Month: April 2020

Update (1200ET): Vice President Mike Pence just said during an appearance on CNN that it “would have been better” if China was more forthcoming with the US during the early days of the outbreak, and basically blamed the Chinese for the White House’s slow response.

And there you have it, the purpose for this particular leak, is to begin laying out the administration’s defense when accosted by critics who accuse Trump of not doing enough early on to combat the virus.

*   *   *

A day after China reported more than 1,500 additional “asymptomatic” cases that authorities said had been left out of the country’s data, while promising to start reporting these cases (they’ve already reported 50 more on Wednesday, blaming most of them on travel) going forward, an intelligence report has been submitted to the White House accusing Beijing of deliberately underreporting cases.

The report, which was leaked to the US press by senior-level officials, revealed that the US believes China deliberately tried to conceal the extent of the outbreak, suggesting that Beijing’s decision to lift its lockdown is probably premature, which is why they’re pivoting toward blaming foreigners for these new “asymptomatic” cases that have supposedly been known to the government all along, they just simply ‘forgot’ to count them.

This shouldn’t be a surprise to anyone, as it was widely speculated during the early phases of the outbreak. But this is the first concrete indication that US intelligence has been taking Beijing’s deceptions seriously, and doesn’t intend to just sit back and take it lying down. Secretary of State Mike Pompeo earlier this month blasted the Chinese for withholding data about the virus.

Here’s the Bloomberg report:

China has concealed the extent of the coronavirus outbreak in its country, under-reporting both total cases and deaths it’s suffered from the disease, the U.S. intelligence community concluded in a classified report to the White House, according to three U.S. officials.

The officials asked not to be identified because the report is secret and declined to detail its contents. But the thrust, they said, is that China’s public reporting on cases and deaths is intentionally incomplete. Two of the officials said the report concludes that China’s numbers are fake.

The report was received by the White House last week, one of the officials said.

The outbreak began in China’s Hubei province in late 2019, but the country has publicly reported only about 82,000 cases and 3,300 deaths, according to data compiled by Johns Hopkins University. That compares to more than 189,000 cases and more than 4,000 deaths in the U.S., which has the largest publicly reported outbreak in the world.

Beijing has sought to convince the Chinese people that the virus was created and spread by the US military, a “conspiracy theory” that’s been dreamed up by the government and spread via state-controlled media outlets, a type of advanced-level information warfare designed to distract from the possibility that the virus may have leaked out of a Chinese bioweapons lab.

China’s lies have been exposed in surprising ways, like the deliveries of urns in Wuhan. Some leaked documents have suggested that China’s real numbers were 52 times higher than what Beijing allowed to be reported.

President Trump’s decision to refer to the virus as the “Chinese virus” was so aggravating for Beijing because it impeded the government’s effort to convince its people that the virus was made in America – though of course they didn’t say that, exactly, they couched their objections in accusations of racism and faux-outrage.

Authored by Noah Bonn via The Mises Institute,

Austrians and Libertarians are well-established critics of central banking in general, and emergency monetary stimulus in particular.

There is near universal agreement that Alan Greenspan should not have cut rates following the Dot-Com Bubble, and that Ben Bernanke and Janet Yellen should not have quadrupled the monetary base following the Housing Bubble.

Yet if you mention this to someone who is not persuaded of our position, you will likely get a response along the lines of:

“well, what should they have done instead?”

“Nothing,” you reply.

“Well then wouldn’t things have been even worse?”

It’s this last question that I don’t believe we have answered to great effect. What would the effects have been if Greenspan, Bernanke, and Yellen had simply frozen the monetary base during their respective crises? More importantly, what would be the effect today if Powell did so?

We are currently in a situation in which many business’ revenues have dried up. Airlines, retail stores, restaurants and bars, cruise lines, oil companies, and others have seen their cash flow deteriorate over the first quarter of this year. Nonetheless, many of their obligations remain: rent still has to be payed; loan payments still need to be made; salaries still need to be paid, etc. As a result, the demand for loanable funds has gone through the roof. The Fed has responded to this situation by injecting hundreds of billions of dollars (if not yet trillions) into various lending markets such as the markets for repurchase agreements, treasury bills, municipal bonds, and mortgage-backed securities.

Don’t be intimidated by the technical specifications of these particular instruments. All of these various open market operations amount to different versions of the same thing: the Fed is responding to the demand for loanable funds by printing new money and lending it.

Given our opposition to these actions, it is worth playing through the exercise of describing what would happen if the Fed simply sat this one out. What prices would change? What levers would move? How would normalcy once again be restored?

As businesses begin to demand short term loans in order to meet their obligations, the first thing we would begin to see is that interest rates would rise. Likely they would rise a lot. For the sake of argument, let’s say the short term interest rate shot up to 15 or 20% on an annualized basis. The effect of this rate change would be two-fold:

• First, it would push the marginal borrower out of the market. This would mean that borrowing for non-essential purposes would be curbed. Credit card rates, for example, would be much higher than normal, and people would be strongly incentivized to pay in cash whenever possible. This would free up funds that could flow to businesses facing financial distress.

• Second, those who do keep cash balances would be strongly incentivized to enter the lending market. Those who had sidelined cash, and had been missing out on the excellent returns of the stock market would suddenly have the opportunity to return 10% in six months on a Certificate of Deposit (CD) account while the stock market is in a state of precipitous decline. This would add even more funds to the lending market, and provide a further lifeline to businesses in need.

All of this, however, starts with the premise that interest rates are allowed to rise. When the Fed suppresses short term rates, this mechanism is broken: there is no incentive to curb short-term borrowing for non-essential purposes, and there is no incentive for those with cash balances to supply short term loans. As of this writing, the yield on CDs at Bank of America is between 0.03 and 0.15% for balances under $10,000, andlittle better for balances above that threshold. As a result, a difficult situation is becoming a genuine liquidity shortage, and financial distress for under-capitalized firms has become a financial emergency for the entire system.

A concept that can help keep these conversations grounded is the acknowledgment that there is no free lunch. When the Fed buys treasury bills, and the federal government uses those funds for bail-outs, even though the money is being printed fresh, the purchasing power has to come from somewhere. In this case, it’s coming from the diluted value of cash balances. So as we can now see, regardless of whether central banks intervene, the lifeline to the economy must come from the cash balances of savers. There is nowhere else for it to come from. The question is simply who gets to profit from this state of affairs. In the absence of Fed intervention, it is the savers who profit. They are rewarded with handsome returns for rescuing those firms who did not prepare for the worst. When the Fed does intervene, the reward goes to under-capitalized banks, and over-extended businesses, who get loans at a price that does not at all reflect the cost they are imposing on society.

Needless to say, these incentives are perverse. Not only are we engaging in the ethically dubious practice of rewarding the profligate and punishing the prudent, but with each next iteration, we are incentivizing poor management decisions, and discouraging the very saving that has just been tapped as a lifeline. With each next business cycle; with each next monetary stimulus; with each next round of bail-outs, our society will find itself with fewer and fewer savers who can be squeezed to rescue the economy. Indeed we are approaching this point already, as a Bankrate survey in 2019 revealed that only 41% of Americans would write a check to cover a $1,000 unexpected cost. The longer these incentives remain in place, the smaller that pool of savings will be, and the dimmer our prospects will become of bouncing back from an unexpected supply shock like that brought on by the COVID-19 panic.

So in conclusion, I’ll contrast this dire picture one last time with the question: what would happen if the Fed did nothing?

• Savers would profit very well over the coming year.

• Viable businesses would eat the cost of borrowing at higher short-term rates, but would ultimately be able to weather the storm.

• Some businesses would inevitably fail, and their resources would become available to more productive uses.

• But most importantly, the signal would emanate through society that it pays to save.

It pays to be prepared for a rainy day. And next time, more would be.

On Tuesday it was revealed that Denis Protsenko, the head doctor at the infectious diseases hospital treating coronavirus patients in Moscow, tested positive for COVID-19.

Just a week ago Dr. Protsenko was photographed shaking hands with President Vladimir Putin, during the Russian leader’s visit to the hospital, where he donned a full protective Hazmat suit to visit patients. But during most of his interaction with Protenko, Putin wasn’t wearing the protective gear. 

Putin’s office now reports he’ll conduct his duties remotely, in self-isolation after the exposure. “The president prefers these days to work remotely,” Kremlin spokesman Dmitry Peskov told the press just before Putin was due to hold a cabinet meeting by videoconference Wednesday.

“We are taking all precautionary measures,” Peskov said further. Joining a list of other leaders who have had to enter self-quarantine after potential exposure, most notably Justin Trudeau, and also Boris Johnson – who was actually confirmed for the virus – Putin will now work exclusively from his presidential residence in Novo-Ogaryovo outside Moscow.

The Russian presidency’s office also now says he’ll no longer shake hands. “Of course everyone is now social distancing,” Peskov said.

“All of those who were with the president at Kommunarka are being tested daily for the coronavirus,” Peskov added, while attempting to assure the public that “everything is fine” with Putin.

Denis Protsenko was the very doctor who gave Putin a tour of the COVID-19 treatment center in the Kommunarka area of Moscow last Tuesday in what we described at the time as clearly a “high risk” photo op.

Currently some two-thirds of Russia’s entire population of just under 150 million is under strict ‘stay at home’ orders after last week Putin announced a paid ‘work holiday’ for at least a week.

This includes some 53 regions of the country under lockdown, which includes the following mandates, according to TASS:

All residents of these regions are ordered to stay home and can go out only to call at a nearby drug store or supermarket, walk the pet, as well as dispose garbage and travel to work if they cannot work from home on official days off declared nationwide between March 28 and April 5.

As of Tuesday Russia has 2,777 official confirmed COVID-19 cases, including 24 deaths, with most infections concentrated in Moscow.

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

“You better tuck that in. You’re gonna’ get that caught on a tripwire.”

 – Lieutenant Dan, Forrest Gump

There is a popular game called Jenga in which a tower of rectangular blocks is arranged to form a sturdy tower. The objective of the game is to take turns removing blocks without causing the tower to fall. At first, the task is as easy as the structure is stable. However, as more blocks are removed, the structure weakens. At some point, a key block is pulled, and the tower collapses.

Yes, the collapse is a direct cause of the last block being removed, but piece by piece the structure became increasingly unstable. The last block was the catalyst, but the turns played leading up to that point had just as much to do with the collapse. It was bound to happen; the only question was, which block would cause the tower to give way?

A Coronavirus

Pneumonia of unknown cause first detected in Wuhan, China, was reported to the World Health Organization (WHO) on December 31, 2019. The risks of it becoming a global pandemic (formally labeled COVID-19) was apparent by late January. Unfortunately, it went mostly unnoticed in the United States as China was slow to disclose the matter and many Americans were distracted by impeachment proceedings, bullish equity markets, and other geopolitical disruptions.

The S&P 500 peaked on February 19, 2020, at 3393, up over 5% in the first two months of the year. Over the following four weeks, the stock market dropped 30% in one of the most vicious corrections of broad asset prices ever seen. The collapse erased all of the gains achieved during the prior 3+ years of the Trump administration. The economy likely entered a recession in March.

There will be much discussion and debate in the coming months and years about the dynamics of this stunning period. There is one point that must be made clear so that history can properly record it; the COVID-19 virus did not cause the stock and bond market carnage we have seen so far and are likely to see in the coming months. The virus was the passive triggering mechanism, the tripwire, for an economy full of a decade of monetary policy-induced misallocations and excesses leaving assets priced well beyond perfection.

Never-Ending Gains

It is safe to say that the record-long economic expansion, to which no one saw an end, ended in February 2020 at 128 months. To suggest otherwise is preposterous given what we know about national economic shutdowns and the early look at record Initial Jobless Claims that surpassed three million. Between the trough in the S&P 500 from the financial crisis in March 2009 and the recent February peak, 3,999 days passed. The 10-year rally scored a total holding-period return of 528% and annualized returns of 18.3%. Although the longest expansion on record, those may be the most remarkable risk-adjusted performance numbers considering it was also the weakest U.S. economic expansion on record, as shown below.

They say “being early is wrong,” but the 30-day destruction of valuations erasing over three years of gains, argues that you could have been conservative for the past three years, kept a large allocation in cash, and are now sitting on small losses and a pile of opportunity with the market down 30%.

As we have documented time and again, the market for financial assets was a walking dead man, especially heading into 2020. Total corporate profits were stagnant for the last six years, and the optics of magnified earnings-per-share growth, thanks to trillions in share buybacks, provided the lipstick on the pig.

Passive investors indiscriminately and in most cases, unknowingly, bought $1.5 trillion in over-valued stocks and bonds, helping further push the market to irrational levels. Even Goldman Sachs’ assessment of equity market valuations at the end of 2019, showed all of their valuation measures resting in the 90-99th percentile of historical levels.

Blind Bond Markets

The fixed income markets were also swarming with indiscriminate buyers. The corporate bond market was remarkably overvalued with tight spreads and low yields that in no way offered an appropriate return for the risk being incurred. Investment-grade bonds held the highest concentration of BBB credit in history, most of which did not qualify for that rating by the rating agencies’ own guidelines. The junk bond sector was full of companies that did not produce profits, many of whom were zombies by definition, meaning the company did not generate enough operating income to cover their debt servicing costs. The same held for leveraged loans and collateralized loan obligations with low to no covenants imposed. And yet, investors showed up to feed at the trough. After all, one must reach for extra yield even if it means forgoing all discipline and prudence.

To say that no lessons were learned from 2008 is an understatement.

Black Swan

Meanwhile, as the markets priced to ridiculous valuations, corporate executives and financial advisors got paid handsomely, encouraging shareholders and clients to throw caution to the wind and chase the market ever higher. Thanks also to imprudent monetary policies aimed explicitly at propping up indefensible valuations, the market was at risk due to any disruption.

What happened, however, was not a slow leaking of the market as occurred leading into the 2008 crisis, but a doozy of a gut punch in the form of a pandemic. Markets do not correct by 30% in 30 days unless they are extremely overvalued, no matter the cause. We admire the optimism of formerly super-intelligent bulls who bought every dip on the way down. Ask your advisor not just to tell you how he is personally invested at this time, ask him to show you. You may find them to be far more conservative in their investment posture than what they recommend for clients. Why? Because they get paid on your imprudently aggressive posture, and they do not typically “eat their own cooking”. The advisor gets paid more to have you chasing returns as opposed to avoiding large losses.

Summary

We are facing a new world order of DE-globalization. Supply chains will be fractured and re-oriented. Products will cost more as a result. Inflation will rise. Interest rates, therefore, also will increase contingent upon Fed intervention. We have become accustomed to accessing many cheap foreign-made goods, the price for which will now be altered higher or altogether beyond our reach. For most people, these events and outcomes remain inconceivable. The widespread expectation is that at some point in the not too distant future, we will return to the relative stability and tranquility of 2019. That assuredly will not be the case.

Society as a whole does not yet grasp what this will mean, but as we are fond of saying, “you cannot predict, but you can prepare.” That said, we need to be good neighbors and good stewards and alert one another to the rapid changes taking place in our communities, states, and nation. Neither investors nor Americans, in general, can afford to be intellectually lazy.

The COVID-19 virus triggered these changes, and they will have an enormous and lasting impact on our lives much as 9-11 did. Over time, as we experience these changes, our brains will think differently, and our decision-making will change. Given a world where resources are scarce and our proclivity to – since it is made in China and “cheap” – be wasteful, this will probably be a good change. Instead of scoffing at the frugality of our grandparents, we just might begin to see their wisdom. As a nation, we may start to understand what it means to “save for a rainy day.”

Save, remember that forgotten word.

As those things transpire – maybe slowly, maybe rapidly – people will also begin to see the folly in the expedience of monetary and fiscal policy of the past 40 years. Expedience such as the Greenspan Put, quantitative easing, and expanding deficits with an economy at full employment. Doing “what works” in the short term often times conflicts with doing what is best for the most people over the long term.

After its worst quarter ever, as COVID-19 lockdowns crushed demand, raising fears about overflowing storage tanks amid a price war that has flooded the market with extra supply, all eyes are glued to today’s official inventory data (after API reported a major surprise build in crude and gasoline stocks) as Standard Chartered analysts, including Emily Ashford warned in a report, oil tanks around the world could fill in six weeks, a move that will likely force significant production shut-downs,

“Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” they wrote.

So, eyes down…

“There is the very real possibility that this week’s storage reports could be the energy patch version of last Thursday’s Weekly Jobless Claims,” Robert Yawger, Mizuho Securities USA’s director of energy said in a note.

“I would expect the numbers to be supersized and challenge multi-year highs/lows on multiple data points. Of course, I have been expecting big numbers for the past couple week, but the fireworks have not happened. That leads me to believe that the data explosion will likely happen this week … Exports will likely be down big, and refinery utilization will likely pull back dramatically. That will leave a lot of crude oil on the sidelines … EIA crude oil storage has been higher for nine weeks in a row. Storage will likely double up and increase at the rate of around 10 million for another nine weeks…at least.”

API

• Crude +10.485mm (+4.6mm exp) – biggest build since Feb 2017

• Cushing +2.926mm – biggest build since Feb 2019

• Gasoline +6.058mm (+3.6mm exp) – biggest build since Jan 2020

• Distillates -4.458mm (-600k exp)

DOE

• Crude +13.833mm (+4.6mm exp) – biggest since Oct 2016

• Cushing +3.521mm – biggest build since Mar 2018

• Gasoline +7.524mm (+3.6mm exp) – biggest build since Jan 2020

• Distillates -2.194mm (-600k exp)

API reported a massive crude build (and gasoline build) overnight but the official data showed an even bigger 13.8mm barrel crude build – the biggest since Oct 2016 and a huge increase in stocks at Cushing…

Source: Bloomberg

Total US crude inventories are now at their highest since June 2019…

Source: Bloomberg

U.S. oil production has remained at a strong 13-13.1 million barrels a day in recent weeks, despite a big drop in the rig count last week (which could presage a shift)…

Source: Bloomberg

Bloomberg notes that it’s important to remember that while prices are low, we haven’t seen the sort of uniform production cut that many are expecting. There are a few reasons.

For one, many of these firms are hedged, so even with WTI trending at $20, that’s not necessarily the price a shale firm receives (there’s nuance here, but that’s another issue). Also, many of these firms may be just completing their wells instead of drilling new ones, which means production continues to rise. The trickle down effect of the rout isn’t quite here yet, but hold on – it might be here soon, particularly if oil remains at these levels.

WTI hovered around $20.20 ahead of the official inventory print and tumbled to a $19 handle after the big build…

How low can prices go? Well, as we detailed last night, the first crude stream to price below zero was Wyoming Asphalt Sour, a dense oil used mostly to produce paving bitumen. Energy trading giant Mercuria bid negative 19 cents per barrel in mid-March for the crude, effectively asking producers to pay for the luxury of getting rid of their output.

Echoing Goldman, Elisabeth Murphy, an analyst at consultant ESAI Energy said that “these are landlocked crude with just no buyers. In areas where storage is filling up quickly, prices could go negative. Shut-ins are likely to happen by then.”

Finally, we note that Brent futures are signaling a historic glut is emerging.

The May contract traded at a discount of $13.66 a barrel to November, a more bearish super-contango than the market saw even in the depths of the 2008-09 global financial crisis.

When the Fed broke the last frontier of moral hazard – at least until it starts openly purchasing ETFs and single stocks after the next market crash, thereby fully nationalizing the market – and announced it, or rather Blackrock, would not only expand its QE to “unlimited” but also buy investment grade bonds and the IG ETF, LQD, it effectively tore the bond market into two categories: that backstopped by the Fed, and that which isn’t (something we described in “Bond Market Tears In Two: Distressed Debt Is Cratering, As Fed Buying Of Investment Grade Sends LQD NAV Soaring“).

It also unleashed the biggest debt bubble of all time.

Why? Because by explicitly guaranteeing investment grade debt, the Fed – by making BBB and higher rated debt effectively risk-free – not only precipitated the biggest one-day surge and inflow into LQD, but unleashed an unprecedented free for all as every single investment grade company – especially those soon to be fallen angels who will be downgraded to junk – have rushed into the bond market to issue debt and raise cash while they can at artificially low yields.

And the data confirms it: according to BofA, after the IG market was largely shut down in the two weeks ahead of the Fed’s March 23 bond buying announcement, US new issuance reached a new monthly record of $260.7 billion in March 2020, bringing YtD to $509.7 billion – the fastest ever start to a year and 47% ahead of 2019’s pace.

Looking at the use of proceeds, BofA observes that refinancings continued at a strong $79.8bn, but as the commercial paper market froze $51.8bn was specifically earmarked for terming that out. In addition, there was roughly $69bn of COVID-19 liquidity-related issuance from banks and companies that drew credit lines or mentioned liquidity in the use of proceeds language. What is more remarkable is that is that another $57bn was for frontloaded issuance for capex, M&A as well as – drumroll – share buybacks and dividends.

Yes, even at this moment, having seen the Boeing blowback which repurchased over $50BN in stock pushing its debt load to record highs and now demands a $60BN bailout, companies have the gall to issue debt and buyback stock! Something tells us there will be a lot of angry articles in the NYT singling out each and every one of those companies, especially if they have or plan to fire even one single worker.

And it’s just starting. Looking ahead, BofA notes that April is seasonally a lighter month than March in primary, accounting for 7.7% of annual issuance on average with a five-year run-rate of $102bn.

However, with the economic shutdown IG companies will continue to issue bonds for liquidity needs while others frontload as the market is wide open. M&A issuance totaled just $2.2bn in March and that may continue in April as global markets remain fragile, and T-Mobile/Sprint using a $23bn bridge loan for the April 1st closing with the IG bond refinancing delayed till when market conditions improve.

On the other hand, 1Q20 earnings-related blackouts will begin in the coming weeks, somewhat limiting the industrial pipeline as far as seasonality goes. As a result, BofA now looks for a wide range of $150-200bn of gross issuance in April. With $36.7bn of maturities in April and another $4.6bn of additional redemptions announced so far for a total of $41.3bn, the implied net issuance in April is $133.7bn.

If correct, total issuance in just the first 4 months of the year could reach a mindblowing $700BN, an unheard of number and one which means the Fed will very soon end up owning equity stakes in hundreds of bankrupt companies once its bonds are equitized as dozens of formerly IG companies are downgraded to junk, and then file for bankruptcy, convering the pre-petition debt into equity.

We, for one, can’t wait to see what the Fed will do when it ends up owning controlling post-petition equity stakes across countless US corporations.

Authored by Richard Breslow via Bloomberg,

Most of us have lower pain thresholds than we would like to admit. And have developed various coping mechanisms to deal with it. We opt to hear what we want to. This tendency is often accommodated by enablers who long ago realized that catering to this preference can win friends and influence people. It contradicts the dictum of under-promising and over-delivering. But is a sleight of hand that often buys time. It can also occasionally lead to heads-I-win, tails-you-lose outcomes, moments of severe disappointment and hurt people.

Today is one of those days. Maybe we can’t handle the whole, unvarnished truth, but would be better served getting more of it and earlier. I don’t want to suggest things are more nefarious than they might really be. But, consider today’s market price action as an example of this in microcosm. It’s also worth pointing out that, at least some of what is going on, is an unwind of the front-running and rote positioning that came with what was a well-advertised and potentially difficult month-end portfolio rebalancing exercise that we just completed. Possibly more than it seems. It won’t take long to find out.

Risk assets are not having a happy start to the quarter. Not horrendous, but certainly discouraging nevertheless. And there are a number of factors that have conspired to drag us down. We were told, yesterday evening, that we are still in the very dangerous stages of surviving the pandemic. “It will be a very difficult two weeks.” Should that have come as a surprise to anyone watching the news? Apparently so. There’s still light at the end of the tunnel, just not as soon as we were told to hope. And with potentially greater human toll. Sometimes, it is just so much better to get out ahead of things. That’s exactly what NIAID Director Anthony Fauci was trying to do. And then he suggested a believable path toward achieving a better result than the models they use suggest.

Global economic numbers are going to be disappointing. Today’s certainly were uninspiring. We know we are in recession. Bad data comes with that. The lesson to learn is to follow the trajectory, one way or the other, and not get solely hung up on the absolute levels. We are in danger of slipping from looking beyond the numbers to merely being unnerved by them. Accept that precise estimates are hard to come by and aren’t really the point. Just look at the dispersion of forecasts for Friday’s nonfarm payrolls.

What may have tipped the balance, given our current mood, is the new realization that the V-shaped recovery is unlikely to happen exactly on schedule as we were promised. New realization? It was an unrealistic expectation that shouldn’t have been stated as the base case. Have we not already been discussing a fourth stimulus plan?

European banks are having to cut out dividends and share buybacks. We’ve been discussing the weakness of this sector and other uses for these funds ad nauseam. This can’t have come as a total bolt from the blue. The market’s reaction should be taken as an object lesson in understanding the concept of asking, “whose ox is being gored” more than anything else.

Some fund managers are bearish. Earnings season will be disappointing and revenue expectations too high. Enough said. Although, I did read that cigarette companies seem to be doing just fine.

The point is, we know these are bad times. And sometimes the bad news gangs up on us. That surely can’t come as a surprise, nor should we pretend it does. If that is the case, we aren’t doing enough to overcome the challenges we face.