Investing in the Age of the Chinese Virus

[Ben]

I heard some interesting talk on the Fox Business this morning regarding economic trends that could create investment opportunities.

In general, this scare is apparently causing the US to look at bringing a bunch of manufacturing back here, or at least out of China.

Specifically, there is an action in Congress to push (don't know if it's stick or carrot) for drug and drug precursor manufacturing to move back to the US. It seems like this will be bound to happen. If not all, at least some critical mass. I have no idea what chemicals make up drug precursors and if we have any abundance of them, but it seems like identifying and investing in the drug components could, maybe, be profitable. At least for the semi-short term. We all know how "memory" works, and when this is all forgotten in five years, people may be looking to China again for cheap stuff.

They were talking about battery components and manufacturing coming back this way too. Maybe that will make my Cobalt stock finally go back up again. 

[K Frame]

"Specifically, there is an action in Congress to push (don't know if it's stick or carrot) for drug and drug precursor manufacturing to move back to the US."

After what the Chinese said a week or two ago, that they just might cut us off from critical medications during this crisis, we'd be *expletive deleted*ing insane not to bring back medical manufacturing.

Something like 96% of all of our antibiotics from from China.

[Ben]

Something like 96% of all of our antibiotics from from China.

I've seen the number vary from the 70% to 90+% ranges, but either way, we should have no more than 50% foreign reliance for critical *expletive deleted*it like that. 90% or more is, as you say, insane.

[Jamisjockey]

Think about it.  What created the severe nationalism in the US between the world wars?
A pandemic and a depression.
It won't be hard to sell to a populace that American investment in homegrown businesses and manufacturing isn't a bad thing in this global age.

[Ben]

I heard an interesting conversation on the teevee this morning about the government helping businesses. The main points were the usual liberal talking point about just bailing out and tossing money at big businesses and the conservative talking point about loaning money instead so the taxpayers get most or some of their money back.

An interesting third point was the government buying stock in publicly traded companies. I didn't catch what the legalities of that would be, but the thought was interesting. Instead of bailing out American Airlines, the gov buys a million shares of their stock, and five years from now, when it has doubled, you sell it and put the profit back in the gov kitty - something targeted like debt reduction or emergency response.

Again, I'm not sure of what the legalities would be, or potential "separation of business and state" issues, but as long as there were guidelines preventing the gov from becoming a majority stockholder or otherwise interfering with said business, it's an interesting thought experiment alternative to just throwing taxpayer money at stuff with no hope of return.

Edit: Oh, another use for the profits I just thought of would be reimbursing the gov coffers for stuff like these $1200 checks we're all going to get. At least I won't feel as bad when I use that dough to buy guns the day after the check arrives if  I know it's all a prepayment for stock profits. 

[brimic]

I posted to the wrong thread about this yesterday, but check out thermo fisher scientific (TMO)- a good stick in good times, and hasn’t fallen off too much, plus we are making test kits for the foreseeable future

[Nick1911]

I heard an interesting conversation on the teevee this morning about the government helping businesses. The main points were the usual liberal talking point about just bailing out and tossing money at big businesses and the conservative talking point about loaning money instead so the taxpayers get most or some of their money back.

An interesting third point was the government buying stock in publicly traded companies. I didn't catch what the legalities of that would be, but the thought was interesting. Instead of bailing out American Airlines, the gov buys a million shares of their stock, and five years from now, when it has doubled, you sell it and put the profit back in the gov kitty - something targeted like debt reduction or emergency response.

Again, I'm not sure of what the legalities would be, or potential "separation of business and state" issues, but as long as there were guidelines preventing the gov from becoming a majority stockholder or otherwise interfering with said business, it's an interesting thought experiment alternative to just throwing taxpayer money at stuff with no hope of return.

Edit: Oh, another use for the profits I just thought of would be reimbursing the gov coffers for stuff like these $1200 checks we're all going to get. At least I won't feel as bad when I use that dough to buy guns the day after the check arrives if  I know it's all a prepayment for stock profits. 

I'm going to go ahead an announce my financial illiteracy.  In your example, how does that actually help American Airlines?  Okay, so the government artificially inflates the stock price by buying a lot of it.  How does that help American, who's income won't have changed because of the higher stock price (still low bookings), and expenses won't have changed because of the higher stock price (Same expenses still exist).

[Pb]

An interesting third point was the government buying stock in publicly traded companies. I didn't catch what the legalities of that would be, but the thought was interesting. Instead of bailing out American Airlines, the gov buys a million shares of their stock, and five years from now, when it has doubled, you sell it and put the profit back in the gov kitty - something targeted like debt reduction or emergency response.

I don't think the gov should own businesses (socialism) or give bailouts (crony capitalism).

[Ben]

I'm going to go ahead an announce my financial illiteracy.  In your example, how does that actually help American Airlines?  Okay, so the government artificially inflates the stock price by buying a lot of it.  How does that help American, who's income won't have changed because of the higher stock price (still low bookings), and expenses won't have changed because of the higher stock price (Same expenses still exist).

They're putting money into the company the same as you or I would. Buying stock is giving the company money to use with the expectation that you'll get some return on investment. I just think it's better than giving them free taxpayer money that they never have to give back, or less worse, an interest free loan with my tax money.

This would at least be the government investing tax dollars in expectation of some return. Obviously as  I said above, the gov can't become a majority stockholder or have say in how the company does business. Also there would be an expectation of a competent government that didn't sell all the shares at once, causing a panic, and that also then made best use of any stock profits for the taxpayers. So it's obviously a low probability, but an interesting discussion versus the gov just throwing our money at things willy nilly, never to be seen again.

[Brad Johnson]

I close on the house a week from tomorrow. I have three funds I'm watching in each of my selected categories. All are essentially equal in long-term returns so I'll drop the money into the one down the most in each group. Hoping to make some bank on the rebound and jump-start the process.

Brad

[charby]

I'm going to go ahead an announce my financial illiteracy.  In your example, how does that actually help American Airlines?  Okay, so the government artificially inflates the stock price by buying a lot of it.  How does that help American, who's income won't have changed because of the higher stock price (still low bookings), and expenses won't have changed because of the higher stock price (Same expenses still exist).

Really simple, AA issues stock and the .gov buys it, not from the exchanges. Many companies have been buying their stock back with profits, so there should be some company owned stock they could sell. Scary part is depending how much stock Uncle Sam owns, the .gov could control the corporate board.

[Nick1911]

They're putting money into the company the same as you or I would. Buying stock is giving the company money to use with the expectation that you'll get some return on investment. I just think it's better than giving them free taxpayer money that they never have to give back, or less worse, an interest free loan with my tax money.

If you or I buy stock in American Airlines, we are not actually giving money to American Airlines.  We are buying a percentage of the company from a third party who already owns that percentage.  The money you pony up for the stock goes to some other investor, not American Airlines unless it's an IPO or they are issuing more shares.

Really simple, AA issues stock and the .gov buys it, not from the exchanges. Many companies have been buying their stock back with profits, so there should be some company owned stock they could sell. Scary part is depending how much stock Uncle Sam owns, the .gov could control the corporate board.

This follows.  And hey, doesn't every other country have a national flag carrier? 

[Pb]

Scary part is depending how much stock Uncle Sam owns, the .gov could control the corporate board.

I agree.  I don't think the government should buy stock in private companies for this reason.

[Nick1911]

Dow really rallied today, on news of a stimulus package near closing.

I've decided to take the other side of this, and took on significant short positions.  I believe that this rally will be reversed, and then some as the virus picks up steam, and more of the country closes down.  I may have been premature, probably should have waited until the deal actually passed.

We'll see if I get screwed!

[Fly320s]

I don't think the gov should own businesses (socialism) or give bailouts (crony capitalism).

Generally speaking, I agree that govt shouldn't give bailouts, but this case is different.  The govt forced/prevented the airlines from flying to certain cities and countries.  It is not AA's fault that they can't fly to all of their nomal destinations.

[MechAg94]

Dow really rallied today, on news of a stimulus package near closing.

I've decided to take the other side of this, and took on significant short positions.  I believe that this rally will be reversed, and then some as the virus picks up steam, and more of the country closes down.  I may have been premature, probably should have waited until the deal actually passed.

We'll see if I get screwed!

If it has a lot of what the Democrats are demanding, you will get screwed in the end.

[brimic]

Dow really rallied today, on news of a stimulus package near closing.

I've decided to take the other side of this, and took on significant short positions.  I believe that this rally will be reversed, and then some as the virus picks up steam, and more of the country closes down.  I may have been premature, probably should have waited until the deal actually passed.

We'll see if I get screwed!

Bear trap.

We aren't anywhere near the bottom yet. The massive stimulus only made small gains, which should tell you that something is fundamentally wrong beyond COVID-19.

[Ben]

Bear trap.

We aren't anywhere near the bottom yet. The massive stimulus only made small gains, which should tell you that something is fundamentally wrong beyond COVID-19.

If people are worried about "missing the bottom", they'll have only to wait until Q2 results are in. We might not drop back to last week's lows by then, but from everything I'm seeing, it will be the bloodbath of 2020 reporting. It will probably also be the last chance for real bargain hunting for a while. After that, people start going on Summer vacations as usual, then start buying Christmas presents as usual, and I'm betting Q4 will rally the market.

[brimic]

If people are worried about "missing the bottom", they'll have only to wait until Q2 results are in. We might not drop back to last week's lows by then, but from everything I'm seeing, it will be the bloodbath of 2020 reporting. It will probably also be the last chance for real bargain hunting for a while. After that, people start going on Summer vacations as usual, then start buying Christmas presents as usual, and I'm betting Q4 will rally the market.

I've read that January 2021 Puts on indices at the current level outnumber Calls by a ratio of 5:1 right now...
It might be a year or more before we see any kind of significant  recovery. The longer we are shut down, the longer that recovery is going to take.
Continually buying into IRA or 401k funds from here on out would be a legitimate good strategy, in 5 years that will pay off.

[Ben]

I've read that January 2021 Puts on indices at the current level outnumber Calls by a ratio of 5:1 right now...
It might be a year or more before we see any kind of significant  recovery. The longer we are shut down, the longer that recovery is going to take.
Continually buying into IRA or 401k funds from here on out would be a legitimate good strategy, in 5 years that will pay off.

I've been hearing 36 months from the "experts", which actually sounds pretty reasonable when comparing to past big drops, given that things are semi back to normal by Summer. Look three years out from every "crash" since the 80s, and the numbers are pretty impressive. In five years for sure anyone that has thrown money in now will be sitting pretty.

[Brad Johnson]

Dow really rallied today, on news of a stimulus package near closing.

I read it as the big investment houses plowing stagnant cash into low-cost funds, then selling off on the day's gain. It'll be happening a lot in the near future.

Brad

[brimic]

I read it as the big investment houses plowing stagnant cash into low-cost funds, then selling off on the day's gain. It'll be happening a lot in the near future.

Brad

Yup. That's why you're going to see 2 steps up and 3 steps back for the foreseeable future. The big boys are sucking all the wealth away from anyone who decides that its a good time to get back in. They also have the advantage of trading after hours when the big moves are being made.

[brimic]

I mis-timed a large buy of June put options a week ago, buying on a small upward swing, but volatility was too high. I'm currently down 100K on that mistake mainly because volatility got crushed with the announcement of Federal relief and stimulus. (If I would have bought them yesterday instead, I'd be sitting really good in the next month... time will tell.
I'm just going to hold those positions for now, as I've lost about 80% of the value, in a week, things can change very drastically. I would need a 10% drop overnight or for the price of SPY to go to around 215 (S&P down to 2150) to break even at this point.
I knew the risk going in, and was looking to hit another grand slam. As it is, the loss is a fraction of what I've made in the last month. I'm more concerned about breaking even in my taxable account because losses would be counted as a wash sale, which is going to hurt at tax time.

[Ron]

http://thezman.com/wordpress/?p=20130

A different take on the stimulus bill.

[TommyGunn]

You are ALL WRONG.    I'd post my prediction too,   but I'd be wrong, too.