Skeptical Investment: 2020-02-17

new: n-cov notes:

Disease modelers gaze into their computers to see the future of Covid-19, and it isn’t good.

Los Alamos Experts Warn Covid-19 "Almost Certainly Cannot Be Contained", Project Up To 4.4 Million Dead.

Guggenheim’s Scott Minerd: “Peace for Our Time”. The coronavirus is a looming economic problem.

“The cognitive dissonance in the credit market is stunning….”

Capital Economics: THE COVID-19 CORONAVIRUS AND ITS ECONOMIC IMPACT (UPDATED 18TH FEB.)

Doug Noland’s Credit Bubble Bulletin: Weekly Commentary: One Extraordinary Year.

Record Highs And Raging Risks - The Mother Of All Head-Scratchers

I am well aware of the market's view that the coronavirus crisis will soon pass. We can expect Beijing stimulus measures to help shore up GDP figures and stock prices. At least in the near-term, it will support confidence. Hopefully the outbreak has peaked, with stimulus measures and an accommodative banking system helping China’s economy to muddle through. Global equities markets have been content to “look across the valley.” Disregarded are China’s acute financial and economic fragilities, the of risk stimulus measures exacerbating Monetary Disorder and mounting risks to social stability. How quickly does the Chinese population bounce back – again eagerly taking on debt, buying apartments and autos and dreaming of a bright and prosperous future?

That equities can run higher in the face of mounting risks is not as confounding as it might first appear. Credit drives the global Bubble – and Credit in the near-term is further benefiting from the outbreak. Overheated securities (speculative) Credit is really benefited. Global monetary stimulus is further assured - rate cuts and more QE. One can now add aggressive PBOC liquidity injections to the Fed and global central bank QE throwing gas on a speculative fire raging throughout global fixed-income markets. ….

I view the equities Bubble as an offshoot of the greater Bubble that continues to inflate in global debt, securities Credit and derivatives markets. On the one hand, it is extraordinary to see equities markets essentially dismiss such consequential developments in China. It does, however, present important support for the Bubble Thesis. Equities rallied to record highs just months before the LTCM/Russia collapse in 1998. Stocks rallied to record highs in 2007 even as the mortgage finance Bubble faltered. It’s only fitting that global stocks rally to record highs as the faltering China Bubble places the global Bubble in serious jeopardy.

Regular Weekly Notes:

It's "The 1%" vs Everyone Else: FAAMG Earnings Soar As Russell 2000 EPS Growth Craters.

As Goldman notes, results were disparate across the size spectrum, with the 5 largest stocks (FB, AMZN, AAPL, MSFT, GOOGL) disproportionately boosting aggregate S&P 500 results in 4Q. As Morgan Stanley first noted a month ago, FAAMG account for 18% of S&P 500 market cap and 14% of S&P 500 earnings. During the fourth quarter, these 5 stocks posted an average earnings surprise of +20%, compared with just 4% for the average S&P 500 company. And the most striking conclusion from earnings season: the "other 1%", i.e., FAAMG, grew EPS by 16%, compared with 0% for the S&P 500 excluding these five stocks, or as Goldman puts it, "mega-cap earnings strength contrasts with small-cap earnings weakness."

SaxoBank: Apple's Downgrade Is Just The Tip Of The Iceberg When It Comes To Earnings Downgrades.

Walmart Misses Across The Board As Guidance Disappoints, Online Sales Slow.

Bank loans, Containers.

China Has Ground To A Halt: "On The Ground" Indicators Confirm Worst-Case Scenario.

Dominos Are Falling – China Shutdown To Crush India’s Already-Crumbling Economy.

Japan Unexpectedly Reports Terrible GDP As It Slides Into Recession.

"Tankers, Tankers. Everywhere!" - Virus Causes Historic' Traffic Jam' Across Asian Supply Lines.

Consumer Price Inflation Hotter Than Expected Despite Goods Deflation. …

…but: 30-Year Auction Prices At Lowest Yield On Record.

Job openings jolted: JOLTS, Small business index, Household debt, Wholesale inventories and sales; German Industrial Production.

(extended) Quote of the Week:

James Howard Kunstler:

What if the Corona virus turns out to be a genuine pandemic with legs, not some punk-ass, flash-in-the-pan bug like SARS… and infects hundreds of millions around the world…? And what if it happens to go logarithmic in the USA, as in China now…? And what if takes a few months, or half a year, to do that…? And what if Americans will not get on airplanes when that happens…? Or gather together in large numbers…? Or if government imposes quarantines …? Will the parties hold their nominating conventions? Might the November election have to be postponed?

Just sayin’… since nobody else seems to be talking about it. A few months ago, nobody was thinking about a disease that would virtually lock-down China’s economy, either… and now here we are. Speaking of which, that lock-down of China’s economy is already generating serious damage to global GDP, after only a few weeks. But nothing shows our detachment from reality like the recent surge in financial market indexes while the Chinese economy was busy shutting down. In particular, one must wonder: What supports the global daisy-chain of debt obligations while all this is going on?

After all, companies doing business need a revenue stream to service their revolving debts. They have to make stuff, and move stuff, and get paid for it. What happens when there is no revenue stream? The workings of this hyper-complex financial system depend utterly on the velocity of these revenue streams. They can’t just… stop! Everybody who follows these things understands that China’s banking system is 1) a hot mess of confabulated public and private lending relationships, 2) completely opaque as regards the true workings of its operations, and 3) shot through with fraud, swindling, and Ponzis. Did China’s ruling party just put its banking system in an induced coma while Corona virus plays out? How can that possibly not affect the rest of global finance, which is plenty janky, too?

The USA gets everything from car parts to pharmaceuticals from China. How long will it take for the manufacturing lock-down to show up in American daily life? What if it continues for some months going forward? You can easily draw your own conclusions.

(not just) for the ESG crowd:

1) Be as destructive as you can and get rich off your efforts. 2) Spend 1-2% of your dirty wealth and expect to be hailed as a philanthropist.:

Amazon’s Bezos Pledges $10 Billion To Climate Change Fight.

A Third Of Fossil Fuel Assets May Soon Be Stranded.

Yet More Finance Profiteering: Green Bonds.

“On the one hand, a new finance fad of “green bonds” shows that investors recognize that climate change is a risk. On the other, it simply perpetuates the convenient but false notion that the private sector by the virtue of cute packaging is a leader as opposed to a laggard in addressing climate change. In fact, confirming doubts about the ability of Wall Street to have good intentions, these green bonds are at best a gimmick to enrich middlemen at the expense of communities and investors and at worst, an exercise in finding new muppets.”

Breakdown or Breakthrough? Degrowth and the Great Transition.

When mainstream approaches to sustainability fail to challenge economic growth they provide limited, sometimes even false solutions to today’s crises. Technological and political interventions that reduce environmental impacts and enhance overall efficiency – though contributing to sustainability in a narrow sense – end up adding to global inequality and ecological overshoot, insofar as they accelerate growth. Growth is one of the chief drivers of social inequality and environmental degradation; it is also what sustains the global capitalist economy.

Sustainability solutions that promote growth under the banner of “green growth” are the easiest to accept and implement, but they are the least able to address the roots of today’s crises. Proponents of green growth believe that growth can be decoupled from environmental impacts, yet there is no empirical evidence that this is possible. Meanwhile, acting on such an unproven assumption obscures the real harm being done by sustaining extractive and exploitative capitalism.

We have already surpassed the known limits to growth, so degrowth is our only option. Sustainability is an outcome of healthy metabolic relationships between an organism and its environment. When consumption depletes resources faster than their rate of regeneration – which is what we are currently doing – it is by definition unsustainable.

Other fare:

Mysterious radio signal from space is repeating every 16 days.

Photo of the Week:

Tres cool video: Fabio Wibmer Rides His Bike Around In Austria.