Daily Research Updates
Morning Briefings
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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!
The Best Cure for a Viral Pandemic Is a Viral Panic
(1) Panic may be a healthy response to viral pandemic. (2) Blaming the kids for the seasonal flu. (3) The benefits of online education and work. (4) The weather theory makes sense, but is controversial. (5) It’s getting warmer in Wuhan. (6) China vs Italy. (7) Is the H1N1 outbreak of 2009 relevant? (8) Mad dash for cash caused widespread market illiquidity last week. (9) VIX and credit spreads blew out last Thursday. (10) Commodities signaling a less bad outcome? (11) Germany and US policy responses helped to boost stocks on Friday.
Fear for All
(1) It’s officially a pandemic. (2) Global recession is underway as both healthy and sick people stay home. (3) Lowering our US GDP forecast to a growth recession for Q2 & Q3, but also raising odds of outright recession from 35% to 45%. (4) No change in our earnings recession forecasts for Q1 & Q2. (5) S&P 500 target: Pushing 3500 to mid-2021, while aiming for 2900 by year-end. (6) The kids are home. (7) Governor Cuomo and Chancellor Merkel saving us or scaring us? (8) Credit-quality spreads signaling credit crunch. (9) Waiting for a policy response: Helicopter money? (10) Fed, running out of ammo, may ask Congress for permission to buy corporate securities. (11) Clash of the Titans in the Oil Patch.
All About Earnings
(1) Q4 S&P 500 revenues and earnings are out. (2) Revenues rose 6.8% y/y during Q4 to new record high. (3) Earnings dipped in Q4, rising only 2.0% y/y. (4) Profit margin also dipped, but in record-high territory. (5) Utilities and Financials lead the earnings gainers, while Energy and Materials lead the losers. (6) IT leads in the profit margin derby. (7) Industry analysts cutting their Q1 & Q2 earnings forecasts, which remain too high relative to our forecast. (8) Record dividends.
Pandemic Pandemonium
(1) Fear continues to spread faster than reported virus cases. (2) Balance of good vs bad news on virus tips toward the former. (3) Virus stats in China and South Korea improve as those in Italy and France worsen. (4) Panic Attack #66 is the most fearful of them all. (5) It all depends on whether the virus goes away or stays. (6) Was that a capitulation bottom yesterday? Maybe not. (7) Putin and MBS playing chicken in the oil patch, with both hoping to hurt each other along with US frackers. (8) Flight to quality has turned into a panic in Treasury market. (9) Reaching for safety instead of yield. (10) Credit quality spreads widening. Signs of a credit crunch? (11) Déjà vu: Energy-related junk bonds in distress, as in 2015.
Three Coins in the Fountain
(1) Spooky bond market. (2) Nostalgia. (3) Coronavirus math: What if lots more people are infected but with mild symptoms? (4) Coronavirus worldometer. (5) The relevance of Tom Hanks, Kelly Clarkson, and Clint Eastwood. (6) Putting subjective probabilities on the Good, the Bad, and the Ugly: 65%/25%/10%. (7) Good: Panic Attack #66 ends soon as pandemic of fear recedes too—65%. (8) Stocks are cheap compared to bonds. (9) S&P 500 forward revenues and earnings remain amazingly resilient at record highs. (10) Bad: Excessively high Fear Factor causes a recession and a bear market—25%. (11) Ugly: Zombie Apocalypse—10%; to avert, the Fed will ZIRP and QE again, and rev up the monetary helicopters. (12) Movie review: “The Invisible Man” (+).
‘We Are Very Much Alive!’
(1) COVID-19 pushes scientists to find solutions fast. (2) Big money is being thrown at the problem. (3) Novel vaccines using mRNA are being tested. (4) Mice helping out. (5) Chinese using CTs and blood tests to better diagnose the illness. (6) Gilead’s drug, remdesivir, is being tested as a treatment. (7) Health care stocks celebrate Biden’s Super Tuesday win. (8) Moderate Dems lining up like good soldiers. (9) Health care sector stocks have underperformed while still delivering earnings.
The BS Virus
(1) Investors prefer Biden over Sanders. (2) Centrists uniting against Sanders in Democratic party. (3) Socialism is a virus that won’t go away. (4) From Rousseau and Robespierre to Castro and Sanders. (5) Fed’s medicine cabinet doesn’t include any vaccines for viruses. (6) Analysts chopping Q1 and Q2 earnings estimates. (7) Lots more earnings warnings coming soon. (8) No sign of a pickup in inflation.
Back to Business
(1) Viral lyrics: Getting to know you, getting to know all about you. (2) May or may not be highly contagious, lethal, and seasonal. (3) Mild symptoms might be undercounted, exaggerating the death rate. (4) Time to consider extreme measures to stop auto accidents? (5) Tech to the rescue? (6) Shaving GDP outlook. (7) Virus bad for capital spending and exports, good for residential investment. (8) M-PMI around 50 corresponds to 2.1% real GDP growth, but also to low-single-digits S&P 500 revenues growth. (9) Truck tonnage index in record-high territory, but truck sales taking a dive recently. (10) Growth in railcar loadings of containers is still weak, reflecting Trump’s deescalated trade wars. (11) Now global health crisis is infecting global trade. (12) Swedes leading the way in e-currency.
COVID-19: The Plot Sickens
(1) We are all virologists now. (2) Most of us can breathe easy. (3) Staying healthy. (4) P/E-led meltup followed by P/E-led meltdown. (5) The previous four seven-day freefalls occurred in bear markets. (6) No longer overbought. (7) FAANGMs cheaper, but not cheap. (8) A bad week for Stay Home as people stay home. (9) Lowering our earnings estimates, but the sun will come out later this year. (10) Industry analysts still too optimistic about earnings. (11) Extreme measures may contain virus while depressing global growth. (12) Really ugly Chinese PMIs. (13) Powell ready to provide a shock-and-awe rate cut? Would it help or hurt? (14) Let’s hope cover-story curse kills COVID-19 as it did previous viruses.
Damage Assessment
(1) Flu vs COVID-19: More alike than different. (2) Keep your distance, don’t touch your face, and wash your hands. (3) COVID-19 less deadly than flu so far, based on number of deaths. (4) S&P 500 down, but not yet in correction territory. (5) Travel-related stocks hit hardest. (6) Valuations getting more reasonable. (7) Beware of cuts to earnings that may be in the near future. (8) Bonds and oil not convinced all the bad news is out.
Government Measures To Stop COVID-19 Triggering Pandemic of Fear
(1) Updating our assessment of COVID-19 crisis. (2) Government actions and warnings to stem virus making Panic Attack #66 the most fearsome of them all. (3) Quarantines and fears of quarantines around the world raising risk of global recession and bear market in stocks. (4) In US, CDC official warns public to prepare for school closings even though she says virus risk is low! (5) Government measures should stop virus, but risk killing us with fear. (6) Flu kills people of all ages, while COVID-19 kills old people (numerous in China) and has spared children younger than 10 so far. (7) Sick happens. (8) COVID-19 can be spread by people with no symptoms. (9) US consumers have nothing to fear but fear about COVID-19 coming to our neighborhoods.
Anatomy of a Virus
(1) Panic Attack #66 hit investors hard yesterday. (2) A viral panic attack. (3) In the spring, there should be healthier weather. (4) Counting on the flu model. (5) Travel and tourism industries are sick. (6) P/E-led correction following P/E-led meltup. (7) The man from WHO isn’t ready to call it a pandemic despite spread to Iran, Italy, and Korea. (8) Getting harder to breathe for millions of small businesses. (9) Fed may need to deliver a couple more rate cuts to keep US economy in a good place. (10) Wuhan Institute of Virology may be China’s Chernobyl.
Snorting vs Sneezing Bull
(1) Known unknown and known knowns. (2) Fed’s policy report mentions COVID-19 as a risk, but Clarida says US economy remains strong and uninfected. (3) China is a weak link in global supply chains. (4) Impressive rebound in February’s manufacturing activity according to NY & Philly Fed surveys. (5) US factories getting a boost from strong housing starts. (6) Consumer optimism lifted by lots of jobs. (7) LEI and CESI confirm economy still expanding. (8) February’s flash PMIs weakened in US and Japan, improved in Eurozone. (9) Bull sneezed on Friday. (10) Investors reaching for yield in bond and stock markets. (11) Tech accounts for nearly half of capital spending. (12) Outperforming stocks include those of the Stay Home, LargeCap, and Growth varieties. (13) Movie review: “The Traitor” (+ + +).
Small World
(1) China’s quarantine disrupts global supply chains. (2) Chinese factory workers are staying home. (3) Coronavirus hits Apple’s demand for phones and supplies of parts. (4) Some auto companies facing parts shortages too. (5) Flying parts on jets. (6) At new highs, stocks still taking it all in stride. (7) Global MSCI forward earnings and revenue estimates holding up. (8) However, industry analysts are starting to cut their S&P 500 earnings estimates for Q1-Q3. (9) Musk’s hyperloop getting bored toward reality in Vegas.