EJ: The countdown to the next crisis of The System has started.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

Stop Gloating..........

[santafe2]

Re: EJ: The countdown to the next crisis of The System has started.

There is simply zero risk of Amazon headcount in operations declining for the foreseeable future. Zero.

Foresight may be in decline, but Amazon’s growth is still far exceeding tech change.

Amazon: Growing too fast for Moore's law to accommodate.

Every 1 Amazon hire in operations equates to 3 jobs lost in traditional retail.

On a much smaller scale we did this to the solar distribution business beginning in 2009. The top 3 distributors sold ~$1MM per FTE. Our business design, out-sourcing and automation allowed us to produce $5MM in sales per FTE. It's not even a fair fight.

[GRG55]

Re: EJ: The countdown to the next crisis of The System has started.

Hi GRG55,

I realise you rarely post specific investment ideas, but I know I, along with others I'm sure, would appreciate any insight you're prepared to share as to how you're going to invest in the energy sector. Add all the relevant boilerplate you like, that you're not licensed to give financial advice etc, etc, and I think most people here on iTulip are able to take responsibility for their own investment decisions.

I'd prefer to take your 'investment advice', even though I don't know you, then any financial advisor I'm likely to find.

Also, I remember EJ's post some time back:

GRG55: 1, EJ: 0

In regards to the huge drop in oil prices.

Thanks in advance, hoping you'll post some actionable advice.

Thanks for the props, but sometimes one just gets lucky...

If, as I expect, this latest "global health care" export from China turns out to be yet another overdramatized international scaremongering episode, it will be the final washout for this phase of the oil cycle.

These are not recommendations, just what I am running the ruler over.
I am looking in two areas; 1) the best of the multi-national majors, and 2) the totally decimated Canadian mid-cap producers

For the first, I am considering a basket of XOM, BP, TOT, CVX, RDS.A - in that order.

I am looking at the latter for the first time in about two decades (some here will recall that takes us back to the era of the 1999 "Drowning in Oil" and 2003 "The End of the Oil Age" Economist Magazine covers . I suppose I should check what that reliably contrary cover indicator is saying now ) . Look for the Canadian midcaps with conventional oil exposure in Alberta and Saskatchewan, such as Whitecap, that have good balance sheets, repeated quarterly free cashflow, and management track records. These are the survivors of the absolute worst downturn I have ever seen in the Canadian oil sector in my 43 years in the energy space. The drop in the price of oil, aided by our narcissist, dilettante Prime Minister and his utterly incompetent Federal Government for the last 5 years, has created the buying opportunity of a lifetime. The rail and port disruptions Canada has been experiencing in recent weeks, in no small part due to our nitwit government, are pretty well the last straw for a permanent stake through the heart of any future major national energy project investment. Canada as a destination for capital for such projects is now dead. That will ultimately benefit the mid-caps who, unlike Teck or Suncor, operate below the political radar screen. Avoid overexposure to the heavy oil sector, although no need to avoid it entirely (MEG is one of the companies you may want to consider).

These companies may not do anything for a year, so patience. Let's understand...the world is not going to stop using oil and natural gas anytime soon.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

TOT (Total I assume) is about where it was 5 years ago.........why won't it be there in 5 years from Now?

They got major investments ahead to get "Green" same as BP..........Shell is different, they sussed it years ago & are investing fast in Hydrogen...

A agree the "Seven Sisters" are not going out of business, major investments required

[GRG55]

Re: EJ: The countdown to the next crisis of The System has started.

TOT (Total I assume) is about where it was 5 years ago.........why won't it be there in 5 years from Now?

They got major investments ahead to get "Green" same as BP..........Shell is different, they sussed it years ago & are investing fast in Hydrogen...

A agree the "Seven Sisters" are not going out of business, major investments required

Mike: LOL. Remember in 2001 when BP decided to "go green" and rebrand itself as "Beyond Petroleum"? Then came out with their new "sunflower" logo? How well has that worked out for them? I have always maintained the sunflower should have been mulched immediately on sprouting, and recycled. Now that would have given them green credits.

These are friggin' OIL and NATURAL GAS companies.

I don't invest in any of these companies for their "green" credentials. I invest because they produce and deliver a vital commodity to the population of the world, and they are incredibly undervalued. That commodity is not hydrogen, just to be clear.

So called ESG (of which green is a part) is being oversold by the bankers and financiers of the world. It's just the latest way they will fleece institutional and retail investors by creating a demand for financial products with the appropriate "credentials" (which they will collect advisory fees to help manufacture), and then charge a premium when they sell it. Most of it won't be green in any material way. And most of it, including "green bonds", will underperform. Investors will bear the cost.

If you want to invest in green, stay away from the oil and gas companies.
On the other hand, if you want to make some money in the next 2 or 3 years they might be worth consideration.

[shiny!]

Re: EJ: The countdown to the next crisis of The System has started.

GRG55, do you have an opinion on the future of the Master Limited Partnership (MLP) model for the pipeline industry, more specifically mid-level pipelines such as EPD, MMP, PSXP and SHLX? A lot of people are saying the MLP model is dead, but you know a great deal more than "a lot of people."

Thanks!

[Down Under]

Re: EJ: The countdown to the next crisis of The System has started.

Thanks for the props, but sometimes one just gets lucky...

If, as I expect, this latest "global health care" export from China turns out to be yet another overdramatized international scaremongering episode, it will be the final washout for this phase of the oil cycle.

These are not recommendations, just what I am running the ruler over.
I am looking in two areas; 1) the best of the multi-national majors, and 2) the totally decimated Canadian mid-cap producers

For the first, I am considering a basket of XOM, BP, TOT, CVX, RDS.A - in that order.

These companies may not do anything for a year, so patience. Let's understand...the world is not going to stop using oil and natural gas anytime soon.

Hi GRG55,

Thanks very much for your reply, especially as I have little/no insight into the oil sector. I fully understand your caveats, and am glad you restated them. Not just for my benefit but also for others.

Since I live in Australia, do you think BHP is worth a look? The other day I had a look at BHP's stock price compared to Suncorp's. By just eye-balling the chart, there appeared to be a strong correlation between the two. Now, of course, I could download the raw data and calculate the correlation, but I'm fairly certain that it would confirm that the correlation is high.

Yet another question, what sort of timeframe do you expect to have finished "running the ruler over" the companies you're looking at?

Best Regards...

[EJ]

Re: EJ: The countdown to the next crisis of The System has started.

EJ, please elaborate!

(via Twitter)





https://twitter.com/ejanszen/status/1230334633734262784?s=20

At this point it’s not possible to make a specific economic prediction, but I can outline dimensions.

1. Global Scale

Behind my warning February 20 was my conclusion that a severe disruption of global and national economies due to the virus pandemic was inevitable.

Unique antecedents as compared to previous virus originating from China:

1) COVID-19 is highly transmissible as droplets, through the air or on surfaces.
2) 80% of infected persons exhibit mild cold-like symptoms and many may continue to circulate in the general population where they can spread the infection.
3) Some infected persons can be infectious and asymptomatic for extended periods and circulate in the general population where they can spread the infection without realizing it.
4) Some of these asymptomatic or mildly ill infected persons will get on one of the 100,000 flights that take off daily worldwide and bring COVID-19 with them.

These factors logically predicted the international spread over a period of 30 days from 10 to 60 countries between January 29 and February 29.





2. National Scale

To estimate the timing and extent of the economic disruption caused by COVID-19 on the world economy, some estimate of the future growth rate of cases and containment date within national boarders is needed.

So far, within each affected country, a similar pattern of spread of the illness occurs as occurred in China.

The COVID-19 Containment Challenge in Democratic Republics: South Korea versus Anhui, China.

No country outside of China has yet instituted the kinds of economically disruptive lockdown measures that China took to contain the virus among the local population. By February 14, 500 million Chinese citizens were confined by lockdown policies.

“As of February 14, at least 48 cities and four provinces in China have issued official notices for lockdown policies, with measures ranging from "closed-off management", where residents of communities in a city or province have to be registered before they are allowed in or out, to restrictions that shut down highways, railways and public transport systems.”

The lockdowns began with Wuhan - the epicentre of the outbreak and where half the world's confirmed coronavirus cases are. After the city's borders were closed on January 23 and all incoming and outgoing flights cancelled, other nearby cities in Hubei province also implemented their own policies restricting the movement of people.

It remains to be seen whether containment of COVID-19 is possible without lockdown measures. Recent evidence from the experience of Italy, Iran, and South Korea suggests that the measures that are being taken to contain COVID-19 short of lockdown may be ineffective to control the spread of the virus.

Anhui, China: Population 62M. Locked down by February 4 by which time 540 COVID-19 cases had been detected. No new cases have been reported since 989 Feb 21. Contained.



Republic of Korea: Population 52M. Cases numbered 2337, 3150 & 4212 Feb 27, 28, & 29. Not contained. No lockdown planned.



Institution of lockdown policies are politically and institutionally practicable in an authoritarian state like China, but highly problematic in democratic republics.

If lockdown measures prove to be necessary to affect containment in most if not all nations where COVID-19 is present, this adds a new level of difficulty to the economic forecasting challenge.

Just as it was politically impractical to organize an international policy to cancel 100,000 daily flights a month ago to prevent the predictable spread of COVID-19 worldwide, within each country containment measures will be effective to the extent that they are accepted with varying degrees of compliance and resistance by the population, and this will depend on national cultural features and the national political framework and conditions.

On the one hand if lockdown measures prove necessary and they are not taken, the sense that the spread of COVID-19 is “out of control” will weigh heavily on public confidence and economic activity. On the other hand, attempts to implement lockdown measures in countries like the US will undoubtedly create political backlash that could be equally disruptive.

Here's the economic COVID-19 economic forecasting problem in a nutshell: the modern global economy is predicated on the free movement of people -- along with goods and capital -- among and within national borders, yet effective management of a global pandemic may prove to demand opposite on a global and national level.

This inherent contradiction will continue to play out somewhat chaotically, and markets will reflect unpredictable short-term and and long-term economic and political consequences.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

"These are friggin' OIL and NATURAL GAS companies"

..........and fast becoming a lot more, Shell sell me my electric power.

They going to have to branch out & all get into a smoke filled room to make plans.

Shell I like the most (along with Total) they sussed that they need to deliver Hydrogen ...

Mike

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

My plan is to wait till the Summer, then see if the fall out is done (over done) & oil majors are hated/unloved etc.....then buy.
Mike

[Chris Coles]

Re: EJ: The countdown to the next crisis of The System has started.

At this point it’s not possible to make a specific economic prediction, but I can outline dimensions.

1. Global Scale

Behind my warning February 20 was my conclusion that a severe disruption of global and national economies due to the virus pandemic was inevitable.

Unique antecedents as compared to previous virus originating from China:

1) COVID-19 is highly transmissible as droplets, through the air or on surfaces.
2) 80% of infected persons exhibit mild cold-like symptoms and many may continue to circulate in the general population where they can spread the infection.
3) Some infected persons can be infectious and asymptomatic for extended periods and circulate in the general population where they can spread the infection without realizing it.
4) Some of these asymptomatic or mildly ill infected persons will get on one of the 100,000 flights that take off daily worldwide and bring COVID-19 with them.

These factors logically predicted the international spread over a period of 30 days from 10 to 60 countries between January 29 and February 29.





2. National Scale

To estimate the timing and extent of the economic disruption caused by COVID-19 on the world economy, some estimate of the future growth rate of cases and containment date within national boarders is needed.

So far, within each affected country, a similar pattern of spread of the illness occurs as occurred in China.

The COVID-19 Containment Challenge in Democratic Republics: South Korea versus Anhui, China.

No country outside of China has yet instituted the kinds of economically disruptive lockdown measures that China took to contain the virus among the local population. By February 14, 500 million Chinese citizens were confined by lockdown policies.

“As of February 14, at least 48 cities and four provinces in China have issued official notices for lockdown policies, with measures ranging from "closed-off management", where residents of communities in a city or province have to be registered before they are allowed in or out, to restrictions that shut down highways, railways and public transport systems.”

The lockdowns began with Wuhan - the epicentre of the outbreak and where half the world's confirmed coronavirus cases are. After the city's borders were closed on January 23 and all incoming and outgoing flights cancelled, other nearby cities in Hubei province also implemented their own policies restricting the movement of people.

It remains to be seen whether containment of COVID-19 is possible without lockdown measures. Recent evidence from the experience of Italy, Iran, and South Korea suggests that the measures that are being taken to contain COVID-19 short of lockdown may be ineffective to control the spread of the virus.

Anhui, China: Population 62M. Locked down by February 4 by which time 540 COVID-19 cases had been detected. No new cases have been reported since 989 Feb 21. Contained.



Republic of Korea: Population 52M. Cases numbered 2337, 3150 & 4212 Feb 27, 28, & 29. Not contained. No lockdown planned.



Institution of lockdown policies are politically and institutionally practicable in an authoritarian state like China, but highly problematic in democratic republics.

If lockdown measures prove to be necessary to affect containment in most if not all nations where COVID-19 is present, this adds a new level of difficulty to the economic forecasting challenge.

Just as it was politically impractical to organize an international policy to cancel 100,000 daily flights a month ago to prevent the predictable spread of COVID-19 worldwide, within each country containment measures will be effective to the extent that they are accepted with varying degrees of compliance and resistance by the population, and this will depend on national cultural features and the national political framework and conditions.

On the one hand if lockdown measures prove necessary and they are not taken, the sense that the spread of COVID-19 is “out of control” will weigh heavily on public confidence and economic activity. On the other hand, attempts to implement lockdown measures in countries like the US will undoubtedly create political backlash that could be equally disruptive.

Here's the economic COVID-19 economic forecasting problem in a nutshell: the modern global economy is predicated on the free movement of people -- along with goods and capital -- among and within national borders, yet effective management of a global pandemic may prove to demand opposite on a global and national level.

This inherent contradiction will continue to play out somewhat chaotically, and markets will reflect unpredictable short-term and and long-term economic and political consequences.

4335 confirmed with 26 dead gives a death rate of 0.6% The worst case, 75,000 with 2,000 deaths shows a death rate of 2.65%

Now look at flu:

"So far, the new coronavirus, dubbed COVID-19, has led to more than 75,000 illnesses and 2,000 deaths, primarily in mainland China. But that's nothing compared with the flu, also called influenza. In the U.S. alone, the flu has already caused an estimated 26 million illnesses, 250,000 hospitalizations and 14,000 deaths this season, according to the Centers for Disease Control and Prevention (CDC)." https://www.livescience.com/new-coro...-with-flu.html

With the greatest of respects, this is another variation of the common cold and it should be treated as such.

[jk]

Re: EJ: The countdown to the next crisis of The System has started.

4335 confirmed with 26 dead gives a death rate of 0.6% The worst case, 75,000 with 2,000 deaths shows a death rate of 2.65%

Now look at flu:

"So far, the new coronavirus, dubbed COVID-19, has led to more than 75,000 illnesses and 2,000 deaths, primarily in mainland China. But that's nothing compared with the flu, also called influenza. In the U.S. alone, the flu has already caused an estimated 26 million illnesses, 250,000 hospitalizations and 14,000 deaths this season, according to the Centers for Disease Control and Prevention (CDC)." https://www.livescience.com/new-coro...-with-flu.html

With the greatest of respects, this is another variation of the common cold and it should be treated as such.

no, you can't conclude that logically.

first, we know nothing about the real severity and fatality rate of covid-19, because we know nothing about the mild and asymptomatic cases which have not been detected.

otoh, we know that of those who get noticeably sick, and test positive, 20% are serious and require hospitalization, 5% end up in an icu for weeks. this is far greater severity than for people who get sick from influenza.

the fatality rate of flu is 0.1%. if covid is 0.6 to 2.3% that is MUCH, MUCH higher.

we've had more cases of influenza, more flu hospitalizations, more flu fatalities simply because up to this date influenza is far more widespread. it is already spread all around the world. thus flu's statistics are being applied to a much bigger population.

but we know that covid is more transmissible than the flu, and there is no vaccine to limit or retard its spread - it will spread throughout most if not all the population, the only question is how fast.

the big unknown is how many people get it and don't get sick.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

[EJ]

Re: EJ: The countdown to the next crisis of The System has started.

4335 confirmed with 26 dead gives a death rate of 0.6% The worst case, 75,000 with 2,000 deaths shows a death rate of 2.65%

Now look at flu:

"So far, the new coronavirus, dubbed COVID-19, has led to more than 75,000 illnesses and 2,000 deaths, primarily in mainland China. But that's nothing compared with the flu, also called influenza. In the U.S. alone, the flu has already caused an estimated 26 million illnesses, 250,000 hospitalizations and 14,000 deaths this season, according to the Centers for Disease Control and Prevention (CDC)." https://www.livescience.com/new-coro...-with-flu.html

With the greatest of respects, this is another variation of the common cold and it should be treated as such.

This is a valid point and one that I considered carefully.

The difference in mortality rate between COVID-19 and seasonal flu is due to the fact that COVID-19 is a novel coronavirus, meaning that it is entirely new and the general population has no immunity, whereas each seasonal flu is a variation on previously existing version to which the majority of the general population has some degree of immunity either because of previous infection with one or more genetically similar viruses or because they have regularly received annual flu shots. This is why getting a flu shot every year is recommended; over time one accumulates antibodies that are cumulatively effective at improving immunity to future flu variations.

The relatively high number of illnesses, hospitalizations and deaths caused by seasonal flu in the US in a flu season that you quote represents the terminal rate of infection in a population of 325 million of an non-contained flu with a fatality rate of 0.1% and an R0 of 1.4. Due to the seasonality and relatively low transmission and death rate of the seasonal flu, no resources are expended in an effort to contain it every year; instead, flu shots are manufactured and widely offered to improve immunity.

A novel virus with an R0 over 2 will spread at an exponential rate, and with a fatality rate over 1% will cause 10x as many fatalities per person infected as seasonal flu. The terminal number of illnesses, hospitalizations and deaths caused by COVID-19 if not effectively contained will be many times higher, as we are seeing in South Korea where four times as many cases and deaths have occurred out of a population of similar size as the province of Anhui, China over the same length of time. The quickly executed draconian measures taken by the Chinese government to contain the outbreak reflects both their comprehension of this math and their autocratic power to control their population.

My concern is that health officials and politicians in democratic republics like South Korean and Italy may have worked out the math that leads logically to the conclusion that drastic containment methods are required, but lack the institutional means and political mandate to implement them, and the result will be higher percentage of illnesses and deaths in proportion to the population size of those countries.

[lakedaemonian]

Re: EJ: The countdown to the next crisis of The System has started.

Here's another: In-home exercise as a substitute for health clubs.

This story behind the rise of Peloton's stock price as the markets tumbled held up for the first few days of the correction last week:

Coronavirus gives Peloton shares a workout

Then investors started to price in recession; Peloton may let you avoid the risk of infection at the gym and exercise safely at home but a $2,400 bike and $40/month subscription is not a viable substitute for the $80 initiation fee and $62/month of a typical club membership (pricing based on Lifetime Fitness, the mid-market health club leader in the US).

VirZOOM's VZfit also lets you exercise at home, and is immersive, transporting you from your location (e.g., in quarantine) and into bright VR worlds to engage in fun activities. A $75.00 motion sensor attaches to any stationary bike with a $10/mo. content access fee, is both an in-home exercise alternative to health clubs and a low cost health club substitute at once.

Our daily unit sales recently tripled. Mostly US-based customers, with a significant uptick in orders from COVID-19 effected areas: France, UK, Germany, Hong Kong, etc.

Excellent point!

And as a VIRZOOM family of users, how could I forget!

Post 9/11 cocooning viral version 2?