The Chinese are running scared. They know if they don’t solve the Coronavirus, their economy will tank big-time, long-term. Further Xi and his bunch will lose their jobs. And that’s the worst. Heck, Xi made himself president for life.
So, they’re pulling out all stops.
Watch your email inboxes and social media for a blitz from Chinese people co-opted into sending positive coronavirus news to everyone and their uncle in America.
Meanwhile, the Economist is waxing enthusiastically on America’s economy:
Goldilocks and the three bears
After a nervy year America Inc has a bounce in its step
The corporate earnings recession may be over. But risks loom
Is the earnings recession over? Many observers of corporate life have been asking this question as America’s listed companies report last quarter’s results in January and February. The omens going into the decade’s first earnings season did not look good. The current expansion is the longest in American history, so a downturn seemed inevitable. Indeed, the first three quarters of 2019 saw year-on-year declines in earnings for the s&p 500 index of leading firms. Financial analysts had forecast another drop, of 2% or so, in the fourth, marking the first such prolonged malaise since 2015-16, when America suffered a manufacturing slump.
With firms accounting for two-thirds of s&p 500 earnings out of the way, the mood has shifted-and then some. American bosses have unfurrowed their brows. A survey of big firms’ chief executives by the Conference Board, a business think-tank, showed a rebound in confidence from a ten-year low in the third quarter. The latest poll of smaller firms by the National Federation of Independent Business, a trade group, also recorded greater optimism. Equities may be headed for what Michael Wilson of Morgan Stanley, an investment bank, calls “a Goldilocks environment”.
America’s biggest firms are leading the charge. Apple’s net income grew by 11% to a record $22.2bn thanks in part to surprisingly strong iPhone sales. A surging cloud business boosted Microsoft’s net income by 38% to $11.6bn. Even Amazon, renowned for profitless growth, increased net income by a tenth, year on year, to $3.3bn. But Big Tech is not alone. Industries from utilities to banks to health care appear to be back in business-prompting analysts to revise upwards their forecasts for 2020. Jill Casey of Bank of America expects profits to rise by 8% this year, compared with the latest estimate of about 1% for last year.
What happened? For a start, fears of a recession have not materialised. If anything, America’s economy is perking up. In January the imf forecast that American gdp would grow by 2% in 2020, faster than the euro area (1.3%) or Japan (0.7%). The “current activity indicator”, an aggregate of 37 economic metrics compiled by Goldman Sachs, an investment bank, rose sharply in January (see chart). Even manufacturing, where activity had been slowing since mid-2018, looks in better nick. A survey published on February 3rd by the Institute of Supply Management points to the first expansion in months.
America’s commercial truce with China announced in December played a role. Most bosses know that this “phase one” deal is imperfect. China’s commitment to purchase $200bn of American agricultural and other exports in 2020 and 2021 is widely seen as unrealistic. But the deal did make clear that President Donald Trump is willing to avoid an all-out trade war with America’s Asian rival, at least for the time being.
Mr Trump’s massive corporate tax cut continues to be a source of bosses’ contentment, as are low interest rates. So too is the absence of wage inflation-a big concern in boardrooms last year. David Kostin of Goldman Sachs argues that it should not be. He calculates that for the median stock in the American market, labour costs (including everything from salaries to share options to health insurance) are stable at around 13% of revenues-despite record-low levels of unemployment. Overall wage growth has been stuck around 3% a year for a while.
You can read The Economist’ piece here.
Yesterday’s bottom line (from Harry) updated
+ Get yourself a flu shot. You have a greater chance of dying from the flu than the coronavirus.
+ Yields are staying low. Bonds and CDs make no sense.
+ If you owe money — say on real estate or anything else — refinance it instantly, if not sooner.
+ Do not borrow money on your credit card. Interest rates will make you puke.
+ Yield stocks can make a little sense, since some offer capital appreciation. We have several: LADR (7.3% yield), AMLP (9.75%), BXMT (6.4%) and BX (3.79%)
+ Technology/cloud stocks make sense, but so do nice growing industrials, like Generac, which can’t keep up with the demand for emergency generators and ZTS, which keeps our precious pets alive and healthy. I also like the two inverter companies — SEDG and ENPH.
+ Keep away from all the sectors I’ve warned against — energy, mining, gold, precious metals, cannabis, bitcoin, big banks, etc.
+ A friend has huge position in XOM. He has “protected” himself against some of the fall by selling covered calls. He’s wasting his time. Exxon is going lower.
+ Residential real estate is crashing in some weird places — like the east side of New York City, which used to be pricey, but now is far cheaper than the West Side. Moreover, some of the east side apartments I’ve eyed lately have magnificent views, and bargain prices.
+ Don’t buy real estate that has retail stores. Want to see empty stores? I’m now running a bike tour of empty retail stores in Manhattan. In one hour, you’ll see 100 empty retail stores. Harry’s Bike Tour of Dead Retail Stores costs only $100. Cash only, please.
+ If own holiday or second or third homes in SALT states and are considering selling, do it instantly. Prices continue to fall. Take your loss and invest it in the market. You’ll recoup your loss in months.
+ Meantime, get a new, lower appraisal on the property you’re keeping. That will at least reduce your taxes which now must be paid with after-tax dollars.
+ You buy an apartment or house today you love it, want to live in it and enjoy it. You don’t buy it because it may appreciate, says master New York broker Nan Schiff.
+ Despite the recent rise in stocks, there are still great buys out there. Go through my list and see what you like — Click here.
I’m proud of my advice in this column over the past several years. I hope some of you followed it and are up nicely.
Latest free advice
+ Buying a helmet? Make sure it’s got Mips. That adds price, but hefty protection. Daughter Claire has done the research and will only buy Mips helmets for her kids. She doesn’t think I need one since my large nose will provide maximum protection. She’s lucky she got her mother’s gorgeous nose.
+ Don’t fall for cheap subscription deals that auto-renew into infinity. I’m still trying to close down my Bloomberg.com subscription. No luck. Three cancellation emails and I’m still waiting. Now I know why he’s a billionaire. Bloomberg.com is the roach motel of business information. You can never check out.
+ No one listens — even if they ask you for advice. All they want to be told is that they’re brilliant. All of my readers are intelligent enough to understand that?
+ Nobody reads the second point in your email. They only read the first, and — if you’re lucky — will answer your first point. But certainly not the second or third.
+ Don’t ever invest in anything IF you’ve only seen the “deck.” Anyone can write a handsome deck raving about the addressable (potential) market, and by implication, they can become a unicorn in 73 seconds flat. Total BS.
+ Want to do well in life? Flatter people. Thank people. Send them something thoughtful if they do something nice for you — if only a Hallmark greeting card.
+ If you deal with paying customers — don’t we all? — please answer their questions quickly. “May I exchange the helmet for a different size?” etc.
+ If you messed up, apologize profusely and send “apology” presents — e.g. your favorite recent book or a $100 Amex gift certificate.
+ You don’t need a password manager if you use Chrome. it remembers everything — even across the several laptops I use every day.
+ All my Verizon bills are too high. Ditto my DirecTV. I can’t find the energy to deal with them. I suspect that’s their “strategy.”
Why do I think this spam email is funny?
Bernie Sanders won New Hamphire
By the end of today I hope to have a new web site up and running — www.BernieSandersIsInsane.org.
I’m trying to also get www.BernieIsNuts.org.
I think I prefer nuts to insane. Your thoughts?
Stay tuned. — Harry Newton
Harry, I cant stop laughing…..
https://nypost.com/2020/02/12/the-next-progressive-threat-from-albany-universal-rent-control/amp/?__twitter_impression=true
There were many who felt FDR was a liability.
And much of politics since FDR has attempted to undo his contributions. That pendulum is still swinging.
yes, bernie is crazy, but so are his supporters!!!
sanders is the price you pay for ronald reagan, george w. bush, and donald trump.