March 10, 2020

Tuesday saw a partial rebound from the big losses on Monday.  This was due to investors buying the dip but also very much due to indications that President Trump is about to provide some kind of stimulus.

I am not going to list any of the individual gains because the gains today in almost all cases did not even make up for the losses yesterday.

The main driver now is fear and it seems that stimulus actions will likely have only a short-term impact. The population and investors need to see hope for containment of the virus.

Once again, I will note that China has the virus apparently very well controlled. According to the latest World Health Organization Situation Report there were just 20 new cases in China yesterday. At that rate China could see the virus virtually eliminated soon as the 81,000 who contracted it mostly recover (60,000 have already recovered) and they peak out perhaps 3500 to 4000 deaths (they are at 3140). This shows it can be contained although it took very aggressive action to do so.

If China can report that the virus is no longer spreading and if one or more other hotspot countries can achieve the same then the level of fear in North America may abate. But until then and as cases rise in North America we may be a long way from peak fear.

Here is a good link for country-by-country figures. It does appear that the death rate in Italy is high at already over 6%. This may be due to an older population in the affected areas.

It also appears that containing the virus and also just the fear reaction is going to slow economic activity. Some sectors like restaurants and of course travel-related could be slowed dramatically. The market is used to steady progress and so even a couple of months of significantly slowed activity would be enough to probably continue to push many stocks lower or at least prevent any real recovery.

Time will tell when, but this storm will pass.

I believe Linamar and Melcor Developments are reporting tomorrow. Neither is expected to report a good Q4 at all. But their outlooks may now be very negative. Linamar typically can see ahead as they track auto sales and other factors. Melcor I think has a more difficult time to know how many building lots it will sell.

P.S. Trump (and his team) announced some stimulus measures. He intends to help businesses but the most concrete proposal is to have a payroll tax holiday probably until the end of the year. I am not sure how the market will react to that. Such a measure will not send money to those most in need (like travel industry employees who might be out of work). And if people become afraid to go to restaurants then they are not going to spend their payroll tax on restaurants. This proposal really seems more about doing something for everyone and smacks of vote buying. Nevertheless, Trump does seem to be willing to help out businesses and those details will emerge. The U.S. deficit will increase. But when the government can borrow money at almost zero interest rate it becomes harder to fear deficits.


In looking at companies now it will be much more important than in has been that the balance sheet be in good shape. A company with little or no debt can survive a big downturn. A company with a lot of debt is okay as long the cash keeps coming in but some companies with a lot of debt will be at risk if their revenues are disrupted very much.

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