Wry & Dry

An over-valued market will... Virus? What Virus? Proposals.

An overvalued market will...

...always correct, eventually.  Sigh.  How often have Readers read this in Wry & Dry?  The market is falling sharply because it is overvalued.  Not because of coronavirus or Harry & Princess Meghan or bush-fires or Greece or [fill in your reason here]. 

Cartoon Harry meghan overvalued

 

[Predictably, Virus-What-Virus-Trump showed greater spin than Shane Warne in blaming the market's plunge on the shambolic Democratic presidential debate.  The debate happened after the market's first plunge.]  

Even after 4 days of large falls, last night the S&P500 index was still trading on an extreme P/E, of 25.8x, up from 20.2 one year ago.  That's a 28% increase on an already overvalued market.   

So Why The Face on the market plunge? 

Why The Face?

Maybe because of this:

No 30 FY 20 

Readers should expect Harry & Meghan not to be on the Saturday front pages.  It will be a hybrid panic about coronavirus and the share-market. 

The latter will scream that this is the worst month since October 2008, when the market fell 13.9%.

Readers will know that comparisons with the GFC are meaningless.  There are other factors at play.  The skill now is to "keep your head, when all about you are losing theirs".[1]

[1]  Apologies to Rudyard Kipling.  

Trump cannot give coronavirus the DCM

On Wednesday, Virus-What-Virus-Trump went nutzo when the deputy director of the US Center for Disease Control said that coronavirus was a real problem for the Yoo Ess Ay.  He responded by tweeting that the virus is “very much under control” and "a vaccine is very close."

Readers might find three sets of facts interesting.

Firstly, it will take at least 12 months to develop a vaccine.

Secondly, the Virus-What-Virus-Trump administration had cut funding for the CDC by 9% and cut its global health security initiatives by 80%, reducing country coverage to 10 countries from 49. 

Thirdly, only 40 of 100 public health labs in the Yoo Ess Ay have working test kits.  Which is why the rate of infection in the Yoo-Ess-Ay seems so low.

Yesterday, some wiser heads got into Virus-What-Virus-Trump's unblocked ear and then he announced $2.5 billion to throw at the problem.  And appointed Vice President Mike Pence as coronavirus tsar.  

Hmm.  Mr Pence has wrestled with scientific doubts all his life. For example, denying that smoking tobacco kills, declaring global warming a myth and presiding over an outbreak of HIV as Indiana’s governor by withholding free syringes.  The only good thing about appointing Mr Pence was who Virus-What-Virus-Trump didn't appoint: one of his children.  

But the trouble for Virus-What-Virus-Trump is that unlike every other thing he doesn't like, he cannot give the coronavirus the DCM.  

What, you expect us to defend an ally?

Readers will be aware of NATO (North Atlantic Treaty Organisation), the treaty of which says if a member country is attacked, then all other member countries will defend it.   

Well, less than 50% of they-the-people-on-the-street in 10 NATO member countries wouldn't raise a finger, with people in just four countries putting on the tin hat.  But almost all would expect the cavalry from the Yoo-Ess-Ay to gallop to the rescue.

Cartoon perfect defence against Russia

A chart showing NATO publics more likely to believe U.S. would defend them from Russian attack than to say their own country shouldThe table clearly shows that the only people who are committed to Europe's defence are those from (a) one country that has left the European Union (UK); (b) one that is 5,000 kilometres away (Canada); (c) one that is 100 kilometres from Russia; and only one from 'old' Europe.

Europe is a geographical expression only.

Leap Day proposals 

Single lady Readers will know that tomorrow, 29 February, is traditionally the one day when they can propose marriage to gentlemen. Because the Earth is round, this opportunity arises only once in every four years.

Of course, the gentleman might refuse, in which case he will have to buy the proposer a gift, traditionally a pair of kid gloves or a silk gown.

Cartoon will you marry me

Wry & Dry, with romance by the quart in every vein, sees possibilities in this tradition.  The usual manner of the gentleman proposing is generally the last time the gentleman controls any relationship situation.  Because after acceptance, his life is out of his hands.  And into those of a blend of his intended and her Wagnerian mother [2].

If the proposal arrangement were reversed, perhaps the post proposal arrangements might also be reversed.  And instead of having descended, at best, to #6 in the family hierarchy (behind wife, child #1, child #2, pet #1, pet #2, mother-in-law), he might rise to a higher ranking.

It's tough being a man.

[2]  /"... with a voice that shatters glass." Apologies to Lerner and Lowe.]  

Almost negative net yield on property

Readers will know that the near zero interest rates have had a dire affect on income from both stocks and bonds.  So Wry & Dry was drawn to the below chart in last weekend's Australian newspaper.  Residential property investment returns have collapsed.

Cartoon dogs in kennel

The chart shows gross rental yield, that is before expenses such as land tax, agent's fees, rates, maintenance, etc.  The net rental yield line would be close to zero.

AMP's economist guru Shane Oliver has estimated a P/E for residential property investment of around 50x.  Would readers buy a stock on a P/E of 50x?

Feed the man, err, meatless meat

Readers may have seen that American agricultural giant Cargill, one the world's largest privately held companies, is launching plant-based hamburger patties and ground "fake meat" products in April. 

Cartoon fast food may contain food

Wry & Dry sees this as further evidence of the continuing decline in the ability of Americans to distinguish, well, anything.  Firstly TV dinners; then fast foods; and now meatless meat. Americans' taste buds will soon go the way of tonsils, appendices and Jacobson's organs and become totally redundant.

Wry & Dry is eagerly awaiting the recycled cardboard hamburger from Visy.  This will be the ultimate signal to his friends of Wry & Dry's virtue: recycled and vegan.  And, to add flavour, smothered with ketchup.

Sanders and Sixty Minutes: tick, tock. Bong.

Readers will by now be aware that Bernie Sanders, the ageing 1960s hippie presidential aspirant, is now the front runner to win the Democrat nomination.

Wry & Dry will not trouble readers with why this would mean a certain I-Want-Four-More-Years-Trump victory and a swathe of Republicans getting elected to the House.  But rather note that Sanders has zero idea about the cost of his populist policies.  Consider the following exchange on CBS' Sixty Minutes programme on Sunday night:

Sixty Minutes: Do you have a price tag for all of these things?
Sanders: No, I don't. We try to, no, you mentioned making public colleges and universities tuition-free and cancelling all student debt, that's correct. That's what I want to do. We pay for that through a modest tax on Wall Street speculation.
Sixty Minutes: But you say you don't know what the total price is, but you know how it's gonna be paid for. How do you know it's gonna be paid for if you don't know how much the price is?
Sanders: Well, I can't, you know, I can't rattle off to you every nickel and every dime. But we have accounted for... you... you talked about "Medicare for All." We have options out there that will pay for it.
Cartoon bernie

Sixty Minutes indeed.  Tick, tock, tick, tock. Tick.  Don't worry about the tick, tock, Bernie.  Worry about the bell tolling. It tolls for thee.

Snippets from all over 

1.  Hong Kong hands out cash

Hong Kong's government is handing out HKD10,000 (~AUD2,000) to adult permanent residents, to aid a population "overwhelmed by a heavy atmosphere." 

Wry & Dry comments:  No clues as to what caused the 'heavy atmosphere'.  Perhaps the months of demonstrations against Carrie Lam.  Or coronavirus.  Or the death hand of Emperor Xi Jinping.  No matter, Wry & Dry understands that there are no plans for a handout of pink batts.    

2.  Housing construction collapses

Housing construction in Australia slumped 4.6% in the December quarter, its largest quarter-on-quarter decline since December 2000.

Wry & Dry comments:  Err, this was before the coronavirus, so Wry & Dry cannot blame China.      

3.  Shrinking to greatness

General Electric shed almost 78,000 employees in 2019, or more than a quarter of its workforce, as divestitures left the conglomerate with the same number of personnel as it had in 1951. 

Wry & Dry comments:  That doesn't mean that 78,000 folk got the DCM.  Businesses were sold.

4.  Democracy Iranian style

Last weekend's elections in Iran saw a 42% voter turnout, down from 62% in 2016.  More than 50% of those who applied to be candidates were rejected, including 90 sitting MPs (mostly reformers and moderates)

Wry & Dry comments: Thus widening the gap between those with their heel on the throat of the people and the people with a heel on their throat.  Expect more external belligerence and more internal unrest.

5.  Coronavirus

The coronavirus epidemic will likely cut 0.1% from global growth this year, according to the IMF, and drag down growth for China's economy to 5.6%, which is 0.4% lower from its January outlook. 

Wry & Dry comments:  The IMF is just guessing.  Nobody knows how growth will be affected.

And, to soothe your troubled mind ...

Miscellany 

Last words ...

The first six months are really hard. The last six months are also really hard. But the 10 years in between, they’re really not that bad.

 -  Unnamed former inmate of a prison in the Yoo Ess Ay, on helpful advice that he would give to Harvey Weinstein.

Wait for the pardon.     

A lightly salted absurdity ...

Deepak, Wry & Dry's Uber driver ... 

...was beaming as Wry & Dry hopped into the back seat of the jalopy.

“Namaste, Mr. Wry & Dry.”

“Namaste, Deepak.”

“What did you think of the bromance?” Deepak asked with excitement.

“I don’t watch that kind of stuff: Mrs. Wry & Dry and I are more documentary focussed,” said a perturbed Wry & Dry, whose mind plunged head-first into the murky pond of reality television shows. 

“No, I meant Trump and Modi’s bromance!” Deepak cried. 

“Ah huh, now that bromance is delightful viewing! The Sachin Tendulkar moment and of course Princess Melania’s photo-stop at the Taj Mahal. The great monument to eternal love,” Wry & Dry sighed.

“But Mr. Wry & Dry, tell me what you thought of the nuts and bolts negotiations. Anjali has been going on about it all week, and between you and me she isn’t a fan of Modi.”

“She is not alone there, Deepak.  But that is more about borders and religion than trade. The former of which, if you ask me, should be at the heart of all bromances!” 

In a moment of absolute clarity Deepak announced, “and in the heart of all romances too, boundaries and faith are central to happiness.”

“I’d say it’s more about nuts and bolts myself” Wry & Dry muttered.

Deepak giggled.

“Speaking of which,” Wry & Dry forged on; “you can tell Anjali, and pretend that you read it all yourself, that indeed Modi and high tariffs remain in place on American imports, like the Harley Davidson, for example. The man stuck to his guns, and made a $3 billion arms purchase instead!”

Deepak raised an eyebrow; “I like the idea to tell Anjali, she will think I’m getting very clever. Can you give me little tips every now and again so I appear that I’ve nailed the nuts and bolts?”

“Hit the nail on the head you mean? Sure, it’s just with nuts and bolts one usually, oh never mind…” tailed off Wry and Dry.

In a second bolt of clarity that descended upon Deepak, he said, “if you ever need tips like that, I always refer to the ancients. A sacred Sanskrit text*, Indian of course, just like my Masala chai.”

“Naturally,” said Wry & Dry and hopped out of the jalopy with a spring in his step.

   -   from the quill of Mrs. Wry & Dry

* Readers may wish to refer to Google to understand the ancient Sanskrit to which Deepak is referring.

Cheers

Anthony 

 

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