China Has ‘Curbed’ the Virus

The Kelly Letter Weekday Digest

OVERVIEW
  1. Virus Update: Xi visited Wuhan. China has "curbed" the virus. 
     
  2. Demographics Don't Lie: 3,158 Chinese have died from the coronavirus since Jan 20—and 1,391,284 have died from other causes.
     
  3. Stimulus and Sentiment: There is a 99.6% chance of a three-quarter-point cut in the fed funds rate. The BOE cut today. The Vix is at 52.
     
  4. My Interview on IdeaSphere: I spoke with Guy Rathbun about the virus being a temporary setback, and this being a fine time to buy or hold—not sell.

BRIEFING
 

1. Virus Update

In the March 1 Kelly Letter, I wrote that Bill Bishop at Sinocism suggested we need to see three unmistakable signs in order to believe that China's Communist Party thinks victory really is at hand:

1. Xi visits Wuhan.
2. A date is announced for the “two sessions.”
3. Kids return to school.

The first one appeared yesterday: President Xi Jinping visited Wuhan, the epicenter of the coronavirus outbreak. Here is the current status of Bishop's three signs:

1. Yes
2. No
3. No

+ Reuters: Xi arrived on the same day that Wuhan shut the last of 14 temporary hospitals that had been opened to manage a surge in coronavirus patients … China said it had just 19 new coronavirus infections on Monday, down from 40 a day earlier. That also marked the third straight day of no new domestically transmitted cases in mainland China outside of Hubei province, where Wuhan is located.

+ MarketWatch: “The spread of the novel coronavirus disease (COVID-19) has been basically curbed in Hubei province and its capital city Wuhan,” Xi said.

+ Bill Bishop at Sinocism: Things are starting to look up for Xi, China, and the Chinese economy after an awful start to the Year of the Rat.

We are not out of the woods, but we see light through the branches.

 

2. Demographics Don't Lie

According to China's National Bureau of Statistics, China had per day on average in 2019:

40,137 live births
27,342 deaths

Since the virus became widely covered on January 20 (51 days through yesterday), these are China’s death figures:

       3,158 coronavirus deaths
1,394,442 total deaths

Only 0.23% of deaths were due to the virus.

 

3. Stimulus and Sentiment

According to the CME FedWatch Tool, there is a 99.6% chance of a three-quarter-point reduction in the federal funds rate at the FOMC's March 18 meeting.

+ BOE: The Bank of England cut its key interest rate to 0.25% from 0.75%. It will roll out a new term funding plan with additional incentives for small and medium-sized enterprises, backed by the issuance of central bank reserves.

+ CNBC: President Trump, in a meeting with Republican lawmakers on Capitol Hill Tuesday, pitched a 0% payroll tax rate that would last through the rest of this year. The White House is also considering federal assistance for the shale industry as oil prices have tanked.

+ The VIX is at 52, its highest since December 2008.

+ CNN Fear & Greed is at an extremely fearful 6.

 

4. My Interview on IdeaSphere

I joined Guy Rathbun for a 29-minute interview about this coronavirus stock market. From his summary:

Although people as well as the markets are rightly concerned, financial specialist Jason Kelly says it’s not a time for panic. “The virus will worsen in the weeks ahead,” he writes in his recent newsletter, “but it still looks like a temporary setback. For long-term investors, this is a fine time to buy or hold—not sell.”

Listen to the full interview at PRX.

Have a good day,

Jason Kelly

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3 Comments

  1. Fletcher
    Posted March 13, 2020 at 4:21 am | Permalink

    Jason,

    THANK YOU for these intra-week notes. As a long-time subscriber, I find your sense of calm refreshing in the current mass hysteria. I am thinking history will look on this as something like the “Chinese Cold Panic of 2020”. Asset bubbles are popping everywhere; what a time for our younger people to ramp up their investing if they are able. I have been encouraging my younger family members to buy into this market over the next few months as the carnage continues.

    At some point, enough people will get fed up with doing nothing and sitting around trembling. There should be a lot of pent-up demand that likely will set us up for a quick partial recovery!

    A thought on nursing homes. My daughter works at a retirement / long-term care center in Cheney, WA. The flu is a frequent unwelcome visitor there and regularly claims our elderly. Maybe one lesson learned for places (hospitals, clinics, nursing homes, etc.) that harbor our most vulnerable would be to insist on proper hygiene for ALL incoming visitors and patients going forward. My daughter says they have no-touch thermometers. So imagine a foyer upon entering facilities where visitors/patients could “Check In” and wash their hands, get their temperature checked, and don masks if they have a cough or runny nose. Is that going too far?

    All the best to you and yours,
    Fletcher

  2. John Cummings
    Posted March 11, 2020 at 9:56 pm | Permalink

    This is a media caused panic in an attempt to tank the economy and hurt President Trumps re-election. Like yelling fire in a crowded theater. First it was russia,russia,russia 24/7, then it was the Muller report, then Ukraine/impeachment and now this.

    In Mass we have 1 confirmed case out of 7 million people and they cancelled the St Patrick’s day parade and may cancel the Boston Marathon.

  3. Posted March 11, 2020 at 8:33 pm | Permalink

    Hi Jason,

    Does the mortality rate above include ICU units not available to non-virus need? This lack of availability, assuming projected rate of infection in the seemingly under-prepared US, means that people needing intensive care will die due to unavailable beds or supplies, an indirect result of the virus overwhelming a region.

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