2020-01-31

Coronavirus Spreading as Fast in China as Outside

If you're closely following the 2019-nCoV outbreak, you probably have been to this Johns Hopkins side tracking the case growth. At the bottom is a chart, blow up below. It has only one axis, making it look like Chinese case growth dwarfs cases outside of China. I plugged the numbers on that site into Excel and made a two-axis chart.
My math says cases are growing at a 38 percent clip in both sets. These percentages are based on the 11-day sample set since January 20. What's striking about this is that if you believe China is underreporting, it appears they tracking the outside of China growth rate. Or it indicates that China is not hiding cases and that governments outside of China are no more successful at stopping the spread of the disease.

Assuming the virus grows at the current rate, the case load on Feb 1 (tomorrow) will be around 13,800 in China and 163 outside of China. [UPDATE: I posted these numbers at 3:09 PM. China has updated the numbers this morning Beijing time to 11.374. The number 24 hours later should be 15,680. Update is to avoid confusion because the numbers are updated several times a day.]

By the end of February, if growth was unabated by treatment, quarantine and other measures, the case count projects to clear 100 million in China and 1.6 million outside of China. To reiterate, that's based off a very small 11-day set of data. I assume the growth rate will slow. Given the incubation period as long as 2 weeks, Chinese quarantine efforts may not show up in the numbers for another week or so.

Markets On The Brink, Again

In the near-term, whether coronavirus spreads or not may determine whether a break comes now or is put off into the future. Important assets such as energy, copper, coal, Brazilian real, Mexican peso, emerging market bonds and more are at, near or broken major support/resistance. These are in alphabetical order.

2020-01-30

Coronavirus Will Kill Energy

The long-term outlook for energy wasn't good before coronavirus, but I thought a potential break of long-term support might come much later into this year or next. At today's open, XLE is less than 2 percent away from long-term support.

2020-01-29

Copper Approaches Critical Test

From August 2019: Copper, Gold and The End of Growth. I looked at the copper/gold ratio:
The pessimistic scenario is the 2008 low doesn't hold and the early 1980s low looms. That move requires going beyond 700. That's huge for global markets and could entail major dislocations such as a major China crisis, but then comes the much larger question.

Is this a massive 40-year basing pattern for the gold/copper ratio? Gold soared relative to copper during the 1970s. A measured move off this basing pattern would carry gold to more than 1200 times the price of copper. That could mean $2 copper would trade alongside $2,400 gold or $10 alongside $12,000. The more probable move, in my opinion, is the former. A doubling of gold and stagnant or even falling commodity prices as growth evaporates.
Ratios tend to be restrained over time, but they also have periods of disequilibrium, phase changes that can establish a new ratio. If gold is remonetized as part of a global financial/economic reset, a higher ratio is possible.

As for copper, it is approaching an important test in the $2.50 area. It's both at a major support line and a Fibonnaci retracement level.

2020-01-28

HIV Drugs Used to Fight Coronoavirus

UAE: Doctors 'cure' coronavirus patient using HIV wonder drugs
Three Beijing hospitals began administering lopinavir/itonavir – two antiretroviral drugs used in combination to treat HIV – to patients suffering from the coronavirus, according to a statement published by Chinese media.

The drugs work by blocking HIV's ability to reproduce by binding to healthy cells.

The medication was used to “substantial clinical benefit” on patients suffering from Sars, another coronavirus which swept through China in 2002 and 2003.
AbbVie (ABBV) makes a version of these drugs, but stock price hasn't moved much yet.

WSJ: U.S. Drugmakers Ship Therapies to China, Seeking to Treat CoronavirusAbbVie, JNJ, Gilead are the companies named.

Updated: China Adds Stock Market and Lottery Sales to Shutdown List, Real Estate Closures Widen

I expect many of these local policies will spread quickly.

Update: Shanghai is closed until February 9. Reuters: Companies in Shanghai cannot resume work before February 9 due to virus fight: government

Sohu: 财政部:彩票市场春节休市时间延长至2月9日24时

China Market Opening Delayed Until Feb. 3 on Virus Upheaval
China’s financial markets will remain closed until next Monday after authorities extended the Lunar New Year break by three days as they grapple with the worsening virus crisis.

Trading will resume Feb. 3, the Shanghai and Shenzhen stock exchanges said. Shanghai authorities separately advised that companies shouldn’t start work until at least Feb. 9.

Some cities started closing real estate offices, Nanchang was the first I noticed: Chinese Realtors Shuttering for Coronavirus During Peak Sales Season

Other reports have since come out.

Jiangxi asked all real estate sales to cease, both direct sales and realtors.

Beijing News: 抗击疫情 江西省房协倡议房企售楼部和中介门店暂停营业
​​In order to do a good job in the prevention and control of the new pneumonia epidemic situation in Jiangxi Province, on January 27, the Jiangxi Real Estate Industry Association proposed that all real estate development enterprises should suspend the sales department of commercial housing (the case) Sales Activity.
East Money: 多地关闭售楼处 返乡置业停摆影响一季度楼市
January 26, Guangxi Real Estate Association of Industry released the "guide my area real estate emergency notification industry and resolutely implement cooperate with the novel coronavirus epidemic prevention and control work," which requires each real estate development company temporarily closed the sales department, do on-site disinfection and Health and epidemic prevention. For commercial and office properties and buildings that are held, operated or used by the company, they shall promptly work with property companies and other related cooperation agencies to strengthen on-site disinfection and epidemic prevention measures.

On the 26th, Sichuan Mianyang City Housing and Urban-Rural Development Committee issued a document stating that from now on, all development enterprises will not be allowed to open the sales office (case) of commercial housing, and do a good job of on-site disinfection and sanitation and epidemic prevention. Equipped in place to strengthen security awareness and guidance for epidemic prevention and control of the staff on duty.

On the 25th, the Housing and Urban Construction Bureau of Ganzhou City, Jiangxi issued a notice to fully prevent and control the new type of coronavirus pneumonia, effectively cut off the transmission of the virus, and protect the health and life of the general public. From now on, all commercial real estate sales offices in the city will suspend business and all real estate agencies in the city ​​will suspend business. Business hours will be announced separately.

The Housing Security and Real Estate Management Bureau of Fuzhou City, Fujian Province also issued a notice on the 25th. From now on, all real estate development enterprises in the city will not be allowed to open the commercial housing sales department (case), and real estate agencies will not be allowed to open real estate intermediary stores. Do a good job of on-site disinfection, sanitation and epidemic prevention, equip epidemic prevention equipment and equipment in place, and strengthen security awareness and guidance for epidemic prevention and control of the staff on duty.

According to incomplete statistics from China Business News, as of January 26, at least more than 17 cities and regions across the country issued notices and closed the sales department.

Yan Yuejin, research director of the Think Tank Center at E-House Research Institute, analyzed First Financial, and more sales offices are expected to be closed in the future. From the practice of closing sales offices in various places, it can be seen that the real estate sector is also actively cooperating with epidemic prevention work and has adopted relatively clear and strict controls. Affected by this, it is expected that real estate transactions in many cities across the country will decline significantly from January to February this year.

Zhang Dawei, the chief market analyst of Zhongyuan Real Estate, said that even if the relevant management department will not close the sales office, major developers will close the sales office themselves, because few people come. In the past years, around the 15th of the first month, there were peak periods for homeowners in the three, four, and five tier cities to return home. However, many small and medium cities now implement strict controls. This year, home ownership has almost disappeared. The market impact is huge.
EO: 多城售楼处暂停开放、中介门店暂停营业
According to incomplete statistics from the Economic Observation Network, as of press time, more than 25 cities across the country, including 14 prefecture-level cities in Guangxi Province, have announced the suspension of mass gathering activities such as new openings or large-scale sales of real estate for sale.

Among them, more than 90% of the city's commercial housing sales department is temporarily closed to the outside world, and real estate agencies' stores are temporarily closed; some cities have even closed the online signing system and suspended housing transactions. Cities such as Leshan require construction sites to stop construction.

Under the influence of the epidemic, a series of "pauses" have taken place, and the real estate market is undergoing subtle changes. "Our real estate is an industrial investment project. During the Spring Festival, there were not many people. During the four or five days of the New Year, the number of daily house visits was 0." Yu Li told Economic Observation Network.

2020-01-27

Market Top Update

I'm partial to the melt-up theory, that a top is not in yet. The bond price is the denominator, thus a rally in bonds along with stocks could maintain a topping H&S pattern.

Hope in Wuhan as "Bank Run" on Hospitals Taxes Medical System

Another video is here with different views and patriotic music playing: 泪目!武汉小区众人隔窗齐唱国歌互相打气:“武汉加油”响彻夜空(Tears! Everyone in Wuhan Community sang the national anthem through the window and cheered each other: "Go Wuhan" ringing through the night sky)

Wuhan residents find new forms of entertainment

An article at 爱股票 explains the situation on the ground and what may be the real risk of the disease, namely overloading the medical system: 如何破解武汉死局
From the performance point of view, Wuhan can be summed up in three aspects. Hospitals and medical staff are overloaded, front-line protective materials are in short supply, and patients' screening or treatment needs cannot be met.

...The core problem of these three aspects lies in the fact that a large number of patients in tens of millions of cities are flocking to limited medical institutions with fever clinics and qualified for pneumonia screening.

There are potential patients and suspect populations, as well as people with common flu and common cold, or patients with fever and other symptoms for other reasons, and there may be normal people who are completely asymptomatic but are more concerned about their physical condition.

Whether it is the site, equipment, personnel, or supplies, medical institutions cannot afford this swarming pressure.
Some are using the term for bank runs to describe the stress being placed on the medical system. There is rumor-mongering about the diseases mortality rate, but the truth is most people won't even need to go to a hospital. However, if 1000 people catch the flu, only one will die in an average year. Thus far, conservative estimates suggest 20 people will die for every 1000 who catch coronavirus. Now imagine it is as contagious, or even more contagious, than the flu. The numbers quickly overwhelm all medical systems in all countries.
According to the statistics at the end of 2018, Wuhan has a permanent population of 11.08 million and a registered population of 8.83 million. Just when most foreigners had left before closing the city, it was 9 million, multiplied by the 2% influenza rate, which was 180,000.

180,000 people want to flood into the hospital as soon as possible to confirm whether they are ordinary flu or coronavirus pneumonia. This does not count as a common cold and other patients, and is not a disturbed healthy person. In all, at least hundreds of thousands of people.

In all fairness, Wuhan's medical configuration is pretty good. Although not as good as Beijing and Shanghai, it is already first-class in second-tier cities. There are 47 top three hospitals in the city, Tongji and Xiehe are the top level in the country. But this can't carry the crowded run of hundreds of thousands of people.
A a result, patients wait for hours just to see a doctor:
Because of the run, patients must line up for three or four or even six or seven hours in the cold and wet early morning to get a chance for an examination.

Because of the run, in the inaccessible hospital lobby, the energy of medical staff is on the limit, and their emotions are on the verge of collapse. There was even a shameless scene of patients tearing their doctor's protective clothing and spitting at the doctor.

At the same time, citizens who seek no cure are willing to swear, and try their best to leave the city and flee to other cities.
If coronavirus is similar to Spanish flu, medical systems around the world will turn away non-critical patients. What's happening in Wuhan will be a near universal phenomena.

The full essay, Google translated, is below. Chinese link here: 如何破解武汉死局

Coronavirus Initial Thoughts

Initial numbers aren't useful. Even if China put out the best numbers, they are dealing with an unknown contagion. SARS mortality rate was high initially because doctors didn't know how to treat it and I recall reading that early treatment may have caused a higher mortality rate. Take everything with a grain of salt.

If the disease incubates for 14 days before the patient shows symptoms, but is contagious during this time, it could have emerged in November. Reports of a viral pneumonia in Wuhan were spreading in late December. It was already too late to contain.

The US (and other nations?) are at most, checking airline passengers for symptoms (fever).

I haven't seen numbers on how many patients require intensive care. A patient in the USA who has contracted a non-severe case of coronavirus may not seek out medical care. Even if they did, the screen might be "Have you been to China recently? Flown out of the country?" It's not improbable that they'd answer no to both, assuming doctors and hospitals in areas with zero cases are even screening patients. My hunch is they would get classified as a flu patient if they pass the screen. If this disease is highly communicable, cases could explode once testing is widely used.

Example: Local hospitals screening for coronavirus as outbreak continues to spread in China
"We've already rolled out screening protocols to all of our emergency rooms here as far as asking about travel so we can be aware of any risk but we're not freaking out," said Dr. Amy Edwards, a University Hospitals Pediatric Infectious Disease Specialist.

SARS had a much higher mortality rate, but was far less contagious. The best medicine was exercise, healthy habits (wash hands frequently, avoid touching eyes, nose, etc.). The threat from coronavirus seems to be that it is more contagious than deadly, but a even a 2% mortality rate is 20x higher than the average flu.

Assuming it doesn't infect a huge number of people or mutate and come back more lethal like Spanish flu did, the economy could still be impacted because it is hard to predict how people would react. If this is an contagious as initial reports, I could imagine most people with young children will avoid work. Schools will close. Unclear how the economy would be impacted if a significant population takes an extended vacation out of an overabundance, but appropriate amount, of caution. In this respect, China will provide excellent information.

Chinese Realtors Shuttering for Coronavirus During Peak Sales Season

Spring Festival is a popular time for home buyers. This year will likely disappoint.

This comes from Nanchang in Jiangxi. officialy there are 36 cases there as of early morning Jan 27, local time, 13th most among Chinese provinces. I expect many more cities will follow suit.

iFeng: 南昌市商品房售楼部及中介门店暂停营业
Nanchang Housing Security and Real Estate Management Bureau announced on the 25th that according to provincial and municipal requirements for better prevention and control of new-type coronaviruses, from now on: all commercial housing sales offices in the city will be closed. Stores of all real estate agencies in the city are temporarily closed and business hours will be announced separately.

2020-01-23

China Escalates Beyond SARS Response: Shuts Down All Transportation

China has quarantined the entire city of Wuhan to try to contain the outbreak.

Caixin: Wuhan Virus Latest: Wuhan Imposes Massive Quarantine, Shutting Down Public Transit
Wuhan imposed a massive quarantine in a step to halt the spread of the viral coronavirus that first appeared there. Starting at 10 a.m. Jan. 23, all bus, subway, ferry and long-distance bus systems in the city of 11 million people will be suspended, and authorities asked residents to remain in the city.

“Residents should not leave Wuhan except for special reasons,” a government statement said. “Departures from Wuhan at airports and railway stations will also be temporarily closed.” No timetable for resumption was given.

• To contain the spreading virus, Wuhan has started screening vehicles and travelers going in and out of the city by road. Temperature checkpoints will be installed along major routes to the city, a central China transportation hub.

The Wuhan city government also required residents to wear masks in public areas including parks, cinemas, museums, shopping malls and restaurants.
If nothing else, China will offer the world lessons in extreme disease containment measures.

As with any government in a similar situation, faces the catch-22 of success. If they quarantine soon enough, the disease is contained. They are criticized for overreacting. If they wait too long, the disease spreads and they are blamed for doing too little. With SARS, it took a couple of months for a similar response, but this time it is more extreme. Travel to and from, and within Wuhan has ground to a halt. Hopefully they've caught it, but disease experts think it is already in several other cities. Which likely means several more cities will go into a similar quarantine. Hopefully it ends there.

Update: Huanggang and Chibi in Hubei province are now under the same quarantine.

2020-01-22

Easing Hukou Rules Accelerates War for Talent

China's solution for the housing market is eased residency rules. The long-awaited hukou reform. This won't solve the crux of the emerging problem: there are too few homebuyers to go around. Attractive cities will grow population and everyone else will lose youth population.

iFeng: 地方两会部署楼市:坚持房住不炒,放宽落户限制
Some provinces explicitly relax restrictions on settlement

In other provinces, the government work report explicitly proposed opening up and relaxing restrictions on settlement.

Guangdong made it clear that it adheres to the "one city, one strategy" policy and promotes the stable and healthy development of the real estate market. Accelerate the promotion of new-type urbanization, and liberalize restrictions on the settlement of cities other than Guangzhou and Shenzhen.

Hubei proposes to improve the Wuhan points settlement policy, and other cities to remove restrictions on settlement.

Gansu proposed that the conditions for the settlement of provincial capital cities be fully relaxed, that for small and medium-sized cities be fully liberalized, that the residence permit system be fully covered, the civicization of the agricultural transfer population be accelerated, and the urbanization rate of the registered population should be 38%.

According to the National Development and Reform Commission, in 2019, Hainan Province and large cities such as Ningbo, Guangzhou, Nanjing, Xi'an, and Shijiazhuang introduced new settlement policies to further liberalize and settle down conditions. At present, with the exception of some provincial capital cities, restrictions on urban settlements have been basically eliminated in the central and western regions and the northeastern region; small cities in the eastern region have basically no entry thresholds, and policies for large and medium-sized cities have continued to relax.

National Development and Reform Commission spokesman Meng Wei recently pointed out that in 2020, urban settlements will be promoted. The key is to stabilize the employment of agricultural and other key populations, so that they can settle in cities and towns more conveniently. At the same time, the expansion of basic urban public services to the permanent population Coverage, effectively improve the quality of civicization of the transferred agricultural population, and ensure that the goal of 100 million people settled is fully fulfilled.

Zhang Dawei believes that liberalizing the settlement policy will help those who already live in the city obtain public resources in the city. For the real estate market, there is also a stable market demand.

2020-01-20

China Adds $4 Trillion to TSF

China's money supply growth accelerated in December. This is expected because the country accelerated local government bond issuance for infrastructure investment. As in recent years, a burst of spending in early 2020 is anticipated.

Total social financing exploded higher after readjustment. The increase is about $4.3 trillion at the current exchange rate.
With the revised data.
Reuters: China's new bank loans hit record in 2019, more stimulus expected
PBOC officials said the central bank had recently revised the way it calculates TSF by adding treasury bonds and ordinary local government bonds.

China had allowed local governments to issue more debt in 2019 as part of a plan to accelerate infrastructure spending and stoke domestic demand.

2020-01-16

If This Be a Melt-Up

The ratio of SPDR Technology (XLK) to the SPDR S&P 500 Index (SPY) is about where it was in 1998. That spike on the chart took place over the course of 15 months, when the Nasdaq more than tripled from its 1998 correction low. The first part of this rally isn't on the chart because XLK didn't exist yet. SPY is currently about $330 and XLK is $95, call it a ratio of 0.30. The ratio peaked at 0.49, call it 0.50. Assuming the S&P 500 Index would gain around 20 percent in this scenario (SPX 4,000 anyone?), SPY would rally towards $400 per share. XLK would rally to $200, a 100 percent increase. AAPL could trade at $800, Amazon $5000, Google $3000, Facebook $1000, Tesla $1000, maybe AMD $500 assuming one or more stocks end up rallying 10 fold like the eventually dotbombs of the late 1990s. (Amazon was one of those dotbombs by the way).

This is not a forecast, but it is what a repeat of the 1999 market melt-up would look like.

2020-01-15

Bitcoin, Bonds and Gold

Gold and now Bitcoin has a positive correlation with long-term treasury bonds. Bond prices typically rise when the economy is weakening or there's panic in the air, it heralds more monetary intervention down the road. A breakout in Bitcoin will
A breakout in Bitcoin would be positive for the entire cryptocurrency space, but it needs to clear $10,000 for a really bullish picture to emerge.
BitcoinSV, which claims to be the true vision of digital money envisioned by Satoshi Nakamoto, experienced a breakout versus Bitcoin yesterday. A successful test of the 0.03 area would confirm the breakout.
Gold remains in a basing pattern. It could decline without wrecking the basing pattern. It is also looking potentially bullish in the short-term though. The junior miner ETF GDXJ needs to rally about 25 percent from here to complete its basing pattern.

2020-01-14

Oil Glut Expanding to Refined Products

Oil experts can put this into better context, but the 30,000 ft view is China doing what China does, building up massive overcapacity and exporting it to global market.

Caixin: China’s Growing Oil-Refining Overcapacity to Fuel Surge in Exports
China’s total refining capacity will grow by 27 million tons to reach 887 million tons in 2020, helping push exports up 18% to 64.5 million tons from last year’s 54.66 million tons, the CNPC Economics & Technology Research Institute (ETRI) said in a report on Monday, putting China on a path to overtake South Korea as the largest oil exporter in the Asia-Pacific region.

...The rise in excess capacity also comes as growth in domestic demand slows.

...Continued growth of refining capacity is largely a function of local government support in an effort to boost economic development, said Wang Lining, head of oil market research at the CNPC ETRI.

2020-01-13

Got Wheat?

Check out the price at the past two solar minimums.

2020-01-09

Falling Pork Prices Save China from a 5pc CPI Print

iFeng: 猪肉降价了!结束环比6连涨,带动鸡肉鸭肉下跌…商务部:加大投放力度
Under the combined action of a series of measures, there has been a positive change in pig production. The latest National CPI (Consumer Consumer Price Index) released by the National Bureau of Statistics in December shows that food price inflation has eased, especially the end of the 6-month sequential increase in pork prices. The year-on-year increase in pork prices also dropped 13.2 percentage points from November. Market analysis believes that the coming of the Spring Festival will continue to drive food prices up. It is expected that there will still be inflationary pressures in early 2020, but pork prices will have downward pressure after the Spring Festival.

It is worth noting that structural inflation has been repaired. Food prices in December 2019 increased by 17.4%, a decrease of 1.7 percentage points from the previous month; non-food CPI rose by 1.3% year-on-year, 0.3 percentage points higher than the previous value. Analysis believes that in the next stage, it is necessary to focus on the advent of the Spring Festival, which may continue to drive up food prices, and still need to continue to pay attention to the rise in oil prices caused by the unstable and uncertain international environment.
NBS: 2019年12月份居民消费价格同比上涨4.5%

2020-01-07

Coupa Troopa Update

Diamonds make for powerful moves.

2020-01-04

National Socialist Greens in Austria

The Hitler coalition of nationalists, socialists and greens is back on in Austria.

Guardian: Austria's Greens vote to enter government with People's party
Members of Austria’s Green party voted on Saturday to join a new government led by the conservative former chancellor Sebastian Kurz, clearing the final hurdle for an untested national left-right alliance.

The coalition pact approved by their party leadership and Kurz’s People’s party earlier this week was backed by 93% of Green delegates . Out of 264 delegates, only 15 voted against or abstained.
Populism is a roulette wheel. Every country is spinning the wheel. Anglo countries have "first past the post" electoral systems that temper volatility, while European countries with proportional representation can produce some interesting mixes. The media has told us for years that the Austrian populists are Nazis or far-right extremists. The alliance with Greens cements the comparison. They don't seem panicked though, almost as if their years of panic was total bullshit.

2020-01-03

The Song Remains the Same in China

Caixin: Major City Land Sales Break Record as Local Governments Fill Budget Gaps
Land sales in major Chinese cities hit a record high in 2019 as officials struggled to fill budget gaps left by tax and fee cuts that have bitten into their fiscal revenue.

Land sales revenue in 50 cities last year grew to a record 4.2 trillion yuan ($601.6 billion) as of Dec. 26, marking a jump of 17.6% from the same period in 2018, according to data provided by a research center of Hong Kong-based Centaline Property Agency Ltd.

“It is the first time that the land sales revenue of the 50 cities surpassed 4 trillion yuan,” said Zhang Dawei, chief analyst at the Centaline research center.
Land sales fund infrastructure investment which makes land valuable. The economy is dependent on this relationship for GDP growth. China has wanted to escape this "trap" for more than 5 years and finds itself more dependent than ever.

2020-01-02

A Pick for 2020

Platinum, and NCP.TO (NCPCF in the U.S.)