You got the feeling late Friday, as the market weakened, that the weekend (homonyms!) wasn't going to bring good news. Sure enough, it went from bad to worse.
Coronavirus has quickly spread worldwide. Iran, Italy, and Korea are among the next biggest hotspots outside of China. Here's how Communist party mouthpiece Hu Xijin put it on Twitter this morning:
"The risk of virus spreading widely in China has passed. Wuhan is still in lockdown while new infection cases are steadily decreasing,even disappearing, in other areas. Situation in countries such as S. Korea is worse than China. Global trade&travel could fall to large scale chaos."
It's one thing to price in a massive first-quarter growth hit from China being shut down (Goldman estimates a 0.8-point drag on the U.S.), and another when you have to add the rest of the world's biggest economies to that list. Your bright spots in the market today pretty much sum things up: Zoom is up 6%, because why ever hold a conference in person again? And Gilead is up 5% after a WHO official said at a briefing in Beijing that its experimental drug remdesivir is "one drug right now that we think may have efficacy."
We'll have a whopper of a show today covering every possible facet of the story and, importantly, getting the latest reports from China, Italy, and elsewhere.
Meanwhile, the 10-year yield is sinking back to almost record lows. It's trading under 1.37% as I write this, and I believe the all-time low is somewhere around 1.31%. We started the year at 1.9%! What's that going to mean for the U.S. housing market if the economy actually keeps chugging along? Housing, recall, is already plagued by shortages of affordable homes in particular. Plunging rates could worsen that, while not helping in new buyers who don't have enough for 20% downpayments.
I'm starting to like the Mark Grant (of B. Riley FBR) line: it's a "Borrower's Paradise*." His recommendation to investors on the other side of that is to consider quality closed-end mutual funds. But I just keep thinking about what longer-term distortions this is creating, especially since yields are global now but their impact is local.
And let's not forget the other big news out of the weekend: Bernie Sanders' big step towards being the Democratic party presidential candidate. I think it's not so much that his supporters are unaware of his Communist sympathies as willing to overlook them in order to advance--most importantly--Medicare For All.
Most people I follow are dismissing M4A as pie-in-the-sky, never-gonna-happen nonsense, but I'm not so sure. If voters in this country want government-run healthcare badly enough to advance Bernie, I actually think it's probably going to happen here soon enough.
And why not now? You certainly wouldn't have to worry about paying for it. Remember--it's a Borrower's Paradise.
See you at 1 p.m!
Kelly
*Who wants to write the song?
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