[Market Madness] Edition 0044

Non-Editorial Friday

May 22, 2020

Information overload

Well folks, as always there is so much to cover. I personally think that the different central bank actions are very interesting. I tried to summarize up some of the newest updates on what is happening in Japan and the Eurozone. Some of their actions are similar to what the Fed is doing. Some are much different, including the use of negative rates and purchasing of stocks by the central banks. Much more on this topic to come, but I hope to have provided some insights that make sense about what is happening currently.

No editorial today, but instead an interesting medical piece regarding the release of a medical journal piece on the dangers of hydroxychloroquine. On Sunday, I will be back to recap more events from the weekend. I might try something new, so stay tuned to see what happens! As always, thank you for the support.

Fundamentals

Friday Close:

· Dow Jones Industrial Avg.: -0.04%

· S&P 500: +0.24%

· NASDAQ: +0.43%

· US 10 YR: 0.661% | 99 7/32

· Crude OIL: $33.48

· COVID 19 Global Cases: 5,274,717

Whatever it takes

Japan is the latest country to take the ‘whatever it takes’ attitude with respect to economic recovery actions. The Bank of Japan has announced its support for business financing is to be around $700 billion (USD), taking a similar approach to the U.S. Federal Reserve and its open-end business finance support program. Their program is very similar to that of the U.S., with no-interest small business loans backed by the government. A global theme of supporting corporate financing is shaping together and for good reason. It will not be one or two global economic leaders that will bring the world economy back to Earth. Rather, it will take a collective or independently co-supported effort in order to keep respective countries afloat and businesses alive. The last thing we need on the global stage is a widespread collapse of businesses. There would be no element of containment to just one economy, and thus the backend recovery would be even worse than what is already expected in the current terms.

The Bank of Japan is not messing around though, they’ve taken much more aggressive steps than the Fed, such as buying stocks in their local market. This was something tossed around here in the U.S. as well, but has not come to the surface, on optimism that the equities markets are not as impacted than the debt market.

A JP Morgan economist out of Japan has noted that the actions being taken have helped prevent a credit crunch so far, but time will tell if they will have success in the long run. As many world leaders, economists, and C-suite officials alike, are suggesting, we have hardly seen the recovery and the road ahead will be long and difficult.

Meanwhile, the European Central Bank (ECB) has already spent more than 180 billion Euros on their emergency repurchase programs and has noted a commitment of over 750 billion Euros more will be available if there is a need. They also plan to open up bank lending windows at rates as low as minus 1 percent to avoid liquidity concerns next month.

There are many challenges being faced globally, and it is really interesting to see how the different global leaders and banking systems are preparing to combat the economic road ahead. I can say that much of my economic background has quivered in the wake of what is happening in the markets. I am certain that I will have to get new textbooks to keep up with how they plan to teach this period of time.

Hydroxy-killer-quine (non-finance piece)

A new study from medical journal “The Lancet” suggests that the anti-malaria drug Hydroxychloroquine could be connected to higher rates of death among COVID 19 victims. The drug, still touted by Donnie (as he is taking it himself to ward of COVID 19), is warned to not be used outside of clinical trials due to the findings of this study. While this study is still in progress, and is said to need clinical trial data as well for a more definitive ruling, the data is scary. It is understandable to want to rush to trying anything that has a potential to bring about some level of cure, but at what consequence?

But even after accounting for differences in age, race, and pre-existing conditions such as heart disease and diabetes, they found the drugs were associated with an increased risk of death. Patients taking hydroxychloroquine with the antibiotic saw a fivefold increase in the risk of developing a serious heart arrhythmia, even accounting for underlying health conditions and demographic differences. The trial enrolled some patients in the US, where the drug has an emergency use authorization for use against Covid-19. (excerpted from article)

The uncertainty brought about by the waves of hope and despair regarding the vaccines in development right now by Moderna and Gilead do not give investors and the world at large much comfort. Unfortunately, that is what happens when something new affects the human body and there is no immediate solution. It will be a difficult road ahead in the battle against COVID 19 and eventually finding a cure, but for now, all we can do is hope for the clinical trials being tested to have a break through.

Quick takes

· China lowers growth target (GDP), acknowledging the difficult road ahead. (via WSJ)

· Pakistan International Airlines plan crashes on approach to Karachi after losing an engine. (via WSJ)

· U.S.—China tensions rise over Hong Kong. (via FT)

Reader’s Corner

The reader liked this fun article about brewing better coffee, in the spirits of the article we talked about this week with Peet’s Coffee. Enjoy here: https://www.wsj.com/articles/you-can-brew-better-coffee-at-home-chemistry-professor-explains-how-11590154201?mod=hp_lead_pos12

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