Global Macro Monitor

Joe making a big move on PredictIt to head the Democratic Ticket in November.   Super Tuesday on deck.

Pence, The Fall Guy?

This really caught our eye.   The probability or price that Mike Pence will be on the Republican ticket with Trump in November has fallen 14 percent since he was appointed the Corona Czar.   Traders betting he may be set-up to be the scapegoat if things go sideways.

Today is a classic example of why smart money buy bonds as a proxy for shorting stocks.  Bear market bounces, such as today’s, are much too violent and can, including for many today, be fatal.

Here is a post about Stan Druckenmiller’s strategy right around the 2018 Nightmare Before Christmas Bear Market,

If you listened to the Druckenmiller interview we posted on New Year’s Day,  he thrives in bear markets, not by shorting stocks but being long bonds.  Shorting stocks in a bear market, though more profitable,  he has learned is riskier due to the higher propensity for nutcracking short squeezes.  Druck also worries about the level he is buying at.  – GMM,  Jan 2, 2019

Our Twitter feed was full of stories about traders who shorted S&P futures at the Globex open last night blowing up just a few hours later.   If you shorted Spooz at the open last night, for example,  you lost 5.74 percent by the close.  A long T-Bond position would have lost you 0.64 percent.  Of course,  what matters is your relative position size and the extra leverage you take on with the bond trade versus the stock short.

Key Levels

The Dow had its biggest one day gain today (see tables below) with the S&P recapturing the 200-day moving average.   A very interesting low in this correction at 2855.84, right at the October low and launch point for the Fed’s No QE ramp.   That is the level the bears will now be gunning for.    Pay attention.

At the end of the day,  the central banks are fundamentally irrelevant in this crisis, in our opinion,  and we really won’t get a handle until the Feds start testing en masse for the coronavirus.  Note we said “fundamentally,” folks, not technically.  Spare the hate mail.

The low COVID-19 count in the U.S. is largely the result of not testing, i.e.,  “Don’t Test, Don’t Tell.”

In the United States, tests have taken place at a far slower pace. A genetic analysis suggested that the coronavirus, which causes a highly infectious respiratory disease called covid-19, has been spreading undetected for about six weeks in Washington state. The U.S. Food and Drug Administration on Saturday took steps to sharply expand testing.  – Wash Post

Wait, there’s more if you want to be outraged,

South Korea had tested a total of 66,652 people for the COVID-19 coronavirus virus as of 4 p.m. local time Thursday, whereas Japan had reported administering roughly 1,890 tests and the U.S. only 445. The huge discrepancy compared to other countries reflects how quickly South Korea’s numbers have been rising, experts say.  – ABC

Valuation As Our Gas Gauge

So, after the 15 percent crash from the February 19th high to February 28th low,  the S&P is still down 9 percent.

Are we buyers?   Check out the black line on the chart below, which shows valuations still at extreme historical valuations.    We saw one comparison of today’s price action to March 2009.   No, no, no.  Not much gas left in the tank.

Yours, baby.

Those are some ugly numbers, folks, and as a matter of fact, the lowest on record.  Not totally unexpected but much worse than anticipated.  The February print came in much lower than the median forecast of 43 by economists surveyed by the Wall Street Journal.

China’s official manufacturing PMI dropped to 38.8 in November 2008 at the start of the global financial crisis.  The composite PMI, which combines the manufacturing and services indices, dropped to 28.9 from 53.0 in January

The export order sub-index dropped to 28.7 from 48.7 in January, while imports fell to 31.9 from 49.0. The sub-index for manufacturing production nosedived to 27.8 in February from January’s 51.3, while the reading for new orders plunged to 29.3, down from 51.4 a month earlier.

The low employment sub-index illustrates the difficulty of finding and recruiting labor, while the high input price sub-index pointed to higher costs for manufacturers due to disrupted logistics and supply chains.

Foxconn’s biggest iPhone plant has struggled to return to full production because of housing problems for workers in need of quarantine. Foxconn and other manufacturers often house workers on-site in large dormitories.

Separately, Taiwan on Saturday reported a cluster of infections in a hospital, the most significant instance of local spread of the disease since the epidemic began. The infections brought Taiwan’s count of confirmed cases to 39. – FT

Especially 50 seconds in.

Don’t think its over, however….

https://twitter.com/NorthmanTrader/status/1232939910014869505?s=20