Morning Briefings
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P/Es in The Twilight Zone
(1) Epidemiologists are like economists, but not in a good way. (2) Models versus common sense and empirical observation. (3) My pandemic prescriptions: required mask-wearing, temperature-taking, and COVID-specific field hospitals. (4) Public health: the seven steps forward followed by Taiwan. (5) Opening up is hard to do, but needs to be done without a second wave. (6) Back to The Twilight Zone: As earnings estimates dive, P/Es soar. (7) Misery Index Model isn’t working, so far. (8) Buybacks falsely accused again.
The Twilight Zone: Where Is Everybody?
(1) “[B]etween the pit of man’s fears and the summit of his knowledge.” (2) A world of fear. (3) Mad-cash-cow disease. (4) From reach for yield to dash for cash, to rebalancing into stocks, to snapping up distressed assets. (5) A pandemic of cabin fever. (6) MMT and QE on steroids. (7) Death-defying deficits. (8) From Weimar to Tokyo. (9) The Cold War between the US and China. (10) Investing in an era of crony capitalism. (11) Hooray: The shortage of distressed assets is over! (12) The lower depths from Maxim Gorky to Jules Verne.
Down & Up
(1) Tech saves the S&P 500, while Energy hardly hurts it. (2) Cooking fatigue helps restaurants’ takeout biz. (3) Investors overlook Energy sector’s miserable Q1 results, seeing only the production cuts that will eventually heal the market. (4) Necessity proves it is the mother of invention in the race for COVID-19 cures and vaccines.
A View to a Kill
(1) James Bond and Jerome Powell. (2) The Fed created and exacerbated the zombie problem. (3) The IMF wrote the script for the current version of “Zombie Apocalypse.” (4) Fed recognized that half of investment-grade bonds were BBB. (5) Fed is now scrambling to save them from Zombieland. (6) Powell saw the problem coming and made it worse. (7) T-Fed’s spiffy new SPVs. (8) Fed sets up two homeless shelters for corporate bonds, including the “fallen angels.” (9) Saudi prince gets a new French palace. (10) Pelosi: “Let them eat ice cream.” (11) Industry analysts scrambling to cut their earnings forecasts. (12) Can FAANGMs lead the way higher?
Small Companies Are Beautiful & Distressed
(1) Oil demand and prices plummet along with global economy. (2) When was the last time you were at a gas pump? (3) Running out of oil storage capacity. (4) Industrial commodity prices ex-oil are down but not plunging like oil so far. (5) The Fed is bailing out BBB fallen angels, not the other zombies in the junk pile. (6) LargeCaps, Growth, and Stay Home stocks have been outperforming, and may continue doing so. (7) ADP numbers show small-sized companies account for about a quarter of employment and paychecks. (8) Unintended consequences: Government’s Paychecks Protection Program runs into some snags. (9) Not enough lifeboats.
S&P 500 Flying, Economy Diving
(1) 1987, 2008, & 2020. (2) Shortest bear market in history? (3) Rebalancing made the bottom. (4) The Fed: bombs away! (5) S&P 500 revenues and earnings growth before and after Lehman. (6) Revenues and earnings before and after COVID-19. (7) Assessing the health, economic, and financial fronts of the war against the virus. (8) The last are first since March 23, but over the long run companies in digital and biological technologies should outperform. (9) Recovery pattern: V at first, followed by a U. (10) US economy losing altitude at lightning speed. (11) China as a role model for other economies? (12) Movie review: “Resistance” (+ +).
Here & There
(1) Economic data getting downright ugly. (2) Consumers buying food and toilet paper, not much else. (3) Banks boosting loan-loss reserves, anticipating defaults. (4) JPM warns Q2 could be worse than Q1. (5) BofA says loan deferral requests may have peaked a week or two ago. (6) For banks, lower interest rates offset the benefit of more commercial loans. (7) Bank stocks already reflect lots of bad news. (8) Diversified Banks’ P/Es climb as earnings fall. (9) A look at how China reopened its economy. Is it relevant to US?
Taking Stock
(1) The Age of Future Shocks. (2) From reaching for yield to dashing for cash to rebalancing into equities, all in two months. (3) Retesting the February 19 high rather than the March 23 low? (4) Some more numbers on the dash for cash. (5) Stock prices soar as P/Es jump more than earnings dive. (6) Record drop in S&P 500 forward earnings last week. (7) Chinese social financing at record-setting pace during March. (8) Fed’s balance sheet up $1.8 trillion in past four weeks to record $6.0 trillion. (9) A primer on some of the Fed’s lending facilities.
Investing in the Post-GVC World
(1) Three Marketeers: Mnuchin, Rubin, and Fink to the rescue. (2) A brief history of Fed Puts. (3) The Fed is playing whack-a-mole again with more moles and bigger hammers. (4) From the Fed to Feddie to T-FED. (5) BlackRock will manage the Fed’s corporate bond portfolio for a small fee. (6) GVC aftershocks will shock the post-GVC world. (7) Globalization is at risk. (8) Bringing supply chains home and working from home. (9) Cash was trash, then came the mad dash for cash. Now cash-rich corporations are like kids in a candy store. (10) M&A boom is on the way. (11) Online shopping, warehousing, logistics, and trucking are likely to continue to boom. (12) Stay away from GVC’s basket cases. (13) A couple of freefalling economic indicators.
Feddie’s Free Money: No Asset Left Behind
(1) Bernanke used bazookas; Powell is using B52s. (2) Carpet-bombing the economic and financial fronts of VW-I with free money. (3) Over $1 trillion raised in dash for cash during March. (4) Businesses tapping lines of credit like never before. (5) Future shock: from QE4 to QE4ever to NALB (no asset left behind). (6) Fed keeping zombies from getting buried. (7) Fed indirectly supporting stocks by enabling rebalancing from bonds to stocks. (8) Bull/Bear Ratio is very bearish, which is very bullish. (9) The Fed is on a buyback binge in the credit markets. (10) The Fed has become the Bank of the United States, with capital provided by the US Treasury. (11) In Powell and Mnuchin we trust. (12) You ain’t seen nothing yet!
Tech Is Going More Viral
(1) US death-count methodology could exaggerate COVID-19’s lethality, leading to policy overkill. (2) Lockdowns are taking a toll on economy. (3) We are all germophobes—and tech addicts—now. (4) Stocks benefitting from pandemic-altered reality include names in the outperforming S&P 500 Tech and Communication Services sectors. (5) Cloud-computing and gaming industry companies are among the winners. (6) Here come the robots—and contactless financial transactions.
The Great Rebalancing: No Asset Left Behind
(1) Working on Chapter 13 of the second edition of my Fed book. (2) A work in progress. (3) The Fed’s remarkable pivot on March 23 marks end of B-GVC, beginning of A-GVC. (4) Weekly data confirm dash for cash during March. (5) Credit spreads confirm March 23 was a major turning point on the financial front of war against the virus. (6) The Fed is the buyer of last resort for bonds, providing cash for rebalancing into stocks. (7) The Fed’s balance sheet is vaulting to new record highs. (8) ECB joins Fed and BOJ with no-asset-left-behind PEPP (Pandemic Emergency Purchase Programme). (9) BOJ doing much more of the same.
The Way Forward
(1) A happy Monday for a change. (2) A list of positives. (3) Getting worse at a slower pace. (4) CVS offering Abbott’s test in two cities. (5) Bill Ackman and Neil Diamond don’t have much in common. (6) Pandemic’s theme song offers the way forward. (7) Analysts just got the GVC recession memo. (8) Bear-market rally or looking past the doom and gloom to good times again? (9) B-52 money: Bazooka and helicopter analogies seem so yesterday and puny. (10) The Great Rebalancing.
Analyze This
(1) Neil Diamond’s song may be a good antidote. (2) Industry analysts tend to be too optimistic during good times. (3) They don’t see recession coming and turn too pessimistic as economy starts to recover. (4) Our Earnings Squiggles Framework shows it all. (5) Biggest downward earnings revisions occur during recessions. (6) Modeling earnings now using 2008-09 experience. (7) Lehman Moment: March 16 White House Guidelines set stage for shutting down the economy. (8) Focus on 2021. (9) Forward earnings just starting to take a dive. (10) Bad versus Ugly scenarios for S&P 500. Bad is the new Good. (11) B-52 money will pour into numerous industries. (12) A few industries are already booming as a result of GVC. (13) Joe’s daughter’s university has a vaccine for COVID-19.
Buddy, Can You Spare $2 Trillion?
(1) The government shows it CARES. (2) Health providers get virus-related expenses reimbursed. (3) Airline industry gets grants and loans. (4) Government may ask for equity in exchange for its helping hand. (5) Companies taking government funding can’t pay dividends or buy back shares. (6) No life preservers for cruise lines. (7) Fed can provide loans to companies large and small. (8) Small businesses can keep the money for free if they hold onto their employees through September. (9) Virus-infected industries cutting dividends and eliminating stock buybacks. (10) Many other industries will do the same as recession hits their profits and cash flow.
After the Pandemic
(1) After the Great Virus Crisis, how will the economy be different? (2) A steep global recession with massive fiscal and monetary stimulus. (3) Demand likely to remain in shock longer than supply after GVC. (4) Moving supply chains closer to home is necessary and costly. (5) From just-in-time to just-in-case. (6) Aggregate demand is in shock. (7) Roundtrip for China’s M-PMI. (8) As parts supplies increase in China, demand for them falls everywhere else. (9) Massive job losses and plunging consumer confidence ahead. (10) Fiscal and monetary policies to the rescue, again?
More on Earnings & Valuation During the Great Virus Crisis
(1) Slashing revenues and earnings estimates. (2) The Great Disruption. (3) Industry analysts have lots of downward revisions to work on from their home offices. (4) Blue Angels show the way forward. (5) Forward earnings going down. (6) Analysts will probably be too pessimistic on 2021 by the end of this year. (7) Refusing to give in to viral bearishness, we think market bottomed a week ago and are seeing some blue in the sky. (8) B-52 money is thawing the credit freeze. (9) Please keep your distance and wear a mask.
P/E x E in a Bear Market
(1) Fed Chair Buzz Lightyear: “QE4ever, to infinity and beyond!” (2) Pandemic of fear triggered by virus pandemic triggered a mad dash for cash. (3) Massive flows out of bond funds caused credit spreads to spike. (4) Fed had lots of practice playing Whac-a-Mole in the credit markets. (5) The buyer of last resort is now buying investment-grade corporate bonds and ETFs. (6) New record high of over $5 trillion for Fed’s balance sheet, with more record highs ahead. (7) Fed set to lend $4 trillion above and beyond QE4ever. (8) More like B-52 money than helicopter money. (9) The deficits of last resort. (10) Last week’s “bull market” is facing a major earnings abyss in coming weeks. (11) Using 2007-09 to benchmark 2019-21. (12) There is a path forward to ending the GVC.
Monitoring Earnings & Valuation During the Pandemic
(1) Analysts break out the shears. (2) Profit margins losing their Trump tax-cut bump. (3) Confidence in earnings estimates crumbles to 2010 lows. (4) Forecasting earnings depends on guessing when businesses can get back to business. (5) Most sectors’ valuations have sunk to lows not seen since the GFC. (6) Will forward P/Es rebound as earnings estimates get cut? (7) Hey, big spender: Handful of S&P 500 CEOs gobble up their companies’ stock at March’s depressed prices. (8) Energy sector sees the most buying, followed by COVID-19-infected businesses. (9) The Simons buy Simon shares, the Icahns double down on Newell Brands.
Searching for Silver Bullets
(1) The Lone Ranger. (2) A horse named “Silver” and a gun full of silver bullets. (3) Cure worse than the disease? Social distancing crushing global economy. (4) Make millions of masks, and make us wear them when we go out of the house. (5) Eight other steps to free us from house arrest. (6) We disagree with the CDC’s case against surgical masks. (7) Don’t fight the Fed. (8) China’s economy may be recovering, but their overseas customers are falling into a severe recession. (9) Good news: Busts are followed by booms. (10) Imperial College COVID-19 Response Team’s report may be too alarmist.
The Lender of Last Resort
(1) Let’s not get depressed. (2) Martial law for seniors and others. (3) Great Virus Crisis versus Great Financial Crisis. (4) Social distancing should work. (5) Mass testing would help. (6) Adding makeshift hospital capacity. (7) The Fed is flying the money helicopter to infinity and beyond. (8) Commodity prices tanking now. (9) S&P 500 revenues growth estimates getting cut. (10) S&P 500 earnings growth estimates getting slashed for Q1-Q4, but remain too optimistic. (11) US railcar loadings bearish for industrial production and merchandise trade.
The Great Virus Crisis
(1) GVC is a world war, but not WWIII. (2) Mobilizing resources to fight the virus. (3) Scrambling for cures and vaccines. (4) US case counts by states: Why is Washington so high, while Florida is so low? (5) The Kirkland outbreak. (6) Good news in China, South Korea, Indonesia, and Mexico. (7) Bad news in Europe and US trigger social distancing responses, which should work. (8) The similarity between virologists and economists. (9) From the Good to the Bad and the Ugly in two weeks. (10) Soaring unemployment, plunging GDP. (11) Start of the Zombie Apocalypse in the credit markets? Or can Fed rescue corporates and munis? (12) This too shall pass…if we all stay home and flatten the infection curve. (13) Fiscal and monetary policies should buy us some time. (14) Movie reviews since 2005.
Collateral Damage from the War Against the Virus
(1) COVID-19 ripple effects and plummeting oil prices slam Financials. (2) Life insurers hurt by low rates, falling investments, and fears of higher mortality. (3) Crash in oil hurts some regional banks. (4) Large banks’ stock buybacks on hold. (5) Companies hit hardest draw on revolvers. (6) Market correction makes investment banking business uncertain. (7) Travel industry needs a vacation. (8) Cruise lines, airlines, and hotels all visit the White House. (9) A deal with Uncle Sam may mean dilution for shareholders.
Helicopter Money May Help To Unlock the Economic Lockdown
(1) Trump’s pivot from relaxing to social distancing. (2) The invisible enemy is very contagious. (3) Flattening the infection curve. (4) False and true rumors. (5) Official and voluntary lockdowns. (6) Fiscal and monetary math: TARP2 + QE4 = helicopter money! (7) So is 2020 the same as 1987-88, 2008-09, or 2015-16? (8) Witch’s brew: health, economic, and financial crisis. (9) Pandemic earnings and valuations.
Morning Briefing 2020-03-17
(1) The panic question. (2) Fear is the cure. (3) Lowering GDP and earnings estimates again. (4) Ranges make more sense than point estimates. (5) Fed is running out of ammo and shock-and-awe. (6) The Fed’s Zombie problem. (7) Mobilizing the troops during wartime. (8) The zero-immunity problem. (9) The R0 Factor. (10) Listen to Dr Fauci. (11) Six feet apart beats six feet under. (12) Flattening the curve. (13) Case studies. (14) Stay healthy, please!