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Old 02-04-2020, 05:51 AM   #21
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I just flew through the Atlanta airport on Thursday. It was as crowded as ever, and my flights were full. Many people were wearing face masks.
Most people book flights at least 3-4 weeks out, as that's when prices tend to go up. (And most travel is planned, not spontaneous. Business travel accounts for a little less than half, and while a good portion of that is refundable or last minute, not all of it is, and I believe as a whole it's only about 40% of all airline travel.) I'm curious what the flights and airports will look like when I travel in 2 weeks, by which time a lot of the travel booked before 2019-nCoV made the news will have been taken already. Or in other words, that's when people traveling will start to be more likely to have booked after it broke in the news, so that's when I would expect to start seeing a decline, if there is one. Although I suppose people could decide to cancel, I think the barrier is higher since most travelers buy nonrefundable tickets. I'm thinking that once we get to the point where people have decided to book or not to book we might see more of an impact.
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Old 02-04-2020, 06:33 AM   #22
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Good points.
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Old 02-04-2020, 09:32 AM   #23
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It is true that this shall pass but I think wise investors should consider the likely economic impact for the next year. Supply chains will be disrupted, China is an integral part. Consumer spending in China will be devastated both because they are staying at home and because of lost wages. Earnings reports are retrospective so don't use them as a part of your investment plan. Right now, IMHO, equity buyers resemble the behavior of the market in 2007. When the impact is reflected in corporate profits we will see 2008 all over again.

China's Central Bank is adding liquidity to its short term market today. This tells me that they see problems ahead. Remember that China has no social security program, just assurances made that the government will take care of the elderly. As a result, Chinese save and invest in real estate for retirement. Many purchased condos now sit vacant. They have their own housing downturn. Some industrial firms have been the walking dead for years, Xi Jinping has been trying to close them as their employees retire. China has depended on rapid economic growth to support their transition to a market economy. This virus is a black swan for them.

Personally, I am positioning myself in a defensive position in anticipation of an equity downturn.
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Old 02-04-2020, 10:01 AM   #24
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A number of folks here travel regularly. For those that have been in an airport in the last week or 10 days, have you noticed a decrease in the number of people going through the airport from what you usually see? Are your flights less full than usual? I can see that flights to Asia, especially China, would be impacted, but I'm curious if there are overall decreases in the numbers of passengers or if specific airports are experiencing declines in passengers.

Just returning from few days in Vegas. Crowded as ever. Saw a few masks in airport but not many. Craps tables were packed. People smoking, coughing, drinking, etc. All types of humanity in all its forms seen. In other words, Vegas normal.
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Old 02-04-2020, 10:17 AM   #25
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Further to Brat's point, if we make the (magnanimous, IMHO) assumption that this is largely contained within China, the question becomes one of how long does it take for this to burn itself out and for normal economic activity to resume. Given that the epidemic continues to expand rapidly, I don't see this happening before the first quarter is over. Depending on when the number of cases peaks and starts to decline (and the data released by the Chinese authorities is buggy enough that we will have a hard time figuring out whether that is propaganda), it might take multiple quarters for normalization to occur. What will that do to global GDP? The second largest economy in the world has the provinces that account for 80% of its GDP affected by this mess, so it isn't going to be a small impact to China or the world. The big rally in EM equity today looks like a pure Chinese central bank short term stimulus reaction, not something based on the real economy.
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Old 02-04-2020, 10:34 AM   #26
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There is no way that this will be contained in China but MAYBE the efforts of other nations will reduce the impact in their countries.

I would hate for it to get a foothold in India. One of the reasons why these coronaviruses don't originate in India is that they are largely vegetarian.

This is the first time in many years that N. Koreans are not fleeing to China. N. Korea is dependent on the Chinese for economic support. Kim Jong-un must not only be worried about his residents getting sick he must be concerned about his next 'check'. N. Korea doesn't contribute to the world's economy but it is the least stable of the Asian countries. If China tells him their purse is empty ...
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Old 02-04-2020, 02:40 PM   #27
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Here’s an announcement of supply chain impact from coronavirus https://thehill.com/policy/transport...h-korea-due-to
Quote:
Hyundai announced Tuesday that it is suspending production in its South Korea manufacturing plants due to supply chain problems caused by the coronavirus outbreak in China.

The world's fifth-largest automaker said in a statement that the suspension is a result of "disruptions in the supply of parts resulting from the coronavirus outbreak in China."
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Old 02-06-2020, 08:48 AM   #28
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SO i am definitely not a market timer, but I can't help but think "this time it is different" (insert your laughs here).... All I see is we have never banned visitors from a country completely due to health that I recall, nor have I ever seen or heard of people being put into forced isolation / quarantine to the degree they are now. I just feel that there are people in both the US and Chinese government that think this Virus has a bigger potential impact than other scares like Mers and SARS. They keep saying "don't panic" the flu is much worse, but we don't close entry to whole populations or quarantine for the flu do we? Something is up and that is why there is such a huge WW effort to contain it like we haven't seen before.

So with that prelude I looked at all my funds and my emerging market stuff is 34% in China and my international is 8-9% in china. So in line w/ my existing IPS, I shifted much of my EM allocation to international to reduce china risk. Won't probably make a huge difference in the end, but at a minimum China GDP will take a hit in 2020. No way to avoid it at this point.
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Old 02-06-2020, 10:16 AM   #29
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If it's different in some ways, it will probably be the same in others.


My thinking (dangerous, I know) suggests that whatever the impact on commerce and the markets, it will be world-wide. IOW no equity market will be completely safe if the global economy stagnantes. And I can't imagine China can take a dive without a cascade effect. That's not to say all of this will happen (global equities crash), but moving your bets out of China might not do as much good as one would hope for.
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Old 02-06-2020, 10:25 AM   #30
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Originally Posted by Brat View Post
It is true that this shall pass but I think wise investors should consider the likely economic impact for the next year. Supply chains will be disrupted, China is an integral part. Consumer spending in China will be devastated both because they are staying at home and because of lost wages. Earnings reports are retrospective so don't use them as a part of your investment plan. Right now, IMHO, equity buyers resemble the behavior of the market in 2007. When the impact is reflected in corporate profits we will see 2008 all over again.

China's Central Bank is adding liquidity to its short term market today. This tells me that they see problems ahead. Remember that China has no social security program, just assurances made that the government will take care of the elderly. As a result, Chinese save and invest in real estate for retirement. Many purchased condos now sit vacant. They have their own housing downturn. Some industrial firms have been the walking dead for years, Xi Jinping has been trying to close them as their employees retire. China has depended on rapid economic growth to support their transition to a market economy. This virus is a black swan for them.

Personally, I am positioning myself in a defensive position in anticipation of an equity downturn.
Absolutely. This will have a global financial impact, and it could take a long time to recover.

The market has also been ignoring the dropping corporate profits S&P500 since Feb 2019.

My financial position is that I already rebalanced early Jan, so I’m sitting on my hands as usual. I already carry plenty of years in ready cash and fixed income.
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Old 02-06-2020, 08:32 PM   #31
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Here is the most recent view from UBS about the financial market impact.

https://financialservicesinc.ubs.com...MOC-Public.pdf
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Old 02-07-2020, 09:34 AM   #32
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I have been following Peter Zeihan for several years. Here is his Twitter comment about the impact of the coronavirus: https://twitter.com/PeterZeihan/stat...59280401620992

That post linked to the South China Post: https://www.scmp.com/economy/china-e...-manufacturers
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Old 02-07-2020, 10:18 AM   #33
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I have been following Peter Zeihan for several years. Here is his Twitter comment about the impact of the coronavirus: https://twitter.com/PeterZeihan/stat...59280401620992

That post linked to the South China Post: https://www.scmp.com/economy/china-e...-manufacturers
So Peter Zeihan has been predicting the collapse of the global Order[sic] for a while now?
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Old 02-07-2020, 10:53 AM   #34
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The early books said the global order would change. Whether or not you see that is collapse depends on your need for the status quo. Basically he predicted that the US would do just fine because of intrinsic geography. You can find lectures he has made to industry groups on UTube, several are summaries of his first book The Accidental Superpower. The most recent Disunitied Nations was published in the fall 2019.
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Old 02-07-2020, 11:23 AM   #35
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SO i am definitely not a market timer, but I can't help but think "this time it is different" (insert your laughs here).... All I see is we have never banned visitors from a country completely due to health that I recall, nor have I ever seen or heard of people being put into forced isolation / quarantine to the degree they are now. I just feel that there are people in both the US and Chinese government that think this Virus has a bigger potential impact than other scares like Mers and SARS. They keep saying "don't panic" the flu is much worse, but we don't close entry to whole populations or quarantine for the flu do we? Something is up and that is why there is such a huge WW effort to contain it like we haven't seen before.

So with that prelude I looked at all my funds and my emerging market stuff is 34% in China and my international is 8-9% in china. So in line w/ my existing IPS, I shifted much of my EM allocation to international to reduce china risk. Won't probably make a huge difference in the end, but at a minimum China GDP will take a hit in 2020. No way to avoid it at this point.
+1 My thinking exactly and have made a similar adjustment.
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Old 02-08-2020, 10:36 AM   #36
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I just checked my Fidelity "Watch List", last Friday all equity ETFs I track were down while all bond ETFs were up. Not by much but an interesting trend.
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Old 02-08-2020, 10:51 AM   #37
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Channeling my inner Joseph Stalin

In the parallel thread on health considerations, there are some data indicating a fatality rate of ~2% of the infected population, and that 80% of the fatalities are over 60 years old.

My admittedly callous, but sincere and objective, question is: if this pandemic spreads widely enough, infecting half the US, then 3-4 million people could die, of whom 80% will be roughly SS age. Three million recipients at an average of $18k in annual benefits is on the order of $54B in checks SSA no longer has to send out.

How much longer does this extend the time before the trust fund runs dry?
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Old 02-08-2020, 07:11 PM   #38
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I saw Fermion placed a bet against CCL. I'm not experienced with options, but if I were, I might do the same. I'm thinking there's little chance the company will be more profitable than the market thought they'd be back in October, and Friday's close was about the same as October.
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Old 02-08-2020, 07:39 PM   #39
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Like a couple others have said, barring a full on pandemic this will pass.




Also, be dubious of any companies referencing this virus as "affecting their business". Corporate executives have a long history of using major headline stories to talk down analyst expectations, teeing the company up to beat when results emerge. I wouldn’t be shocked if that were at work here.
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Old 02-08-2020, 07:43 PM   #40
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Novel Corovirus (NCV) has now killed more people in one month than SARS did in its entire nine-month run.

Not saying this is predicative, but NCV appears both highly infectious and pretty deadly (between 2 and 3% mortality once you're infected). I'd give NCV at least a 50% chance of disrupting supply chains for six to twelve months (if not more).
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