• Haven't had to remind ourselves of the levels at which market circuit breakers kick in, but here they are.
  • Level One: 7% decline in the S&P (2,784)= 15 minute trading halt.
  • Level 2: 15% decline in the S&P (2,586) = 15 minute trading halt
  • Level 3: 10% drop in the S&P (2,378) = all markets are closed for the day.
  • We admit, we are a bit paralyzed today as its probably too early to buy, and it's fundamentally wrong to sell into a 5% market down draft.
  • Smart guy Kyle Bass said this morning on CNBC that he is also not buying or selling, but there will be big opportunities on the other side of this, which he thinks will take another month to sort as the virus begins to fade from warm weather and prevention actions, which need to be intensified.
  • He also said company's balance sheets really matter, and more broadly while US banks are stressed tested/in good shape, the capitalization of banks in Europe and parts of Asia, have not been modified enough since 2008.
  • Silly but entertaining reports have popped up in recent days about Americans being unwilling to drink Corona beer because of the coronavirus.
  • One of those reports: 38% of Americans wouldn't buy Corona beer "under any circumstances" because of the coronavirus, according to a recent survey.
  • Good rundown of the week.  Some thoughts from Warren Buffet, and for us, what should become increasingly important, stock picks that maybe should be worth considering, especially with the late day turn around on Friday.
  • Stocks mentioned: Berkshire Hathaway (-10%) Apple (off 16% from high in early February), Microsoft (-12%), Alphabet (-12%), JP Morgan (-15%), Verizon (-8%).  Article also goes through some picks in the energy sector.
  • Separately (from us), for those who are less risk averse, look at sectors that have been hit the hardest with business models that are capable of recovering the most quickly when the virus lets up.  Airlines, hospitality with China exposure, gaming with Macau exposure and Disney (-18%) which has been hit due to park closures.  We'd stay away from cruise lines as see a longer path to recovery.
  • Lots of press following the announced succession of Iger yesterday, with the consensus view and questions being that Chapek is the right guy (successfully ran the parks division since 2015 and is close to Iger) and why now and seemingly so sudden?
  •  Chapek will report to Iger who becomes Executive Chairman focusing on creative, with Chapek running the company.
  • Barron's attributes the rapid announcement to Iger's desire to avoid succession type battles that dogged the company prior to Iger taking control.  We'd also add that Iger is 69 years old.
  • Article rightfully asserts that important challenge will be growing the company's streaming businesses, but with Chapek's experience in consumer products, studio distribution, and home entertainment before running the parks, he is clearly qualified.
  • Disney stock is down 1.2% today in an up market.
  • Investors are placing odds at 23% that the Fed lowers rates 25 to 50 basis points at the March 18 meeting.  Odds last Friday were at 11%.  Expectations of a rate cut rise for meetings later this year.
  • Recent comments from senior Fed officials have been cautious acknowledging that they are watching the impact of coronaviurus, but no commitment that a rate change is imminent and that they are comfortable with the Feds current position.
  • Economists generally at this point seem to support this view that at this point the economic impact will remain largely focused in China, albeit being the world's second largest economy. While others do see the risk to the world economy, the Fed will be forced to respond.
  • Separately, reports out of China this morning are claiming that new cases have peaked/are declining.  If this is true, this has important ramifications on global supply chains/economy and stock prices.
  • Good read/interview with a guy who in the thick of it.
  • He thinks 5G will once again initially push growth with applications in the enterprise sector, then consumer vs the other way around as its been since 2000.
  • He says consumers care about content, not transmission speed or coverage.  Related, he says key for customers will continue to be the aggregation of entertainment services, video, music and gaming.
  •  HBO Max is an important driver of business being a low cost high value channel, that will drive broad subscription demand, but also advertising services.
  • He doesn't see the Sprint/T-Mobile deal impacting AT&T, although acknowledge that once integrated the combined entity will be in a better position.
  • Positive article on Caterpillar as the stock trades at 14.6 times on likely trough earnings this year (down 15% YOY), with a valuation that seem to assume the US economy will enter a recession.
  •  Revenue from all three of its major business units have been declining (construction, mining and energy/transportation).  But, inventories have declined the past year and the company has been able to push margins through continued operating effciencies.
  • The article cites analyst beliefs that the stock valuation reflects this cloudy outlook putting PT multiples of 15 to 18 times earnings.
  • Street sentiment is mixed with nine of 22 covering analysts buy rated.
  • Really interesting stock, that has gone through almost legendary volatility the past year and half or so.
  • In 2019 after losing its contract with the USPS in its core business line as a postage re-seller, the stock went from a high of $261 in July 2018 to a low of about $34 in May 2019.
  • But, at the same time (unbeknownst to us) the company was laying the groundwork (pun intended) to develop a software platform to assist local ecommerce companies in last mile deliveries.  And, the company announced today that the USPS has rewarded postage re-sellers new agreements.
  • Today the stock is up 44% .. an incredible story (of course we did not buy the stock).
  • Value investors targeting Macy's for underlying real estate value, most notably a potential 1.5 million re-development above the company's flagship store in Manhattan.
  • But, office space leasing trends in Manhattan have been hurt by space coming on line from Hudson Yards on the West Side, illustrated by weak performing Manhattan focused office REITs.
  • Our view is this is a weak reason to buy the stock.
  • Tough day for Under Armor after reporting a bad 4Q and lowering 2020 guidance, the stock was down 16.7%, following a tough few years as the company continues to be lost. Here's some analyst comments cited by Barron's.
  • Even after the stock was pummeled, Cowen seems to believe the stock is still expensive commenting that the company will need to generate significant growth and earnings to justify the stock valuation.
  • Key issues for the company have been the fit of its clothes and missing out on the major "athleisure" trend.
  • There is some question if the new CEO "kitchen sinked" resetting the bar for investora, implying the stock may be primed to move up this year.  Although some analysts believe the company will struggle to revitalize its brand.