Captain_Walker

MAN AND MONEY vs VIRUS! WHO WILL WIN?

Education
SP:SPX   S&P 500 Index
The picture of the 2019-nCOV is rapidly evolving. Globally there have been >14,000 cases and >305 deaths . The trajectory of spread of this virus has exceeded SARS (2003).

In under 20 days there are 14,544 cases. There were less than 20 cases in the same period for SARS.

SARS plateaued off at 8,500 cases after 100 days then fell off. What we're seeing in hard evidence is that nCOV is going rapidly exponential - almost doubling in 20 days what SARS reached in 100 days.

8 countries have effectively quarantined China in various ways. AND NOW - China has told everybody to calm down, that it will maintain financial stability and pump their market with USD$173 Billion from Monday 3rd February 2020. The FED and Australia are considering similar moves.

The global economic disruption in what was a 'risk-off' situation, is gonna be serious and probably last well over a year. This doesn't mean that the markets will tank over the next year. It means expect bearish pressure.

Think also about an 'endpoint'. How will anybody know when it is safe to open borders, trade and travel in China?

If the VIX gets above 53 there is serious trouble!
Declarations & Disclaimers: For the avoidance of doubt, this post is only about potential impact of a virus in financial contexts. I take no comfort at all in people suffering and dying. Whilst I am sorry about the human consequences, I deal with the markets as an instrument - like any other. It is not illegal or immoral to exploit the movement of any market for any cause. As usual this is not trading advice. If you lose your money, kindly sue yourself.
Comment: List of things China is doing to fight!

PEOPLE’S BANK OF CHINA
Supply 1.2 trillion yuan ($174 billion) to money markets on Monday, meaning a net 150 billion yuan injection
Provide banks 300 billion yuan in money for relending
Use open market operations and other tools to ensure sufficient liquidity, keep money market rates stable
Temporarily remove the cap on forex debt for some firms
Be less strict in checking banks’ required reserves at the end of January

CHINA BANKING AND INSURANCE REGULATORY COMMISSION
Lower lending rates and fees for companies and regions most affected by the outbreak
Suitably extend the grace period for firms that have difficulty meeting the end-2020 deadline to comply with new asset management rules
Allow some insurers to raise their investment in equities from the current limit of 30% of assets
Maintain the pace of overall credit expansion and continue to lower borrowing costs across China, especially to manufacturers, and to small and private firms
Encourage banks not to call in loans to firms affected by the virus, especially smaller ones; consider rolling over loans

CHINA SECURITIES REGULATORY COMMISSION
Temporarily halt night sessions for futures trading from Feb 3
Allow some share pledge contracts to be extended by as much as six months
Allow listed companies to apply to delay reporting financial results for 2019 and first quarter of 2020
Streamline corporate bond sales, including by allowing financial institutions to submit materials online
Raise financing quota for some brokerages and encourage them to boost capital
Comment: 2020-02-03: Chinese markets lost 8% at the open despite all the measures above.

BREAKING NEWS (2020-02-04 00:30) China death toll at 425, with 20,438 confirmed cases.
Comment: Deaths from virus now >500 and those infected continues to rise over 25,000! All this is on a parabolic or exponential track. For details see https://wuflu.live/

The markets are plain stupid! How? Hope of some cure and/or vaccine causes a push north by 250 pts on DJI. Why is this stupid? Simple - because even if a vaccine or cure was developed last week:
1. It won't be effective 100%
2. testing would take at least a year.
3. manufacture and distribution would take another year.
4. Not everybody who needs it will get it.
5. In the mean time the virus will continue to spread and possibly mutate - causing havoc in country and global economies.
Comment: Round one! Man and money win over virus in the market! 😲😄
Comment: Virus situation is rapidly worsening. Outright panic about to break out world wide. The transmissibility of this virus is now following that of the Flu epidemic of 1918 which killed millions.

But there are more problems ahead in China. Among a group of 138 patients, 26% required intensive care and 4.3% died, higher than other, broader estimates of fatality from the virus. This could mean that there is a mutation of the virus to a more dangerous strain.

FED balance sheet 42% of GDP @ 2020-01-26. Does money have value anymore? [Different perspective on the virus https://youtu.be/NjTdvALChwk ]