Dow rebounds more than 11% in best day since 1933 as Congress nears coronavirus stimulus deal Investing |
- Dow rebounds more than 11% in best day since 1933 as Congress nears coronavirus stimulus deal
- Don't be misguided, markets bottom will be signalled by low VIX and actual economic data, not huge rallies
- Lawmakers agree to $2 trillion stimulus early morning
- Boeing CEO Says He’d Resist Aid If U.S. Demands an Equity Stake
- Reminded: during the 2008 financial crisis, the markets rebounded long before economic data got better.
- Today’s jump not because of incoming stimulus package.
- Why next week's unemployment numbers are likely to be worse than this week's
- Futures falling again
- Why does Boeing need help they have 9.5 billion in cash. That's more cash than Microsoft has
- Coronavirus outbreak leads to largest collapse in euro zone business activity ever recorded
- Suncor energy reduces oil sands production as Canadian oil prices collapse to $8.54/barrel
- For those who were waiting for a lower entry point, has the Fed intervention or stimulus package changed your outlook at all?
- California's increase of unemployment insurance claims is absolutely staggering
- Dead cat bounce? Or is this the sharp V
- Gileads drug remdesivir, is granted orphan drug status pending FDA approval for treatment of COVID19. This one will be controversial folks.
- Reuters: Boeing plans 737 MAX production restart by May
- Factbox: Global oil, gas producers cut spending after crude price crash
- Why did Buffett overpay for Delta, and are the airlines going bankrupt?
- Reminder that were still up from the december 2018 lows.
- Occidental Petroleum is reducing salaries for its U.S. employees by up to 30% and CEO Vicki Hollub's pay will be cut by 81%, an internal email says.
- Airports, not airlines, are the rebound play for air travel
- It's not just restaurants and movie theaters cutting jobs. Small business layoffs spread.
- Invesco Mortgage Capital Says Unable to Meet Margin Calls
- Nothing is priced in until it already happened
| Dow rebounds more than 11% in best day since 1933 as Congress nears coronavirus stimulus deal Posted: 24 Mar 2020 01:05 PM PDT |
| Posted: 24 Mar 2020 03:45 PM PDT Today is pure optimism and the reaction to good news (or what looks like good news). Fiscal stimulus is anything but certain by tomorrow, FED is doing unlimited QE, and Trump thinks the US can open up by Easter. Fiscal stimulus takes time to kick in and for many people and businesses comes a week too late. It helps putting money in the pockets but doesn't suddenly restart the economic apparatus -only consumer and investment confidence do that. Unlimited QE is like fishing with dynamite: quick results but a lot of underlying damage. lts worth noting that this is not a financial crisis but a public health crisis with financial implications. The FED can at best alleviate some symptoms but that's it. The US is not testing nearly as fast as Korea (17 times less tests per capita when I checked this weekend), nor is it taking the lockdown serious. Unless a million tests appear by this weekend so the virus can be traced and narrowed down, Trump has to face the reality that he either locks down fully now or blows this crisis out of imaginable proportions in less than a month by opening. So in my opinion, how does a bottom look like? 20-30% drop from the current level, with decreasing volatility starting in one or two weeks when the spread of the virus becomes more clear and the economic data hits us hard. Shy but ever more common gains and then more big rallies than drops (but not 10% if that's what you want). We've only had one VIX spike, in 2008 there were 3. Also plenty of examples of fake rallies like today's and the first Friday of the month. The sp500 was grossly overpriced in February, so whatever it fell until the first days of March was barely an overdue correction. Now you have to input recession to get the true dimension of the collapse. Disclaimer: this is just my opinion and I'm not offering investment advice [link] [comments]  |
| Lawmakers agree to $2 trillion stimulus early morning Posted: 24 Mar 2020 10:46 PM PDT Senior lawmakers and members of the Trump administration early Wednesday came to an agreement on a massive stimulus measure to try to keep Americans whole as the economy shuts down due to the coronavirus. "Ladies and gentlemen, we are done. We have a deal," White House aide Eric Ueland announced at the Capitol just after midnight. White House officials said the measure will cost about $2 trillion. Negotiators worked all day, with Treasury Secretary Steven Mnuchin and incoming White House chief of staff Mark Meadows shuttling between meetings with Republicans and then Democrats. The package includes direct deposits for all Americans, $367 billion for loans to small businesses and an unprecedented program that will allocate $500 billion to the Treasury Department. Some of that money will be used to guarantee a Federal Reserve loan program for small and medium-size businesses. Larrry Kudlow, director of the White House's National Economic Council, said the funds could be leveraged into $4 trillion of lending through the Fed. Most adults would receive direct payments of $1,200, while children would see $500 checks. Hospitals would receive some $150 billion under the deal and small businesses would get $367 billion in aid. [link] [comments]  |
| Boeing CEO Says He’d Resist Aid If U.S. Demands an Equity Stake Posted: 24 Mar 2020 03:50 PM PDT
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| Posted: 24 Mar 2020 06:23 AM PDT I have no clue when the "bottom" of this crash will be, but I've seen a lot of people saying "it's still got a lot further to fall" for reasons such as unemployment rates are going to go up, supply will go down, companies are going out of business and so on. All of these events are certainly correct, however that is not how the stock market works. The markets to not necessarily react to events on time. The markets started their rebound from the financial crisis in March 2009, despite economic data continuing to get worse for months after that point. Investors anticipate events in the future and sometimes react accordingly. Other times they don't. Nobody can predict a market bottom, nobody knows when it will be. [link] [comments]  |
| Today’s jump not because of incoming stimulus package. Posted: 24 Mar 2020 02:29 PM PDT The reason for the rise was because trump surprised everybody saying the US may go back to business as usual in the next week or two. The stimulus package was already priced in. What wasn't priced in was a much shorter time for the US to be under lockdown. The thing is though the governors will make the decisions in their states and I highly down New York, California etc will go against the advice of doctors and listen to trump because he wants the economy to recover at the price of following medical advice let alone the rest of the world. [link] [comments]  |
| Why next week's unemployment numbers are likely to be worse than this week's Posted: 25 Mar 2020 01:33 AM PDT We are preparing for potentially the worst unemployment numbers ever on record this Thursday. However with the Stimulus package now passed businesses across the US can now examine whether they have funding in order to retain employee's or if they'll need to trim immediately in order to survive. For Small businesses which represent ~$5.9B or ~44% of the total US economy they are clearly the biggest losers in this stimulus package unless CNN has made a major misread. The bill would ensure the Small Business Administration could serve as a guarantor for loans of up to $10 billion for small businesses to ensure they can maintain their payrolls and pay off their debts. https://www.cnn.com/2020/03/25/politics/stimulus-senate-action-coronavirus/index.html Small businesses employ 58.9 million people, which makes up 47.5% of the country's total US workforce. Accounting for the projected 2M employees in the first round of layoffs we can easily assume that half of these are from large companies. This leaves us a potential 57.9M small business employees now on the chopping block. Another 5% reduction this upcoming Thursday seems very reasonable if not low given small business owners are quarantined around the country and have nothing to do but look at their outgoing cash expenditures. This represents 2.9M layoffs in next Thursday's unemployment numbers. Folks, Welcome the largest layoffs in history... Next week will be worse Cash or Short... Calls are completely insane for anything other than day traders. [link] [comments]  |
| Posted: 24 Mar 2020 04:56 PM PDT
What's your take ? Green or red day? [link] [comments]  |
| Why does Boeing need help they have 9.5 billion in cash. That's more cash than Microsoft has Posted: 24 Mar 2020 04:07 PM PDT Microsoft has 8.9 billion in cash. Boeing has 9.5 billion in cash Both number from each company's latest balance sheet. [link] [comments]  |
| Coronavirus outbreak leads to largest collapse in euro zone business activity ever recorded Posted: 24 Mar 2020 09:52 PM PDT |
| Suncor energy reduces oil sands production as Canadian oil prices collapse to $8.54/barrel Posted: 24 Mar 2020 03:32 PM PDT https://finance.yahoo.com/news/rare-step-oil-sands-giant-180056744.html (Bloomberg) -- Record low prices for heavy Canadian crude have prompted one of the biggest operators in the oil sands to take the rare step of shutting production. Motivated by the "extremely low" prices, Suncor Energy Inc. announced on Tuesday that it will shut in one of its two so-called trains at its two-year-old, 194,000 barrel a day Fort Hills oil sands mine. The company also is delaying the start up of its MacKay River oil sands wells to May, after operations were halted in December because of a malfunction and fire. The move comes as the coronavirus pandemic slashes worldwide oil demand just as Saudi Arabia ramps up oil production in a price war with Russia, sending global oil benchmarks to the lowest prices in almost two decades. Western Canadian Select, the oil-sands benchmark, fell to $8.54 a barrel, which will be a record low if it settles at this price, data compiled by Bloomberg show. The value of the bitumen itself, excluding the light condensate that's added so the heavy crude can be pumped through pipelines, was valued at just $3.83 a barrel. Oil sands wells and mines are built for billions of dollars to last for decades. They are rarely shut because many of their operating costs are fixed and, for the wells, leaving the reservoirs cold for an extended period of time could cause damage. Suncor and its partners Total SA and Teck Resources Ltd. agreed to operate the single processing stream at Fort Hills at full utilization to increase cash flow amid the low prices for bitumen. The guidance for Suncor's share of Fort Hills bitumen production in 2020 was reduced to between 55,000 to 65,000 barrels a day from between 85,000 to 95,000 barrels a day, the company said in its release. The use of one train at the mine "will increase cash flow, particularly when bitumen prices are extremely low, as we are able to significantly reduce variable costs," the company said. "Unit costs for the remaining production will be higher because of this decision as a result of fixed costs being covered by lower volumes." (Adds Fort Hills production guidance in second to final paragraph) For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted business news source. ©2020 Bloomberg L.P. [link] [comments]  |
| Posted: 24 Mar 2020 09:24 AM PDT I've been spending the last few weeks browsing this sub and other related sites trying to gauge sentiment and see what other investors like myself (who are on the sidelines) have been thinking about the current market. General consensus seemed to share the opinion that we are only a few weeks into the crisis and things will get worse before they get better. However, since then the Fed has stepped in with unprecedented action and now there is a new stimulus package expected to pass this week. Has anyone's outlook changed? A few of the stocks on my watch list (TSLA, DIS, SQ) have seen a massive rally over the last two days and I'm kicking myself for not budging. I'm too stubborn to buy in now but I have this terrible feeling that I will be left on the sidelines while the market begins to make a recovery. [link] [comments]  |
| California's increase of unemployment insurance claims is absolutely staggering Posted: 24 Mar 2020 05:26 PM PDT |
| Dead cat bounce? Or is this the sharp V Posted: 24 Mar 2020 10:01 AM PDT If this is a dead cat, she sure is bouncing like she sucked on a tank of helium first, especially in the hardest hit industries. $EAT up 39% $BLMN up 39% $AAL up 34% Even $CCL is up 21% $TSLA is up 16% today and 31% on the week [link] [comments]  |
| Posted: 24 Mar 2020 06:50 AM PDT A summary of recent events: The first phase 3 drug trials are not due until April, likely late April as Gilead had trouble rapidly getting early access to candidates in hubei province that met their strict criteria (not using alternative treatments) Trials were also initiated in the US. Amongst these trials, Gilead was also giving the drug out on a compassionate use basis to high risk/ high need patients. Just yesterday Gilead cancelled this, as they were flooded with requests for compassionate use, while still struggling to have enough candidates for their phase 3 studies. Their goal is to finish the studies first, and then if those are promising, to have enough of the drug able to be manufactured for the most advanced/high risk patients. Orphan drug status is normally designated for rare diseases. This will become political quickly, as GILD is a part of the president's task force, and will be seen as nepotism or cronyism. I'm sure they will get lambasted in the media if the cost of the drug is prohibitively high, or if there is limited supply of the drug. There is certain to be limited supply. Again, studies are not out until April, hopefully early in April. It's very likely these could come out in late April. In February, analysts determined the windfall from this potential FDA approval would only land Gilead 2.5 billion in conservative estimates. Tldr: this will get ugly and political if this drug is approved by the FDA and gileads drug is effective against the Wuhan clan. If you're going to buy Gilead, buy it for their immuno oncology pipeline, or for their Blockbuster HIV franchise. Or buy Gilead because of their healthy cash flow, or their strong balance sheet. Or buy it for their cash horde. If this becomes a windfall for GILD, they're going to need to price their drug at 200 a month or lower to avoid regulatory scrutiny. [link] [comments]  |
| Reuters: Boeing plans 737 MAX production restart by May Posted: 24 Mar 2020 06:26 PM PDT Seems very confident.
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| Factbox: Global oil, gas producers cut spending after crude price crash Posted: 25 Mar 2020 12:45 AM PDT |
| Why did Buffett overpay for Delta, and are the airlines going bankrupt? Posted: 24 Mar 2020 09:46 PM PDT Link to original post here, which has some funny images too: http://theyieldblog.com/ Text only: With airline stocks in precipitous decline and details of a bailout being hammered out this minute, I've spent the past two weeks trying to better understand the longer-term profitability (or lack thereof) of the airline industry. Warren Buffett, America's favorite ruthless grandfather, famously joked about the airline industry in 2008: We see this precarious dynamic across many capacity-commodity industries: companies carefully expand production capacity, wary of sparking build-out wars. Samsung, commenting most recently on their Q4 earnings call, would rationalize their expansion of NAND (the chip used in solid-state drives) capacity very carefully, trying not to scare competitors into believing there would be industry oversupply: Similar to the NAND industry, which consolidated from five major players to four after the implosion of Elpida, the merger of Continental Airlines with United Airlines in 2010, and the merger of US Airways with American, shrank airline the industry to three large players (United, American, and Delta), with four tiny players (JetBlue, Southwest, Spirit, and Virgin) resulting in route consolidation and highly-profitable small-airport destinations (i.e., a flight to Buffalo NY has a higher price-per-mile than a flight to Chicago). Buffett describes this industry consolidation and collusion in his typical bullshit-folksy way, after taking an 11% stake in Delta Airlines: There are a bunch of subtle ways that airlines can collude to restrict capacity. One approach, as alluded to by Delta in what I can only describe as the greatest big-brain-energy play in the history of collusive behaviors is as follows: Another (arguably) legally-defensible approach would be for all airlines to pledge 85% of their earnings to dividends: airlines that cut their dividend (in order to grow fleet size), would see their stock immediately punished (since their dividend was cut), and dividends of this magnitude would prevent fleets from growing, thereby enabling stable industry capacity and profitability. Dividends would have the added benefit of preventing poorly timed share repurchases: the fact that UAL and DAL have cut share repurchases exactly when their stocks are cheapest is all I need to say here. Unfortunately for shareholders, airline CEOs are generally paid in options (which don't pay a dividend), and therefore, airline CEOs have a tendency to favor share buybacks, which, if you recall from our article "How to be a shitty investor", are only good in limited circumstances. The biggest driver of airline capacity however, is no longer fleet size, capital allocation decisions, or emissions, but airport landing and takeoff slots: the scheduled time a flight is allowed to arrive and depart at a specific hub. These slots are effectively "timeshares" in the literal sense, and are owned by a specific airline, while being sold/coordinated by airports. Most US airports are near-capacity, so for an airline to gain a foothold in a new hub, an existing airline must approve it. This obviously leads to incredibly profitable horse-trading shenanigans (the horses are airport slots): like collecting specific properties in Monopoly, airlines will trade slots until a duopoly of airlines control the slots at each airport. This game of Monopoly even has a name: "hub premium", the higher price that passengers tend to pay when an airline has consolidated a significant percentage of overall slots at a single airport. Hub premiums and slotting are the real reason Buffett loves airlines: in good times, they can no longer be their own worst enemy, and are limited in capacity expansion through limited airport slots, and can even gain extraordinary pricing power in hubs they control (some online whitepapers have shown that the hub premium can be as high as 10-20%, which is effectively the entire profitability of the industry). In 2000, the Wendel H. Ford Aviation Investment and Reform Act for the 21st Century (Air-21) attempted to curb this behavior and attempted to ensure that new entrants had ample access to airport facilities and slots, stating that "major airports must be available on a reasonable basis to all air carriers wishing to serve those airports". In order to encourage airports' cooperation in opening up airports to "all air carriers wishing to serve those airports", Congress made federal sources of funding contingent on compliance: blocking passenger facility fees (up to $4.50 per ticket) in government subsidies should an airport fail to comply. Note that these fees would go to the airport, not the airline, as obviously airlines would otherwise happily eat a $4.50 loss to reprice by an extra $100-$200. Unfortunately for consumers, this law only applies when an airport is responsible for "over 0.25% of all enplanements", which means that smaller US airports are incredibly profitable for incumbent carriers that have no requirement to give up their slots. Analysts ask about slots on conference calls, and you should notice from the following JetBlue earnings call how closed-lipped leadership is being here: no carrier wants to tip their hand on how negotiations are proceeding. Hunter Keay of Wolfe Research to JetBlue management: Stephen Priest, JetBlue CFO: Joanna Geraghty, JetBlue COO: The New York Times has some interesting stories showing how incredibly hard it is to break into an airport for a marginal player: Slots appear to be the most strategically important property of an airline: they inherently restrict airlines from competing each other to death. Buffett is right as usual: the first 100 years of airline growth were uncapped by airport slot constraints, which are now preventing airlines from becoming their own worst enemy. To the upside, I see an enormous opportunity for airlines to be far more shareholder-friendly by enacting aggressive capacity restraint through dividend signalling and carbon emission control. To the downside, airlines will continue to face more regulation: airlines touch a broad base of political constituents and their long-term profitability is fundamentally capped by consumer ire and regulatory oversight. If you've ever wondered if antitrust regulation is truly helpful, consider this: Berkshire Hathaway has over $124bn in cash or T-bills, and without regulation Buffett could trivially acquire all five US airlines with no external financing, consolidating airport slotting across every airport and gaining monopolistic pricing (I can hear Warren's heavy breathing), and single-handedly float their working capital needs. With regulation, new entrants will be able to gain footholds and compete if pricing gets too far out of wack. Ultimately, the answer to the question of long-term US airline profitability rests almost exclusively on regulatory oversight: with peak travel demand in non-Corona times exceeding airport capacity, US airlines will be as profitable as they can get away with. Are airline stocks worth owning, right now? The airline bailout memo paints the exact picture we would imagine: China Southern Airlines March 18 Press Release: While Delta is better-positioned than United, their working capital "backdraft" is simply too high: flight refunds will absolutely devastate their liquidity. Delta had $47bn of annual revenues in 2019, so consider the possibility of Delta seeing $5bn-$20bn of pending refund requests (my wild-ass guess) while having only $2bn of cash for refunds, and $40bn of opex ($11bn of which is salaries, and $2bn of which are landing fees), the fixed costs of Delta still massively outweigh existing liquidity: I estimate the working capital suck to be so high that Delta and others may need a second bailout should this disaster last 18 months. Airlines are sort of like very fragile insurance companies or banks: they float/"lend" an enormous amount of money ($50bn of revenues / $44bn opex for Delta) while being worth very little (Delta is valued at $13bn on the day of this writing). Airlines have been walking a very wobbly tightrope over the past 5 years, and falling off has meant a $50bn federal bailout, which vastly exceeds the amount the industry used to repurchase shares over the last 4 years. Airline profits should be tucked away for leaner times, but instead are wasted on overvalued shares, making their share price rise almost illusory. Ironically, the US Federal bailout's plan to block stock buybacks for US airlines should actually be great for investors in the long-run: were someone to buy shares today and hold until results normalized, airlines will be able to return cash to shareholders at incredibly high yields (as a percentage of cost basis). Delta prints $7/share in earnings in a peak year but pays only $1.50 in dividends. Post-bailout, we can imagine Delta's share count doubling (and share prices halving) from massive equity dilution. Imagine a world where Delta is forced to distribute $3.50 a share in dividends on after you paid only $5-$10 a share. I'm a buyer of post-bailout DAL at $8/share. [link] [comments]  |
| Reminder that were still up from the december 2018 lows. Posted: 24 Mar 2020 01:41 PM PDT |
| Posted: 24 Mar 2020 07:28 PM PDT From the WSJ: Occidental Petroleum Cuts Pay for Staff, Executives
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| Airports, not airlines, are the rebound play for air travel Posted: 24 Mar 2020 11:17 AM PDT I will begin by saying I AM AN AMATEUR RETAIL INVESTOR AND NOBODY SHOULD EVER TAKE MY ADVICE FOR ANYTHING RELATED TO INVESTING. With Boeing and the airlines running to the USFG for bailout money and share prices in the tank, a lot of people are starting to poke around tickers like $UAL, $DAL, $LUV and $BA thinking that there is a lot of value to be had. This is largely on the theory that air travel is part of the backbone of the world economy and, whenever the crisis subsides, there will inevitably be plenty more money to be made in this industry. That is definitely true, but I don't think that trying to go for individual airlines (or even Boeing) is the right way to chase this opportunity. The reason is that these companies go through bankruptcy and restructuring all the time. United, along with several predecessors to Delta, have done so as recently as this century. If these companies end up having to drink from the government trough, especially with the widespread public sentiment against further bailouts, a wiping out of the existing shareholders seems to me to be a real possibility. Airports, on the other hand, seem to me to be a much more exciting opportunity. Most American investors don't think about airports as an asset class because all airports in the US are publicly run. Outside the US, however, there are a number of publicly-traded airports that are run privately, often on a concession basis. Airports are a much more natural monopoly than airlines and, since most airports get much more attractive margins than airlines, tend to have better balance sheets and therefore face a much lower possibility of bankruptcy or restructuring. Airport stock prices have seen similarly drastic haircuts as the major airlines, but seem much better positioned for a safe rebound than airlines. I am personally invested in $PAC (a collection of Mexican airports) and $AUKNY (Auckland NZ), both of which have seen >50% drops from their recent highs, and am rapidly expanding my positions at these low prices. In anything less than an end-of-the-world scenario, air travel will return to its highs and continue to grow, and airports' revenue numbers should bounceback at the same time. [link] [comments]  |
| It's not just restaurants and movie theaters cutting jobs. Small business layoffs spread. Posted: 24 Mar 2020 09:14 AM PDT |
| Invesco Mortgage Capital Says Unable to Meet Margin Calls Posted: 24 Mar 2020 09:46 AM PDT |
| Nothing is priced in until it already happened Posted: 24 Mar 2020 07:14 PM PDT What markets price in is some likelihood of something happening. If something worse than the average/median market expectation happens, the market value will go down some amount. If something better happens, it will go up some amount. If exactly the thing the market expected happens, well then it was priced in. But that never happens. It's the same idea of sports betting odds. If one team is favored +3, it means the market consensus comes to that. But when the outcome of the game is decided, then people are paid out accordingly. Same idea. [link] [comments]  |
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