THE DAILY EDGE: 20 JULY 2020

Coronavirus Deaths Surpass 140,000 in U.S., as Trump Sees Flare-Ups as ‘Burning Embers’ President Trump said the coronavirus pandemic will be brought under control and he played down the public health threat.

(…) In an interview on Fox News that aired Sunday, Mr. Trump said many recent cases involve young people. “They have the sniffles and we put it down as a test,” he said.

Mr. Trump said some flare-ups of new cases were like “burning embers” and flames that need to be put out. “We have embers and we do have flames. Florida became more flame-like,” he said, adding, “It’s going to be under control.’’

The president also said that the ramp-up in testing in many states was behind the rise in new cases. Public health leaders, including Dr. Anthony Fauci, have said that the rise in positivity rates indicates it isn’t just testing that is behind the surge in infections. (…)

The percent of positive tests on a seven-day average has swelled from about 4.4% in mid-June to almost 9% as of mid-July, according to Johns Hopkins. (…)

In the Fox interview, Mr. Trump said, “Many of those cases are young people that would heal in a day.” He added: “Many of them—don’t forget, I guess it’s like 99.7%, people are going to get better and in many cases they’re going to get better very quickly.”

Joshua Sharfstein, a professor of public health at Johns Hopkins, said Mr. Trump “seems to be saying it’s really not that big a deal. You can still agree somebody may have a mild case and be concerned that they could cause someone else to get quite sick and die.” (…) (WSJ)

“I will be right eventually”

Pressed about past statements that the coronavirus would at some point disappear, Trump said “I’ll be right eventually. I will be right eventually,” adding, “It’s going to disappear, and I’ll be right.”

US COVID-19 surge could trigger a double-dip recession – FT

(…) Fulcrum economists have developed a new model. It suggests that the virus’s effective reproduction number, known as R, is now above the critical level of 1 in all but five of the US’s 50 states. Weighted by gross domestic product, this means that 95 per cent of the US economy is affected by a viral reproduction rate high enough to cause an exponential rise in the number of cases — unless something intervenes to prevent this.
This spread of R levels above 1 is the broadest it has been since the epidemic started.

Fulcrum economists have modelled an alternative scenario where full lockdowns are eventually needed in states where the R is currently above 1.5, with partial lockdowns in states where R lies between 1.25 and 1.5, and no lockdowns elsewhere.
This would lead to a large drop in activity — in effect, a double dip — of about 7 percentage points through the whole economy while the lockdowns last. If the situation persisted for three months, it would knock almost 2 percentage points from this year’s growth rate, compared to the latest consensus forecasts. (…)

As Trump Ignores Virus Crisis, Republicans Start to Break Ranks President Trump continues to press for a quick return to life as usual, but Republicans who fear a rampaging disease and angry voters are increasingly going their own way.

(…) And in his home state of Kentucky last week, Senator Mitch McConnell, the majority leader, broke with Mr. Trump on nearly every major issue related to the virus. (…) “The straight talk here that everyone needs to understand is: This is not going away until we get a vaccine,” Mr. McConnell said on Wednesday, contradicting Mr. Trump’s rosy predictions. (…)

“I want more briefings but, more importantly, I want the whole White House to start acting like a team on a mission to tackle a real problem,” Mr. Sasse [R-Nebraska] said. “Navarro’s Larry, Moe and Curly junior-high slap fight this week is yet another way to undermine public confidence that these guys grasp that tens of thousands of Americans have died and tens of millions are out of work.” (…)

A poll published Friday by ABC News and The Washington Post found that a majority of the country strongly disapproved of Mr. Trump’s handling of the coronavirus crisis, and about two-thirds of Americans said they had little or no trust in Mr. Trump’s comments about the disease.

Mr. Trump’s political standing is now so dire that even Republicans who have spent years avoiding direct comment on his behavior are acknowledging his unpopularity in plain terms. (…)

Nearly one-third of children tested for COVID in Florida are positive. Palm Beach County’s health director warns of risk of long-term damage

(…) “They are seeing there is damage to the lungs in these asymptomatic children. … We don’t know how that is going to manifest a year from now or two years from now,” [Dr. Alina Alonso, Palm Beach County’s health department director] said. “Is that child going to have chronic pulmonary problems or not?”

Her comments stand in contrast to Gov. Ron DeSantis’ messaging that children are at low risk, and classrooms need to be reopened in the fall. DeSantis has said he would be comfortable sending his children to school if they were old enough to attend. (…)

State statistics also show the percentage of children testing positive is much higher than the population as a whole. Statewide, about 31% of 54,022 children tested have been positive. The state’s positivity rate for the entire population is about 11%. (…)

Israeli Data Show School Openings Were a Disaster That Wiped Out Lockdown Gains Of 1,400 Israelis diagnosed with COVID-19 last month, 657 (47 percent) were infected in schools. Now 2,026 students, teachers, and staff have it, and 28,147 are quarantined.

Israel’s unchecked resurgence of COVID-19 was propelled by the abrupt May 17 decision to reopen all schools, medical and public-health officials have told The Daily Beast. (…)

Importantly, on May 17 in Israel it appeared the virus not only was under control, but defeated. Israel reported only 10 new cases of COVID-19 in the entire country that day. (…)

On June 3, two weeks after schools opened, more than 244 students and staff were found to test positive for COVID-19.

According to the education ministry, 2,026 students, teachers, and staff have contracted COVID-19, and 28,147 are in quarantine due to possible contagion.

Just in the first two weeks of July, 393 kindergartens and schools open for summer programs have been shuttered due to cases of COVID-19. (…)

On Tuesday, Israel reported 1,681 new cases of COVID-19 infection, its worst result since the outbreak began.

The source of the infection explosion can be seen clearly in the numbers from June. As Kliner told the Knesset, 1,400 Israelis were diagnosed with the disease last month. Of those, 185 caught it at events such as weddings, 128 in hospitals, 113 in workplaces, 108 in restaurants, bars, or nightclubs, and 116 in synagogues, according to Kliner, while 657—which is to say 47 percent of the total—were infected by the coronavirus in schools. (…)

“The reopening happened too fast. It was undertaken so quickly that it triggered a very sharp spike, and the return to more conservative measures came too little, much too late,” Khatib says, summing up Israel’s dilemma.

(…) the ministry of education indicated it “intends to open schools as usual” on Sept. 1, even though the numbers from June would seem to provide conclusive data about the risks. In any case, no strategy is in place to prevent a second round of school epidemics.

Galia Rahav, who chairs the department of infectious diseases at the Sheba Medical Center in Tel Aviv, said in an interview that “what happened in schools is just too much gathering, day after day, and kids come home and infect mom and dad. The top numbers of new infections were in kids.”

Due to the large number of infections among children, she noted, “the average age of an Israeli with COVID-19 has gone down to between 20 and 39,” while infections in citizens over 65 have held steady. In Jerusalem, the Israeli city with the highest rate of infection, most of the people with COVID-19 are under the age of 35. (…)

‘The pandemic is gaining momentum’: Africa prepares for surge in infections

Trump Campaign Turns to Tele-Rallies as Coronavirus Cases Surge

PANDENOMICS

What Banks Tell Us About Business: Everybody Is Struggling When they reported earnings this past week, the biggest U.S. lenders said they don’t expect America’s economy to pull out of its slump soon.

When they reported second-quarter earnings this past week, big U.S. lenders said they don’t expect the U.S. economy to pull out of its slump soon. A protracted downturn, bank executives said, bodes poorly for all manner of American businesses, even those not directly affected by the travel bans and social-distancing measures put in place to curb the virus.

From the first quarter to the second, the four biggest American banks nearly doubled the amount of money they set aside to cover soured corporate loans. It was different in the first quarter, when banks increased provisions for consumer loans far more. (…) (Bank of America set aside less for loan losses than the other banks. Chief Executive Brian Moynihan said early signs of a rebound are encouraging.) (..)

“Everybody is, bluntly, struggling,” Bill Demchak, chief executive officer of PNC Financial Services Group PNC -1.88% Inc., said on an earnings call Wednesday. “The generic corporate client we talk to, who’s otherwise open and doing business, is almost without exception down from what they would have expected going into the year and down from where they were last year.” (…)

One by one, bank executives warned that the worst of the coronavirus recession has yet to come. They said they no longer expect a quick snapback in economic activity or employment. (…) “I don’t want to be pessimistic…I want to be a realist.” (…)

“In the first quarter, when we were really looking at a deep but short-lived downturn, we were really very much focused on most impacted sectors,” said JPMorgan Chief Financial Officer Jennifer Piepszak. “Now that we’re looking at a more protracted downturn, we’re reserved for a much more broad-based impact across sectors.” (…)

U.S. Companies Gear Up for Longer Road to a Rebound Business executives who were bracing for a monthslong disruption due to the coronavirus are now thinking in terms of years. Their job has changed from riding it out to reinventing roles and strategies.

The fierce resurgence of Covid-19 cases and related business shutdowns are dashing hopes of a quick recovery, prompting businesses from airlines to restaurant chains to again shift their strategies and staffing or ramp up previous plans to do so. They are turning furloughs into permanent layoffs, de-emphasizing their core businesses and downsizing production indefinitely. (…)

“We’re seeing stalling demand growth at this point,” Delta Chief Executive Ed Bastian said in an interview with The Wall Street Journal. The company opened the airline earnings-reporting season with a loss that Mr. Bastian called a staggering illustration of the pandemic’s impact, and he told analysts he didn’t expect the level of business flying to ever recover to its pre-pandemic level as companies rethink the need for putting employees on the road. Leisure traffic could take two years or more to recover, assuming a vaccine or treatment becomes widely available, he said.

Meanwhile, American Airlines Group Inc. AAL -4.34% told 25,000 workers that their jobs are at risk after federal aid expires Oct. 1 and United said it is exploring shedding 36,000 employees, or nearly half of its U.S. workforce, as both airlines said they expect it to take years for demand to approach normal levels. (…)

“The risk of a relapse in demand is rising,” said Gregory Daco, an economist at Oxford Economics. Mr. Daco’s measure of states’ recovery finds the economic rebound has slowed week-over-week in 14 states and declined in 15, with confirmed infections rising in 39 states that together account for 90% of the U.S. economy. (…)

“It’s becoming increasingly clear that the second half of the year will not rebound anywhere near our pre-Covid forecasts,” Vox Media Chief Executive Jim Bankoff wrote in a memo to staff. “Furthermore, as cases rise tragically across the country and many of our elected leaders avoid decisive action, we have very limited visibility into the timing or strength of a recovery.”

As $600-a-Week Jobless Aid Nears End, Congress Faces a Quandary Lawmakers must decide whether the pandemic-related payments are a vital boost to the economy or are keeping people from going back to work

Some 25 million Americans are set to lose $600 a week each in federal unemployment benefits at the end of the month, one of the thorniest issues Congress faces when it returns to Washington this week to consider another coronavirus relief bill.

Many people view the payments as a lifeline, and analysts say the $15 billion a week in federal spending has provided vital support to an economy staggering from the effects of the pandemic. But critics say the money, paid on top of regular state jobless benefits, discourages some Americans from returning to work as businesses try to reopen, holding back the recovery.

A University of Chicago study found 68% of unemployed workers who are eligible for benefits receive more in jobless payments than their lost earnings—with the median payment 34% more than their former weekly paychecks. (…)

Democrats are pushing to extend them through January, while Trump administration officials and top GOP lawmakers are exploring whether to continue them at a reduced amount. (…)

Three months to the elections…with a Democrat Congress sniffing victory and a trailing GOP President and vulnerable Senate…and a very worried consumer…

Mnuchin Calls for Forgiving PPP Loans to Smallest Businesses The Treasury secretary told lawmakers that they should consider turning into grants the Paycheck Protection Program loans taken out by the smallest U.S. businesses.

Congress should consider automatically forgiving Paycheck Protection Program loans taken out by the smallest U.S. businesses—and offer a second helping of aid to firms hard hit by the pandemic, Treasury Secretary Steven Mnuchin said Friday.

The comments came at a House Small Business Committee hearing, where lawmakers in both parties signaled they want to push out more small-business aid as the U.S. continues to grapple with the coronavirus.

Mr. Mnuchin, testifying before the committee, suggested the Trump administration would back a proposal from U.S. banks and others who have said the massive lending program should see loans under $150,000 automatically turned into grants.

That would account for 86% of the roughly 4.9 million PPP loans issued to date, and about 27% of the roughly $520 billion lent. Without a change to the law, all those businesses will have to apply to have their loans forgiven, documenting that they used the money on payroll and other qualified expenses. (…)

To date, the small-business lending program has distributed about $520 billion and has about $130 billion remaining available. (…)

414 Companies, Including GameStop and Wendy’s, Nearing Default

When the U.S. sneezes, the world catches a cold. What happens when it has severe COVID-19?

(…) “The risk ahead is that a large share of the U.S. population will have to contend with an important deterioration of living standards and significant economic hardship for several years. This, in turn, can further weaken demand and exacerbate longer-term headwinds to growth.” (…)

The U.S. economy accounts for about a quarter of world gross domestic product. Though much of that is service-related, and much of the direct impact of the virus is tied up in industries like restaurants with weak links to the global economy, the connections are still there. A lost job leads to lower consumer spending leads to fewer imports; weak business conditions lead to less investment in the equipment or supplies that are often produced elsewhere.

Year-to-date U.S. imports through May are down more than 13%, or roughly $176 billion. (…)

U.S. Housing Starts Strengthen in June; Building Permits Rise

Low mortgage rates are bolstering new home building activity. Residential housing starts strengthened 17.3% last month (-4.0% y/y) to 1.186 million (SAAR) from 1.011 million in May, revised from 974,000. Despite these gains, total starts remain 26.7% below their January peak. The Action Economics Forecast Survey expected 1.174 million starts in June.

Starts of single-family homes rose 17.2% last month (-3.9% y/y) to 831,000 after the 4.4% May improvement to 709,000, revised from 675,000. Multi-family starts increased 17.5% (-4.1% y/y) to 355,000 from 302,000 in May, revised from 299,000.

A 2.1% increase (-2.5% y/y) in building permits to 1.241 million units followed a little-revised 14.1% May improvement. Permits to build single-family homes increased 11.8% (-1.1% y/y) to 834,000 after improving 12.0% in May. Permits to build multi-family homes fell 13.4% (-5.3% y/y) and reversed most of May’s increase.

By region, last month’s improvement in housing starts reflected a 114.3% increase (-5.4% y/y) in the Northeast to 105,000. It followed declines in each of the prior four months and starts remained 51.6% below January. In the Midwest, housing starts rose 29.3% (-0.5% y/y) to 181,000 after rising 3.7% in May. In the South, starts increased 20.2% (-4.6% y/y) to 606,000 after three months of sharp decline. Starts in the West fell 7.5% to 294,000 after a 76.7% May strengthening.

  

• U.S. Home Prices Hit Record High in June

(…) “The coronavirus hasn’t dragged home prices down; in fact we’ve seen just the opposite—prices are rising in spite of the pandemic,” Brian Walsh, a Redfin agent in Tampa, Florida, said in the report. The median home price there was up 8% last month, compared to June 2019.

Mr. Walsh noted that move-in ready homes are getting “multiple offers—some up to 10 or 15. The winning offers are almost always all-cash with zero contingencies.” (…)

“Nearly a quarter of a million fewer households have bought a home in the first half of the year compared with the same period last year,” according to Mr. Marr.

Earlier this week, a separate Redfin report found that home sales were up 2% on a seasonally adjusted basis for the week ending July 5, surpassing pre-pandemic levels for the first time.

Record number of NYC landlords dole out discounts as demand falls Remote working opportunities may lead to future price cuts in Big Apple

Rent prices were discounted across 34.7 percent of properties in the Big Apple during the second quarter, according to new data from real estate website StreetEasy. The median asking price fell by 6.7 percent, which is about $221 per month or $2,652 per year, due to reduced demand. Higher-end apartments saw the largest price cuts – as wealthy buyers have flocked to the suburbs since March.

“Demand will remain low as new hires, interns and students begin jobs and school remotely, and as many New Yorkers escape the city temporarily or permanently,” Nancy Wu, StreetEasy Economist, told FOX Business. “As inventory piles up due to this lack in demand, even more landlords will need to make rent cuts, and rents will likely drop even further.” (…)

While some people were headed to suburbs in the near vicinity, others were picking up and heading to states in the south, like Florida and the Carolinas. (…)

WORTH YOUR TIME

During my 45-year investment career, I have met, read and worked with very many economists, particularly during the earlier part. With experience, I found that their added value, for me, generally was not worth the time. A few, however, proved helpful. One of them is Lacy Hunt at Hoisington Management. What is particular about Hoisington is that they only invest in U.S. Treasury securities and are thus totally focused on the economy and on its main drivers. Their quarterly review is always informative, particularly since they have generally been right.

From their latest review (my emphasis):

Four economic considerations suggest that years will pass before the economy returns to its prior cyclical 2019 peak performance. These four influences on future economic growth will mean that an extended period of low inflation or deflation will be concurrent with high unemployment rates and sub-par economic performance.

First, with over 90% of the world’s economies contracting, the present global recession has no precedent in terms of synchronization. Therefore, no region or country is available to support or offset contracting economies, nor lead a powerful sustained expansion.

Second, a major slump in world trade volume is taking place. This means that one of the historical contributions to advancing global economic performance will be in the highly atypical position of detracting from economic advance as continued disagreements arise over trade barriers and competitive advantages.

Third, additional debt incurred by all countries, and many private entities, to mitigate the worst consequences of the pandemic, while humane, politically popular and in many cases essential, has moved debt to GDP ratios to uncharted territory. This insures that a persistent misallocation of resources will be reinforced, constraining growth as productive resources needed for sustained growth will be unavailable.

Fourth, 2020 global per capita GDP is in the process of registering one of the largest yearly declines in the last century and a half and the largest 2020 decline since 1945. The lasting destruction of wealth and income will take time to repair.

Each of these points is well explained in only 5 very readable pages.

There is a particular focus on debt:

Total domestic nonfinancial debt, excluding off balance sheet liabilities such as leases and unfunded pension liabilities, surged to a record 259.7% of GDP in the first quarter of this year, 11.4 percentage points higher than the 2009 level when Lehman Brothers failed. Confirming economic research regarding diminishing returns of the overuse of debt, each dollar of debt generated only 38.5 cents of GDP in the first quarter of this year. This result is defined as the marginal revenue product of debt (MRPD), which is down from 40 cents at the end of 2019 (Chart 3). Each dollar of debt has generated only 13 cents of GDP growth for the past four quarters, less than one-half of the 26.5 cents generated during the final four quarters immediately before the recession that started in late 2008.

Here’s global debt after Q1’20. This is a growing global problem, only hidden currently because of low interest rates. But if interest rates rise…

…which is why some say that central banks will keep rates, short and long, very low for a very long time. TINA will be with us for a while.

Hunt also discusses soaring corporate debt:

Except for the very short run, the Federal Reserve’s lending operations for the corporate bond market are a negative for economic growth. The BOJ (Bank of Japan), ECB (European Central Bank) and the People’s Bank of China (PBOC) have all been buying corporate debt of failing entities for more than a decade with the BOJ doing so for more than 25 years. These operations have provided a fleeting lift to economic activity, but at the end of the day they resulted in misallocation of credit, poor economic growth and disinflation/deflation. By keeping failing players in the game, this prevents the process Joseph Schumpeter called “creative destruction” as well as “moral hazard”, thereby eliminating these critical factors that make free market economies successful. When central banks sustain failing businesses, resources are tied up in nonproductive firms and therefore unavailable for new firms that can contribute to economic growth.

Automotive’s New Reality: Fewer Trips, Fewer Miles, Fewer Cars?

KPMG dives into the post-Covid-19 automotive world:

More than a quarter of adults purchased items in bulk more often, according to a survey of 2,200 Americans conducted by Bloomberg News and Morning Consult. Brands have also fallen out of favor, as 23% of respondents said they purchased generic or store brands more often. In fact, 16% of Americans plan to buy private-label or bulk items even more frequently once the pandemic ends than they did before lockdowns.

EARNINGS WATCH

We now have 47 reports in, a 77% beat rate and a +11.5% surprise factor. Aggregate earnings of the 47 companies having reported are down 43.5% on a -1.4% decline in revenues. Q2 earnings are still expected down 43.2% on a -10.9% revenue hit.

Trailing EPS are now $140.26.

16% of companies raised guidance, and not one company lowered guidance. 

TECHNICALS WATCH

This is a dangerously overvalued equity market, careless about earnings and most other basic equity drivers, seemingly largely influenced by FOMO, TINA, DFTF (don’t fight the Fed) and Big Mo, as well as by the uninitiated crowd often entering this world of apparent “easy, quick money” near the end of long bull runs.

It always ends in pain but we never know when.

Hence the use of smart technical indicators, not to reduce risk, rather to help those willing to endure high fundamental risk calibrate their risk and try to time their exit.

The blog sidebar lists the main technical indicators I follow. I chose them because they are primarily medium-long-term trend indicators with proven odds (here), they are simple and they make sense. Lowry’s Research, in particular, has its own sensible methods of measuring some key technical factors, including its unique OCO (Operating Companies Only) indicators and its measure of demand and supply.

For each of them, the sidebar shows my own star rating (5 green is the opposite of 5 red) or whether the indicator is simply green or red.

Use these at your own risk!

Lowry’s remains on the bullish side, seeing that equities are consolidating gains within a narrow range with the “uptrend from
the March low intact as sellers remain quiet”. In effect, buyers have paused but sellers are not actively selling. Another way of looking at it could be to say that investors have become wary about valuations but FOMO still dominates.

• 13/34–Week EMA Trend (CMG Wealth)

Speaking of FOMO, Jason Zweig in the WSJ:

From 1720 to Tesla, FOMO Never Sleeps The South Sea bubble is the classic story of an investing mania. Are investors today any wiser?

(…) Financial bubbles are often cited as proof of irrationality, but what they prove is that investors are human. As one formerly cautious banker, throwing some of his own money into the South Sea, pointed out on June 18, 1720: “When the rest of the world is mad we must imitate them in some measure.” (…)

As word spreads that “everybody” is doing something, it can be hard for anybody to resist joining. Humans have a profound need to belong to a group. Investing in something popular makes us feel popular.

In 18th-century London, coffee houses and ballrooms became centers of market gossip. One woman wrote: “South Sea is all the talk and fashion. The ladies sell their jewels to buy, and happy are they that are in… Never was such a time to get money as now.” (…)

Today, the online platform Reddit teems with speculators boasting about their biggest trades. (…) Seeing many others invest in something sends a powerful, if often inaccurate, signal that it might be a good idea.

That can quickly coalesce into a narrative, in which our imaginations rapidly transport us to different places and times. (“I’ll become rich, just like they did.”) A good story, as the poet Samuel Taylor Coleridge wrote, automatically triggers a “willing suspension of disbelief for the moment.” (…)

The South Sea bubble did have many critics at the time. But conformity is a powerful force that can counteract gravity for longer than skeptics often expect. Bubbles are neither rational nor irrational; they are profoundly human, and they will always be with us.

We can debate ad nauseam whether Robinhood users are moving the market or some individual stocks or not. I find it more interesting, and perhaps more revealing, to look at what stocks are mostly attracting this new crowd. The 12 most popular stocks according to robintrack.net are F, GE, AAL, DIS, DAL, AAPL, MSFT, CCL, GPRO, TSLA, ACB and PLUG.

Nine of the top 12 are companies among the most difficult to rationally analyse and value for professional investors. There is clearly a hip-shooting crowd effect.  Bloomberg about TSLA:

Almost 40,000 Robinhood accounts added shares of the automaker during a single four-hour span on Monday, according to website Robintrack.net, which compiles data on the investing platform that’s much beloved by day trading millennials. (…) The frenzy in interest means that as of the end of Monday’s trading session, there are now roughly 457,000 users on the Robinhood app that hold shares of the company in some form.

The number of TSLA holders has grown another 27k last week. Remarkably, the number of holders has multiplied by 2.7 since mid-March and has never declined even though the stock has quadrupled during the period. Long-term investors? More the Big Mo/FOMO types. Greed has taken over.

Moderna, which just released very preliminary results of an experimental Covid-19 vaccine, was the most popular Robinhood stock last week. If Ford, GE, Disney, American and Delta Airlines and Carnival Cruses were among your top 10 holdings, you sure would hope that Moderna has an effective vaccine…

Amateurs aren’t the only ones chasing returns in momentum stocks. Quant funds and other strategies that trade factors such as momentum and volatility have grown in popularity in recent years. Some of these funds along with individual investors are often quick to buy stocks that are doing well, then can sell just as fast when trading conditions shift. (WSJ)

• Mall Owner CBL Prepares to File for Bankruptcy Protection

CBL & Associates Properties Inc., the owner of more than 100 shopping malls across the U.S., is preparing to file for bankruptcy, according to people with knowledge of the plans. (…) Shares of CBL plunged 11% after Bloomberg reported the bankruptcy preparations, and dropped an additional 18% as of 4:40 p.m. in late New York trading. (…)

CBL bonds maturing in 2023 last traded around 25 cents on the dollar, according to data compiled by Bloomberg. (…)

Robinhood bottomfishers have actively bought CBL since March. The stock closed at $0.34 last Thursday, $0.25 Friday and is $0.19 bid this morning, most likely on its way to zero.

Wall Street Turns Bullish on Biden Those playing the markets see a good chance that Biden will win and Democrats take Congress—and it doesn’t seem to bug them as much as you might think.

(…) It helps that Mr. Biden hasn’t veered left as much as some feared (or some of his primary opponents hoped.) Wall Street sees what generally amounts to a centrist-left economic policy. Mr. Biden is working to make some of the progressives in his party happy, but he hasn’t gone over to them entirely. (…)

Whatever the outcome, UBS sees the election as neutral to positive for the stock market generally. A blue-wave scenario, where Democrats control everything, comes as slightly positive for the economy and neutral for stocks—fiscal expansion is likely to offset tighter regulations and higher taxes. (Only President Biden with a Republican Senate is negative, with increased regulation but limited fiscal stimulus.) (…)

Under a Biden victory, there’s little question that taxes would rise. The 2017 tax law signed by Mr. Trump reduced taxes. Mr. Biden is proposing to erase some of that, which he stands a good chance of doing if Democrats also control the Senate.

Corporate profits would likely take a hit: Moving the corporate tax rate to 28% from 21% would reduce per-share earnings by about 5%, UBS estimates. Goldman puts Mr. Biden’s entire tax program at roughly 12% in 2021—reducing per-share earnings for the S&P 500 to about $150 from about $170.

As a result, you might expect tax-sensitive stocks to be under pressure this summer—but so far, they aren’t, the UBS analysts found.

One interpretation: To Wall Street, the election matters—but the coronavirus is still more important. If the economy continues to struggle in January, as many economists expect, Democrats may not be able to raise taxes by much even if they want to. But if they want to change health care in the midst of a pandemic, or as it’s resolving, they absolutely could do it. (…)

Wall Street self-serving logic in action. The silver lining of a continuously struggling economy would make raising taxes more difficult, at that is positive because it would prevent a 5-15% drop in profits from higher taxes. Never mind the lower aggregate profits resulting from a struggling economy…and the fact that higher taxes would become reality as soon as the economy would finally recover.

FYI:

Some are not so bullish as Barron’s charts: