Corona Virus, DOW and the Economy

I'll start by saying that I believe Europe isn't there yet, but they'll be in recession.

China also will be there soon.

The US will follow. For us, by the classical definition, we'll be there in 2 quarters.

Why? I think there's too much debt in small to medium businesses. Overhead is too high with wages, rent and cost of raw materials taking too much of the profits. When the CV spreads and when many of us know someone who has it, we'll become hermits. Sure, we'll go to work, but social activity will drop to near zero. Companies that cater to social activities will have revenues go way, way down. If they're weak financially, they'll be out of business in weeks. If they have a little saved up, they may last a quarter - two at the most. So only the strongest will survive if this lasts over 2 quarters. Jobs will be lost - many jobs. Property owners will have retail/warehouse vacancies and may be foreclosed. The recession may last until early 2021 or a full year. The damage will be anywhere from average to medium - I don't see it being anywhere near the 2008 recession.

I think the CV will spread like wildfire for another 2-4 weeks. If it keeps spreading exponentially for 2 months, we (as in the world) will be in trouble. It also depends on how lethal it is with healthier, younger people. When someone in the spotlight gets sick and dies, you'll see a near panic hit. And it will. Someone who you'd never expect to die from it. "If xxx died, then how will I make it?"

We may see the Millennials choose to leave the city and start moving to the suburbs, where there's more space and catching a virus will be much harder. I'm not sure, but we may see it happen.

We may also see a lot of older Boomers die, which will hit the surviving Boomers hard. Travel will most likely be curtailed for a while. Cruise lines will get crushed. International travel will be very low. Though we may also see a change in attitude - "xxx saved and saved, worked way too many years and he didn't get a chance to spend his money and enjoy life ... now look at him! I'm going to live life, because who knows when my time will come!" Holding on to "treasures" may go away and collectibles may become less desirable.

I think the DOW has a chance to bottom at 15,451, but only if it takes out the December 2018 low of 21,792 with strength. If loses 21,792 and confirms it, next are 20,380 and 19,678, which provide weak support. 17,884 is stronger, but still weak. 17,063 was tested and passed, so it may stop here. If not, 15,451 is the next. That'll make it a 48% loss from the high. Possible? Unfortunately it is.

That's how I see it, but this is just my hypothesis and I have no clue if it'll happen as I think it will.

By the way, I really, really, really hope I'm wrong about this.

It’s a damn good thing, the U.S. economy is as strong as it is when this hit,... and that we didn’t accept the economy to be weak as a norm that was told to us a few years back. But this virus, like all the outbreaks from the last 20 years we had (Mers, SARS, Swine Flu,....) needs to be addressed.

its unfortunate, that this panic has seemingly a lot of political undertones feeding these reactions.

reactions we didn’t see from the previous outbreaks. At least to this extent we are seeing now.

A little more details....

• 2004 - SARS
• 2008 - Avian
• 2010 - Swine
• 2012 - MERS
• 2014 - Ebola
• 2016 - ZIKA
• 2018 - Ebola
• 2020 - Coronavirus

Even though it’s still early, some numbers are coming out:

• The coronavirus has a contagion factor of 2
• SARS has a contagion factor of 4
• Measles has a contagion factor of 18

With these numbers, some statistics are coming out like the Coronavirus has a cure rate for people under 50 years of age of 99.7%.

...which is better than 'flu.

That’s a good point; for myself, this past summer starting in May, I did a lot of traveling for work until mid-December.

Most of my days were 14-18 hours long, and on top of that being on call. The weekends were about 8-12 hours long for each each day. The few weekends I did have off where I could return home, I spent in either Urgent Care, the ER, or both. The first day off I really had was Christmas.

In September I told my wife to put me on her insurance; I’m going to try to make to the end of the year, and since my departure I’ve had flu-like, cold-like and respiratory-like problems,... all my immune defense systems were weakened due to exhaustion. I still have what is now a small lingering respiratory problem.

Here’s a little write up (a little outdated being just a week old ) about it for a comparison between flu and coronavirus.

In reality it’ll be one's knowledge (or ignorance) for the spread.

An example would be the large Spanish flu pandemic of 1918: the problem was the lack understanding of it, but what I believe was the major spread was WWI, where a large number of people (soldiers) from all over the world were combined in close quarters (barracks and ships) and then returned home.

Similar to this is the international travel we have today.

Based on some info from an acquaintance in the vicinity of China who has contacts in the country, some cities there are already starting to remove quarantines and get back to a limited semblance of normal operation. Businesses that were closed are reopening. It isn't near to Wuhan, but it suggests that with good disease-control response here in the West we will ride out the CV pretty soon.

21,792 is gone. Went thru 20,380 today, but need confirmation tomorrow. 19,678 is next target and it's weak, so it could go right thru to 17,884 and then to 17,063. Keeping an eye on 15,451 as the last support that has to hold. If not, it could be really, really ugly.

19,173 close, so 19,678 is gone too. No confirmation until Monday's close, but I think we're going to get some pretty bad news this weekend. Also, someone is going to do the math and we'll have some terrible numbers based on CA and NY closing.

17,884 is not very far away now - less than 1,300 pts, which can go in 1/2 a day. And that's a weak support level. 17,063 is only 800 below that and it's also a weak support level. The market can take both out in one session ans still have more to go.

15,451 is a strong support level and we're now 3,700 pts away. That could be hit in two days if we have bad enough news over the weekend.

As a thought, for those who think we've bottomed here, sell your stocks and replace them with call options. Why?

1. With call options, you can only lose as much as you pay for the option.

2. If the stock rallies, your call option will go up. And you can exit anytime - you don't have to hold until expiration.

3. If you do a call spread, you lower the cost of the call option, which limits your loss. You also limit your profit, but you can always buy another call option with higher strikes if the stock rallies.

Here's an example - I'm using TSLA, since a lot of people played this one.

One month ago, lets say you had 100 shares of TSLA. The stock closed at $899.41 or you had $89,941 of equity. If you bought 1 contract of TSLA April 850 call options right before the market closed and sold your 100 shares, you'd have $89,941 in cash and you paid $132.70/option or $13,270 for 1 contract of 100 calls. Your net is $76,671 in your pocket and you control 100 shares of TSLA. Fast forward to today.

TSLA closed at $427.53 and the call option closed at $1.60. If you didn't buy the call and just had the stock, you would have $42,753 in equity or a $47,188 haircut - ouch. If you had the option, you'd have $76,671 in your pocket and $160 in options or $76,831. Your loss would be $13,270 - $160 or $13,110. Much better than $47,188.

Or, you could've bought a call spread. Buy the April 850 call and sell the April 1000 call. This would give you the right to buy 100 shares of TSLA at 850 and you'd be forced to sell the stock for 1000 (if it got that high). Back on 2/20/20, the April 1000 call was 74.25. So your income would be $7,425. You paid $13,270 for the 850's, so your net would be $5,845. You would've sold the stock and bought the spread. You'd have $84,096 in your pocket and you'd have a 150 pt spread. Today, the spread is worth $0.70 or $70. So you could sell it and have $84,166 in your pocket. Better than owning the stock ($47,188) or even owning only the 850 call ($76,831). And the kicker is if the stock ran to 1000, your option would be worth 150 x 100 = $15,000. You paid $5,845, so you'd net $9,155. Add that to $84,166 and you have $93,321. Not as good as owning the stock itself, where you'd have $10,000, but you would've saved yourself a big headache by riding the stock down to $471.88.

This is why I do a lot of call spreads. You can also do this with put spreads. And as a plus, you can also do call spreads with different expiration dates or you can buy 10 of one and sell 5, so you're longer. You can do the same the other way around, but 5 and sell 10, but your losses are not longer limited.

Well I think the Corona virus is just a blip on the radar and will be ancient history in a couple of months, the price war over oil that the Saudis have started really can only help the economy with lower prices...On top of all this the fed has cut aggressively and plans more cuts, this is also bullish for the economy...the jobs report that just came out shows stronger than expected job growth, also bullish for the economy...on top of all this we have new trade agreements with just about everybody in the free world and beyond....I think the market is going to come roaring back with the strength of a runaway locomotive....I'm thinking this will happen when the corona virus has run itself to ground...Another month or so of extreme volatility, and an excellent buying opportunity...People saw great returns lately and were a little nervous about valuations, so at the first sign of trouble they all sold out and retreated to bonds...when everybody realizes that the market has further to run, it will be off to the races again....stand by...

Bingo!

Interestingly, the most prominent supermarket in Bagshot is currently completely out-of-stock of both kitchen roll and toilet paper.

And then people use to laugh at preppers.

I am thinking of a company that uses the waste product of corn harvesting..the cob;Sorted by size,texture,and color.

(I would expect the largest sizes to be scooped up(pardon the pun) by lawyers and politicians as they will need them for both ends of the procedure)

Red for the standard fare,white for the meticulous,and premium blue for the upper crust high class blue-nose buyers.

What goes in one end must exit the other.

There will always be a demand for wiping material...and some large stock holders will presently use more than average.

I agree with the big picture assessment that corrections are healthy for the general economy, the analogy of flushing out the weakness rings true.

My employer, a multinational company serving manufacturing industries in energy, life sciences, automotive, consumer products, etc. is preparing for recession sometime this year because management saw indicators last year that it is coming. At least in manufacturing.

The CV market reaction and economic hit to the services and related industries is going to highlight the weakness inherent in a US economy that is more and more concentrated in services instead of producing goods.

I also think the DOW and other stock indices are not truly indicative of the strength of the US economy as it affects most individuals. Big publicly traded companies that sway the markets are not as geographically bound as they once were and the investors buying and selling enough to have an impact are not the vast majority of people working for a living and investing in retirement accounts and mutual funds.

This is very interesting. I wonder what your management saw that made them believe a recession was coming this year? I'll tell you something - those who saw it are amazing. They see things clearly. They see things for what they are, not what others say. They could plan for a downturn, far, far, far sooner than anyone else.

I agree with you regarding the danger of us being more of a service economy vs manufacturing. As brick and mortar retail keeps going under, more and more restaurants are popping up. Margins are super thin and only the ones with huge volume (dollars not customers) are doing well. So a little hiccup can take out all the ones barely making it, which are a lot.

Regarding the stock market, I think the most dangerous thing we've done is to create ETF's. SPY, QQQ and DIA are the big guns. When they go up, all is good in the world. When they go down, it's really bad. When someone sells 100 shares of QQQ, they're also selling shares of MSFT (11), AAPL(11), GOOG(8) and AMZN(8) (plus shares of the rest of the QQQ holdings). And of course we have the double and triple ETF's - stock market on steroids. And at last the craziness like TVIX - could've made a fortune in the last few weeks on this one.

Boy, I'd love to be a fly on the wall at your executive level meetings!

..."According to CDC, this year's flu season has led to at least 16 million medical visits and 350,000 hospitalizations. CDC found that the percentage of outpatient visits for influenza-like illness decreased to 5.3% in the week ending on Feb. 29, down from 5.5% the previous week. The national baseline for those visits is 2.4%.

CDC estimated that there have been 20,000 deaths related to the flu so far this season."...

https://www.advisory.com/daily-briefing/2020/03/10/flu-update

Corona virus = 41 deaths 1731 cases....

https://www.worldometers.info/coronavirus/#countries

The media obsession with this virus IS the problem.

And why is that?,...other then influencing this coming November.

They're still praying for a recession. It's their only hope for November.

their ‘Hope and Change’ didn’t work so good the last time,... but what the heck.... ‘bless their little hearts’ for trying.

I hope we get a big change in government this year. A lot of Congressmen need to be thrown out. A story broke this morning, regarding some Senators who used inside information to sell stocks (and some went short) well before the market crashed. They were privy to information they received from meetings - stuff that's not available to the public. That's insider trading and it's illegal. We need to make it public and then get them out of office.

I told my better half this morning that I was very upset to hear about this, but we all know it happens. My hope was to hear our POTUS say something - anything! How about "We're deeply upset to hear that some people in congress may have used insider information to profit from the great losses in the stock market and their actions may have helped fuel the losses. I have put XXX in charge of this and I will have a report back to you after they finish their investigation. If we find this to be true, we will demand their resignation."

That's what I would've liked to hear. Instead, nothing! Now that's a shame.

All career politicians ... from both sides of the aisle.

You're absolutely correct! Both sides of the aisle and it's disgusting!

I'm not an expert in this field - not even close. The media has this as their top story on every newscast I've seen. I understand that this is a big deal for them, because they can get people to react. If they want to instill fear, they will. Or confidence - they can do that too.

What it's done to me.

1. I didn't go to my office yesterday. It was raining here and on the cool side. I was feeling worn out after driving for hours with our "rain" traffic. LA drivers don't know how to drive in the rain! It was around 1:00 pm and my office closes at 5:00. I sent an email to my team, letting them know that I wasn't coming in. Normally, I'd be there, but I was feeling tired and the other day, someone had red eyes and coughing/sneezing. I that was enough to push me to work from home.

2. Last Saturday, we had to go to Walmart to pick up a microwave for my condo. I was in the microwave aisle, putting the microwave in the cart, when a Chinese lady walked by, then 10 feet from us, she sneezed - of course she didn't cover her nose! I was super pissed and my first instinct was to tell her off. My better half grabbed my arm and pulled me to the next aisle away from her. She told me the most important thing is to keep away from that area. We went around that area, then straight to the self checkout lane, so we could get out fast. The person at the door wanted to see our receipt and I just walked right by - who knows if that person had CV, but I didn't want to take a chance.

3. Today, I was at a fast food place when this guy coughed without covering his mouth. I gave him a very evil stare and he walked away quickly. When he was waiting for his food, I heard him cough a few more times - he wasn't facing me and he was over 10 feet away.

I've been watching the news (mostly CNBC and Bloomberg, with a little of the local evening news). I don't like what I've seen and yes, they have worried me.

My lungs are the weak spot in my body. I've had some pretty bad illnesses that stemmed from my lungs. When I'm healthy, I don't have any issues - no shortness of breath or lack of oxygen - unless I'm out of shape. When I get sick, my lungs usually take the brunt. So I'm concerned that CV could do some damage to me or maybe even kill me! I'm at an age where I feel that my body isn't as strong as it was a few years ago. I'm slowing down and I'm injuring myself (torn muscles, tendons, etc) much more frequently.

When I heard that CV is here in my town, I got worried. I don't think it'll hurt to play it safe, so that's what I'm going to do.

We'll see how this pandemic either grows or peters out. My guess is that it's going to get much worse, before it gets better.

Be safe everyone!

Hi Solar,

Tonight, I just read that we have 6,300 cases and 108 deaths. This isn't even a week since your post. New York alone has 1300 cases.

It's accelerating fast and we're not even testing the masses yet.

Today, the WH doc said something like it'll hopefully be one month until it peaks and we start seeing fewer new cases.

I don't know what to think. I know the economy is going to take a huge beating. A lot of small mom and pop restaurants are going to go under. I don't think we'll be able to avoid a recession and it may be a bad one. Not as bad as the 2008-09 recession, but it might be pretty severe. Job losses may be much more than expected. We may also find that many of us can work from home (in the future) vs going to an office. That'll cut out going out to lunch, car repairs and gas (less driving) or even getting rid of one of the family cars, dry cleaner bills, buying nicer clothes, gals and their purses - many buy expensive purses to show off at work - and even stuff like shaving cream, razors, hair gel, makeup, deodorant, etc.

Give it some thought and let me know what you think.

Update from yesterday, when I originally posted.

1. Travel to Europe (except UK) will be banned starting Friday at midnight. 30 day ban!

2. Airline stocks already took a beating and more will be coming tomorrow.

3. Stock market got beaten up pretty badly today and futures are down another 1,094 to 22,481.

4. Tom Hanks and his wife have CV.

5. The POTUS speech was much different from any I've seen from him. Someone said that maybe he has CV. I don't know ... maybe. Or, someone told him that he needs to present the message without his normal cockiness? Either way, something has changed.

6. Italy is pretty much shut down.

7. Social gathering with large numbers of people are going to be cancelled.

a. NCAA March Madness with no fans???

b. NBA games suspended???

c. Coachella Music Festival postponed until October???

d. The Late Show and Tonight Show will not have an audience???

8. More companies are telling their employees to work from home.

Guys, this CV is for real - it's not a political play or the news media overdoing it. Someone in the city I live in (and work) has CV - it's confirmed! That means it's here - not what I want to hear.

What are we (as a society) willing to give up to contain it? My better half said that everyone should stay home, except for essential people. Food, health, emergency, utilities, etc. She said we need to stay home for 30 days, so we can control CV. What will that do to our economy? Basically go to 0, right?

Whichever way we attack CV, I can't see how we'll avoid a recession. I just hope it's short and not too deep. There's a lot of fat in our economy that needs to be trimmed. A lot of companies on the fringe will go under - this includes some names we don't expect.

Does anybody watch the Late Show or Tonight Show anymore?

Once they went blatantly political, I stopped watching. It become so predictable and trite, it wasn't funny anymore.

I haven't watched either in years. Jay Leno was great, but he retired years ago.

Or SNL,...

they used to rib everyone, not is another arm of the left...

I loved watching SNL when I was a kid. Look at the talent!

Bill Murray

John Belushi

Dan Akroid

Gilda Radner

Larraine Newman

Chevy Chase

Jane Curtain

Garrett Morris

I also loved watching Second City TV. In fact, I liked Second City even better than SNL. On one show, one of the guys was playing Toulouse Latrec (the artist). The guy was walking around on his knees - they put shoes on his knees to make him look like a midget. And John Candy - he seemed like such a nice guy, but boy could he make me laugh. And I thought Catherine O'Hara was so hot!

This Samurai warrior will take on this Kung Flu...

John Belushi!!! What a guy. It would've been fun to party with him!

Could they make a 2020 Animal House??? No way! The kids wouldn't get it. We'd love it, but the younger generation never knew anyone that lived like that.

Late 70's - 80's parties = kids getting drunk/high, doing stupid things, having fun, hanging out (no cell phones or texting) and trying to get lucky (with a decent success rate to boot) and dressing in tee shirts and blue jeans (not the $200 ones with holes in them).

2020 parties = kids texting, kids Snapchatting, kids spending lots of money "dressing to impress", watching videos on their phone and if they're lucky, they "hook up".

Lol,... party with John Belushi... I don’t think so... that was one candle lit at both ends and burn quick...

nope,

• no Animal House II
• no Blazing Saddles
• no History of the World
• no etc...

there are too many over educated, highly focused, thin skinned, Jejune people that’ll gets too easily offended from a movie made in that type of genre be produced... you never hear the end of it...

frankly, it wouldn’t be worth it. I’m just glad, I was able to view it when those movies first came out.

as far as your comment...

Late 70's - 80's parties = kids gettin...

I and/or a lot of my friends resembled that remark.

I love it!

Have a great day and be safe!

Yesterday, I wrote the post about things that happened that day. I see a huge economic "cost" to these things.

1. The airlines are going to have a lot of empty planes sitting idle. Much fewer in plane staff, fewer ground support staff, idle ticket agents, Expedia/Travelocity/Priceline - much less staff needed. The economic cost is going to be very steep.

2. Airline stocks got a nice bounce today, but how long will it last. I think it's an opportunity for those who are long to get out.

3. Stock market got a nice bounce today - thank the POTUS for that! It was a much needed bounce and it was a good one. How will the market's respond next week? It depends on a few factors, but the main thing is that the Dec 2018 lows were supported. Many people will open their 401k statement and get a huge shock. It could cause them to sell everything, just like in 2008.

4. Movie star gets CV. Won't have a big effect on our economy, unless he gets very sick and people get scared.

5. I think the POTUS had a great plan today. Citizens should feel more secure about this - if you think you're sick, there will be a website (by Google) to let you know if you should be tested. Then there's a temporary place in town, where you can be tested for no charge, with results given within 24 hours - and there will be millions of test kits available next week. This is a positive for the nation - we now have a plan of attack. The cost? I have a feeling that it's going to be paid with government funds.

6. Italy being shut down will have an economic effect on us. We won't be able to get good from them - someone posted that the only place we can get swabs is from Italy. Is it correct? I don't know - according to the POTUS, they will have millions next week. What about other things - Italians are known for their beautiful stonework, tiles, etc. And their clothing is fashionable and higher quality, so stores like Saks, Neimans, etc will suffer.

7. Cancelling large social events like concerts, sports, political events, trade shows, large weddings, live tv shows, movie theaters, plays, live shows (Shen Yun, Circus de Soleil etc) and elections. All the people who work these events, the ticket sellers, support staff, food vendors and caterers, transportation/roadies, local hotels, advertisers, gig workers (Lyft and Uber) and airlines/train/bus/taxi workers. That's a lot of jobs lost of postponed. I even heard about jobs that we typically don't think of: the company that makes name tags, posters and banners or the owners of the venue, tee shirt, jacket and hat companies, cup/straw/plastic silverware/napkins manufacturers. Pennants you hang from the window of your car. Goofy big foam hands. Body paint. Lots and lots of people are going to be hurt.

8. Working from home means no business travel, no business lunch, no regular lunch at the sandwich shop, no gas for the car (no commute), not bus or train pass, no Uber or Lyft, no dry cleaning, no shoe shining, less shaving and soap/shampoo/mouthwash/deodorant/hair products, no car wash, no valet parking at work (or monthly lot fees), no bringing in food for the staff, no morning coffee, copiers and printers idle, office lights off, no janitorial services needed, less maintenance needed, etc. Another big economic loss.

And what happens if we start to enjoy working from home? Will this be a permanent shift in the way we work?

What happens if we find that we can get along without going to the movies? We find that Netflix, Roku, etc work better and it saves us a lot of money.

What happens if we get weaned off of sporting events and concerts or live shows. We spend more time with our family and we find that rewarding.

This could create a cultural shift - remember that it takes 21 days to break a habit. Much of these "short term" changes are 30 days or more.

From someone who un-retired himself due to big losses in the stock market (many years ago), I have some advice for those who are heavily invested. You can be bullish - it's a good thing, because stocks go up much more often than not. A rule of thumb is that stocks go down much faster than up. Sometimes the difference is huge - like the last few weeks.

Do you sell now? I don't know - nobody does. And if you sell now, you lock in a smaller profit or even a loss. So, what do you do? Hedge your investment with a put option. For those who don't know about puts, they are options that you buy from someone selling the option (you don't buy or short stock, you just own an option that you bought from someone selling it). The put option gives you the right to force someone to buy one share of stock at a given price (strike) before a set date (expiration). Put options protect against large drops in the stock price.

Here's an example. Let's say you bought MSFT at 139 and you want to protect yourself from taking a loss. The stock is at 153. You buy a May 15, 2020 150 put for 11. Options are sold in blocks of 100 called a contract, so if you own 100 shares of MSFT, you'd buy 1 contract of MSFT May 150 Put options for $1,100. If MSFT stays above 150, your option expires worthless on May 15, 2020. You're okay, because you still own the stock and it only cost you $11. If the market drops 25% and MSFT falls to 115, you have an option that gives you the right to force someone to buy your 100 shares of MSFT for 150/share or $15,000, even though the stock is only worth $11,500. Or, you can sell the option for $35x100 = $3,500 and keep your 100 shares of stock. You'd want to buy more put options at that point to protect your long position in MSFT.

Right now, put options are expensive - insurance is expensive when things are going bad. The VIX will tell you how expensive put options are. Right now, the VIX is over 50 - that's a bad sign for people who are long. Most times the VIX is in the 12-15 range - I've actually seen it in the 8's. When it's in the 8's, the same put options will be $3-4 vs $11.

This is the mistake I made when I was investing heavily. I didn't buy put options - knew I should, but I was greedy and didn't want to pay for the insurance. That was back in early 2000, when stocks were at an all time high. IF I would've, my life would've been much different. It was a very expensive lesson, but I'm okay, because I was young enough (and had enough energy) to start over.

I hope this helps.

Part of the issue is overinflation (bubbles) of the market due to 401K money.There are not enough IPOs and actual corporate assets are not growing fast enough to absorb the 401K money that flows into the market. The 401K money has to be spent and the result is inflated stock prices.

A significant portion of the "corrections" is actually evaporation of the inflated values of the equities back to realistic values. However, as long as the 401K money keeps flowing in, the market level will reinflate. Just know that the "corrections" will repeat at regular intervals, set off by whatever triggers a response and the secret to doing well is timing your exit strategy and your ability to wait for an acceptable level to exit.

I want to disclose something, so everyone knows where I'm coming from. Back on Feb 21st, I started shorting the market, by buying SQQQ options - I actually did a call spread, because I didn't want to allocate that much money to buy a call.

I've been adding more spreads as the market kept dropping. On the rare bounce, I bought back the short end of the spread, then resold the next day or two days later at a higher strike. I had multiplied my number of contracts by 833% from the initial purchase and I decided to close out 44% of my position this morning, keeping the other 56% active, but watching closely. My return has been a very nice 262% profit in a little over three weeks. Why did I close some of my position today? I'm anticipating a bounce here. The NY Fed just threw a ton of money at the short term bond market - similar to what they did in October 2019. The market had a 1000 point bounce, but then has fallen back to near the lows of the day. Just tempting the greedy who are short. I almost reloaded those shorts, but I stopped and appreciated my recent gains - I stopped the greed cycle this time!

The Dec 2018 low of 21,792 is a strong support level and I'm anticipating that the market will hold this level at the close tonight. Even if it doesn't, I think we'll see it hold this level by tomorrow's close - that's still okay from a technical point of view. If it doesn't, that means there's so much weakness that the buyers won't come out and the sellers won't go away - if this happens, we're headed to the strong 15,503 support level.

The problem with the market right now is that people still feel that the market is going to be okay after a few months of downturn. For a bottom to happen, the market needs capitulation. That means that average people are going to panic and tell their 401k plan to "sell everything, before it goes to 0". Remember that back in early 2009! People had enough of the roller coaster and they threw in the towel. March 2009! We may or may not not get there - nobody knows. What I do know is that we're in a bear market now and bear markets respond much different than bull markets - you have to change your strategy. When will I close out all my shorts and start buying? When I see a good solid bounce with follow through (means that I'm not going to buy at the absolute low, which I'm okay with. Or I hear regular people are not longer in the wait and hold mode.

As I wrote last night, it may be a good idea to buy some protection, just in case 21,792 doesn't hold. Another 6,200 pts is going to be painful. If the next bounce doesn't break 23,158, then it's just a bounce and we'll re-test 21,792. Buying protection here or at 23,158 is a good idea.

The DOW closed at 21,200! Tomorrow will be the day we'll confirm the close below 21,792. Futures are -455 as I type this. It doesn't mean anything other than things don't look good, but a lot can happen in 15 hours.

Sorry, about the negative posts I've put out. I'm hoping that my posts may help some of you with your investments. I make no money if you buy puts and nobody here has enough money to move the market. It's just to share some knowledge and experience that I've acquired over many years of trading.

Good luck to everyone and I hope that this CV problem ends quickly with very little impact to our lives and our loved ones.

I would be more concerned by over-leveraged companies. In nearly all sectors of the economy, the vast majority of players in their market sector are now merely ghost-brands under one of a small number of parent companies that control that entire market.

Always seeking to acquire more, despite they are burning money annually. They polish the turd, using the existing BRANDS to acquire more debt.

Apparently, private equity firms are all-too-happy to involve with what should be insolvent companies.

A great example of this is FORTIVE. But they are not alone.

It could be that the supervirus of the world economy is DEBT

We're 23T in debt. That's an insane number. With a low interest rate of 4%, our annual interest will be 840B. 2.5B per day in interest. For all the working people in the US, it comes out to $16.20 per day per person in the US. For a week, that's $113 per person. $490/month per person, just for interest. Or to put it in a different perspective, every working person in the US has an additional $147,663 30 year mortgage to pay off. If we us 4% as the nominal interest rate, we will have to pay $705/mo for 30 years to pay it off. That's $705/mo for each and every working person in the US for 30 years!

Nobody calculates this into our personal budgets, since we don't pay it back - or at least we think we don't. Why are our taxes so high, compared to our parents?

As a society, we're addicted to buying with debt. Don't worry about saving, just pull out the plastic and get it NOW! Because you deserve it for working sooooo hard!

Nothing is going to change until we make a conscious choice to live within our means.

The corona virus may bring on the economic pandemic. It will be a lot worse. The laws of physics apply to the economics as well. You can't get something for nothing. Our government is trying to do this by printing more money. This will eventually cause our money to be worthless-huge inflation! That will cause more misery than the corona virus. A past president told his party that a deficit doesn't matter to get elected. And it has been working. They run up the deficit to stay in office and it has been working. I think the chickens have now come home to roost. The economic disaster that may be coming will be disastrous!! I hope something is done to keep this from happening.

I first heard this a while ago and it shocked me.

40% of the population in the US does not have $400 in savings for an emergency.

Yes, this was a study done by the Fed. Here's the link: https://www.cnbc.com/2018/05/22/fed-survey-40-percent-of-adults-cant-cover-400-emergency-expense.html

The average American household has $7K in credit card debt (as of Dec 2019). The system is definitely broken! https://www.nerdwallet.com/blog/average-credit-card-debt-household/

The system isn't broken, many people tend to be grasshoppers, not ants.

https://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

And they won't change their ways until they feel the pain. If the gubmint bails out those who fail to plan, they'll never change their ways.

The sure don't, but the bad thing is that we, the responsible middle class wind up bailing the system out.

Think about how high taxes are now - and you can bet, they're going higher.

@PAPADOC

I completely understand what you're saying, but this is what I thought when we dumped all that money in to TARP, TALF, etc after the Great Recession. Going back to Econ 101, when debt levels get too high, the FIAT currency will collapse, inflation will go thru the roof and the country will begin defaulting on it's debt. So, why aren't we there yet? $23T is one heck of a lot of money that we owe. Sure, some is held by the Federal Reserve, but still, we have a lot of debt and it's growing very fast, now that CV has hit.

Yesterday, when the Fed kicked in $1.5T to resolve the repo market problem (2nd time since Oct 2019), we dodged a bullet ... or did we. It's not a good thing for banks to be short of funds - it could cause another meltdown like what happened in 2008. So we kick the can down the road instead of fixing the problem. If it weren't for CV, there would've been another Black Swan, because we're fixated on stocks going up, up and up! Big money investors know better. They've seen this happen and they know when to pull out. Back in December 1999, a very good client of mine told me that her family had liquidated all their stocks and they had bought property (blue chip type property). She "recommended" that I do the same. She said that their analysts told them that they should sell all their stocks, so they did. I was young and foolish and I didn't listen. By April 2000, I was so smug - the market had rallied some 25% and I thought her old stodgy analysts had no idea how this "new" economy would work - eyeballs are valuable, not earnings! Well, we know what happened and I un-retired myself. It was so bad that I couldn't talk about it for years!

We have so much debt - so much that I don't see a way we can pay it off. But that's what I felt a decade ago, yet the economy keeps pumping along. Is this the time where we're not going to recover? I don't think so. We'll just keep printing money until someone calls our bluff. Maybe it'll be China - after they get their act together and they find a way to be the economic leader in the world. We're the spoiled consumer, believing that we deserve to be catered to and to have all kinds of "things" - so while we're living this dream, China is chipping away, ready to surpass us. Imagine if they hold so much of our debt, that they can impart control on us.

What do you think is going to happen with our debt, the economy and our future as the world economic powerhouse?

Stodgy business models are not good for the economy. Economy must be reactive to needs. Needs are business opportunities. If you cannot react you will lose.

Great point and I completely agree. The problem I see is that poorly run businesses or old stodgy ones keep getting propped up by a government who doesn't want to see an economic downturn. If we keep those businesses propped up, barely on life support, sucking up valuable assets, then that business is stealing from ones who can put the same assets to better use.

The latest news in my region is that we don't have enough swabs for tests. Because the swabs come from Italy. Is there no one to make the swabs we need here? Or maybe we should cry in our beer because we can't sell pretzels.

The only swabs available are made in Italy? How is that possible??

Today, our POTUS told us that we'll soon have millions of test kits available next week. Something isn't right.

For those who are technical analysis guys, here's something to think about.

1. The saving point for this market was 21,792, which is the Dec 2018 low. We went through it yesterday, but it wasn't confirmed, because of today's action. I see it as the low held, which is what a strong support level should do. Yes, it can go through, but as long as it doesn't get confirmation of the new low, the technicals hold up.

2. The 50% retracement (bounce) from the recent high to recent low is 23,158. We closed at 23,185. Interesting how that point is like a magnet. Since we have a 50% bounce, we'll see how the action looks next week. It depends very heavily on what happens this weekend and if anyone important gets sick or dies. Very morose, but something that needs to be watched closely.

3. December 2018 lows on the S&P = 2351 and Nas =7201 held. Even though we hit a bear market, we didn't breach the Dec 2018 support - not yet.

4. The VIX got super hot 75 range. That's a sign that we're in maximum fear and we bottomed out. We could see it get higher, depending on how bad things are over the weekend. Or, that could be the market bottom.

5. The long Treasuries seem to have had their rates bottom out. The 10 year and 30 year are back to a very weak, but reasonable level.

6. Oil got a nice bounce after today's speech. It had panic selling on Wednesday.

The key to all this is how bad things get in the US. Or if the testing plan doesn't work, because people overrun the Google site slowing it to a snails pace, people go to get tested and there are no test kits, people expect to hear back in 24 hours and they don't or they have to shut down an entire city.

Stay tuned!

Today, I had to do some banking.

The branch I normally go to was closed on Wednesday. No notice on the website, just a sign in the window - Closed due to Emergency.

So, I didn't go yesterday. I called the main office and I was told that they may re-open tomorrow (today). Early today, I went to the website and they're going to be closed until at least next Wednesday.

I went to another branch today. The first thing I noticed is that there was plenty of parking - there never is, so that's odd. The branch is in a medium size shopping center and it seemed like all the stores were open. When I walked in the branch, I was expecting a long line, due to Friday banking. Nope, just two people in front of me. When I asked the teller how busy it was, he said it's been a slow day for Friday. I then asked for cash and he told me that his cash drawer is empty, but I could go the next teller and get cash.

When I was leaving, I spoke to the branch manager - he's a good friend I've known for many years. He told me that they're wiping down everything. The windows at the teller lines have smears from the chemicals they're using for wipe downs. They tellers have to wipe down everything after x number of customers. The metal tray that you pass stuff to the teller and back - that gets wiped down. Funny thing - when I passed checks to the teller, I noticed that the metal tray had a sticky feel - like it's super clean metal. I've never felt that before! They also have to wipe down door handles, seats, desk tops, etc. The directive comes from corporate headquarters.

On the way home, I heard that LAUSD is closing all schools in Los Angeles for 2 weeks. That's 3/4 million kids at home! In the rest of the state, 29 of the 30 largest districts are closing. That put the total at nearly 2M students out of school! Parents will have to stay home or find help to watch their kids - talk about a huge impact that nearly every parent didn't plan for. And you can't send them to the Boys and Girls club, because the kids are suppose to stay out of large groups.

Here's somethings for you to consider if you're an investor.

1. The market has trained us to buy the dip. The market ran way too high and now it has to come back. I saw the same thing in 1997-2000. The psychology is to buy the dip and now that the market is down over 30%, people are still thinking "buy the dip".

2. Too many big people in the business are saying "looking for things to buy now, because stocks are on sale - whatever you do, don't sell now" "the market will be up in a year from now, so don't worry" "if you sell now, you'll regret it, like in Dec 2018"

3. I have only heard this from one professional, which is scary. He said that the market run in 2019 needs to be erased from our minds, because we based the rally on a strong 2020 economy with big corporate earnings gains. We're not getting them this year, so the market highs need to be erased from our idea of the value of a stock AND we're not facing a recession, which the market didn't factor for in 2019.

4. Nobody knows how bad earnings will be. Revenues will be down sharply in Q1 and Q2. When revenues go down, jobs will be lost and the economy will suffer.

5. Our country didn't have money in reserve from the strong economy. The Fed didn't have much ammo in the Fed Funds Rate (1 1/2 pts, which is now 0 after two emergency moves). We now have to go very deeply into debt again, to keep from crashing the economy. We didn't learn our lesson from 2008-09. We have more national debt and very few seem to care.

Here's a very sad outcome of our desire to overspend. We've stolen money from our elderly who did what they were suppose to do. The ones who have a nice nest egg are suppose to be enjoying retirement with a 6% return on SAFE investments like 10 year treasuries. Currently, a 0.85% rate on a $2M portfolio (which is a nice retirement portfolio) gives them $17,000/ year - after taxes, that leaves $14K/yr or $1,166/month (Social Security and FICA were never paid on the employee end on a 401k plan or IRA, so it has to be paid on withdrawals). Add $3K SSI and you have $4,166 per month to live off of. When they were planning for their retirement 20 years or more ago, their financial adviser told them to plan for 6% for a 10 year treasury yield or $120K/yr or $90K after taxes. Add $36K for SSI and that gives you $10K/mo. No worries about travel, giving money to grandkids, helping family members in financial crisis, etc. A drop of 60% from the plan is a life changer!

6. Here's the big one. The stock market rallied based on the strength of the consumer. It's done, PERIOD! Since that was the basis for buying stocks and running the market up, it's now time to re-evaluate and take down revenues and earnings - very sharply!

Back in 2002, I spoke to a good friend who is a financial adviser. He told me to have $2M (in 2002 money) in the bank or investments that earn income, my house paid off, no car loans and no credit card debt when I retire. The plan was to get a 6% return on 10 year treasuries and get $3K per month from SSI. With inflation, my $2M goal is now $3M (in 2020 money) and when I retire, I'm looking at $3.5M in 2030 money. From now until then, I need to find a way to safely pull 6% per year from my retirement account. I don't like it, but the only safe way to get a 6% return now is real estate - not flipping, but rental income. In 10 years, I don't think interest rates will be us and I hope ROA's will be high enough for apartments or rental homes.

I agree. Indiscriminate cash infusions just prolong the inevitable. I also think cash payments to people is wrong too. It's like taking money out of our wallet to give to ourselves. We the People have to pay for it one way or another. Keep the same safety nets in place that are already there. Resist all urges to pile on new entitlements.

It like when they implemented the CCC during the depression, it was a band-aid, that for the most part accomplished nothing with the exception of planting trees.

What actual did pull us out of the depression had nothing to do with it.

this is no different and what it does accomplish is postponing the inevitable.

I see Captain Obvious posted,... lets hear from Captain Obvious has to say and his views... lol

Short squeeze on the horizon....haha

Yup,...

^{I hope I didn’t offend anyone with that answer,.., but I’m sure I did.}

Yesterday and today, I've had a very bad feeling about this. Shutting down an entire state is lunacy. "Flatten the Curve" - I've heard it at the pizza place when I was buying food yesterday. The guy had no idea what it meant - he's just repeating what the media and government are telling him.

H1N1 didn't have this type of response and we survived. In fact, I just read that it had a much greater effect on younger vs older people (fatality rate). And we didn't shut down one state!

Taking precautions is what we need to do. We don't need to be treated as children ... however when I heard the restaurant owner say that he wants the state to shut down, so we'll FTC (Flatten the Curve), then maybe we do need intervention, because the average citizen may be too caught up in watching and believing the news.

I have an interesting theory I'll write about in a minute. It's very upsetting if it's true.

Here's my - nobody cares about our country - rant.

On Friday the 13th, we were given hope. Google site to find out if you should be tested. If you should be tested, they send you to a local place, where you drive up, get swabbed and go home. In 24 hours, you have the results. Over 1 MILLION KITS will be available NEXT WEEK! I heard those words and it gave me a feeling that this wouldn't be so bad.

It's been a week and what happened?

1. No Google site.

2. No huge supply of test kits.

3. No network of drive up test sites.

4. No 24 hour response.

My response to this.

1. Google said that they never agreed to this and it was our POTUS jumping the gun. Maybe so, but WHO CARES! If we're working together to solve this problem, then stop pointing fingers and solve it. How hard would it be for a HUGE company like GOOGLE with their huge engineering staff and huge stockpiles of money to get this done? NO PATRIOTISM! If they really wanted to do it, they would've! If I was given the honor of making a website that would help our country, I'd do it.

2. No huge supply of test kits. We could make these, but our corporations don't want to spend the money. South Korea banded together as a nation and found a solution to roadside testing. Here's a story - we should be able to do the same, but we're not unified, so we can't. https://www.wired.co.uk/article/south-korea-coronavirus

3. The nationwide network of test sites failed to arrive. BUT, some are up an running. CVS, Walgreens, Walmart and Target - great for us, because most of us live pretty close to one of these stores. We just need to ramp up, which I hope will happen soon.

4. 24 hour response isn't happening now. Labcorp and Quest would run the tests and there are lots of these labs in the US. Again, I hope this will happen soon.

Our POTUS is trying to use this as a way to get re-elected. The left is using this to stomp on the administration. Yet, they are in charge of the House and they haven't come up with a solution. The right controls the Senate and they've done nothing either. Oh wait, I can't say they haven't done anything. They've sold a ton of stock and even shorted the market. And they did it based on insider information (insider information is information from a reliable source (CEO or upper management in a company is a good example) that is not available to the public which is used to make a profit).

We'll see some changes in our lives from this day forward. The government will have more control. We're going to shift our desire to be in large groups of people - keep away from big crowds or you can get sick. We're going to eat in more - bad for restaurant owners, but good for our health. We're going to travel abroad less. We're going to become more addicted to video games, binge watching shows, text/facetime/Facebook/Snapchat etc. We're going to hoard more paper products and canned food. Many of us will continue to work from home, reducing the need for office space and the expenses. We'll need fewer cars, less gas, less dry cleaning, fewer office clothes, less eating lunch out, less morning Starbucks, less picking up drive thru dinners, less car maintenance and fewer happy hours. More of us will be working for big corporations. We'll have even fewer small business owners and the desire to own your own business will decrease. We're going to run for safety sooner and more often. We're going to accept (and maybe applaud) more government debt - because we're being sold on the notion that it's necessary for us to survive, however some of us know it's not. The middle class will pay for this again!

I also feel that patriotism has taken a big step backward. We as a nation are not being put as the highest priority; instead, it's about protecting the big organizations - businesses, hospitals, government, etc. They're trying very hard to convince us that this is about America, but I don't see it. The sheep will, but they'll always be the sneaking suspicion that the government did this for their benefit and not ours and questioning how our congressmen could use this to their advantage. The words have been whispered in their ears, however most won't process it, but the seed is planted. Unless there's a big stink, which I would love to see. Time to get the crooked politicians out and bring new ideas on how to solve our problems, because the old guard isn't doing a good job, except for their bank accounts.

Stepping off the soapbox and running to the kitchen for a pepperoni calzone!

if there help to assist, fine, that’s a bonus...

I always found out the only one you can trust is #1 don’t wait for others...

this is going on now with the country leading infectious expert and Facebook Zuckerberg

https://www.facebook.com/facebook/videos/520947868798446/

Our economy and the DOW.

Economically, we're in huge trouble. Unemployment just went up big. Many small business owners will soon lose their business - you can't survive when the gov't tells you to take $0 income for a minimum of 1 month. The effect will snowball! Less people working = less money in the economy. Fewer business owners = less B-B business, more unemployment, less spending (from the owners) and less money for the landlords = less spending from them.

We are in a recession. This is a fact. We don't have data yet, since it's backlooking data, but we're in it. How bad will it be? I think it'll be quite a bit worse than originally thought. A state with an economy that would be 5th largest in the world if it were it's own country - shut down! State expenses don't stop. Revenue goes to near $0. We're going backward fast!

What will be the cost to someone in the US? $15K? I think more than that. $30K - sounds more like it. $10T, just for us, the people. What about business losses - corporations? Another $3T. Then there's the municipalities and states. Another $5T. $18T loss for the federal government to absorb. And we're already $23T in debt!

This is why the stock market has taken a beating. The DOW lost the Dec 2018 lows a while ago. The S&P lost it today 2,351, but the test will be Monday - if it confirms, then we're headed lower. The Nasdaq hasn't hit the 6,192 level yet, but it's headed there. Where will it stop? The DOW has support at 15.4K. After that, it's quite a way down. Will it drop to Mar 2009 levels. I hope not. Technically, it shouldn't.

Nasdaq has support at 4,266, then the next level is 2,810 And finally 1,268 but again I don't think it'll drop that far.

Capitulation is when the traders just give up. They throw in the towel. QUIT! I GIVE UP! SELL EVERYTHING! Mar 2009 was capitulation - it was actually a retest of the 2008 lows and it held up. Right now, too many are buying the dip. They trade on the premise of a few things, which no longer matter.

1. Buy the dip has worked for the past 11 years. My answer: Yes, that was in a bull market. Buy the dip doesn't work in a bear market, which is where we're at.

2. The market will be higher 6 or 12 months from now. My answer: How do you know? Their premise relies on a short CV cycle. What are you using for earnings? How can you calculate earnings - we're in unknown territory.

3. The high fliers haven't come down enough. A bear market takes everything down with it. The high fliers hold out the longest, but when they go, they go fast and hard. Facebook, Amazon, Google, Apple, Microsoft, Netflix, etc. The Nasdaq hasn't dropped as much and hasn't taken out the Dec 2018 lows. It has to for the bear market to end.

4. Fear isn't high enough for the market. I can't believe it hasn't, but traders aren't scared and greed is controlling them. Greed is from them not wanting to miss out on the next rally. Instead, they should be fearful - what if the market drops another 30%? Can I handle it? or 40%?

5. As I watch the ticker, I still see too many stocks above 100/share. I remember watching the ticker in 2008/09 and there were almost no stocks over 100/share. Most were single digit with some double digit.

6. Companies are talking patriotism, but their actions are not. They're still too self serving. Google blew the CV website they promised. Why? How hard would it be for a company as big as Google to have asked their web developers to build a site and to get it up and running? How hard would it be to get enough servers to handle the traffic? I don't think it would've been that hard for a huge company like Google. So, why didn't they do it? Back in WWII, I think any large company would've jumped at the opportunity to help our country. Now, we have these tech companies who are so selfish and don't understand the full meaning of patriotism! This one really bothered me.

With all these issues, we aren't near a bottom. I've been doing this a very long time and I learned a very, very, very hard lesson back in 2000. What's happening now is similar to 2000 - except it's happening much faster than 20 years ago. The lesson I learned is that you can't be too optimistic when you're in a bear market. Right now, I see too much optimism, so it's too early to buy.

One final thought. If you want to get in, be patient. We don't know where the bottom is, so watch for the market to bounce off a level. It'll stay above that low for a while, then it'll retest the low. At that point, you can take a chance and start buying, but be ready to sell if the level doesn't hold - wait for the next time and repeat.

it would have been worse, is if this happened 4 years ago, with poor leadership, Economy in the basement and getting worse, and reaction time delay for the fear of insulting other country’s while simultaneously pandering to them.

It would've definitely been different!

I don't think you can talk the market down anymore....we get you're short, but really....enough is enough...

IMO,... The difference is, the value is still there... the price may not reflect it.

By all means, the value is still there. The big tech companies are not going out of business. AAPL, MSFT, GOOG, AMZN, FB - they have a great future. And they're floating on cash.

We just don't have a grasp on what will happen to the economy and earnings. Until we do, this market is going to be a roller coaster.

Hi Solar,

I can't do anything to move the market. I'm just trying to help everyone make a good decision. I re-read my post and there are facts and also my opinions about the market. I know it's hard to read, but isn't it better to know?

You can stay long, but if you're in the market pretty heavily, just get some insurance (buy puts) or hedge so you don't get hurt too badly.

Most times, capitulation happens as the market bottoms or when it does a double bottom. It's just how our mind works.

The cure is worst than the disease.

Where is the sanity in all this? Like my co-worker said, "It's like the guy standing on his front lawn with a gas can in his hand watching his house burn stating, "That'll take care of the bedbugs."

In my opinion, the biggest problem with CORVID-19 is it contingency level. Where some many are susceptible and catch it in a very short time.

Wisconsin is having almost a total lock down with the exception of going to get only needed items.

get this over with quickly.

I was told that San Francisco is locked down. Similar to what you said about Wisconsin. I was told that you could get arrested if you're caught on the street and not going to something necessary (food, health, gas, bank, etc).

LA isn't there yet, but the streets have very little traffic.

It's 6:22 pm now and a car hasn't passed my house in 30-40 seconds. This time of day, normally I have trouble crossing the street!

100% correct!

There is no sanity! NONE!

Today, I heard something that made a lot of sense. He said that we need to have ventilators/respirators, masks, gloves, etc. Keep the staff safe and give people a place to go if they get sick. His advice was to force the manufacturers to modify their assembly lines to make the machines and supplies in huge quantities. Then send everyone (except the most susceptible) back to work. Keep up our social distancing, but go eat at the restaurants, see movies, go to a ball game. Everyone wear a mask (if you're sick, you won't spread it). Let everything get back to normal as fast as we can.

He recommended that we do this ASAP and within 2 - 3 weeks, we could be back to a semi-functioning country.

I like his idea!