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Gordo

Just curious, anyone have a plan, or preps for global pandemic?

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16 minutes ago, TomBAvoider said:

Halleluja! It's over! Unemployment is massively down, the economy is recovering like a rocket... or at least we can hope so

Not so fast, Tom :)

The Unseen Unemployed: Why Skyrocketing Unemployment Numbers Are Incomplete

My guess is, there is an expected uptick as states reopen slowly, but many more than before are just not looking for work, thus are not counted among the "unemployed" in the official stats.

Edited by Ron Put

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WHO advises public to wear face masks

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People over 60 or with health issues should wear a medical-grade mask when they are out and cannot socially distance, according to new guidance from the World Health Organization, while all others should wear a three-layer fabric mask.

The announcement on Friday marks a significant change of stance by the WHO..

[...] Until now the global body has been reluctant to advocate the wearing of face coverings by the public because of limited evidence that they offer protection. There were also fears of a rush on masks leading to shortages of medical-grade versions for health workers.

 

Better late than never,  but this advice should have been given months ago  and made a core element of government Covid-19 policy.

 

 

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image.png.121ff0616dc0e25fda081dd5520a4c26.png

Europe is looking much better than everyone else right now...

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2 hours ago, Gordo said:

image.png.121ff0616dc0e25fda081dd5520a4c26.png

Europe is looking much better than everyone else right now...

If Trump is re-elected, I will move to Amsterdam with my daughter. 

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The stock market is making absolutely no sense. I'm glad I pulled out of it completely last November.

The numbers don't correlate with the rest of the economy which indicates it's artificially propped by the Fed and certain banks. It's a great time to be a multi-billionaire!

 

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18 hours ago, TomBAvoider said:

Halleluja! It's over! Unemployment is massively down, the economy is recovering like a rocket... or at least we can hope so

Yes.

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11 minutes ago, Annik said:

The stock market is making absolutely no sense. I'm glad I pulled out of it completely last November.

The numbers don't correlate with the rest of the economy which indicates it's artificially propped by the Fed and certain banks. It's a great time to be a multi-billionaire!

 

The Friday employment report was a positive surprise, which added fuel to the speculative fire, market has already priced in a V shaped recovery and things are improving by many measures.  There is solid evidence of a surge in speculation and new accounts over the last couple of months, and a surge in retail trading (partly due to the elimination of commissions by pretty much every broker).  So there has been a buying frenzy by the most naive investors, and they have been rewarded (they are even buying bankrupt Hertz, which is a stock that is almost guaranteed to go to zero before end of year when they reorganize). At the same time many of the most experienced have been sounding alarms like Warren Buffet and Jeremy Grantham.  I suspect this won't end well for retail investors, but who knows, the market can remain irrational for years.  The wave of bankruptcies is just starting really: Commercial Chapter 11s Jump 48% in May Y/Y

I also noticed that on Thursday the NASDAQ was down on its biggest volume in over 5 years, that might be some kind of red flag, but then it was also off the the races again the very next day, so...

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1 hour ago, Annik said:

The stock market is making absolutely no sense.

We touched on this topic earlier in this thread. I'll observe again that the state of the stock market often does not reflect the current state of the broader economy. I'm not saying we won't see a serious correction, especially if there is a big second wave in the fall. But there is a pretty good argument to be made that with the fiscal and monetary policies in place, this may simply be another case by which the system is rigged so the rich (capital owners) getting richer and the poor (labor class & small business owners) getting poorer.

Part of it is that the stock market and the major indices are dominated by large companies (esp tech) and they are forward looking, with 90% of the value of stocks coming from the discounted future corporate earnings beyond the one year time frame. Equity investors believe that we will get past this and strong companies will weather this downturn, with many of them (e.g. Amazon or Costco) gaining market share when mom and pop stores go belly up.

Here is Jim Cramer making this argument better than I can. It doesn't seem fair or healthy for our society, but contrary to your assessment Annik, it does make some sense.

--Dean

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For awhile now - many years - of observing the market, I've been developing a theory that seems extremely nihilistic and perhaps cynical to the max, and I hope I'm wrong... but it has a kind of irresistable strength. I really hope I'm wrong - but here it goes: the stock market completely disconnected from the underlying equity. In theory, the earnings and the future potential of a company are reflected in the stock. But for years and years we've seen outrageous P/E that didn't make any sense and so people spoke of "overvalued" and so on, but the corrections never seemed to come. What if the new generation of stock market buyers, or simply the new reality of the stock market was that the stock is simply treated as a an abstract symbol, say AMZN, and stock market investors are completely uninterested in what it stands for and anything connected to it - they just note that the symbol AMZN seems to have momentum, so they pile in, exactly as they might put money on "RED" at a roulette table... nobody asks what RED represents, it's just somewhere you put your chips on.

Now, that would explain why people will pile into Hertz that's bankrupt - because they don't ask what the symbol representing Hertz stands for or the underlying equity - to them it's just "RED" or "GREEN" or whatnot and they'll pile in for any random reason. Essentially, the market becomes nothing more than a lottery. Doubtlessly that has been true for many investors from the beginning of the stock market, but large institutional investors still had "rational" principles and invested based on their best understanding of the equity and its future potential, so it was a "rational" bet. And those large investors therefore due to their purchasing power imposed a kind of discipline on the market.

But what if those large investors got overwhelmed by a huge number of "lottery investors" as happens during irrational market bubbles - like in the 1920's and late 1990's - and the discipline gets drowned under huge inflows of irrational capital? You get a market that makes "no sense". 

Now, what if as people look to put their capital to work, more and more everyone is piling in and so now the institutional investors and their discipline are permanently overwhelmed in effect? You'd have the market transition fully to the "lottery market" - at which point it makes no sense to ask for rational answers as to why a given stock or indeed the whole stock market moves up or down - it's a lottery. Nobody cares if Hertz is bankrupt anymore than someone would ask if "RED" is bankrupt on the roulette table. It's just where you happen to put your bet, like picking a number on a lottery ticket - one is as good as the next one.

I suppose this must be too cynical - at least I hope so. 

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52 minutes ago, TomBAvoider said:

You'd have the market transition fully to the "lottery market" - at which point it makes no sense to ask for rational answers as to why a given stock or indeed the whole stock market moves up or down - it's a lottery. 

This is clearly off-topic, but I've long had a similar perspective and so will chime in.

I said above that the accepted fundamental theory of stock valuation involves summing up the company's future discounted earnings. But why should future discounted earnings be valuable to a would-be investor, particularly when it comes to growth stocks which almost never pay out their earnings, i.e. in the form of dividends. Case in point, Amazon which has been losing money for most of its history and has never paid a dividend but instead plows its profits back into growing the company.

Stock buy-backs have been popular lately, and explain (to a point) why stock prices have risen over the last few years - fewer shares available in the face of a fixed demand means the stock price will go up. But that doesn't explain why there is a demand in the first place.

As a stock investor, you own a tiny share of the company, and therefore might get something back if the company was ever liquidated. But even that is unlikely since in the very rare event of a liquidation, stockholders are very far down in the hierarchy of creditors. 

Once a company issues stock (and gets the proceeds), its relationship and obligation to shareholders also seems very tenuous. What does Amazon care about its own stock price? Jeff Bezos certainly does care given his large holding in his own company's stock. So there is that connection and stock options for company employees is a similar way that the interests of shareholders and employees/managers can be aligned. But this doesn't explain why the pieces of paper have value in the first place. Heck, you don't even seem to get any paper these days (as far as I can tell)!

Like Moderna recently with their hopeful vaccine results, when things go well and the stock price goes up, the company can issue more stock and raise more capital. But new stock issuance is a very rare event. 

Given how tenuous these links seem to be, the stock market has always seemed to me to be more like a ponzi scheme than a lottery. You buy stock because you believe you'll be able to sell it down the road to someone who will pay more for it, based loosely on how well the company seems to be doing. If so, it's a ponzi scheme that has been going for over 400 years since the Dutch East India Company issued the first shares. I figure it will probably continue for a least a few more decades until we are all dead.

Given the shaky underpinning for stock valuation, maybe Bitcoin doesn't seem so bad Tom? 😉

--Dean

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Oof, bitcoin is such a complicated subject, I'd rather not get into it - and as it's 100% off topic anyway, I'm staying away from it. But yes, the Ponzi scheme seems to have been the model for the stockmarket, but I always thought that it was when the market was still "rational" - how's that for cynicism... the rational market, i.e. the best case scenario is a Ponzi scheme - my thesis is that it's deteriorated since then into outright lottery. But I'm going to desist from going into this tangent as it's way OT.

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I agree with a lot of the stock market sentiments above, including the temporary stimulus package effect and the fact that the rally is driven by a handful of large companies.  But I also think it will end sooner rather than later since there is not enough dumb money to keep it afloat for too long.

My guess is that the era of index funds is coming to an end and (good) money managers will start providing value again.  Especially those who know distressed debt.

I also wish that a mod would move this thread to the chitchat area....

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19 hours ago, Gordo said:

The Friday employment report was a positive surprise, which added fuel to the speculative fire, market has already priced in a V shaped recovery and things are improving by many measures.  There is solid evidence of a surge in speculation and new accounts over the last couple of months, and a surge in retail trading (partly due to the elimination of commissions by pretty much every broker).  So there has been a buying frenzy by the most naive investors, and they have been rewarded (they are even buying bankrupt Hertz, which is a stock that is almost guaranteed to go to zero before end of year when they reorganize). At the same time many of the most experienced have been sounding alarms like Warren Buffet and Jeremy Grantham.  I suspect this won't end well for retail investors, but who knows, the market can remain irrational for years.  The wave of bankruptcies is just starting really: Commercial Chapter 11s Jump 48% in May Y/Y

I also noticed that on Thursday the NASDAQ was down on its biggest volume in over 5 years, that might be some kind of red flag, but then it was also off the the races again the very next day, so...

It's very concerning. Also, we have a President who has repeatedly used bankruptcy as a form of debt resolution. Who will pick up the tab for the U.S.?

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On 6/5/2020 at 9:34 PM, Ron Put said:

mccoy, I guess fear blinds and makes some perceive threats and data irrationally.  Just as some were obsessed with the most absurd Covid-19 death predictions, now some fail to understand that the excess death data is still preliminary and subject to adjustment, but more importantly, that ER visits for heart attack, strokes and cancer treatments are down close to 50%.  Normally, during stressful times, like earthquakes or 9/11, heart attacks and strokes increase significantly.  During the Covid-19 period, those are dramatically down, while deaths at home are significantly increased.  It will take a while to sort it out and publish real numbers (and I assume there will be politically driven pressure as to how they are presented).  But it seems likely that the virus hysteria has resulted in a significant number of deaths from other causes, although it is unclear if it will affect the total excess death for the year.  To put it in perspective, over 100,000 Italians die from heart attacks each year, a much higher percentage of the population than in France, for example.

Fear blinds and makes some perceive data irrationally, but I might say the same for obstinacy, or pervicacy, or however we want to call it.

The negative all cause death data which suggest missed accidents, strokes and so on are evident in some areas with no serious outbreaks and are up to -10%. But in the area where the outbreak has been serious you might have a +200% peak, 200-10% = +190%. This aspect has been evaluated in the official Istat study.

I'll stop it here because unfortunately must optimize time, I simply agree to disagree.

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Here is another data point in the seemingly never-ending debate over hydroxychloroquine as a treatment for covid-19. It is a randomized trial out of the UK which was stopped short a couple days ago. From the preliminary report (pdf) on the results:

‘We have concluded that there is no beneficial effect of hydroxychloroquine in patients hospitalised with COVID-19. We have therefore decided to stop enrolling participants to the hydroxychloroquine arm of the RECOVERY trial with immediate effect. We are now releasing the preliminary results as they have important implications for patient care and public health.

‘A total of 1542 patients were randomised to hydroxychloroquine and compared with 3132 patients randomised to usual care alone. There was no significant difference in the primary endpoint of 28-day mortality (25.7% hydroxychloroquine vs. 23.5% usual care; hazard ratio 1.11 [95% confidence interval 0.98-1.26]; p=0.10). There was also no evidence of beneficial effects on hospital stay duration or other outcomes.

‘These data convincingly rule out any meaningful mortality benefit of hydroxychloroquine in patients hospitalised with COVID-19. Full results will be made available as soon as possible.

This would seem to put to rest the use of hydroxychloroquine for covid-19 treatment, but who knows. I've said that before...

--Dean

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Detailed vaccine update:

Scientists are struggling to quickly find a vaccine that can vanquish coronavirus

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There are at least 135 vaccines in development — a number that has has doubled since late March. One of the most promising comes from Inovio Pharmaceuticals of San Diego, which is wrapping up a small safety trial in humans. But the coronavirus won’t be vanquished quickly.

[...] “I really think it is going to be another year, if not longer, before I can get vaccine at my pharmacy or doctor’s office,” said Dr. Davey Smith, chief of infectious diseases at UC San Diego

 

 

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In the latest MedCram vid he summarizes the latest infection rates, the US one whole is only going down slightly, with California, Texas, and Florida all seeing increases in infections.  He also noted that Australia is heading into Winter and yet there is no uptick in cases there so that's a good sign that maybe there won't be a seasonal spike. 

 

 

I am seeing the same thing Todd mentioned above, many people seem to be throwing in the towel on caution, in my area there are a lot of restaurants with outdoor seating and they were all PACKED yesterday, no one wearing masks, tables close together but outdoors so maybe risk is not that high.  They also announced schools are officially going to reopen as of July 1.  Casinos in Vegas have reopened.  I wonder if the prevailing idea has actually shifted to "lets do herd immunity" even though no officials have stated this.

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So there's a long list of micronutrients which supposedly are helpful with CV-19, including zinc, selenium, possibly vit. D - now you can add vitamin K (particularly K2):

https://www.theguardian.com/science/2020/jun/05/vitamin-k-could-help-fight-coronavirus-study-suggests

"Researchers studying patients who were admitted to the Canisius Wilhelmina hospital in the Dutch city of Nijmegen have extolled the benefits of vitamin K after discovering a link between deficiency and the worst coronavirus outcomes."

"The research, undertaken in partnership with the Cardiovascular Research Institute Maastricht, one of Europe’s largest heart and vascular research institutes, studied 134 patients hospitalised for Covid-19 between 12 March and 11 April, alongside a control group of 184 age-matched patients who did not have the disease.

Jona Walk, a second researcher on the study, which was submitted for peer review on Friday, said: “We want to take very sick Covid-19 patients and randomise so that they get a placebo or vitamin K, which is very safe to use in the general population. We want to give vitamin K in a significantly high enough dose that we really will activate [the protein] that is so important for protecting the lungs, and check if it is safe.”"

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Regarding the stock market - at every bubble peak there is this popular idea of a "this is the new normal".  There is a famous quote from 1929 near the bubble peak from Yale economist Irving Fisher who jubilantly told the New York Times “Stock prices have reached what looks like a permanently high plateau”.  And yet there is a clear history of cyclicality of valuations.  The popular myth today is that the Fed can prevent stocks from declining.  I think this is sheer fantasy, and we will revert to the mean with regard to valuations, but no one can say when that will happen.  If I had to guess, I think what is going to happen is that Biden will win the presidency, and shortly thereafter the market will begin a real bear phase - this will be mostly because of a change in sentiment/psychology and the realization that the enormous debt bubble will be a drag on earnings, and the rise in populist demands / socialistic values will also be a drag on corporate earnings.  I don't actually believe any particular president has much bearing on economic fundamentals (also congress and not the president has all the real power when it comes to influencing the economy - creating all laws, tax policy, budgets, deficits, etc). 

We are in a recession right now, but it's a weird one in terms of comparison basis to other recessions just because of how fast and furiously we plunged, and how fast and furious the expected rebound is likely to be.

Hertz is a good example to look at because it represents something that has been going on for years, massive corporate balance sheet leverage (debt) which is and has been a popular scheme used by insiders and a certain group of investors to "cash out" (sometimes in the form of corporate stock buybacks).  If you are holding stock in a company that has a lot of debt and not a lot of earnings, you are a "bag-holder" already at this point.  When some high profile bankruptcies hit and shareholders are wiped out, I think more and more people will start to think about the risk of their investments.  Eventually I think people will also consider what it means to own stock - i.e. you are part owner of a real business, and that business has to return money to your pocket or grow in some real tangible way, and shouldn't be evaluated differently from buying a local barber shop or restaurant.  If Amazon were to pay out all their earnings as dividends, you would be dead before you even got your initial investment back (yet alone some kind of return on investment).  

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“Stock prices have reached what looks like a permanently high plateau”.  And yet there is a clear history of cyclicality of valuations. 

Sure, there's a clear history of cyclicality of valuations, and what goes up must come down and the laws of gravity (and economics) still apply. We all know this. But while that's a famous quote from Irving Fisher, there's an even more famous quote from Keynes, and it has the additional advantage of being true: “"The market can stay irrational longer than you can stay solvent." So yeah, we know it's irrational and we know a correction is coming... but when? Probably longer than you can hold out betting against the irrationality of the market :)... that's why shorting has been going out of fashion and is almost extinct despite crazy valuations - even if you are right, and a given stock is a travesty, it can still hold on longer than your short... as the history of many famous shorts shows. The same for shorting the market. Now, you could choose not to short, just to step out altogether, but then you can miss out more on the irrational highs compared to the brief decline. That's the secret behind Buffett's always staying in. Or more cynically, why most "investing" these days is momentum investing. 

I remember back in the day how AMZN was analyzed according to classical investing principles and very distinguished analysts were proving 10 ways to Sunday that AMZN is insanely overvalued, and in fact, given how it's expanding expenses with non-existent or tiny profits they thought AMZN was going bankrupt any second - so time and again folks would go big into shorting AMZN... that was back in the 90's... and those folks lost their shirts (and shorts!) - and here we are today and AMZN is flying higher than ever. How long has it been - over 20 years. Are you sure you wanna bet against AMZN today, no matter how overvalued you think it is? In good markets, and bad markets (COVID-19 market), AMZN just keeps flying... maybe, to modify Fisher's dictum “AMZN price has reached what looks like a permanently high plateau”. So, is it coming down? And if you think it is, are you betting on it? Everything looks different once you put your money on the table :)... It reminds me of the Mike Tyson wise observation: "Everyone has a plan until they get punched in the mouth" :)

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The bloodtype and CV-19 drum is getting beat louder. This time, it's not blood type affecting severity of the disease, but susceptability in the first place:

https://www.bloomberg.com/news/articles/2020-06-08/23andme-provides-more-evidence-that-blood-type-plays-role-in-virus

"Research published last week prior to peer review suggested blood type may play a role in the severity of patients’ reactions to SARS-CoV-2. That study looked at the genes of more than 1,600 patients in Italy and Spain who experienced respiratory failure and found that having type A blood was linked to a 50% increase in the likelihood a patient would require a ventilator. An earlier Chinese study turned up similar results regarding a person’s susceptibility to Covid-19.

“There have also been some reports of links between Covid-19, blood clotting, and cardiovascular disease,” said Adam Auton, lead researcher on the 23andMe study.  “These reports provided some hints about which genes might be relevant.”

The 23andMe study, which looked at susceptibility rather than severity of illness, included 10,000 participants who told the company they had Covid-19." 

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Covid-19 news: Lockdowns prevented 3.1 million deaths in Europe
An estimated 3.1 million deaths due to covid-19 were prevented by lockdowns and other coronavirus social distancing measures across 11 countries in Europe including the UK, according to a modelling study published in Nature. 470,000 deaths were averted in the UK alone, the researchers who did the study told the Guardian

Read more: https://www.newscientist.com/article/2237475-covid-19-news-lockdowns-prevented-3-1-million-deaths-in-europe/

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