Spekulatius

I think it is correct that WEB gets info from Bill Gates as well as lots of income ing data from his wholly owned business.I am sure he knows quite well the how the economy is doing right now almost to this day After all, if you own a railroad, huge utility’s , retail and manufacturing companies, insurance companies dealing with millions of co summers, you bet he has knows quite well that is going on right now, probably more so than most economic ist.

Didn't RuleNumberOne call this? He may have. I’m not too surprised but I’m pretty sure this was the first time I heard a Fed insider officially say this. So than the government can exert control on many US companies which is a giant step towards socialism. I said this before, but I think Bernie wins without being nominated.

I don’t know that Trump is a Pharma salesman too. He is peddling chloroquine again now in today’s briefing “It’s a powerful drug!”. “What do you have a lose?”

Non Covid-19 related medical issues. Dentists work, hip replacement, pacemakers. Everything that a wait a little, but shouldn’t.

I sold this because I realized that RR may get into a cash squeeze. Their cash flows have been weak all along and their maintenance contracts are based on flying hours, which I am guessing went to near zero. RR will not go bankruptcy. It is an strategic assets for the UK and the government own a golden share and will backstop them. I don’t think a backstop in Europe will be as painless than in the US. Governments in Europe do not shy away from taking control of a business. In the UK’ case, the most likely case is a capital raise that is backstopped by the government and will hand them effective control. It has happened before many decades (1970’s ?) ago , so it’s not without precedent at all

I don’t know about you, but I never had concerns after 9/11 to go out with friends. It might be different if you lived in NYC, but elsewhere; knowing how terrorism works, it’s not a compounding thing. You are quite safe after a terrorist attack, because they take a long time to plan out. Epidemics are different - they are compounding and follow exponential growth laws at least early on. In addition, they affect the whole county, the entire air travel and not just a few locations. I don’t intend to downplay 9/11, and I remember this vividly, but to me, it seemed like a piece of cake compared to this, unless one was in those doomed airplanes or twin towers of course. The big question is now have we reached the peak and how long is this shoulder going to last until we can assume it is safe to open bits and pieces here and there. I guess everything is progress but I don’t see normalcy for any month or to be specific early spring. by that time, we could have a nasty recession and a GDP that could still be down 5-10% from where we were at the 2/1/2020 run rate.

The problem is not just that we get the biggest depression like economy of our lifetime, the bigger problem is the equity valuations even based on pre-Covid-19 multiples are quite elevated. I concur that late 2018 was a way better buying opportunity because at that time, at least the economy was in a reasonable shape. Right now, who knows what we got.

Off the top of my head. Death is a terrible business, it is mostly small operators. And worst of all, it is NOT a high growth business. I remember looking up Japan, death numbers is increasing only about 1% / yr, and I don't think they can offer much more expensive services over time. Since you can’t really meet, there is no reason to do elaborate funerals. It’s turn and burn time ( cremation). More business potentially, but far less profitable.

1)We will rebound possibly 75% of The GDP quickly, but the rest will be much harder. A 25% gap will steel feel like an awful recession. 2) more intervention and higher taxes.

81k is on par with a model I posted here a few days ago. The model that Fauci presented with 100-240k dead was an outlier compared to anything else I have seen.

Can we go back to bitching about nasty viruses and the crappy economy, please, please!

I voted yes, low conviction. I believe the market will base in the 1600-2000 point range for the SP500. I do believe the economy has taken on a lot of damage and will be take more. In 5 years we will be over it, but will still feel the consequences. I feel this is worse than the GFC crisis, but time will tell. I could easily see scenarios where in 5 years we just reach the same GNP level that we were supposed to have in 2020 before this happened. I can also see pressure on profit margins from insourcing as well as higher taxes, especially for corporations. I feel like a V recovery is priced in, but any more dire scenario certainly not.

Risk factors are any chronic cardio issues, any lung impairment (Asthma etc.), smoking, vaping, obesity , age >60, being male, any immune system issues and probably a few others. It almost seems to perfectly target republicans voters, especially if they try to get ahead themselves with the herd immunity and don’t take any precautions whatsoever. In any case, it’s not just “older people”. Of course older people tend to compound risk factors which also compounds the risk getting serious complications. My wife treated what seemed a perfect fly health patient in his thirties for CV-19 who most likely got it from vaping (with friends?). Purely anecdotal, I know.

^ Excellent listfrom Nocalledstrikes. I would also point out that many of BRK ownership (banks, airlines) as well as fully owned subs (retail, PCP Iscar) are affected by the current crisis to a significant extend. Their crisis is just barely 4 weeks old, even though it feels like a long time.

The WH briefing are an example on how not to run meetings. Endless blabber, off topic excursions (often fueled by off topic questions). How many times did Trump say, “we have got to go back to work”. Whats up with his medical advice telling the doctors to “try chloroquine! “. Add a in a lot of advertisement for himself. It’s quite something to watch. He really needs to be coached on this, because it is embarrassing (imo). It’s a rating hit for sure, but in a good way?

Capitalism on the upside, socialism on the downside sounds like a great company slogan. Personally, I absolute think we should save our crude, not the E&P industry for later. If the latter goes broke, the rocks with shale oil will still be there in the future. No reason to exploit them when crude is plentiful. But I am not running the country and I think Trump will do something. It’s just his nature to meddle in stuff.

Listed below are some of the references used to formulate this post. I would say this is nothing new, just perhaps an accentuation of a previous trend, although it looks like a reversal. Since the GFC, there has been a marked shift in credit card usage. Consumers have deleveraged. The absolute balance is back to where it was before but it's still way down once adjustments are made for population and GDP growth. There is potentially an obvious contributing factor: the compensatory (and more) growth in the balance of the 'consolidated' credit card. It's reasonable to expect a net down effect on the credit card balance when circumstances force people to pay down and when the 'consolidated' credit card account explodes to the upside as people, in the aggregate, are not always stupid (think of the permanent income stuff that Mr. Milton Friedman, of Nobel fame, talked about). I would submit that the consequences of the growth of the 'consolidated' credit card account are hard to handicap and are certainly not covered by present-day stress tests (for BAC and others). https://wallethub.com/edu/cc/credit-card-debt/25533/ https://www.philadelphiafed.org/-/media/consumer-finance-institute/payment-cards-center/publications/discussion-papers/2016/dp16-01_what-happened-to-revolving-credit-card-balances-2009.pdf?la=en The second link deals with the revolving component but is relevant nonetheless. TL;DR version: If people continue to adapt their savings rate to the growth of the 'consolidated' credit card balance, they will eventually be able to spend more wisely but the interim period may be difficult for banks. https://fred.stlouisfed.org/series/PSAVERT Personal bias: I wonder if a beautiful deleveraging is possible. This is of interest here (and I am more interested in CC issues than BAC, so I am replanting this here. it also is of relevance for SYF and AXP or ADS. Today we have an unique situation of both a demand shock and an economic shock mostly related to the service sector . What is going to happen to existing CC issues in terms of income as well as defaults. The work from the Philadelphia Fed looking at what happened to the CC balances in 2009 is pretty interesting. I noticed the headline numbers of 27.8% balance reduction by defaults. that’s a pretty high number and I think we could easily see similar numbers today based on the suddenness of the economic shock. DFS CETC1 ratio is 10.5% and DYF is ~14.1% can they remain solvent? Looks a bit questionable to me, of course a lot depends on the speed of default, and their reoccurring income (which will also go down because customers will spend less ). Both companies and AXP are not part of the stress test any more, which could give some insight what is expected to happen during a severe economic shock unfortunately.

The last one maybe the key sentence. Doing nothin is nothin Trump’s vein, good or bad he feels the urge to do something, whether it works or not is a different question.

They have ~11.5B in contractual obligations coming due in 2020 per 2019 10k $8.2B in current assets and $20.2B incurrent liabilities. It’s a highly operationally levered business. Also, they will declare bankruptcy before cash runs out.

It doesn’t make sense to default on leases if you need the Aircraft to keep flying, it is quite another case, if there is tons of idle aircraft around and you can’t fly. In the latter case, it could make sense to default especially when everyone else is doing it too. It’s a bit the “Calvinball” angle that I have been pointing out in other threads that I have been pointing out which I think will make some notions about preconceived notions how things “should” work out obsolete. Regardless of the short term, I can’t really see a scenario where we don’t end up without a huge surplus of aircraft relative to demand in the medium term (2-3 years).

I don't think anyone is thinking air travel gets back to normal in a year's time but I have high confidence that it grows over the long-term and AerCap has enough liquidity and unencumbered assets to get well past the next two years even assuming a highly distressed environment. I think countries that rely heavily on tourism will bend over backwards to get people flying again. As I've already said, I know many people already taking advantage of cheap flights and booking vacations for end of summer early fall simply because they had to cancel their current ones. People still want to travel. I think leisure travel will recover much faster than business travel. This is just speculation though. So many variables to take into account. But if any bit of stability returns on a macro economic scale then I can see air travel ramping up within a 1-2 year time frame. This is my guess, but I think the flights end of summer will probably not happen. I am sure the airlines like the free working capital though. My wife had quite some trouble to get refunds for flights booked for April as the airlines push rebooking , but to when and where (from our perspective?). They are very slow doing so as it eats into their working capital. Refunds take 30 days plus....

Q: How much in tariffs would he have to add to "foreign oil" if U.S. already "~energy independent producer"? Just close off foreign imports altogether? Would it matter though as U.S. demand for oil has also cratered? Will WTI trade at a wide premium to Brent and will refiners get hosed? Or will refiners pass those costs to Americans who, though financially struggling, will willingly buy $3-4/gallon gasoline to fund the welfare for the oil industry so it helps DJT's reelection bid? US refineries right now export a lot of gasoline and other products and they would certainly get hosed. They probably would have to reduce throughput and certainly the increased input cost would be passed on the consumer for gasoline, diesel, heating oil as well as chemical products. To avoid influx of crude byproducts he would need to add tariffs for those as well or probably destroy these industries that use/produce them.

Who says we can’t drink? You gents are killing me! Our household right now - short version - consists of [2 x #metooCOVID-19?] - we bottomed out on Saturday March 14th 2020, both ill. Forced to switching to digital retailing [we chose nemlig.com] because of no access to testing as of now. She makes lists of what to order - I type them. At every order - if it's not already on the list - I add wine. Now she has started asking me : "Why are you ordering all that wine?" -I guess it's an unconscious mechanism. [ : - ) ] I hope you are doing OK with whatever bug you caught. It seems that the first line treatment is actually isotonic/sports drink, but I think adding a bit wine to the mix doesn’t hurt. One of the first thing I did was stocking on up wine, beer etc when the crisis got evident. I also have a subscription for a winery club that keeps the supplies coming. I have changed my signature accordingly a while ago. Yes, 200k is far above middle class Statistically, but depending on where you live, it doesn’t feel so. Median HH income in the town I live is ~140k and most towns around me are similar. Then there are other cities not so far where median HH income is 1/3 around ~50k. I would say that if the unemployment gets as bad as projected, this cohort could get hit badly too in terms of income loss and most probably haven’t 6 month of cash expenses, but that’s just my guess. We will probably see defaults in this group as well, because I don’t think this crisis is going to be over quickly.

That's interesting. From what i read a lot of lower-income people losing their jobs right now, will actually have more money coming in than before (combination of unemployment and the check from Mnuchin). How fast do you get an unemployment check after you file in the US. There might be some cash flow mismatch, but my impression was that for a couple of months most people will be able to scrape by. Supposedly (don't know how accurate it is) but 40% of Americans can't come up with $400 in an emergency. I guess they can try to scrape by on credit cards...but that seems kinda pointless long term. Hopefully with them spending less (can go out, cant drink, cant buy shit) for a month or two the extra money gets them through. Who says we can’t drink?

Yea. But shouldn't those people have some dough to tide them over though this? Plus calling 200k a year households middle class is quite a stretch. No matter the location. Isn't NYC median household income something like 60k? They should, but will they? It also depends how long this lasts. If it lasts 6 month, most of this cohort will be out of cash for sure. point being, they could be worse of then low income from a cash flow perspective for a long time.