around why stocks act the way they do right now, but it should be evident to anyone watching, that stocks are not a reflection of economic activity.  They are not forward looking instruments or whatever BS line you are being fed on TV.  They are video game  and you aren't given the cheat codes.

Also, it's good time to revisit what we mean when we talk about the markets.  The 5 largest companies - Microsoft, Apple, Amazon, Alphabet (Google), and Facebook - carry the same weight as the 350 smallest companies in the S&P 500. 


Also, I've tried to talk about relative value of stocks before.  The value that you get for a stock is it's price divided by earnings.  For the whole market, it's the market price divided by total earnings.  Slowly earnings forecasts are starting to fall, so the denominator is going down while the price has risen over the past month.  The result? At the market peak in February, you were paying 19 times earnings for the stock market - expensive by historical standards.  Today, you are paying 19.6 times, ie, as we've stalled the economy, lost 22 million jobs and sent countless companies heading toward bankruptcy.....Stocks are MORE expensive today than they were at the all-time peak two months ago.

Oil prices stabilized a bit but they remain incredibly volatile. It's worth noting that somewhere between 40-50% of US oil producers will go bankrupt if oil stays under $30 for a prolonged period of time (say through the fall).

Where we are - about 1 million tests a week.
Where we need to be - 30 million tests a week.

Where we are - less than 2,000 people in the US working on this.
Where we need to be - 100,000 - 300,000 analysts working on this.

Small Business Loans
Where we are - the vast majority of the first wave of $350 billion went to banks largest customers.  Again, this is the problem with public/private partnerships without oversight.  If you trust a corporation to do the right thing, they will do the right thing for themselves. Another new round of financing of $320 billion is set to be passed this week ---- think about that for a moment $670 billion in money blown in 2 months which is like 85% of the TARP Bailout in 2008 and no one has any idea where it's going.

Where we need to be - I'm torn on this because this feels like throwing money on campfire.  An extra month of rent or payroll is not going to make a difference for a lot of small businesses.  If you operated your business on the edge and you can't weather 3-6 months being shutdown, then maybe your business wasn't viable in the long run.  I don't love the fact that many large corporations sucked up the first $350 billion, but without oversight that money is gone. 

Our Cultural Divide
Where we are: We have a divided society and no way unify our culture.  I'll point out that all of the "re-open" America protests are basically the work of one guy in Jacksonville.  He bought all of the websites, populated the state sites and started the conversation on social media.  For all of the talk of protests, states like Maryland reported that they had more media inquiries about the protests than they had actual protesters.  However, perception is reality in our society now and the perception is that red States are full of people who need a hair cut so, they are going to start opening up despite the fact that we hit new all-time highs yesterday in cases and deaths. 


Where we need to be: there's no fixing this, the best bet is to draw a new border from NJ to Michigan/Minnesota and let the Northeast and the West Coast join Canada (we can merge Montana/North Dakota with Alberta/Saskatchewan and give it to New TexFlorida or whatever the new country will be called).

#Sarcasm (sort of). 
via @perlhack
Canadian smoke detectors are just a voice saying “Sorry, I don’t want to alarm you but…”

via @billforpa14
I mean you have to admit it's hilarious that the people who have spent their entire lives stockpiling beans & ammo and publishing newsletters about preparing to shelter in place during a global crisis are the ones having meltdowns because they can't go to the cheesecake factory.

via @Whatevah_Amy
Working from home would be fantastic if everyone would stop calling and emailing me.


Monday, April 20, 2020

Brother, can you spare a barrel?


This morning the early chatter in the market was talk about a slight weakening of the May Futures contract for oil.  When I first noted it to a friend, it was down 20% in the first few hours of trading.  A huge decline but in today's markets it was shrugged off. 

By noon, that decline was 50%

By 1pm the decline was 95%!

Okay, at that point what can you lose right? If something goes from $20 to $0 you lose 100%.  Ah, but oil futures are a funny animal.

I once worked with one of the most successful oil traders on Wall Street.  He told me that on his first year on the job he missed a position and was required to take delivery of something like 100,000 barrels of oil. 

Back to today - Someone (I suspect we'll find out who in the coming weeks) came into the end of the contract trading window with a position that would normally just get rolled to June.  However, there were suddenly no buyers for the May contracts.  Okay, well, in the worst case scenario like my friend mentioned above, you can take delivery of oil, store it and then sell it later. 

Unless, EVERY AVAILABLE STORAGE SPACE IS FULL.  The shutdown of the economy had dramatically cut demand for oil.  Oil companies only know how to do one thing - pump oil - so I've been watching storage tanks fill around the US and I was a little worried but you assume they'll find storage somewhere.  Unless, they can't when you can't find normal storage you have to pay a huge premium for odd storage (tankers, ships, railcars).

The May contract was basically illiquid only trading a few contracts among computers but that didn't stop the price decline. It fell to $0.00 and kept falling, -$5.00, -$7.00, -$12.50, -$20.00 finally settling at -$37. Down over 300% for the day and implying that if you took delivery, you would be PAID $37/barrel of oil.  Agree to take a million barrels of oil and collect $37 million.  Now you have to figure out where to put 42 million gallons of oil, but I just gave them my home address as 1600 Pennsylvania Avenue Washington DC.

Again, this was a market fluke as the June contract represents a more accurate oil price of $21. However, the June contract might have the same problem if storage facilities remain filled to the brim.

So, while it makes for a historic day of trading and some poor traders probably lost their jobs today but it's not like gas prices are going negative.

Speaking of gas prices - has anyone noticed how sticky they are in NNY?  The price of oil is down 50% over the past 6 months and gas prices have barely budged. I'll go into the reasons why in another post sometime.

Talking about oil raises some good questions about the rest of the commodity complex.  In food products - Corn, Soybeans, and Sugar have already fallen about 30% but they all look like the could fall another 50-60%.  Imagine the repercussions through the economy if farmers are facing payouts at 30% of what they were expecting just 3 months ago.  Bankruptcies will be rampant, but it's an election year so I'm sure there will be more bailouts.
Quote of the Day
via @NorthmanTrader
"We've known the vast majority of Americans have been living paycheck to paycheck.

Now we find many businesses have in essence done the same.

Few reserves, no ability to sustain themselves without bailouts after just a few weeks.

What will all this look like on the other side?"
Daily Dose of Humor

via @mom_tho
Things my kids will sleep through: fireworks, thunderstorms

Things that wake my kids up: my eyelids closing

via @katewouldhaveit
Recipe for Hard-Boiled Eggs:
1. Gently place eggs in water and bring to a mild boil
2. Let boil until you remember you left something on the stove (12-54 minutes)

via @momjeansplease
My ideal date: we order food, I eat mine and yours. you are impressed and order me more.

Cheers and stop trading oil futures with your $1200 stimulus check!

Sunday, April 19, 2020

Scratch a cynic

and you'll find a disappointed idealist.

George Carlin
That quote resonates with me because I had a conversation with my mother last week about idealism.  I would consider myself an reformed idealist because i realize we can no longer fix our political and economic systems given the divided state of our nation and I guess that makes me cynic.
Economic backdrop:

I know everyone is grasping at straws for comparisons of the current economic collapse.  They don't exist.  Consider this chart from Bloomberg - as GDP (a measure of economic activity) shrinks while spending explodes this year, the deficit to GDP in the US is expected to soar to 18% (and I think it could be higher).

Consider some of the countries with the WORST deficits to GDP (bonus points if you can find a common theme)....

Syria - 8.7%
Egypt - 10.8%
Cuba - 11%
Iraq - 11%
Afghanistan - 14%
Libya - 18%
Venezuela - 38%

Seriously, that is some high quality company to keep for the US.

Obviously, there are a number of differences between the Japanese economy and the US economy (#1 vs #3, service component, etc, etc) but since 2000 I've told anyone who will listen that the US is on a path to becoming an economy similar to Japan's by 2030-2040.

Since so many people are obsessed with stock charts - take a look at Japan.


Basically, flat for 33 years. Yeah!
I won't get into the debate about Re-Opening America because it has become a political hot potato, but it is interesting to see early reports back from countries that opened back up where infection rates are soaring again (Singapore, Japan, Korea) and in Germany the message of "open for business" seems to be misconstrued as "back to normal".  A lot of people in Germany this weekend noted that lack of social distancing means they may have to revert back to lock down mode.  This will be the story of Texas and Florida around Memorial Day.

Something was also have to watch is some data out of South Korea where some 2.1% of cases were people who previously tested positive but were cleared.  These recovered patients then relapsed and are now testing positive again.  That could be worrisome if it becomes widespread.
Daily Dose of Humor:

via @junejuly12
This morning some guy assumed I would move my cart so he could go against the directional arrows in a narrow grocery store aisle.

He was wrong.

via @snarkymommy78
I just used TWO paper towels to clean up a spill like some kind of pre-quarantine person

via @mommajessiec
By the age of 35 you should have at least one couch solely for laundry.


Thursday, April 16, 2020

Three card monte Thursday!

For the 5th consecutive Thursday the United States reported absolutely catastrophic initial jobless claims. This time 5.3 million fellow Americans lost their jobs - just 7.5 times the previous all-time record from the time B.C. (before COVID19).

So as I mentioned earlier in the week -

Total jobs created in the US in the past 12 years were roughly 22 million. 

Total jobs lost in the last 4 weeks were roughly 22 million.

There is no sugar coating this data.  Ignore the stock market (I'll get to that in a second) unemployment is going to be north of 15% and maybe approach 20%.  No one can appreciate how historically bad things are going to get. 

This visualization may help. The white line is cumulative jobs created and  the green line is initial jobless claims.

However, the stock market show must go on so for the third consecutive Thursday Washington insiders have played a shell game around the release of terrible jobs numbers.  They've managed to snatch the microphone and deliver their own message by shouting louder than the headline jobless numbers.

* Three weeks ago Fed Chairman Powell did a live TV interview just before data was released. 

* Two weeks ago the Fed a new $2.3 trillion Wall Street bailout just as the jobs data was released.

* Today the White House hinted all day about a potential break through in treatment and opening up for business. 

So, Washington is planning to open up but Governors around the US keep extending opening dates.  Remember, this was the problem with our shutdown, we staggered the shutdown and it caused more problems than if we'd gone with a national shutdown as soon as the first outbreak hit Washington State. Staggering the open will eventually cause the same sort of confusion.

However, the entire stock market is soaring tonight not on news from the Stock Pumper in Chief but because of a potential treatment....well, not really but...

So, after the market close statnews reported that EARLY results of a study of drug made by Gilead Sciences in a 2400 person study showed promise in SOME percentage of 125 people.  So, there was a potential benefit for 5% of people in a non-randomized trial in China.  WE'RE SAVED!!!

Interestingly, Gilead has not commented. It doesn't sound like this trial was conducted according to normal research standards and interestingly, Gilead has said they aren't interested in building a business around this drug.  Gilead's stock has soared tonight taking the rest of the market along for the ride. If things opened where they are trading overnight we would only be down 12% from all-time record highs as the globe faces the worst economic crisis of our lifetimes.


Unfortunately, people that aren't very bright like to view the daily stock market moves as an indicator of economic success.  Maybe some day that will change but that day is not today.

If the stock market opens at these levels it will be a very interesting day tomorrow because that will represent a 62% retracement of the losses and 2905-2935 is the level where all of the programs will probably start selling. Hard to say but it should be a fun day for the computers to do battle (humans need not apply).
Daily Dose of Humor:

via @Crockettforreal
"Being a parent is literally just changing the toilet paper roll and cleaning up messes that don’t belong to you repeatedly until you die"

via @FunnyBison
"I’ve added a new weekday. I call it “Bingeday.” You can do whatever you want on Bingeday.

Also, I’ve renamed the other days to Bingeday."

Shelter line stretches around the corner....

Welcome to the new world order.
Families sleeping in their cars in the Southwest
No home, no job, no peace, no rest.

Bruce Springsteen - The Ghost of Tom Joad
Food bank lines from San Antonio.
It always cracks me up that Bruce Springsteen will forever be associated with "Born in the USA" - which is actually a protest song - and still wrote the dark and poignant Ghost of Tom Joad (check out the RATM version as well).

There was a slew of data out today which deflated the markets. Honestly, considering how grave this data was for the markets to only be down 2% was a sign of something.  Consider first the initial look at retail sales data.

Motor Vehicles and Parts: -25.6%
Furniture: -26.8%
Food and Beverage Stores: +25.6%
Gasoline: -17.2
Clothing Stores: -50.5%
Sporting Goods Stores: -23.3%
General Merchandise Stores: +6.4%
Department Stores: -19.7%
Food and Drinking Places: -26.5%
Nonstore Retailers: +3.1%

When you look at those numbers keep in mind that is for MARCH when most of the country was still open.  April will be unbelievably bad and as sad as it is to say, many retailers won't make it to Labor Day.

via @hedgeyesnakeye
This is a really specific data chart to the hotel industry but RevPAR is revenue per available room.  So if you have 10 rooms and rent 8 of them at $100 each your Revenue ($800) per available room (10) is $80.  These are mind-boggling drops.


As we move forward one thing that is going to become more and more apparent is that the GINORMOUS, HUUUUGE bailout was principally geared to saving the those companies that would cause the most pain for the banks, not necessarily those companies that will save the most jobs or are the most critical to the economy.  Over time as this becomes apparent, I worry that it will foster a greater divide in our country.  I really want to be wrong with this prediction.

NEW: SBA expects to run out of money for emergency coronavirus loans for small businesses imminently—*this afternoon,* sources tell me. The $349 billion in the PPP program is meant to help cover payroll.

This program with a $350 BILLION price tag didn't last a month.  Probably because everyone under the sun somehow qualified as small business - Ruth's Chris Steakhouse? You know the giant chain that caters to wealthy? Yep, "small business" and got a loan.  There are countless stories like that which will further sow divide when these stories become more widely known.

In related news, I know we can't be shocked by Congressional incompetence but this takes the cake.  Congress has to oversee how we will spend some $2.2 trillion and so far they've appointed a team of 100 crack auditors, fraud detectives and financial geniuses??? No. They have one guy. ONE GUY who doesn't have an office and was an aid to Sen. Warren.

Hey, @elisestefanik, @senschumer, @sengillibrand - I'm free, HMU.

Quote of the Day:
via @raphaelbostic - Atlanta Fed Reserve “What we are hearing from our contacts is that May is going to loom as a large month, in terms of the transition of concern from this being a liquidity issue -- one where we are really talking about cash flows...and whether companies can exist at all,”
Daily Dose of Humor:

via @LurkatHomeMom
Where do you see yourself in 5 years?

Me: *envisioning a pile of ash sweeping thru a post apocalyptic wasteland* middle management I guess?

via @momsense_ensues
If this kid is in my classroom again come September, I’m quitting.

via @LhLodder
Today I worked from home, ran 10 miles, home schooled my kids, cleaned the house, made a delicious dinner, and got my kids to bed early. It’s amazing what you can accomplish when you lie.


Tuesday, April 14, 2020

Young people speaking their minds...

Getting so much resistance from behind
It’s time we stop, hey, what’s that sound
Everybody look what’s going down”

Buffalo Springfield - "For What It's Worth"
Thanks for indulging my love for great musical lyrics with a strong message.  This one is a little older, but go back and give it a listen if you haven't heard it recently :)
Missoula Connects – Ongoing Updates – Businesses that are Open to ...

Remember, when I mentioned on Sunday night that this was coming? The "Look, it never was that bad. Go have some pancakes at the Cracker Barrel!" message?

I'll avoid the politics of someone having a meltdown yesterday on live TV but this is the challenge that we face as the country attempts to re-open.  Right now we are a tale of 3 countries:

* The West Coast who acted swiftly to close cities and where the rates of hospitalization are manageable.

* The Northeast - grandstanding Governors are basking in near universal praise while their citizens die in staggering numbers - one out of every 12 people who has died from COVID19 lives in NYS but our Governor is polling higher than ever.

* The South - this will be the next ground zero because this disease disproportionately targets older people with diabetes and weight issues.  Combined with the fact that Southern states were 10-14 days behind the rest of the country in responding means that their peak is still weeks away.

Given this vastly disparate response in our nation keep these stats in mind:

* Roughly 50% w no symptoms (perhaps as high as 80%)
* 5 day dormancy makes contact tracing nearly impossible in a free society
* the virus lingers on surfaces including things shipped
* there is a 2 week delay in hospitalizations vs. infections.

The decision to re-open America has to be driven by considering the science, the state of our healthcare system and to a lesser, extent the economy.  All of the Governors who spoke on this matter seem to agree that the health of their citizens needs to drive this debate.  However, Washington has appointed a grim reapers panel of unqualified corporate donors and yes men.  That "panel" will cause more chaos than it will address.

And when the economy does reopen what will it look like? What companies are going to ask workers to return to a corporate office? There is talk that things like voluntary self-gatherings (think NFL games or concerts/festivals) might not return until the FALL of 2021.  People who think the country will go from 0 to 100 overnight based on some order from Washington are either wildly ignorant or engaging in day drinking (or both).
Sad stat of the day:

via @NorthmanTrader
Coronavirus deaths, worldwide.

12th of February: 1,261
12th of March: 4,981
14th of April: 120,000

Roughly 1 in 5 of the global death total is in the United States. 
Deutsche Bank finally got around to doing the math that I did for you last week.  This quote is staggering but is reflective of something I've been trying to get across to people for the past decade - our economy was fueled by too many companies living in a debt bubble.  Unfortunately our solution for too much debt is........more debt.

"DEUTSCHE: “Since the 2008-2009 recession ended, the US economy created 22 million jobs, and including our forecast for this week’s jobless claims shows that the US economy over the past four weeks lost 25 million jobs ... A decade of job gains undone in just four weeks.
The stock market continued it's daily swings from based on COVID news - down sharply in the morning only to bounce at the end of the day because of hopium provided by the White House.  Today, stocks are up again in the pre-market (but weakening a bit) as people chase the narrow band of tech stocks (Amazon keeps soaring).

The tech heavy NASDAQ is actually up about 4% from the point where it was 6 months ago.  Think about that in light of what's happened in the global economy over the past 2 months.  It's a stark reminder that the stock market is not the economy, the stock market is a high stakes, computerized video game with almost no correlation to the underlying economy.
Daily Dose of Humor:

via @DrakeGatsby
"If you eat raw pizza dough, a block of cheese, and drink some boiling hot marinara sauce, you can make a lil’ pizza in your tummy"

via @bartandsoul
"Expectation: Today, I will be my best self
Reality: Eats for 14 hours straight"

via @junejuly12
"Quarantine Morning in Review

8:30: opens fridge
9:30: opens fridge
10:15: opens fridge
11:00: opens fridge
11:01: leaves fridge open"


Sunday, April 12, 2020

The price of your greed

Is your son or your daughter
('s future tax payments)
What you going to do
When there's blood in the water.

Grandson - "Blood//Water"
So much to cover tonight but I had to start with an ode to one of the many artists we missed in concert over the past month - check out Grandson on Spotify.

I don't typically do this but if you have 9 minutes take it to read this blog post in full.  It speaks to the concerted effort that is going to take place to make us all forget this period of time and the colossal way we screwed up as a nation.

Here's the link.

"And so the onslaught is coming. Get ready, my friends. What is about to be unleashed on American society will be the greatest campaign ever created to get you to feel normal again. It will come from brands, it will come from government, it will even come from each other, and it will come from the left and from the right. We will do anything, spend anything, believe anything, just so we can take away how horribly uncomfortable all of this feels."

I noticed this effort this weekend listening to sports radio of all places.  The ex-jocks who normally talk about 40 yard dash times were suddenly infectious disease experts and they took call after call from people around the nation decrying our nation's pause to slow spread of COVID19.  This is how the propaganda machine will ramp up.  You can't fight it but you can be aware of it.

Markets and Bailouts, oh my
If you can remember all of the way back to Thursday, markets were mixed on the initial reports of just another 6 million Americans losing their jobs last week. However, in a totally unrelated move, at the exact moment that the 4th straight record number of job losses was released the Fed announced ANOTHER bailout package of $2.3 trillion for the bond market and stocks took off.  They opened up 1.5% and that's about where they ended the day.  This is an interesting point for the markets, the chart readers tell us there's maybe another 5% upside if they can keep the global liquidity onslaught coming.  However, the weight of gravity on the markets is growing and there was evidence late last week of some large participants setting up for the next move down. 

On the one hand you have an economy in complete free fall and on the other hand you have governments doing everything in their power to save the banks and the markets at your expense. 

Just a final note on Thursday's bailout of the bond market.  What has happened over the last 5 years is that corporations issued debt (bonds) to buy their stock - this reduced the number of shares outstanding and pushed up stock prices - which doesn't really make a company more valuable but it helps reward executives who are paid in stock.  Now the Fed is going to buy the bonds of these companies (possibly in violation of the law) to save these companies that made terrible financial decisions and the reward their executives.

*** Hang on for the math: 
1. Company A has 100 shares outstanding and a price per share of $10 - they are worth $1,000. 
2. They borrow $100 and use that to buy their stock (they buy 10 shares at $10).
3. The company's value should adjust for the debt (but the market never does).
4. Instead people assume a value of $1,000, but now there are only 90 shares - the new price is $11.11/share. If your bonus was based on the stock going above $10.50 you are getting a fat bonus!

Oh, you still have to pay back that pesky $100 you borrowed but NOW the Fed is going to swoop in and save the day.

The goal is to lift asset prices and hope that the wealth effect trickles down to the rest of the economy.  The best investment of 2020 might be buying discount  Occupy Wall Street shirts because I think this is going to have a huge resurgence.

Shut up and enjoy your $1200.

Oh and on the subject of stimulus - note that despite our stimulus dwarfing any other package around the world by about 10-20x remember that the bulk of the money is going to corporations - who Mitt Romney called "people" - not to you.

via @nathanlerner
Stimulus packages around the world:

UK: 80% of workers' salaries
Denmark: 75% of workers' salaries
S Korea: 70% of workers' salaries
Netherlands: 90% of workers' salaries
Canada: $2k per month
Australia: $1k per month

US: One time $1200 check that may take months to arrive

via @NorthmanTrader
"Where in this chart do you see evidence of the greatest economic crisis of our lifetimes? A recession with millions unemployed?
I submit: You don't. Not at all.
Nothing's been priced in."

That little tiny dip at the end of this chart - that's reflective of your 17 million jobs lost. 


A 1931 (there's that year again...) cartoon by John Baer called "Recovery Package" seems appropriate 90 years later.


Forecast of the Day: 

Not my forecast but understand the parallels - I've argued that the US is continuing it's slow motion train crash and morphing into a Japanese style economy (slowing growth, aging population, insane debt levels, insane government intervention).  Well, that's sped up in the past 3 months and as someone pointed out that if it's the case, the Dow has a 30 year forward range of 7,500-15,000 (it closed at 23,500 on Thursday). 

I struggle with how that could be reality because it would bankrupt every major pension in the US but hey, the Fed could just add another $30 Trillion to bail them out to I suppose :/
If you didn't see the line of cars at the San Antonio food bank this weekend go ahead and click to see the sobering photo.
Daily Dose of Humor:

via @Mommajessiec
I’m bored, but not figure-out-what-tiktok-is-bored.

via @henpeckedhal
At what point does it stop being a nap and start being Sleep Part II?

via @elademonio
I don't need friends, I need a private island filled with dogs and donuts.


Thursday, April 09, 2020

Day trading 101

Everyone better sign up for day trading classes online ASAP because it doesn't sound like there will be any other jobs left in another few weeks.

Jobless claims came in higher than expected at a staggering 6.6 million again this week and now total almost 17 million in the past 4 weeks.  This means that roughly 85% of job growth of the past decade has been wiped out in a month. 

I can't adequately put these numbers into perspective.  Imagine a this sports analogy - Wayne Gretzky has the record for most points in a single NHL season at 215.  The weekly jobless claims for the past 3 weeks are like some new phenom who totaled 1,000 points, 2,400 points and 2,200 points in three consecutive seasons.  It makes no sense because the numbers are too absurd to be believed.  We are living through historic times.

I was clearly wrong in thinking the numbers would come in light due to system issues.  Unfortunately, that means that there is probably more bad data to come because I heard lots of stories from people in NY, Florida and Texas about challenges filing claims this week.

Stocks are currently mixed but honestly who cares?  17 million fellow Americans are out of work.   :(

Cheers because we no longer have am and pm we just have "coffee time" and "wine time"

Wednesday, April 08, 2020

"The world is my expense,

The cost of my desire..."

Sleep Now in the Fire - RATM

Tomorrow we will get our third straight historically significant initial jobless claims.  The average estimate is for 5 million new claims but I think it may actually be less than that due to flaws in the filing system.  Computerized filing in a number of states failed this week so while the real number of jobless claims may be north of 5 million, the reported number may come in lower at 4 or 4.5 million. 

Regardless, let's talk perspective - if it's 4 million, that will put the total jobs sucked out of the economy in 3 weeks at 13.9 million.  That would be 60% more jobs lost than in the great recession of 2008 in 3 WEEKS.  It would also mean that of the 20 million jobs or so created since 2010, roughly 70% of them were vaporized in 3 WEEKS.

If history has taught us anything in the past 2 weeks it's that the stock market does not care about jobs or the economy.  The stock market is its own virtual reality game playing tic tac toe against itself.  By the end of tomorrow, going into the holiday weekend, we might have lost 14-15 million jobs in our economy and stocks will be up 40-45% from their lows.  The stock market is not the economy and the sooner people in Washington realize that the better we'll all be.
The curious case of Staples
This perfectly sums up the state of "capitalism" in the US.  Staples is a failing office supply retailer that was bought by a private equity firm in 2017.  Last year as result of some complicated financing the private equity firm who originally contributed just $1.6 billion of the $6.7 billion acquisition - paid itself a $1.3 billion dividend while the business at Staples continued to collapse. 

Fast forward to March of 2020 - the virus shutters most retail in the US and Staples sent a letter to their landlords yesterday basically telling them to pound sand.  They said they aren't paying rent for April and made no guarantees about May.  Look, the commercial landlords of Staples aren't your average Joe and Jane but when you live in a world where financial engineers can steal from a company and then a year later ignore basic lease agreements well, I don't think it's going to end well for anyone.

* It's worth noting that the financial genius running our giant slush fund for corporations - Treasury Secretary Mnuchin - well, his claim to fame is that he decided putting Sears and Kmart together would be a brilliant move.  He was able to extract a lot of money out of those companies (like the owners of Staples) before they both collapsed in a heap. Nice work if you can get it.
Quotes of the Day - Snarky edition
via @QTRResearch - a little hyperbolic but these are extraordinary times
 "Stocks have recovered 44% from the lows and all it took was the annihilation of our currency, a full on nationalization of all businesses, an embarrassing declaration to the rest of the world that our Central Bank is beholden to stocks & a sly introduction to both martial law & total corporate Marxism!"

via @BradHuston
"Why are we screaming higher today?  Because the lead socialist dropped out the presidential race when we're doing socialism for billionaires hand-over-fist to save the stock markets owned primarily by the 1%."

"Markets rally as the threat of socialism has been averted.
Now let’s return to our regular program of Fed bailouts, stimulus packages, $3.5 trillion deficits and free money for everyone."
Daily Dose of Humor
via @mommajessiec
"I don’t know who needs to hear this, but now is not the time to try on your skinny pants."

via @wittysassbasket
"I'm intermittent feasting"

via @simoncholland
"Y’all, I don’t think we would have made good pioneers."


*PS thanks again to everyone that's come back and sharing the blog.  You can click the Facebook or twitter links below to share it.