“Negative Nines & $1.5T” Vista Partners Daily – March 12, 2020

The world and the US economy slowed down measurably again today as a number of coronavirus containment procedures rolled out and surfaced via announcements including closures & suspensions of many schools, athletic tourneys and leagues, businesses, and flights between the US to Europe to name a few. In turn, it was an uglier day in the world and the same could definitely be stated for the markets, which saw the major indices close down sharply all in the negative nine percentage range while falling off the cliff until the close of trading. The Fed did try to bring forth support as they stepped forward with a $1.5T pledge to add liquidity in the markets. However, the markets shrugged it off and continued its selloff. The $1.5T is being offered through repurchase (Repo’s) agreement operations based out of the Federal Reserve Bank of New York which will seek to provide financing for banks & broker-dealers at the center of the economy to enable and ensure trading and flow of the markets, etc.

At the close of trading the S&P 500 dropped by -9.51%, the Dow dropped by -9.99%, the Nasdaq dropped by -9.43% & the Russell dropped by -11.18%. The FAANG stocks drove down the slippery, steep, & jagged road of the markets again today. Facebook (FB) closed at $154.47/share, -9.36% just off of its 52-wk low, Alphabet (GOOG) closed at $1,114.91/share, -8.27%, Amazon (AMZN) closed at $1,676.61/share, -7.92% approx. $3 off of its 52-wk low, Apple (AAPL) closed at $248.23/share –9.88%  & Netflix (NFLX) closed at $315.52/share, off -9.91%. With the negative trading session, the Velocity Shares Daily 2x VIX Short-Term ETN (TVIX), a leveraged “bet” against the market rising, closed at $397.89/share up an amazing  +46.97%%. TVIX’s 52-wk low which was not long ago is $38.33/share.

Oil prices also dropped -4.3% and closed at $31.57/bbl after yesterday’s  Saudi Arabia moves to boost production by 1M barrels/day to 13M barrels/day and the added worries of global growth as the economy grinds to a halt in reaction to the coronavirus and the associated actions. The S&P 500 energy sector was off -12.3%.

However, US treasury yields recovered a bit again today as the 2-yr yield closed flat at .49% while the 10-yr yield closed 3 basis points higher at .85%. The U.S. Dollar Index also strengthened by +.8% to close a 97.25.

A couple of economic points surfaced today as the Producer Price Index for February dropped by -.6% month/month & the core PPI dropped by -.3%. The initial jobless claims report confirmed a drop by 4k for the week ending March 7 to 211k while continuing claims for the week ending February 29 dropped by 11k to 1.722M.

A bright spot to note again was served from San Francisco’s Vir Biotechnology (VIR) which rose another +11.34% to close at $37.60/share. Vir announced this week a research collaboration agreement with the National Institutes of Health (NIH) and the National Institute of Allergy and Infectious Diseases (NIAID), Vaccine Research Center (VRC) to advance characterization and development of human monoclonal antibodies (mAbs) against coronaviruses, including SARS-CoV-2, the virus that causes the disease COVID-19. The joint project, which will begin this week, will augment ongoing efforts by both parties to identify antibodies that can be used to prevent or treat the infection with existing and emerging viruses and help inform the development of vaccines. Under the terms of the agreement, Vir and NIAID will work together to identify and optimize combinations of antibodies against coronaviruses, including SARS-CoV-2, SARS, and MERS, as well as antibodies that may be effective across additional types of coronaviruses. The two parties will exchange antibodies and other materials for testing in combination and individually and, by mutual agreement, will perform in vivo animal studies to analyze immune responses.

Economic Reports

On Monday, we did not receive any economic data. 

On Tuesday, we received the NFIB Small Business Optimism Index for February, which confirmed a higher move to 104.5.

On Wednesday, the Consumer Price Index (CPI) report revealed a move higher by +.1% month/month in February & the core CPI moved higher by +.2%. The Treasury Budget report for February also confirmed a deficit of $235.34B vs. a deficit of $233.98 bln a year ago so, not a great deal of change. The weekly MBA Mortgage Applications Index report showed a massive +55.4% increase with the lowering of interest rates.

On Thursday, the Producer Price Index for February dropped by -.6% month/month & the core PPI dropped by -.3%. The initial jobless claims report confirmed a drop by 4k for the week ending March 7 to 211k while continuing claims for the week ending February 29 dropped by 11k to 1.722M.

Investing & Inspiration

“The riskiest thing we can do is just maintain the status quo.
I get up at 4:30 in the morning, seven days a week, no matter where I am in the world.
I think it is important for people who are given leadership roles to assume that role immediately.
What I’ve really learned over time is that optimism is a very, very important part of leadership.” Bob Iger, Ceo of Disney

“There are old traders and there are bold traders, but there are very few old, bold traders.”-Ed Seykota

“Let this scenario play out on its own, in its own fashion. As you watch it unfold, you will soon be grateful that you choose the peaceful path. Remember — those who live by the sword, die by the sword.”

“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” -Jim Cramer

“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” -Mark Cuban

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“The only true test of whether a stock is “cheap” or “high” is not its current price in relation to some former price, no matter how accustomed we may have become to that former price, but whether the company’s fundamentals are significantly more or less favorable than the current financial-community appraisal of that stock.” -Philip Fisher

“I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.” -Richard Dennis

“The four most dangerous words in investing are: ‘this time it’s different.” -Sir John Templeton

“Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.” -Arnold Schwarzenegger

Tomorrow

Tomorrow’s significant economic data report schedule will include the following:

• The preliminary University of Michigan Index of Consumer Sentiment for March
• The Export and Import Prices for February