investmentwatchblog--2020-05-21--With Covid-19 infecting millions across the world, China is facing an unprecedented global backlash

With Covid-19 infecting millions across the world, China is facing an unprecedented global backlash that could destabilise its reign as the world

Its neighbour India has sensed an opportunity and is keen to make inroads to a space it hopes China will vacate sooner rather than later .
China ’ s weakened global position is a “ blessing in disguise ” for India to attract more investment , transport minister Nitin Gadkari said in a recent interview .
The northern state of Uttar Pradesh , which has a population the size of Brazil , is already forming an economic task force to attract firms keen to ditch China .
India is also readying a pool of land twice the size of Luxembourg @ @ @ @ @ @ @ manufacturing out of China , and has reached out to 1,000 American multinationals , Bloomberg reported .
“ This outreach has been an ongoing process , ” Deepak Bagla , chief executive of Invest India , the government ’ s national investment promotion agency told the BBC .
“ Covid will only accelerate the process of de-risking from China for many of these companies.
” The US-India Business Council ( USIBC ) , a powerful lobby group that works to enhance investment flows between India and the US , also said that India @ @ @ @ @ @ @ “ We are seeing India prioritise efforts to attract supply chains , both at central and state government level , ” Nisha Biswal , President of USIBC and the former assistant secretary of state for south and central Asian affairs in the US Department of State , told the BBC .
@ realDonaldTrump Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people .
Please explain to this dope that it was the “ incompetence of China ” @ @ @ @ @ @ @ this mass Worldwide killing !
78 % Of Americans Are Willing To Pay More For Non-China Made Products ; Poll A Bloomberg poll has revealed that an overwhelming majority of Americans would be willing to spend more money on products if they are manufactured outside of China , with 40 % saying they simply will not buy anything made in China at all .
In addition to these findings , 55 % said that they do not believe China can be trusted to fulfil its trade-deal commitment to buy more U.S. products , @ @ @ @ @ @ @ import restrictions over the pursuit of free-trade deals as a better way to boost the U.S. economy .
The findings come as President Trump announced that he now feels ‘ differently ’ about the trade deal he signed with China earlier this year .
” I feel differently now about that deal than I did three months ago , ” Trump told reporters Tuesday .

Its neighbour India has sensed an opportunity and is keen to make inroads to a space it hopes China will vacate sooner rather than later.
China’s weakened global position is a “blessing in disguise” for India to attract more investment, transport minister Nitin Gadkari said in a recent interview. The northern state of Uttar Pradesh, which has a population the size of Brazil, is already forming an economic task force to attract firms keen to ditch China.
India is also readying a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China, and has reached out to 1,000 American multinationals, Bloomberg reported.
“This outreach has been an ongoing process,” Deepak Bagla, chief executive of Invest India, the government’s national investment promotion agency told the BBC. “Covid will only accelerate the process of de-risking from China for many of these companies.”
The US-India Business Council (USIBC), a powerful lobby group that works to enhance investment flows between India and the US, also said that India has significantly stepped up its pitch.
“We are seeing India prioritise efforts to attract supply chains, both at central and state government level,” Nisha Biswal, President of USIBC and the former assistant secretary of state for south and central Asian affairs in the US Department of State, told the BBC.
www.bbc.com/news/world-asia-india-52672510
Donald J. Trump
@realDonaldTrump
Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing!
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5:35 AM – May 20, 2020…
www.zerohedge.com/political/latest-escalation-president-trump-blames-china-mass-worldwide-killing
78% Of Americans Are Willing To Pay More For Non-China Made Products; Poll
A Bloomberg poll has revealed that an overwhelming majority of Americans would be willing to spend more money on products if they are manufactured outside of China, with 40% saying they simply will not buy anything made in China at all.
In addition to these findings, 55% said that they do not believe China can be trusted to fulfil its trade-deal commitment to buy more U.S. products, while 66% said they favor raising import restrictions over the pursuit of free-trade deals as a better way to boost the U.S. economy.
The findings come as President Trump announced that he now feels ‘differently’ about the trade deal he signed with China earlier this year.
”I feel differently now about that deal than I did three months ago,” Trump told reporters Tuesday.
summit.news/2020/05/20/poll-78-of-americans-are-willing-to-pay-more-for-non-china-made-products/
Spokesman speaks stupidly on behalf of China, trying desperately to deflect the pain and carnage that their country spread throughout the world. Its disinformation and propaganda attack on the United States and Europe is a disgrace…. — Donald J. Trump (@realDonaldTrump) May 21, 2020
h/t Q33


investmentwatchblog--2020-05-21--What I Do When Markets Make No Sense

What I Do When Markets Make No Sense

Which way from here ?
How do we separate what we know from what is unknowable ?
And how can @ @ @ @ @ both reduce risk and capitalize on high-probability of future gains , despite unprecedented and unpredictable @ @ @ @ @ Rule , CEO of Sprott Asset Management , returns to Liberty and Finance / Reluctant @ @ @ @ @ questions and to share his seasoned and successful habits of thought and action which have @ @ @ @ @ well during volatile and cyclical times of trial and triumph .

Rick Rule interviewed by Dunagun Kaiser on Reluctant Preppers
Which way from here? How do we separate what we know from what is unknowable? And how can we take prudent actions to both reduce risk and capitalize on high-probability of future gains, despite unprecedented and unpredictable forces at play?
We are primarily funded by readers. Please subscribe and donate to support us!
Rick Rule, CEO of Sprott Asset Management, returns to Liberty and Finance / Reluctant Preppers to answer viewers’ questions and to share his seasoned and successful habits of thought and action which have served him and his clients well during volatile and cyclical times of trial and triumph.


investmentwatchblog--2020-05-21--Even CNN Admits Trump will win!

Even CNN Admits Trump will win!

Trolling through news today I came across this CNN story… If the 2020 race moved 8 points in Trump ’ @ @ @ @ @ d win .
You could even concentrate on just the most recent incumbent elections of @ @ @ @ @ 2020 , opinions of the incumbents ( George W. Bush in 2004 and Barack Obama @ @ @ @ @ early .
The final national results in those races differed from the May polls by @ @ @ @ @

Trolling through news today I came across this CNN story…
Trump has a real shot of winning
If the 2020 race moved 8 points in Trump’s direction, he’d win.
You could even concentrate on just the most recent incumbent elections of 2004 and 2012. Like 2020, opinions of the incumbents (George W. Bush in 2004 and Barack Obama in 2012) were hardened early. The final national results in those races differed from the May polls by 3 and 4 points.
www.cnn.com/2020/05/20/politics/trump-2020-analysis/index.html
Jake


investmentwatchblog--2020-05-22--Treason Runs Deep With The [DS], Ratcliffe Next DNI, Buckle Up

The [ DS ] /MSM are now doing everything and anything but at each turn the people are finding out @ @ @ @ @ .
Treason runs deep with the [ DS ] .
Ratcliffe was just confirmed as @ @ @ @ @ [ DS ] are now blocked , they are exposed , there is no place @ @ @ @ @ are coming for them .

The [DS]/MSM are now doing everything and anything but at each turn the people are finding out that they have been lying. Treason runs deep with the [DS]. Ratcliffe was just confirmed as the next DNI, the [DS] are now blocked, they are exposed, there is no place to hide, the patriots are coming for them.
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investmentwatchblog--2020-05-22--Median Home Price Does Classic Head-Fake as Home Sales Plunge and Condo Sales Collapse

Turmoil in the housing market and its impact on the “ median price.
” Across the US , despite record low mortgage rates , sales of “ existing homes ” – closed transactions of previously owned single-family houses , townhouses , condos , and co-ops – plunged 17.8 % in April from March , after having already plunged 8.5 % in March from February , to a seasonally adjusted annual rate of 4.33 million homes , last seen in September 2011 ( also 4.33 million ) .
The last time sales were lower was in July 2010 .
This knocked @ @ @ @ @ @ @ 25 % from pre-Covid February ( data via YCharts ) : Compared to April 2019 , homes sales dropped 17.2 % , according to the National Association of Realtors today .
It was the sharpest year-over-year drop since August 2010 , during the Housing Bust ( data via YCharts ) : But condo sales were hit much harder than house sales – and that ’ s crucial for the discussion of the median-price head-fake in a moment : • Sales of single-family houses dropped by 15.5 % year-over-year , to 3.94 million units @ @ @ @ @ @ @ sales of condos collapsed by 31.6 % year-over-year to 390,000 seasonally adjusted annual rate .
The “ Change in Mix ” causes the median price to do a head-fake .
“ Changes in the composition of sales can distort median price data , ” the NAR cautions in its footnote # 3 .
This is not normally a huge issue unless the market goes into turmoil when sales volume plunges and the bottom is falling out of the low end , because tens of millions of people have lost their jobs , and @ @ @ @ @ @ @ mortgages , which is now .
We ’ re seeing evidence in the NAR report that the bottom is falling out at the lower end : the 31.4 % collapse in condo sales .
We ’ ll get to that in a moment .
First , the median price jumped 7.4 % to $ 286,800 , which would be astonishing , given the turmoil in the market and the unemployment crisis , but this being a median price , it ’ s not astonishing ; it ’ s expected : The median price @ @ @ @ @ @ @ where half the homes sell for more and half the homes sell for less .
The median price metric can be distorted by the price-mix of the homes that have sold , as the NAR points out in its footnote # 3 .
When sales at the lower half of the spectrum plunge while the upper half is hanging on better , then this changes the price-mix of homes that have sold , with a relatively smaller number of lower-priced homes in the mix , and a relatively larger number of higher-priced homes @ @ @ @ @ @ @ mix the median price of all homes sold , though actual prices of individual homes may have gone into other directions .
How a “ change in mix ” skews the median price : The table below shows a very simple housing market .
In April 2019 , 9 houses sold , with a median price of $ 300,000 .
In April 2020 , the sold again , each at the same price as a year ago , but the two lowest-priced houses didn ’ t sell .
So actual house prices did @ @ @ @ @ @ @ median price jumped because the mix changed : That a median price index can be heavily skewed by changes in the mix is its primary disadvantage .
That ’ s why the Case-Shiller Home Price Index uses “ sales pairs , ” comparing prices of the same home over time , multiplied by thousands of homes in each market .
The Case-Shiller index essentially delineates how the price of the same home changes over time .
It is not impacted by mix .
But the Case-Shiller Index is a three-month rolling average released @ @ @ @ @ @ @ data set , released on April 28 , was the average of sales prices that were entered into public records in December , January , and February – useless for the Covid-19 market .
So we ’ re stuck with the median price index for now .
But we need to understand that changes in mix skew the median price away from actual changes in home prices .
And this is what happened in April .
Condo sales plunged 31.6 % year-over-year , more than twice the decline of house sales ( -15.5 @ @ @ @ @ @ @ lower-priced than houses .
The fact that condo sales plunged more than twice as much as house sales shows two things : One , the mix changed , resulting in a larger share of houses in the mix and a smaller share of condos ; and two , it indicates that the lower half of the price scale is seeing relatively larger volume declines – both houses and condos – than the higher end .
This dynamic makes intuitive sense : Volume plunged as tens of millions of people have lost their jobs @ @ @ @ @ @ @ , and those that still have jobs but are not at the top of the income scale and have perhaps lower credit scores and need riskier mortgages to buy a home , well , they have problems getting approved for a mortgage because now riskier mortgages have become harder to come by , and because lenders are getting more skittish about lending on condos , which are perceived as riskier .
So when there is a drastic drop in volume accompanied by a drastic change in the price-mix of what sells , the @ @ @ @ @ @ @ of how actual prices changed .

Turmoil in the housing market and its impact on the “median price.”
Across the US, despite record low mortgage rates, sales of “existing homes” – closed transactions of previously owned single-family houses, townhouses, condos, and co-ops – plunged 17.8% in April from March, after having already plunged 8.5% in March from February, to a seasonally adjusted annual rate of 4.33 million homes, last seen in September 2011 (also 4.33 million). The last time sales were lower was in July 2010. This knocked April’s sales volume down by 25% from pre-Covid February (data via YCharts):
Compared to April 2019, homes sales dropped 17.2%, according to the National Association of Realtors today. It was the sharpest year-over-year drop since August 2010, during the Housing Bust (data via YCharts):
But condo sales were hit much harder than house sales – and that’s crucial for the discussion of the median-price head-fake in a moment:
Sales of single-family houses dropped by 15.5% year-over-year, to 3.94 million units seasonally adjusted annual rate.
But sales of condos collapsed by 31.6% year-over-year to 390,000 seasonally adjusted annual rate.
The “Change in Mix” causes the median price to do a head-fake.
“Changes in the composition of sales can distort median price data,” the NAR cautions in its footnote #3.
This is not normally a huge issue unless the market goes into turmoil when sales volume plunges and the bottom is falling out of the low end, because tens of millions of people have lost their jobs, and lending standards have tightened up for riskier mortgages, which is now.
We’re seeing evidence in the NAR report that the bottom is falling out at the lower end: the 31.4% collapse in condo sales. We’ll get to that in a moment.
First, the median price jumped 7.4% to $286,800, which would be astonishing, given the turmoil in the market and the unemployment crisis, but this being a median price, it’s not astonishing; it’s expected:
The median price is the price in the middle, where half the homes sell for more and half the homes sell for less. The median price metric can be distorted by the price-mix of the homes that have sold, as the NAR points out in its footnote #3.
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When sales at the lower half of the spectrum plunge while the upper half is hanging on better, then this changes the price-mix of homes that have sold, with a relatively smaller number of lower-priced homes in the mix, and a relatively larger number of higher-priced homes in the mix. This change in mix pushes up the median price of all homes sold, though actual prices of individual homes may have gone into other directions.
How a “change in mix” skews the median price:
The table below shows a very simple housing market. In April 2019, 9 houses sold, with a median price of $300,000. In April 2020, the same top 7 houses sold again, each at the same price as a year ago, but the two lowest-priced houses didn’t sell. So actual house prices did not change at all. But the median price jumped because the mix changed:
That a median price index can be heavily skewed by changes in the mix is its primary disadvantage. That’s why the Case-Shiller Home Price Index uses “sales pairs,” comparing prices of the same home over time, multiplied by thousands of homes in each market. The Case-Shiller index essentially delineates how the price of the same home changes over time. It is not impacted by mix.
But the Case-Shiller Index is a three-month rolling average released with a one-month lag. The last data set, released on April 28, was the average of sales prices that were entered into public records in December, January, and February – useless for the Covid-19 market.
So we’re stuck with the median price index for now. But we need to understand that changes in mix skew the median price away from actual changes in home prices.
And this is what happened in April.
Condo sales plunged 31.6% year-over-year, more than twice the decline of house sales (-15.5%). Condos generally are somewhat lower-priced than houses. The fact that condo sales plunged more than twice as much as house sales shows two things: One, the mix changed, resulting in a larger share of houses in the mix and a smaller share of condos; and two, it indicates that the lower half of the price scale is seeing relatively larger volume declines – both houses and condos – than the higher end.
This dynamic makes intuitive sense: Volume plunged as tens of millions of people have lost their jobs and are out of the housing market, and those that still have jobs but are not at the top of the income scale and have perhaps lower credit scores and need riskier mortgages to buy a home, well, they have problems getting approved for a mortgage because now riskier mortgages have become harder to come by, and because lenders are getting more skittish about lending on condos, which are perceived as riskier.
So when there is a drastic drop in volume accompanied by a drastic change in the price-mix of what sells, the median price is not a reliable indicator of how actual prices changed.


investmentwatchblog--2020-05-22--The Worst Unemployment Spike In U.S. History – 1 Out Of Every 4 Workers Has Filed For Unemployment B

The Worst Unemployment Spike In U.S. History – 1 Out Of Every 4 Workers Has Filed For Unemployment Benefits In 2020

Even though most U.S. states have begun the process of “ reopening ” their economies , the unprecedented tsunami of job losses that we have been experiencing just continues to roll on .
On Thursday , we learned that another 2.4 million Americans filed initial claims for unemployment benefits during the previous week , and that brings the grand total for this pandemic to a whopping 38.6 million .
To get an idea of just how badly this swamps what we witnessed during the last recession , take a look at this chart .
This is the biggest spike in @ @ @ @ @ @ @ a very wide margin , and analysts are expecting another huge number once again next week .
After my father got out of the U.S. Navy , he worked as a math teacher for many years , and throughout my life I have always had a deep appreciation for numbers .
And in this case , the numbers are telling us that we are facing something truly horrific .
During the month of February , the number of Americans that were currently employed peaked at 152,463,000 .
If you take the 38.6 million @ @ @ @ @ @ @ during this crisis and divide it by 152,463,000 , you will find that it gives you a figure of more than 25 percent .
In other words , more than one out of every four jobs in the United States is already gone , and more job losses will be coming week after week .
And of course not everyone that loses a job actually files a claim for unemployment benefits .
So the true percentage of Americans that have lost a job would be even higher .
It had been hoped that @ @ @ @ @ @ @ once states began “ reopening ” their economies , but so far that is not really materializing .
For example , Georgia was one of the first states to begin lifting restrictions , but that state also “ now leads the country in terms of the proportion of its workforce applying for unemployment assistance ” … Georgia ’ s early move to start easing stay-at-home restrictions nearly a month ago has done little to stem the state ’ s flood of unemployment claims — illustrating how hard it is to bring jobs back @ @ @ @ @ @ @ outside .
Weekly applications for jobless benefits have remained so elevated that Georgia now leads the country in terms of the proportion of its workforce applying for unemployment assistance .
A staggering 40.3 percent of the state ’ s workers — two out of every five — has filed for unemployment insurance payments since the coronavirus pandemic led to widespread shutdowns in mid-March , a POLITICO review of Labor Department data shows .
Our politicians really didn ’ t understand what they were doing when they started locking down state after state .
@ @ @ @ @ @ @ was in an extremely fragile state and was already moving rapidly toward recession territory , and now fear of COVID-19 has burst all of our economic bubbles .
The U.S. economy is now in a death spiral , and a survey that was just conducted by the Census Bureau came up with some numbers that are simply eye-popping… Already , we are beginning to see mortgage delinquencies rise to very alarming levels .
In fact , in April we witnessed the largest single month jump that has ever been recorded… Sadly , the @ @ @ @ @ @ @ to get worse .
The “ enhanced unemployment benefits ” that Congress recently passed have been helping many unemployed Americans to pay their mortgages , but now it appears that President Trump and Senate Majority Leader Mitch McConnell do not intend to extend those benefits past the July deadline .
They are concerned that those benefits have been so generous that they have been discouraging many Americans from going back to work , and they are quite right about that .
Unfortunately , it isn ’ t just homeowners that have been missing @ @ @ @ @ @ @ entire commercial real estate industry is on the precipice of a meltdown as rent payments and mortgage payments are being “ skipped ” all over the nation on a widespread basis .
On Thursday , we learned that even the owners of The Mall of America have been skipping their mortgage payments… Unless Congress steps in and showers the entire commercial real estate industry with giant mountains of cash , I don ’ t see how an unprecedented meltdown can be averted .
It is going to be horrifying to watch , and @ @ @ @ @ @ @ that we witnessed in 2008 .
Of course similar things can be said about the economy as a whole .
At this point , Bank of America is projecting that U.S. GDP will fall 40 percent on an annualized basis during the second quarter of this year… When Bank of America starts sounding like The Economic Collapse Blog , that is a clear sign that things are really starting to fall apart in a major way .
Now that restrictions are being lifted all over the nation , the number of confirmed COVID-19 @ @ @ @ @ @ @ and fear of this virus is going to paralyze economic activity for the foreseeable future .
And what most Americans still don ’ t understand is that what we have experienced so far is just the beginning…

by Michael Snyder
Even though most U.S. states have begun the process of “reopening” their economies, the unprecedented tsunami of job losses that we have been experiencing just continues to roll on. On Thursday, we learned that another 2.4 million Americans filed initial claims for unemployment benefits during the previous week, and that brings the grand total for this pandemic to a whopping 38.6 million. To get an idea of just how badly this swamps what we witnessed during the last recession, take a look at this chart. This is the biggest spike in unemployment in all of U.S. history by a very wide margin, and analysts are expecting another huge number once again next week.
After my father got out of the U.S. Navy, he worked as a math teacher for many years, and throughout my life I have always had a deep appreciation for numbers.
And in this case, the numbers are telling us that we are facing something truly horrific.
During the month of February, the number of Americans that were currently employed peaked at 152,463,000.
If you take the 38.6 million workers that have filed for unemployment benefits during this crisis and divide it by 152,463,000, you will find that it gives you a figure of more than 25 percent.
In other words, more than one out of every four jobs in the United States is already gone, and more job losses will be coming week after week.
And of course not everyone that loses a job actually files a claim for unemployment benefits. So the true percentage of Americans that have lost a job would be even higher.
It had been hoped that the unemployment numbers would begin to normalize once states began “reopening” their economies, but so far that is not really materializing.
For example, Georgia was one of the first states to begin lifting restrictions, but that state also “now leads the country in terms of the proportion of its workforce applying for unemployment assistance”…
Georgia’s early move to start easing stay-at-home restrictions nearly a month ago has done little to stem the state’s flood of unemployment claims — illustrating how hard it is to bring jobs back while consumers are still afraid to go outside. Weekly applications for jobless benefits have remained so elevated that Georgia now leads the country in terms of the proportion of its workforce applying for unemployment assistance. A staggering 40.3 percent of the state’s workers — two out of every five — has filed for unemployment insurance payments since the coronavirus pandemic led to widespread shutdowns in mid-March, a POLITICO review of Labor Department data shows.
Our politicians really didn’t understand what they were doing when they started locking down state after state. Coming into 2020, the U.S. economy was in an extremely fragile state and was already moving rapidly toward recession territory, and now fear of COVID-19 has burst all of our economic bubbles.
The U.S. economy is now in a death spiral, and a survey that was just conducted by the Census Bureau came up with some numbers that are simply eye-popping…
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Nearly half of Americans say that either their incomes have declined or they live with another adult who has lost pay through a job loss or reduced hours, the Census Bureau said in survey data released Wednesday. More than one-fifth of Americans said they had little or no confidence in their ability to pay the next month´s rent or mortgage on time, the survey found.
Already, we are beginning to see mortgage delinquencies rise to very alarming levels.
In fact, in April we witnessed the largest single month jump that has ever been recorded…
Mortgage delinquencies surged by 1.6 million in April, the largest single-month jump in history, according to a report from Black Knight, a mortgage technology and data provider. The data includes both homeowners past due on mortgage payments who aren’t in forbearance, along with those in forbearance plans and who didn’t make a mortgage payment in April. At 6.45%, the national delinquency rate nearly doubled from 3.06% in March, the largest single-month increase recorded, and nearly three times the prior record for a single month during the height of the financial crisis in late 2008, Black Knight said.
Sadly, the truth is that this is only going to get worse.
The “enhanced unemployment benefits” that Congress recently passed have been helping many unemployed Americans to pay their mortgages, but now it appears that President Trump and Senate Majority Leader Mitch McConnell do not intend to extend those benefits past the July deadline. They are concerned that those benefits have been so generous that they have been discouraging many Americans from going back to work, and they are quite right about that.
Unfortunately, it isn’t just homeowners that have been missing payments.
At this point, the entire commercial real estate industry is on the precipice of a meltdown as rent payments and mortgage payments are being “skipped” all over the nation on a widespread basis. On Thursday, we learned that even the owners of The Mall of America have been skipping their mortgage payments…
The biggest shopping center in the country, The Mall of America, has missed two months of payments on its $1.4 billion mortgage, a sign of just how much retail real estate owners are reeling during the coronavirus pandemic. The mall, operated by private developers Triple Five Group, skipped mortgage payments in April and May, according to Trepp, a New York-based research firm that tracks the commercial mortgage-backed securities, or CMBS, market.
Unless Congress steps in and showers the entire commercial real estate industry with giant mountains of cash, I don’t see how an unprecedented meltdown can be averted.
It is going to be horrifying to watch, and it is going to absolutely dwarf anything that we witnessed in 2008.
Of course similar things can be said about the economy as a whole. At this point, Bank of America is projecting that U.S. GDP will fall 40 percent on an annualized basis during the second quarter of this year…
Now that banks have had a chance to evaluate the collapse in the economy in the post-covid world, a new round of GDP forecast revisions is coming, and it’s a doozy, with Bank of America spearheading the latest effort by slashing its Q2 GDP forecast from -30% to -40%. Not without a trace of irony, BofA’s chief economist Michelle Meyer writes that “words cannot describe” the loss in economic output, which is “unlike anything we have seen in modern history.”
When Bank of America starts sounding like The Economic Collapse Blog, that is a clear sign that things are really starting to fall apart in a major way.
Now that restrictions are being lifted all over the nation, the number of confirmed COVID-19 cases is starting to rise again, and fear of this virus is going to paralyze economic activity for the foreseeable future.
And what most Americans still don’t understand is that what we have experienced so far is just the beginning…


investmentwatchblog--2020-05-22--CNN is a ridiculous parody of a news agency

Recently Chris Cuomo interviewed his brother Andrew Cuomo where they proceeded to do a “ prop comedy ” routine with @ @ @

Recently Chris Cuomo interviewed his brother Andrew Cuomo where they proceeded to do a “prop comedy” routine with his brother.
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investmentwatchblog--2020-05-22--Why Bear-Market Rallies Are So Tricky | Elliott Wave International

Many professional financial observers have opined that the stock market bottom is in .
Yes , stocks have rallied since @ @ @ @ @ the return of this sentiment should give investors pause .

Many professional financial observers have opined that the stock market bottom is in. Yes, stocks have rallied since March 23, however, the return of this sentiment should give investors pause.
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investmentwatchblog--2020-05-22--Perfect SPY Elliott Wave setup

Perfect SPY Elliott Wave setup

SPY just completed a textbook perfect Elliott Wave impulse and is starting a nice looking correction as well .
Yes , this is chart crayon drawing and I usually don ’ t pay attention to this stuff , but this market is so insane right now that I actually think this is going to work .
EDIT : Adding text of a comment I made to explain a bit more since this is actually legit DD and not a joke .
The thing is normally this stuff is bullshit , but it tends to work in super irrational markets .
@ @ @ @ @ @ @ and it can actually work in those markets .
Right now we are in a situation where the Fed ’ s QE has practically guaranteed that the market has liquidity and credit , which is what drives markets .
We won ’ t see a massive drop through the floor while liquidity is available .
That happens when WAY more people want to sell than buy and so sellers are willing to outcompete each other to execute a trade .
Right now , the market is purely a prediction market detached from fundamentals @ @ @ @ @ @ @ usual retail influence .
Retail investors are piling in without knowing what the hell they are doing ( AKA MANY OF YOU ) and adding to the liquidity but also adding volatility .
But , as soon as we see a correction begin these “ investors ” will get spooked and we will see a steep drop , followed by a buy back in because STOCKS ONLY GO UP and repeat .
This is basically textbook Elliott Wave behavior , which ultimately what the theory is about — predicting emotionally driven trading behavior @ @ @ @ @ @ @ information is only for educational purposes .
Do not make any investment decisions based on the information in this article .
Do you own due diligence .

by AvailableLight3
SPY just completed a textbook perfect Elliott Wave impulse and is starting a nice looking correction as well. Yes, this is chart crayon drawing and I usually don’t pay attention to this stuff, but this market is so insane right now that I actually think this is going to work.
EDIT: Adding text of a comment I made to explain a bit more since this is actually legit DD and not a joke.
The thing is normally this stuff is bullshit, but it tends to work in super irrational markets. A lot of crypto traders use EWT and it can actually work in those markets. Right now we are in a situation where the Fed’s QE has practically guaranteed that the market has liquidity and credit, which is what drives markets. We won’t see a massive drop through the floor while liquidity is available. That happens when WAY more people want to sell than buy and so sellers are willing to outcompete each other to execute a trade.
We are primarily funded by readers. Please subscribe and donate to support us!
Right now, the market is purely a prediction market detached from fundamentals and with a way more significant than usual retail influence. Retail investors are piling in without knowing what the hell they are doing (AKA MANY OF YOU) and adding to the liquidity but also adding volatility.
But, as soon as we see a correction begin these “investors” will get spooked and we will see a steep drop, followed by a buy back in because STOCKS ONLY GO UP and repeat. This is basically textbook Elliott Wave behavior, which ultimately what the theory is about — predicting emotionally driven trading behavior detached from fundamentals.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-05-22--Ron Paul is right. There is no chance the Fed will unwind any of this post-crisis balance sheet expa

Ron Paul is right. There is no chance the Fed will unwind any of this post-crisis balance sheet expansion.

See this clip , 1:04 mark .
Ben Bernanke tells @ RonPaul that his plan is to get the balance @ @ @ @ @ 1-trillion . '
( March 2010 ) There is no chance the Fed will unwind @ @ @ @ @ sheet expansion.t.co/yVHlMyp7xj

See this clip, 1:04 mark. Ben Bernanke tells @RonPaul that his plan is to get the balance sheet to 'something under $1-trillion.' (March 2010)
There is no chance the Fed will unwind any of this post-crisis balance sheet expansion.t.co/yVHlMyp7xj
— Peter Schmidt (The 92ers) (@The92ers) May 21, 2020


investmentwatchblog--2020-05-22--Imagine Fed’s surprise when they realise that another Deflationary Bust is developing…. despite floo

Imagine Fed ’ s surprise when they realise that another Deflationary Bust is developing… .
despite flooding the system with @ @ @ @ @ just bought another $ 80b in mortgage backed securities .
It accounted for 77 % @ @ @ @ @ .
Something is clearly going on in the real estate market .
Where there is @ @ @ @ @ pic.twitter.com/iEkLmovU9D

Imagine Fed’s surprise when they realise that another Deflationary Bust is developing…. despite flooding the system with money….! t.co/NYZkvXlLxG
Again.
The Fed just bought another $80b in mortgage backed securities.
It accounted for 77% of their stimulus this week.
Something is clearly going on in the real estate market.
Where there is smoke there is fire. pic.twitter.com/iEkLmovU9D
— Otavio (Tavi) Costa (@TaviCosta) May 21, 2020


investmentwatchblog--2020-05-22--According to the Fed model for evaluating equities, the S&P 500 is fairly valued at 7500 (conservati

According to the Fed model for evaluating equities, the S&P 500 is fairly valued at 7500 (conservatively).

According to the Wikipedia entry for the Fed model for evaluating equities : In its strongest form the Fed model @ @ @ @ @ market are in equilibrium , and fairly valued , when the one-year forward-looking earnings yield @ @ @ @ @ yield The 10 yr is currently trading at 0.67 % , which translates to a @ @ @ @ @ 2019 the S & P 500 earned $ 157 per share .
Let ’ s @ @ @ @ @ earnings fall to $ 50 per share in 2020 .
The S & P should @ @ @ @ @ parity with the Fed model for evaluating equities .
Disclaimer : This information is only @ @ @ @ @ not make any investment decisions based on the information in this article .
Do you @ @ @ @

by trollhard9000
According to the Wikipedia entry for the Fed model for evaluating equities:
In its strongest form the Fed model states that bond and stock market are in equilibrium, and fairly valued, when the one-year forward-looking earnings yield equals the 10-year Treasury note yield
The 10 yr is currently trading at 0.67%, which translates to a P/E of ~150. In 2019 the S&P 500 earned $157 per share. Let’s guess (conservatively) that earnings fall to $50 per share in 2020. The S&P should trade at 7500 to reach parity with the Fed model for evaluating equities.
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You’re welcome.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-05-22--What if jobs don’t come back? Stanford study says 42% of job losses will result in permanent job los

What if jobs don’t come back? Stanford study says 42% of job losses will result in permanent job loss. It’s a perfect storm of stupid in the stock market right now

Many Jobs May Vanish Forever as Layoffs Mount With over 38 million U.S. unemployment claims in nine weeks , one economist says the situation is “ grimmer than we thought.
” The PDF of the Borrero , Bloom , and Davis working paper I ’ ll try to quote some relevant sections from the NYT article : “ I hate to say it , but this is going to take longer and look grimmer than we thought , ” Nicholas Bloom , an economist at Stanford University , said of the path to recovery .
Mr. Bloom , a co-author @ @ @ @ @ @ @ ’ s effects on the labor market , estimates that 42 percent of recent layoffs will result in permanent job loss .
“ Firms intend to hire these people back , ” Mr. Bloom said , referring to a recent survey of businesses done by the Federal Reserve Bank of Atlanta .
“ But we know from the past that these aspirations often don ’ t turn out to be true.
” In this case , the economy that comes back is likely to look quite different from the one that closed .
@ @ @ @ @ @ @ normal , causing thinner crowds in restaurants , theaters and stores , at sports arenas , and on airplanes , then fewer workers will be required .
Large companies already expect more of their workers to continue to work remotely and say they plan to reduce their real estate footprint , which will , in turn , reduce the foot traffic that feeds nearby restaurants , shops , nail salons and other businesses .
Are the bulls here continuing to be bullish if this happens ?
New York Fed President John Williams Thursday @ @ @ @ @ @ @ damage from Covid-19 , warning of worsening unemployment and stating it will be some time before a clearer view on the economy develops .
“ It Felt Like A Death ” : 20 % Of Illinois Restaurants Will Go Out Of Business In Coming Months

Many Jobs May Vanish Forever as Layoffs Mount With over 38 million U.S. unemployment claims in nine weeks, one economist says the situation is “grimmer than we thought.”
The PDF of the Borrero, Bloom, and Davis working paper
I’ll try to quote some relevant sections from the NYT article:
We are primarily funded by readers. Please subscribe and donate to support us!
“I hate to say it, but this is going to take longer and look grimmer than we thought,” Nicholas Bloom, an economist at Stanford University, said of the path to recovery. Mr. Bloom, a co-author of an analysis of the coronavirus epidemic’s effects on the labor market, estimates that 42 percent of recent layoffs will result in permanent job loss. “Firms intend to hire these people back,” Mr. Bloom said, referring to a recent survey of businesses done by the Federal Reserve Bank of Atlanta. “But we know from the past that these aspirations often don’t turn out to be true.” In this case, the economy that comes back is likely to look quite different from the one that closed. If social distancing rules become the new normal, causing thinner crowds in restaurants, theaters and stores, at sports arenas, and on airplanes, then fewer workers will be required. Large companies already expect more of their workers to continue to work remotely and say they plan to reduce their real estate footprint, which will, in turn, reduce the foot traffic that feeds nearby restaurants, shops, nail salons and other businesses.
Are the bulls here continuing to be bullish if this happens?
Almost a million new amateur traders with an innate desperation to hear good news from one of the scammiest sectors of the market. WHAT COULD GO WRONG? t.co/FjMlmobfwi — Linette Lopez (@lopezlinette) May 21, 2020
Reopening reality check: Georgia's jobs aren’t flooding back. What a surprise… t.co/CesbDhBOPa — GregTheAnalyst (@Analyst_G) May 21, 2020
This is the same guy that told you the economy was fundamentally sound, that no recession was coming despite the yield curve inversion, and that repo was temporary.
He lost his dot plot a long time ago. t.co/Zmh2clUK6k — Sven Henrich (@NorthmanTrader) May 21, 2020
New York Fed President John Williams Thursday pledged unwavering commitment to limit the economic damage from Covid-19, warning of worsening unemployment and stating it will be some time before a clearer view on the economy develops.
“It felt like going through the grieving process, which I still am. Any time I thought about it, and I looked at the prospects, it just, in my gut, didn’t feel like it was something that would be workable.” This is the same guy that told you the economy was fundamentally sound, that no recession was coming despite the yield curve inversion, and that repo was temporary.
He lost his dot plot a long time ago. t.co/Zmh2clUK6k — Sven Henrich (@NorthmanTrader) May 21, 2020


Just the brrr-ginning$

Just the brrr-ginning$ pic.twitter.com/N3mJlezh8f
78 Central Banks around the world have cut interest rates in 2020… pic.twitter.com/b3RSx9hiLY
— Charlie Bilello (@charliebilello) May 21, 2020


investmentwatchblog--2020-05-22--Lot of talk already about 2nd wave of Covid-19. In California, the first wave is still ongoing.

Lot of talk already about 2nd wave of Covid-19 .
In California , the first wave is still ongoing .
@ @ @ @ @ cases is creeping up pic.twitter.com/LkRQikDpdx

Lot of talk already about 2nd wave of Covid-19. In California, the first wave is still ongoing. 7-day averages of new daily cases is creeping up pic.twitter.com/LkRQikDpdx
— Gregor Peter (@L0gg0l) May 21, 2020


investmentwatchblog--2020-05-22--Earnings expectations have completely collapsed globally

Earnings expectations have completely collapsed globally , but is that a good thing or a bad thing from a market @ @ @ @ @ the historical take + context : t.co/A7iWhi96pC pic.twitter.com/BMg7YezDW5

Earnings expectations have completely collapsed globally, but is that a good thing or a bad thing from a market cycle perspective? Here's the historical take + context: t.co/A7iWhi96pC pic.twitter.com/BMg7YezDW5
— Topdown Charts (@topdowncharts) May 21, 2020


investmentwatchblog--2020-05-22--$ESTC Soon to Rise, an unrecognized beneficiary of the Fortune 500’s E-Commerce Transition

On April 27th , Mark Cohodes , a well-known short seller and investor , mentioned his bullishness on Camping World .
His thesis was that people—needing a socially and medically acceptable form of escape / recreation—would turn to RVs and the outdoors , resulting in dramatic sales increases .
Since his interview , CWH has doubled in value from ~ $ 8 to ~ $ 18 .
Mark was able to look at an obvious shift ( quarantine ) in behavior and identify a non-obvious beneficiary ( RV / outdoor equipment sellers ) .
This is a great mindset when @ @ @ @ @ @ @ , we ’ ll take a look at another obvious shift and discuss a non-obvious beneficiary , Elastic N.V. ( ESTC ) .
I believe that ESTC will see it ’ s stock price rapidly appreciate after June 3rd , when ESTC ’ s earnings reveal that it ’ s highly undervalued compared to peers .
TL ; DR Buy ESTC for an undervalued tech play that capitalizes on increased traffic for online commerce/site search , as well as a shift to work from home ( all due to COVID ) This is @ @ @ @ @ @ @ re getting in while it ’ s hella cheap • Examples of this shift evident from other tech company earnings reports • Why ESTC is poised to benefit from this shift/said tech companies • Why ESTC is undervalued compared to peers It ’ s no secret that consumer spending is shifting online .
Online sales growth has been accelerating at 13+ % YoY—and those numbers are pre- Covid-19 .
Now that businesses are being forced to move online , this process will accelerate in a virtuous cycle : more online businesses = more @ @ @ @ @ @ @ = more market for businesses = more online businesses .
This shift has already largely occurred for big companies , but now this cycle will accelerate for small and medium sized companies .
To be successful here , it is crucial not only to provide consumers more options to appeal to their needs and convert to sales , but to also be able to understand user preferences by observing patterns in their browsing , so you can personalize presented options for optimal sales growth as well as customer retention .
The incentives to @ @ @ @ @ @ @ in more to e-commerce .
The second part of the shift is that manye companies are focusing on WFH ( work from home ) and are responding to new needs to support such a paradigm shift .
Obviously , these companies will need firewalls , endpoint protection , security etc .
as well as needing better ways to manage remote collaboration and access to files/documents from unsecured locations that may not have all the protections a “ secure facility ” like an office workplace , has established .
Indexing and searching those files/documents @ @ @ @ @ @ @ becomes relevant Evidence of the COVID Shift in Tech Earnings Let ’ s think about the less obvious implications of this combined shift .
What companies stand to benefit from continued WFH and from a massive spike in ecommerce / site usage ?
I ’ ll list some examples of companies that have seen extraordinary usage increases that are now reflected in their market valuation from recent earnings reports • SHOP reflecting a surge in both online sellers and online revenue sales • TWLO reflecting a massive surge in companies trying to reach @ @ @ @ @ @ @ detail on every single company above , but why don ’ t I just let you take a look at how these companies are doing recently .
So what in the hell is going on ?
Every company dipped during COVID as you can see , some reaching as low as half of the peak valuation they had pre-COVID in the massive bull run we saw beginning of 2020 .
Only to blow their previous all time highs out of the water in a massive rebound !
Why ?
The common theme is @ @ @ @ @ @ @ some cases being almost complete surprise profits vs loss expectations , with a general 5-15 % revenue surprise beat • SHOP was expected to have a .17c loss for Q1 , only to beat with a 19c profit !
• DDOG was expecting a 2c loss , only to have a 6c profit • TWLO was expecting an 11c loss only to have a 6c profit • FSLY was expecting 12c loss only to have a 6c loss • MDB ’ s earnings was last in January , so does not reflect COVID @ @ @ @ @ @ @ perception around its demand The source of these surprises is because people underestimated the COVID shift which has benefited these companies massively and acted as tailwinds vs the analyst perceived headwinds .
Now let ’ s get to the point of the article , who else can benefit from all the above shifts we described ?
Let me introduce you to Elastic , a company whose product you use literally everyday without knowing and benefits from the previously proven shifts .
Elastic provides a ( freemium ) open source software stack which allows @ @ @ @ @ @ @ is to Uber what Google is to the internet .
To further explain the necessity of this product , I ’ ll quote Scott Miller of Greenhaven Road Capital : “ The simplest form of search is a search box on a website like Cooking.com where users go to search the library of recipes .
However , with thousands of recipes indexed on the site , how should search results be ordered ?
What should be included ?
Do you allow for misspellings ?
Synonyms ?
If you are in charge of optimizing @ @ @ @ @ @ @ build your own search tool or integrate with the extensive built-in functionality of Elasticsearch.
” Scott continues to make the prescient point that for companies like Uber and Tinder , “ search [ and the data it generates ] is the product.
” For years , Elastic has been a vital component of the world ’ s most popular apps and business websites .
Take a look at some of Elastic ’ s customers here , and note that they are all big dogs : Shopify , Uber , Stack Overflow ( Twilio @ @ @ @ @ @ @ all told , over 32 % of the Fortune 500 use Elastic to power mission-critical search apps .
Even the peerless brokerage Robinhood—known for its elite technological focus—turns to Elastic .
Also , while it is not listed explicitly , many other companies you know of also use them like Netflix , LinkedIn , Slack and more .
Google a company and elastic search and you ’ ll probably find a blog post about how they use it .
As part of it ’ s support , Elastic has a holistic stack referred @ @ @ @ @ @ @ , Kibana ) that power a multitude of the needs that go beyond just supporting search , but also processing the data/logs , monitoring it , and visualizing it to identify patterns that can serve as opportunities for enhancing customer/product experience .
Their services can be used to index content for websites referred to as site search , but they also have a flavor of the service focused on Enterprise search to enhance workplace productivity .
As thousands of companies increasingly shift to online-only , WFH , and dealing with more site usage @ @ @ @ @ @ @ in-house search tools , or turn to a provider .
That means that the company which is able to be the best provider will win over these customers and benefit greatly—they ’ ll be the “ Camping World ” of this shift .
Who are Elastic ’ s competitors in the market ?
If you have the above needs , you will end up using either Elastic , Splunk , or Amazon Elasticsearch ( which I ’ ll cover in the next section ) to serve your needs .
Let ’ s table @ @ @ @ @ @ @ freak out just yet ) and establish Elastic as better than Splunk first .
First , Elastic ’ s pricing is much more forgiving than Splunk ’ s—vitally important given the current economic reality .
Elastic recently lowered its non-enterprise grade pricing over 60 % to $ 16.40 a month , which will be extremely appealing to cash-strapped businesses .
And ESTC ’ s enterprise grade product is far cheaper than Splunk ’ s , which is priced at $ 2000 a year , minimum .
Further , Elastic has been designed from @ @ @ @ @ @ @ ( as opposed Splunk ’ s machine-data parsing focus ) .
This is better suited to the needs of non-tech businesses who are now trying desperately to give customers a satisfactory web experience .
You can make your own determination based on the information in this comparison : Finally , I think that Elastic enterprise search is a great addition to Elastic ’ s offerings .
Enterprise search “ gives users the ability to explore content across common SaaS-based data sources ( including Google Drive , GitHub , Salesforce and Dropbox ) from @ @ @ @ @ @ @ coordinating both WFH and shifting online , this will be a huge boon , as a single searchable repository massively improves efficiency .
Now let ’ s tackle Amazon .
Before you go piss your pants , note that this is one case where Amazon is out of its element and has been unsuccessful despite being in market for almost five years already .
First , Amazon only became a competitor to Elastic by essentially copying it in an unethical but very Amazon-like manner ( software strip-mining ) .
However , I ’ @ @ @ @ @ @ @ of wooing new businesses even in light of Amazon ’ s sketchiness : ESTC has shown willingness to fight in the courts , and they , like MongoDB ( which is now at ATH despite Amazon ) , have other methods of continuing to be open-source while impeding unsavory appropriation from competitors .
Further , Elastic has an extreme focus on R & D investment , meaning that Amazon can not dedicate as many resources purely to search ( and the dataviz that results from it , etc. )
.
Lastly , ESTC @ @ @ @ @ @ @ as a product ( being the developers ) whereas Amazon can only provide support for the AWS component of their service .
All of this results in Amazon having far fewer notable clients despite debuting in 2015 !
Prime video is literally the most recognizable brand here from a consumer POV and they HAVE to use it : Don ’ t believe me that it ’ s fine to compete with Amazon ?
Here ’ s Shay Bannon , Elastic CEO , on their last earnings call : In my opinion , Elastic @ @ @ @ @ @ @ three-horse race , already beating Amazon and likely to beat Splunk .
That ’ s great , because it will accelerate Elastic ’ s two drivers of value : existing customer spend and new customer acquisition .
Elastic ’ s customers love the product .
According to their Q3 filing , Elastic ’ s Net Expansion Rate was over 130 % , meaning that existing customers spent 30 % QoQ on Elastic .
This metric has actually exceeded 130 % for 12 consecutive quarters .
Can you imagine a service that you would @ @ @ @ @ @ @ ( except Robinhood FDs ) Keep in mind that this is how well they do in a pre-COVID world—existing customers should spend even more this quarter due to the COVID shift and a desire to cater to customers more and more .
Having the analytics to optimize customer experience and retain them is priceless in this economy , add in that Elastic employs a pricing philosophy where you pay for the resources and data you use ( plus support / consulting fees ) , and the incentives are very aligned .
Validating this @ @ @ @ @ @ @ Twilio have emphasized an increased focus on data usage in recent presentations ( images taken from Shopify ’ s IP and Twilio ’ s most recent 10-Q , respectively ) : Instacart , Udemy , Robinhood , Shopify , Slack , Datadog , GitHub Soundcloud , F-commerce , Fiverr , Twilio , Fastly , Uber ( eats ) , etc .
: these are just a handful of companies which have seen usage dramatically increase .
That means that they should be using ESTC even more , too and earning even more revenue @ @ @ @ @ @ @ total number of customers by 8 % QoQ in Q3 .
This was a continuation of a positive customer growth trend , reporting gains of 700 , 900 , and 800 customers QoQ ( adding up to 10,500 paying customers today ) .
Elastic is good at attracting big accounts .
Accounts over 100k/y have seen quarterly increases of 35 , 50 , and 45 QoQ to 570 today .
Further , Elastic ’ s will continue to have a massive customer base from which to draw new customers .
The ELK stack @ @ @ @ @ @ @ there is a pretty obvious path to growth assuming customers can be converted—which they have shown that they can do .
And as is argued above , Covid should be a huge accelerant towards converting more .
Also , people will be incentivized to convert because ESTC is intelligently focusing on other solutions these customers need .
These include infrastructure monitoring and SIEM applications .
To further bolster these solutions , they ’ ve made prescient acquisitions , like Endpoint Protection in 2019 ( which , by the way , is a direct @ @ @ @ @ @ @ revenue from the professional services ( essentially customer support ) category increased 43+ % QoQ , showing that they aren ’ t ignoring the importance of the customer support driver .
In these dire times , this number will only increase—many companies literally can not afford to have their search fail .
When businesses are online , it is all the more important to retain customers and maintain their purchasing habits , particularly as customers are more highly conscious of their breadth of options .
Even before Covid , there was no question @ @ @ @ @ @ @ Simply look at their accelerating revenue and gross profit generation , which is driven ( 90+ % ) by Elasticsearch subscribers .
We ’ re seeing 40+ % growth , every year , without fail , and with margin maintenance : Put another way : “ ESTC ’ s dominance is also reflected in their ability to sustain revenue growth around 60 % w/ accelerating SaaS revenues : 70 % - > 106 % - > 114 % which now form 22 % of revenues vs 17 % a year ago .
SaaS @ @ @ @ @ @ @ overall GM has still stayed stable around 74 % .
” Additionally , it ’ s important to point out that , due to their financial calendar , the next filing will incorporate 2 months of “ Covid earnings ” as opposed to only one for companies like DataDog , because Q4 2020 ER on 6/3 reflects February-April , vs Jan-March as most companies we mentioned above .
That ’ s a double dose of COVID spikes meaning even more impressive gain opportunities !
They aren ’ t yet profitable ( which should @ @ @ @ @ @ @ is often held against them .
But in all seriousness , this is not always bad—think of early Amazon .
Like Amazon , Elastic spends a ton on R & D , rather than expansion : And despite R & D spend , operating margins are trendings in the right direction : -27 % - > -18 % - > -18 % .
IMO , the question is not “ if ” but “ when ” ESTC becomes profitable , and they ( like Shopify , for instance ) may achieve profitability this @ @ @ @ @ @ @ constant while revenue due to increased usage improves their bottom line ( post COGS of course ) .
All Search and No Play Makes Stack A Dull Toy So here ’ s the play .
ESTC ’ s stock has somewhat recovered from the impact of Covid , but it ’ s still ~5 % below where it was at its last ER at the end of February when it had a triple beat that sparked a 30 % ER spike from 63 $ open to 81 $ high before settling near 70 @ @ @ @ @ @ @ its PTs being in the $ 80 – $ 100 range .
However , because of the vast usage increase for their product which should occur from the en masse shift of WFH and web usage , it deserves an appreciation in price , not mere recovery .
Consider its peers are all at all time highs that are 20-30 , some cases 100 % higher than their previous peak , and if there is another big beat across the board , or surprise profit , ESTC will likely have a similar run @ @ @ @ @ @ @ up towards high end of its PT Previously , this stock has traded at 20x+ revenue .
Currently , it ’ s at around 14-15x , which is not accounting for the fact that this crisis should be helpful—and nor is it accounting for a stellar Q3 , which was somewhat lost in the sauce .
Keep in mind that stellar Q3 just had a 7c beat on earnings , and raise in guidance , and caused SP to rise 30 % .
Imagine what a COVID fueled beat and raise could do @ @ @ @ @ @ @ will all be reflected by the June 3rd ER .
Additionally , it ’ s worth noting that ESTC has had a recent run of beats : Ultimately , ESTC has an unfairly low EV to revenues when compared to competitors .
I think this might start to shift as their strategy which has been viewed historically as unclear , shows that it is paying off with customer traction and COVID tailwinds to approach profit in 2021 FY ( 2020 Calendar Year ) : If they do beat similar to last quarter , @ @ @ @ @ @ @ forecasts , it ’ s possible ESTC could surge another 20-30 % into the 90s—this would put its price in line with historical averages .
In any case , its average PT from analysts is ~ $ 84 .
Institutions and smart money know this .
This past quarter , ESTC has been among the top ten stocks hedge funds have increased stakes in .
Additionally , I don ’ t think this is fully priced in yet : IV is similar to its historical pre-earnings levels and likely will be inflated due @ @ @ @ @ @ @ Free cash flow and cash from operations have been down in the past few quarters .
• Their biggest moat is probably the fact that , because they are open source , they have hundreds of thousands of independent developers—but that ’ s also their biggest weakness ( e.g .
people can misconfigure Elastic Stack causing data breaches ) .
• SAAS companies may now be “ priced to perfection.
” • Elastic is prone to having human error related “ data breaches ” because people don ’ t know how to configure @ @ @ @ @ @ @ this is getting better but you still see reports regularly of morons from high profile companies that fucked up .
Obviously , I ’ m bullish .
But as always , look into the pros and cons and do your own DD !
If you ’ re searching for a play ( yes I am gay ) , this might be it .
6/19 $ 80 C if you want more risk / reward .
6/19 $ 85 C and above True wsb Yolo .
If you ’ re a more sophisticated brand @ @ @ @ @ @ @ nice way to lower your cost basis and avoid IV crush while still capturing high moon potential P.S .
if you ’ re on the fence , Splunk has ER after hours today , should be good signal of how ESTC does and it may get a boost from a beat there Disclaimer : This information is only for educational purposes .
Do not make any investment decisions based on the information in this article .
Do you own due diligence .

by Frostyfragzz
Storytime
On April 27th, Mark Cohodes, a well-known short seller and investor, mentioned his bullishness on Camping World. His thesis was that people—needing a socially and medically acceptable form of escape / recreation—would turn to RVs and the outdoors, resulting in dramatic sales increases. Since his interview, CWH has doubled in value from ~$8 to ~$18. Mark was able to look at an obvious shift (quarantine) in behavior and identify a non-obvious beneficiary (RV / outdoor equipment sellers). This is a great mindset when it comes to generating plays.
Here, we’ll take a look at another obvious shift and discuss a non-obvious beneficiary, Elastic N.V. (ESTC). I believe that ESTC will see it’s stock price rapidly appreciate after June 3rd, when ESTC’s earnings reveal that it’s highly undervalued compared to peers.
TL;DR Buy ESTC for an undervalued tech play that capitalizes on increased traffic for online commerce/site search, as well as a shift to work from home (all due to COVID)
This is SHOP/TWLO electric boogaloo, except you’re getting in while it’s hella cheap
Thesis Breakdown
Shift in market demand due to COVID Examples of this shift evident from other tech company earnings reports Why ESTC is poised to benefit from this shift/said tech companies ESTC competitors and why ESTC shines Why ESTC is undervalued compared to peers Potential ER outcomes and implications for market valuation Play recommendations Positions
The COVID Shift
It’s no secret that consumer spending is shifting online. Online sales growth has been accelerating at 13+% YoY—and those numbers are pre- Covid-19. Now that businesses are being forced to move online, this process will accelerate in a virtuous cycle: more online businesses = more options for consumers = more online spending = more market for businesses = more online businesses. This shift has already largely occurred for big companies, but now this cycle will accelerate for small and medium sized companies.
To be successful here, it is crucial not only to provide consumers more options to appeal to their needs and convert to sales, but to also be able to understand user preferences by observing patterns in their browsing, so you can personalize presented options for optimal sales growth as well as customer retention. The incentives to improve customer retention/experience will help consumers lean in more to e-commerce.
The second part of the shift is that manye companies are focusing on WFH (work from home) and are responding to new needs to support such a paradigm shift. Obviously, these companies will need firewalls, endpoint protection, security etc. as well as needing better ways to manage remote collaboration and access to files/documents from unsecured locations that may not have all the protections a “secure facility” like an office workplace, has established. Indexing and searching those files/documents is just another example of how search becomes relevant
Evidence of the COVID Shift in Tech Earnings
Let’s think about the less obvious implications of this combined shift. What companies stand to benefit from continued WFH and from a massive spike in ecommerce / site usage?
I’ll list some examples of companies that have seen extraordinary usage increases that are now reflected in their market valuation from recent earnings reports
SHOP reflecting a surge in both online sellers and online revenue sales TWLO reflecting a massive surge in companies trying to reach customers more proactively FSLY reflecting a huge surge in online content traffic DDOG reflecting a huge increase in monitoring/data analytics needs MDB reflecting a huge increase in demand for cloud databases
I can go into detail on every single company above, but why don’t I just let you take a look at how these companies are doing recently.
preview.redd.it/susf6cka94051.png?width=1152&format=png&auto=webp&s=21301456662c0dc5be2d8b603623a81c085ba440
So what in the hell is going on? Every company dipped during COVID as you can see, some reaching as low as half of the peak valuation they had pre-COVID in the massive bull run we saw beginning of 2020. Only to blow their previous all time highs out of the water in a massive rebound!
Why?
The common theme is massive beats on earnings reports, in some cases being almost complete surprise profits vs loss expectations, with a general 5-15% revenue surprise beat
SHOP was expected to have a .17c loss for Q1, only to beat with a 19c profit! DDOG was expecting a 2c loss, only to have a 6c profit TWLO was expecting an 11c loss only to have a 6c profit FSLY was expecting 12c loss only to have a 6c loss MDB’s earnings was last in January, so does not reflect COVID gains, however has been benefiting from perception around its demand
The source of these surprises is because people underestimated the COVID shift which has benefited these companies massively and acted as tailwinds vs the analyst perceived headwinds.
Now let’s get to the point of the article, who else can benefit from all the above shifts we described? Let me introduce you to Elastic, a company whose product you use literally everyday without knowing and benefits from the previously proven shifts.
The Beneficiary
Elastic provides a (freemium) open source software stack which allows searching within apps / websites. Elastic is to Uber what Google is to the internet. To further explain the necessity of this product, I’ll quote Scott Miller of Greenhaven Road Capital:
“The simplest form of search is a search box on a website like Cooking.com where users go to search the library of recipes. However, with thousands of recipes indexed on the site, how should search results be ordered? What should be included? Do you allow for misspellings? Synonyms? If you are in charge of optimizing search results on Cooking.com, you can build your own search tool or integrate with the extensive built-in functionality of Elasticsearch.”
Scott continues to make the prescient point that for companies like Uber and Tinder, “search [and the data it generates] is the product.” For years, Elastic has been a vital component of the world’s most popular apps and business websites. Take a look at some of Elastic’s customers here, and note that they are all big dogs:
preview.redd.it/xbieql0g94051.png?width=512&format=png&auto=webp&s=b2cd658861323b3f7993744ae86270705374f41b
Shopify, Uber, Stack Overflow (Twilio too, though not pictured)… all told, over 32% of the Fortune 500 use Elastic to power mission-critical search apps. Even the peerless brokerage Robinhood—known for its elite technological focus—turns to Elastic. Also, while it is not listed explicitly, many other companies you know of also use them like Netflix, LinkedIn, Slack and more. Google a company and elastic search and you’ll probably find a blog post about how they use it.
As part of it’s support, Elastic has a holistic stack referred to as ELK (Elastic, Logstash, Kibana) that power a multitude of the needs that go beyond just supporting search, but also processing the data/logs, monitoring it, and visualizing it to identify patterns that can serve as opportunities for enhancing customer/product experience. Their services can be used to index content for websites referred to as site search, but they also have a flavor of the service focused on Enterprise search to enhance workplace productivity.
As thousands of companies increasingly shift to online-only, WFH, and dealing with more site usage, they have two options: improve in-house search tools, or turn to a provider. That means that the company which is able to be the best provider will win over these customers and benefit greatly—they’ll be the “Camping World” of this shift.
Who are Elastic’s competitors in the market?
If you have the above needs, you will end up using either Elastic, Splunk, or Amazon Elasticsearch (which I’ll cover in the next section) to serve your needs. Let’s table Amazon for now (don’t freak out just yet) and establish Elastic as better than Splunk first.
First, Elastic’s pricing is much more forgiving than Splunk’s—vitally important given the current economic reality. Elastic recently lowered its non-enterprise grade pricing over 60% to $16.40 a month, which will be extremely appealing to cash-strapped businesses. And ESTC’s enterprise grade product is far cheaper than Splunk’s, which is priced at $2000 a year, minimum.
Further, Elastic has been designed from day-one as a full text search engine (as opposed Splunk’s machine-data parsing focus). This is better suited to the needs of non-tech businesses who are now trying desperately to give customers a satisfactory web experience. You can make your own determination based on the information in this comparison:
preview.redd.it/hvys389j94051.png?width=441&format=png&auto=webp&s=a7f9ec2c7d2b7de6927e7e829add9606fb90545a
Finally, I think that Elastic enterprise search is a great addition to Elastic’s offerings. Enterprise search “gives users the ability to explore content across common SaaS-based data sources (including Google Drive, GitHub, Salesforce and Dropbox) from a single search box.” For companies coordinating both WFH and shifting online, this will be a huge boon, as a single searchable repository massively improves efficiency.
Now let’s tackle Amazon. Before you go piss your pants, note that this is one case where Amazon is out of its element and has been unsuccessful despite being in market for almost five years already.
First, Amazon only became a competitor to Elastic by essentially copying it in an unethical but very Amazon-like manner (software strip-mining). However, I’m bullish on ESTC’s chances of wooing new businesses even in light of Amazon’s sketchiness: ESTC has shown willingness to fight in the courts, and they, like MongoDB (which is now at ATH despite Amazon), have other methods of continuing to be open-source while impeding unsavory appropriation from competitors. Further, Elastic has an extreme focus on R&D investment, meaning that Amazon cannot dedicate as many resources purely to search (and the dataviz that results from it, etc.). Lastly, ESTC actually can provide direct support for Elastic as a product (being the developers) whereas Amazon can only provide support for the AWS component of their service. All of this results in Amazon having far fewer notable clients despite debuting in 2015! Prime video is literally the most recognizable brand here from a consumer POV and they HAVE to use it:
preview.redd.it/doaxhbnm94051.png?width=512&format=png&auto=webp&s=a4bbd7afba5b7a3a791baf900adcdf47c518e3b8
Don’t believe me that it’s fine to compete with Amazon? Here’s Shay Bannon, Elastic CEO, on their last earnings call:
preview.redd.it/r40trvzo94051.png?width=512&format=png&auto=webp&s=fbea310253091c0c731fdffd5cb6c02bdbd1779b
In my opinion, Elastic will be the clear winner of this three-horse race, already beating Amazon and likely to beat Splunk. That’s great, because it will accelerate Elastic’s two drivers of value: existing customer spend and new customer acquisition.
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Existing Customer Spend
Elastic’s customers love the product. According to their Q3 filing, Elastic’s Net Expansion Rate was over 130%, meaning that existing customers spent 30% QoQ on Elastic. This metric has actually exceeded 130% for 12 consecutive quarters. Can you imagine a service that you would triple your spend on every twelve months (except Robinhood FDs)
Keep in mind that this is how well they do in a pre-COVID world—existing customers should spend even more this quarter due to the COVID shift and a desire to cater to customers more and more. Having the analytics to optimize customer experience and retain them is priceless in this economy, add in that Elastic employs a pricing philosophy where you pay for the resources and data you use (plus support / consulting fees), and the incentives are very aligned. Validating this theory, client companies like Shopify and Twilio have emphasized an increased focus on data usage in recent presentations (images taken from Shopify’s IP and Twilio’s most recent 10-Q, respectively):
preview.redd.it/ro2aaawt94051.png?width=512&format=png&auto=webp&s=f2b53f8d1e125f91b9289d198318bf24d64361ff
preview.redd.it/x575j0au94051.png?width=512&format=png&auto=webp&s=8bf716663d9035f83d95fe8311315e66f6ab4d46
Instacart, Udemy, Robinhood, Shopify, Slack, Datadog, GitHub Soundcloud, F-commerce, Fiverr, Twilio, Fastly, Uber(eats), etc.: these are just a handful of companies which have seen usage dramatically increase. That means that they should be using ESTC even more, too and earning even more revenue.
New Customer Acquisition
Elastic was able to increase its total number of customers by 8% QoQ in Q3. This was a continuation of a positive customer growth trend, reporting gains of 700, 900, and 800 customers QoQ (adding up to 10,500 paying customers today). Elastic is good at attracting big accounts. Accounts over 100k/y have seen quarterly increases of 35, 50, and 45 QoQ to 570 today. Further, Elastic’s will continue to have a massive customer base from which to draw new customers. The ELK stack has over 500 million downloads, so there is a pretty obvious path to growth assuming customers can be converted—which they have shown that they can do. And as is argued above, Covid should be a huge accelerant towards converting more.
Also, people will be incentivized to convert because ESTC is intelligently focusing on other solutions these customers need. These include infrastructure monitoring and SIEM applications. To further bolster these solutions, they’ve made prescient acquisitions, like Endpoint Protection in 2019 (which, by the way, is a direct blow to Splunk). Additionally, revenue from the professional services (essentially customer support) category increased 43+% QoQ, showing that they aren’t ignoring the importance of the customer support driver. In these dire times, this number will only increase—many companies literally cannot afford to have their search fail. When businesses are online, it is all the more important to retain customers and maintain their purchasing habits, particularly as customers are more highly conscious of their breadth of options.
Financials:
Even before Covid, there was no question that demand for ElasticSearch was growing. Simply look at their accelerating revenue and gross profit generation, which is driven ( 90+%) by Elasticsearch subscribers. We’re seeing 40+% growth, every year, without fail, and with margin maintenance:
preview.redd.it/7od2p2gx94051.png?width=1600&format=png&auto=webp&s=0bfb6214981f1e336a829c714e0633a87e470a13
Put another way: “ESTC’s dominance is also reflected in their ability to sustain revenue growth around 60% w/ accelerating SaaS revenues: 70% -> 106% -> 114% which now form 22% of revenues vs 17% a year ago. SaaS has slightly lower gross margins, but overall GM has still stayed stable around 74%.”
Additionally, it’s important to point out that, due to their financial calendar, the next filing will incorporate 2 months of “Covid earnings” as opposed to only one for companies like DataDog, because Q4 2020 ER on 6/3 reflects February-April, vs Jan-March as most companies we mentioned above. That’s a double dose of COVID spikes meaning even more impressive gain opportunities!
They aren’t yet profitable (which should appeal to an autist), which is often held against them. But in all seriousness, this is not always bad—think of early Amazon. Like Amazon, Elastic spends a ton on R&D, rather than expansion:
preview.redd.it/dcs9zszz94051.png?width=512&format=png&auto=webp&s=7f2412f4c6019d135a8755dc300848e2483d4eda
And despite R&D spend, operating margins are trendings in the right direction: -27% -> -18% -> -18%. IMO, the question is not “if” but “when” ESTC becomes profitable, and they (like Shopify, for instance) may achieve profitability this quarter if R&D expenses are constant while revenue due to increased usage improves their bottom line (post COGS of course).
All Search and No Play Makes Stack A Dull Toy
So here’s the play. ESTC’s stock has somewhat recovered from the impact of Covid, but it’s still ~5% below where it was at its last ER at the end of February when it had a triple beat that sparked a 30% ER spike from 63$ open to 81$ high before settling near 70.
That’s despite many of its PTs being in the $80 – $100 range. However, because of the vast usage increase for their product which should occur from the en masse shift of WFH and web usage, it deserves an appreciation in price, not mere recovery.
Consider its peers are all at all time highs that are 20-30, some cases 100% higher than their previous peak, and if there is another big beat across the board, or surprise profit, ESTC will likely have a similar run with series of upgrades and continuous rise up towards high end of its PT
Previously, this stock has traded at 20x+ revenue. Currently, it’s at around 14-15x, which is not accounting for the fact that this crisis should be helpful—and nor is it accounting for a stellar Q3, which was somewhat lost in the sauce. Keep in mind that stellar Q3 just had a 7c beat on earnings, and raise in guidance, and caused SP to rise 30%. Imagine what a COVID fueled beat and raise could do for the SP?
I think this will all be reflected by the June 3rd ER. Additionally, it’s worth noting that ESTC has had a recent run of beats:
preview.redd.it/md5i1m43a4051.png?width=512&format=png&auto=webp&s=d372211deb9dcae89ec549980491cb7529827d75
Ultimately, ESTC has an unfairly low EV to revenues when compared to competitors. I think this might start to shift as their strategy which has been viewed historically as unclear, shows that it is paying off with customer traction and COVID tailwinds to approach profit in 2021 FY (2020 Calendar Year):
preview.redd.it/71e16x75a4051.png?width=512&format=png&auto=webp&s=cefde9ecb1e1582235ad808246ebc28388554f29
If they do beat similar to last quarter, and/or provide optimistic guidance for 2021 FY forecasts, it’s possible ESTC could surge another 20-30% into the 90s—this would put its price in line with historical averages. In any case, its average PT from analysts is ~$84.
Institutions and smart money know this. This past quarter, ESTC has been among the top ten stocks hedge funds have increased stakes in. Additionally, I don’t think this is fully priced in yet: IV is similar to its historical pre-earnings levels and likely will be inflated due to COVID related market volatility.
Gay bear case:
Free cash flow and cash from operations have been down in the past few quarters. ESTC faces stiff competition Their biggest moat is probably the fact that, because they are open source, they have hundreds of thousands of independent developers—but that’s also their biggest weakness (e.g. people can misconfigure Elastic Stack causing data breaches). SAAS companies may now be “priced to perfection.” Elastic is prone to having human error related “data breaches” because people don’t know how to configure it to actually keep data private, this is getting better but you still see reports regularly of morons from high profile companies that fucked up.
Obviously, I’m bullish. But as always, look into the pros and cons and do your own DD!
If you’re searching for a play (yes I am gay), this might be it.
TL;DR:
$ESTC
6/19 $75 C safest low risk
6/19 $80 C if you want more risk / reward.
6/19 $85 C and above True wsb Yolo.
If you’re a more sophisticated brand of autist, spreads may be a nice way to lower your cost basis and avoid IV crush while still capturing high moon potential
P.S. if you’re on the fence, Splunk has ER after hours today, should be good signal of how ESTC does and it may get a boost from a beat there
My positions:

preview.redd.it/1l9ewsn8a4051.png?width=1408&format=png&auto=webp&s=f2cb8e0266b4b1c8580b9371fa8900b10af53388
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-05-22--Jobless claims are simply too high. They have been falling for 7 weeks, but they didn’t fall enough

As we mentioned last week , Connecticut put that they had 10 times the number of initial jobless claims that they actually had .
That was a huge mistake which made the results look worse than they were .
That was resolved this week as the number of initial claims was revised down from 2.981 million to 2.687 million .
As you can see from the chart above , initial claims fell again .
They were 2.438 million which was above estimates for 2.375 million .
The problem is the total is adding up to an impossibly bad number .
@ @ @ @ @ @ @ above 20 % in May ’ s labor report .
This situation is still disastrous even though many states have partially reopened .
The optimistic projection is for initial claims to fall quicker in the next few weeks .
There has been a 38.6 million increase in initial claims in the past 9 weeks .
This was a bad report compared to the prior declines .
There was only a 249,000 decrease which is much less than the prior week ’ s decline of 489,000 .
This time we don ’ t have @ @ @ @ @ @ @ .
Because of how many jobs have already been lost , it ’ s almost a given that initial claims will fall .
We need them to fall quicker .
In some states , the unemployment rate is 30 % to 40 % as you can see in the chart below .
Georgia still leads the pack even though it was one of the first states to reopen .
It ’ s good that Georgia hasn ’ t seen a spike in new cases , but its labor market isn ’ t improving @ @ @ @ @ @ @ the rest of the country .
That implies the rally in stocks may have gone too far .
Utah has done a fantastic job with testing which has allowed it to have the lowest unemployment rate .
There is a 29 point gap between the worst state and the best state which is much more than the 10 point gap at the peak of the last recession .
There were 25.073 million continued claims in the week of May 21st .
That ’ s up from 22.548 million .
The increase of just @ @ @ @ @ @ @ mirage .
We aren ’ t yet near the end of this recession .
Remember , when continued claims start to fall , it means the recession has ended or is almost over .
There was also a 2.2 million increase in claims under the PUA program which is self-employed people .
Most were from Massachusetts signaling its backlog was worked through .
Despite what the grim jobless claims report indicates , Americans are on the move as the economy reopens .
63 % are avoiding small gatherings as of May 17th which @ @ @ @ @ @ @ 12th .
6 % are avoiding public places and 76 % are avoiding travel by plane , bus , or subway which were both down 13 points .
We also have the data in the charts below .
There was an 8 point jump in people visiting restaurants .
On the other hand , there was no change in the number of people going to work .
More companies such as Facebook , and Shopify are switching to online work .
If companies can avoid having people come in to work , they @ @ @ @ @ @ @ movement .
The question is how sustainable this trend is .
It ’ s certainly stronger than the trend of people ordering food for delivery .
People are always going to want to gather together to eat .
That has occurred throughout human history .
This recession was caused by an exogenous event .
We are seeing people use in person services less because of social distancing .
Everything that you have learned about recessions in the textbooks must been discarded .
As you can see from the chart below , usually investments @ @ @ @ @ @ @ GDP , but now we are seeing a 1 point decline .
That ’ s because this recession wasn ’ t caused by overinvestment .
Furthermore , many companies are increasing their investments .
The work from home firms and online stores are growing rapidly .
Traditional stores are growing their omnichannel approach and restaurants are investing in delivery .
Pizza restaurants are flash freezing their pizza for delivery around the country .
On the other hand , services had had a -5 point impact on GDP which is different from the usual @ @ @ @ @ @ @ because of the decline in human interaction .
Manufacturing is usually the most cyclical part of the economy , but now it ’ s services because of social distancing .
Manufacturing is known for bouncing back very quickly .
Let ’ s see if services can do the same in the next few months .
There has been a huge increase in debt offerings in the past few weeks as the credit market has loosened even though the need for debt is still high because demand is low .
Some claim the increase @ @ @ @ @ @ @ policy .
It is but , you could argue its a positive .
The mandated shutdowns are causing the need for debt .
The Fed ’ s policy is simply allowing it to occur .
The other option would be a massive wave of bankruptcies which would make it harder for the economy to recover .
This isn ’ t necessarily a moral hazard in the short-term because companies didn ’ t cause this recession .
It was an exogenous event .
However , if these policies persist indefinitely it opens up a @ @ @ @ @ @ @ .
As you can see from the chart below , Moody ’ s has estimated the default rate of consumer related industries .
It ’ s no surprise beverage , food , and tobacco are low because those are needs and people are addicted to smoking .
The hotel , gaming , and leisure segment is expected to have about a 17 % default rate in the next year .
Don ’ t think Fed policy is preventing anything from bad happening .
It ’ s just saving us from the worst case @ @ @ @ @ @ @ claims are simply too high .
They have been falling for 7 weeks , but they didn ’ t fall enough this past week .
The unemployment rate is well over 20 % .
The good news is people are starting to go out more .
This is a different recession as services have led the collapse in economic activity .
The Fed calmed financial markets which allowed for a lot of new debt to be offered .
The best places to avoid defaults are in necessities like food and beverage , while @ @ @ @ @ @ @ hotels .

by UPFINA
As we mentioned last week, Connecticut put that they had 10 times the number of initial jobless claims that they actually had. That was a huge mistake which made the results look worse than they were. That was resolved this week as the number of initial claims was revised down from 2.981 million to 2.687 million.
On the 38.6m who have filed for jobless claims, “It is difficult to make a case why this number will now not drive toward 50 million before the economy begins its long and winding road to recovery and expansion.” – @joebrusuelas pic.twitter.com/gKIC3TZ8vS — Carl Quintanilla (@carlquintanilla) May 21, 2020
As you can see from the chart above, initial claims fell again. They were 2.438 million which was above estimates for 2.375 million. The problem is the total is adding up to an impossibly bad number. The unemployment rate is going to explode above 20% in May’s labor report. This situation is still disastrous even though many states have partially reopened. The optimistic projection is for initial claims to fall quicker in the next few weeks.
There has been a 38.6 million increase in initial claims in the past 9 weeks. This was a bad report compared to the prior declines. There was only a 249,000 decrease which is much less than the prior week’s decline of 489,000. This time we don’t have a big revision lower to lean on. Because of how many jobs have already been lost, it’s almost a given that initial claims will fall. We need them to fall quicker.
In some states, the unemployment rate is 30% to 40% as you can see in the chart below.
Slok put out a chart showing how significant the job losses have been in some states, such as Georgia, where the unemployment rate is nearly 40%: pic.twitter.com/o9Tkwe1EdL — Lisa Abramowicz (@lisaabramowicz1) May 21, 2020
Georgia still leads the pack even though it was one of the first states to reopen. It’s good that Georgia hasn’t seen a spike in new cases, but its labor market isn’t improving quickly which is a bad sign for the rest of the country. That implies the rally in stocks may have gone too far. Utah has done a fantastic job with testing which has allowed it to have the lowest unemployment rate. There is a 29 point gap between the worst state and the best state which is much more than the 10 point gap at the peak of the last recession.
There were 25.073 million continued claims in the week of May 21st. That’s up from 22.548 million. The increase of just 171,000 in the prior week was a mirage. We aren’t yet near the end of this recession. Remember, when continued claims start to fall, it means the recession has ended or is almost over. There was also a 2.2 million increase in claims under the PUA program which is self-employed people. Most were from Massachusetts signaling its backlog was worked through.
Americans On The Move
Despite what the grim jobless claims report indicates, Americans are on the move as the economy reopens. 63% are avoiding small gatherings as of May 17th which is down from 84% on April 12th. 6% are avoiding public places and 76% are avoiding travel by plane, bus, or subway which were both down 13 points. We also have the data in the charts below. There was an 8 point jump in people visiting restaurants.
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In the past week, the percentage of Americans who report visiting a restaurant surged from 13% to 21%. t.co/4Fwz31XMx4 pic.twitter.com/vagqipMDe6 — GallupNews (@GallupNews) May 21, 2020
On the other hand, there was no change in the number of people going to work. More companies such as Facebook, and Shopify are switching to online work. If companies can avoid having people come in to work, they will. Tech companies are leading the movement. The question is how sustainable this trend is. It’s certainly stronger than the trend of people ordering food for delivery. People are always going to want to gather together to eat. That has occurred throughout human history.
New Recession
This recession was caused by an exogenous event. We are seeing people use in person services less because of social distancing. Everything that you have learned about recessions in the textbooks must been discarded. As you can see from the chart below, usually investments have about a -4 point impact on GDP, but now we are seeing a 1 point decline. That’s because this recession wasn’t caused by overinvestment.
So far, the distinctive thing about the sudden stop of 2020 is the collapse in consumer spending on services.
A crucial question that follows is how far will investment contract over coming months.
This is still VERY early days.
Via @SoberLook pic.twitter.com/kT14SZpzwV — Adam Tooze (@adam_tooze) May 21, 2020
Furthermore, many companies are increasing their investments. The work from home firms and online stores are growing rapidly. Traditional stores are growing their omnichannel approach and restaurants are investing in delivery. Pizza restaurants are flash freezing their pizza for delivery around the country.
On the other hand, services had had a -5 point impact on GDP which is different from the usual mildly positive impact. That’s because of the decline in human interaction. Manufacturing is usually the most cyclical part of the economy, but now it’s services because of social distancing. Manufacturing is known for bouncing back very quickly. Let’s see if services can do the same in the next few months.
Expected Default Rates
There has been a huge increase in debt offerings in the past few weeks as the credit market has loosened even though the need for debt is still high because demand is low. Some claim the increase in debt is a consequence of Fed policy. It is but, you could argue its a positive. The mandated shutdowns are causing the need for debt. The Fed’s policy is simply allowing it to occur. The other option would be a massive wave of bankruptcies which would make it harder for the economy to recover. This isn’t necessarily a moral hazard in the short-term because companies didn’t cause this recession. It was an exogenous event. However, if these policies persist indefinitely it opens up a lot of moral hazard for the future.
As you can see from the chart below, Moody’s has estimated the default rate of consumer related industries.
Most consumer-related industries are expected to see default rates of at least 10% this coming year, as per @MoodysInvSvc @SoberLook pic.twitter.com/khlCr4Q7xP — Liz Ann Sonders (@LizAnnSonders) May 21, 2020
It’s no surprise beverage, food, and tobacco are low because those are needs and people are addicted to smoking. The hotel, gaming, and leisure segment is expected to have about a 17% default rate in the next year. Don’t think Fed policy is preventing anything from bad happening. It’s just saving us from the worst case scenario which is a depression.
Conclusion
Jobless claims are simply too high. They have been falling for 7 weeks, but they didn’t fall enough this past week. The unemployment rate is well over 20%. The good news is people are starting to go out more. This is a different recession as services have led the collapse in economic activity. The Fed calmed financial markets which allowed for a lot of new debt to be offered. The best places to avoid defaults are in necessities like food and beverage, while the worst places are travel related like hotels.


investmentwatchblog--2020-05-22--Who isn’t cutting jobs? You know what first thing a broke middle class employee with two kids does w

What angers me more than anything is Powell going on national television saying he has no limits he can buy @ @ @ @ @ incentivizes people to do the things that causes the economy to need never ending intervention @ @ @ @ @ inequality

Who isn’t cutting jobs? You know what first thing a broke middle class employee with two kids does when they lose their job and can’t make the mortgage. Take the penalty and cash in the 401k. Companies need to sell stock, boomers, and now working class. Market on borrowed time t.co/AGgGsGhMp9 — hks55 (@hks55) May 22, 2020
Dell Halts 401(k) Matching, Pay Raises, Hiring to Preserve Cash
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JP Morgan: "We raise our forecast of the unemployment rate and expect it to stay above 10% through year-end" "We are less confident in 2021 growth prospects and see GDP in 4Q21 5% lower than the pre-pandemic path" — Nick Timiraos (@NickTimiraos) May 22, 2020
Hmmm…..
Roughly 1-in-4 are unemployed.
Banks won't loan you money with 20% down, a 700+ credit score and a #Job
New and Existing Home Sales are in the tank.#Redfin #Homebuyer #Demand hits record high…
I call Bulls*** pic.twitter.com/3P1WlHW8F4 — Lance Roberts (@LanceRoberts) May 22, 2020
B of A – Don't look for V pic.twitter.com/RzHGTlD1RF — Win Smart, CFA (@WinfieldSmart) May 22, 2020
What angers me more than anything is Powell going on national television saying he has no limits he can buy everything. This just further incentivizes people to do the things that causes the economy to need never ending intervention stimulus moral hazard no growth inequality
What angers me more than anything is Powell going on national television saying he has no limits he can buy everything. This just further incentivizes people to do the things that causes the economy to need never ending intervention stimulus moral hazard no growth inequality — hks55 (@hks55) May 22, 2020
#ES_F Two-month highs in every significant bear market for the last 50+ years. Any print in June above May's high will satisfy the requirement. Robinhood beware. pic.twitter.com/3JrEvAgyHR — J. Brett Freeze, CFA (@Techs_Global) May 22, 2020