The now-ubiquitous Dr. Anthony Fauci told reporters that America’s virus response “isn’t like a light switch on and off.” But that might not be entirely true for the economy. It may be more like a light switch than Fauci’s estimate for the response. After turning the economy back on, Americans will still have to participate in social distancing, but going from only essential economic activity to even half of former capacity utilization could be a pretty powerful boost. That said, the longer America drags out its shutdown, the more likely it is a negative feedback loop will form, causing … [Read more...]
Amazon Suspending its Shipping Service
Shortages of labor and capacity brought on by the coronavirus outbreak have forced Amazon to suspend its Amazon Shipping service. Paul Ziobro reports in The Wall Street Journal: Amazon told shippers the service, known as Amazon Shipping, will be paused starting in June. It was available in just a handful of U.S. cities. Under the program, Amazon drivers would pick up packages from businesses and deliver them to consumers, rather than ship orders from Amazon warehouses. “We understand this is a change to your business, and we did not take this decision lightly,” Amazon said in a note to … [Read more...]
Is Warren a Skinny Dipper?
“You never know who is swimming naked until the tide goes out.” –Warren Buffett CNBC reports here that Buffett sold large stakes in Delta Airlines and Southwest Airlines last week. Berkshire now holds just under 9% of each firm. The chart below shows the prices of Southwest and Delta shares. Somebody has apparently been swimming naked. Who knew that dirty dog from Omaha was a skinny dipper! … [Read more...]
The Fed Set the Fire It’s Now Claiming to Fight
The firemen are also the arsonists; irresponsible policy from the Federal Reserve made the coronavirus crisis worse than it had to be, writes James Grant. He continues in The Wall Street Journal: It took a viral invasion to unmask the weakness of American finance. Distortion in the cost of credit is the not-so-remote cause of the raging fires at which the Federal Reserve continues to train its gushing liquidity hoses. But the firemen are also the arsonists. It was the Fed’s suppression of borrowing costs, and its predictable willingness to cut short Wall Street’s occasional selling … [Read more...]
What Should Harley Do Now?
Harley was Young Research’s "Stock of the Decade" in the 1990s. The shares were first recommended as a buy in May of 1992 at a price of $3.62. During the 2000s, we advised a series of buys and sells chronicled in the chart below. The chart runs through 2007 and there was only one additional buy and sell recommendation that was essentially a wash. On the sale we explained: “The dynamics of Harley’s business have changed. HOG has transitioned from a growth company to a cyclical company reliant on a consumer that may be jobless, over-indebted, and unable to obtain financing. Demand for … [Read more...]
The Russian Ruble Crisis
Six years ago, oil was trading at $100 per barrel and the Russian ruble was trading at 35 to the dollar. Translating that exchange rate into oligarch terms, it would have taken about 4.5 million rubles to buy one of Mercedes’ coveted G-class SUVs. Today, oil trades at about $20 per barrel and for oligarchs with 4.5 million rubles to spend on a SUV, it's time to start looking at Chevys. … [Read more...]
U.S. Intelligence Says China is Lying About its Coronavirus Numbers
According to sources in the U.S. intelligence community, China is lying about the number of cases and deaths the country has suffered from the COVID-19 coronavirus. It is easy to suspect funniness in China's COVID-19 reporting. Look for instance at the map of China's biggest cities below. There are 14 cities in China around the size of New York City, or larger. Among them, none but Wuhan come anywhere near the number of cases logged in The Big Apple. That's despite the virus reaching those cities before it came to NYC. (Quick note, the number of cases listed by each city is that of the … [Read more...]
Coronavirus Case Growth Update
Below are updated coronavirus case daily growth numbers through yesterday. Growth in cases in Italy continues to slow which offers hope for the U.S. and other countries still seeing too rapid case growth. South Korea’s numbers have ticked up, but still look under control. There have also been downticks in France, Germany, the U.S., and Spain, but it may be early to judge if those are real trends or testing constraints. … [Read more...]
Coronavirus “War” Spending Could Spark Higher Inflation
At Barron's, Randall W Forsyth explains that "war" spending in the battle to fight the effects of the coronavirus could spark higher inflation. He writes: Wartime finances that balloon budget deficits and that are covered by money-printing have proved inflationary throughout history. At the same time, globalization—already in retreat in the trade wars—will be curtailed further, as supply chains are relocated to avoid crossing borders, rather than to maximize comparative advantage. That will raise the cost of internationally traded goods at a time when prices of services already are moving … [Read more...]
Gold Please
Below is a chart of the Federal Reserve’s balance sheet. The Fed has gone into money-printing overdrive. Over the last month, the central bank has conjured over $1 trillion out of thin air to buy Treasury bonds and mortgage-backed securities. The Fed is printing at a pace of up to $125 billion per day. Once the stimulus passes, the Fed will be given about $500 billion in capital that can be leveraged up to 10X to buy more assets. The source of that leverage is newly printed money. We are talking about an additional $4.5 trillion. Meanwhile, the Federal Government is likely to run a … [Read more...]
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