Birinyi Associates points to a Bloomberg
story at 1:43pm implying Human to Human Bird Flu transmission in indonesia as
the source of the selloff.
The chart looks like that’s where the softness began; Kudos to Cumberland
Advisor’s David Kotok for flailing this issue recently when everyone had already
moved passed it . . .
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UPDATE March 24, 2006 9:14am
David Kotok of Cumberland Advisors goes into more details: How Bird Flu May Have Contributed to the Stock Market Sell Off
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Source:
Seven Indonesian Bird Flu Cases Linked to Patients
John Lauerman
May 23 (Bloomberg)
http://www.bloomberg.com/apps/news?pid=10000080&sid=
aWESsJvt6CFE&refer=asia
Avian influenza – situation in Indonesia – update 14
WHO, 23 May 2006
http://www.who.int/csr/don/2006_05_23/en/index.html
How Bird Flu May Have Contributed to the Stock Market Sell Off
David Kotok
MARKET COMMENTARY, May 21, 2006
http://www.cumber.com/commentary.aspx?file=052106.asp&n=l_mc
And everyone had a good laugh at his expense yesterday. Look who’s laughing now. BCRX up 17% after hours relative to the morning open.
This whole birdflu concern is way overdone. In almost 3 years: “Since late 2003, the virus has sickened 218 people in 10 countries, killing 123 of them, WHO said today.” That’s not really an alarming number.
Assuming most of those people have been in Asia, and how close people come in contact with and live next to each other in asia, imagine all the people who have been exposed to it. Considering out of all the people exposed (probably hundreds of millions), for only 200 to get sick and 100 to die in over 3 years just shows you how overblown this really is.
While birdflu could possibly turn into a world wide epidemic, the chances are rare.
Its a concern yes, but I believe its overblown (now and for some time).
Ah well, I guess you see that kind of a sharp sell off when theres this kinda fear running around in the market.
Oh please!!!:“Priority is now being given to the search for additional cases of influenza-like illness in other family members, close contacts, and the general community,” the WHO said. “To date, the investigation has found no evidence of spread within the general community and no evidence that efficient human-to-human transmission has occurred.” AND THEN THEY READ THE WHOLE STORY…..
Birinyi=Idiots
What a bunch of crap. That’s just an excuse. A cover story. For a number of hours before then the market did nothing NOTHING after a gap open. When there were no bids at the end, they just walked away JUST LIKE THEY DID A COUPLE DAYS AGO. No bird flu story then. And there ain’t one now. Pathetic. And to point to this and say , yeah, that could be it Barry? Please.
None of the stocks that may have had repercussions from this news showed any move around 1:43. Look @ GKIS, SAFM and PPC intraday. Look at the BCRX mentioned above. All made their daily moves earlier and/or much later than this news.
Can’t say this definitively rules out the story being a catalyst, but I think it is a red herring. It was a weak mkt from 10:30 onwards and the last 2 hours the sell off accelerated. A result of the fact that traders are more willing, still, to sell the bounce than to buy the dips.
I seriously doubt the market cratered on bird flu. This market was tanking since the open. By 1pm, the AD line had already changed by -800 or so and had made lower highs and lower lows all day. It might have been a convenient excuse to dump but today was pathetic before 1pm.
Here’s the “dirty” that I have heard. Commie 5 year plan, politburo driven, centrally planned production China. What a surprise. There are stories in Australian sites of an unusually rapid crumbling of the Chinese economy caused by the collision of high commodity prices with enough steel making capacity to supply the entire world and none of the 800 Chinese steel companies making a profit since they are run by centrally planned commies more concerned about employment. This has been met by a dollar mess that is rapidly choking Asian exports. Sort of confirmed by some story on ChinaNews.com, the commie government backed web site, that the dollar mess could bust the Chinese boom. And, if some of the data is accurate that the American consumer is falling off of a cliff……………..the expectation by big hedgies is that the Chinese economy is going to roll fast and hard.
So, the hedgies have been unwinding in the face of a potential commodities collapse caused by a disproportationate amount of the global demand coming from China married to a weak dollar cutting off Asia and the American consumer shutting down.
Pure talk right now but supported by wild stories out of Australia.
Needless to say, I tend to support such a story since I’m the only person in the western hemisphere who is negative on communist planning and the China miracle. And, the selling is concentrated in Asia and markets serving Asia.
On the contrary, traders “Are” buying the dips. Hence the trading range. The downside momentum is slowing.
support is 1254-1255 on the sp, and resistance is 1275-1277.
B. Would this add more impetus for China to start dumping dollars and TBills? Net foreign purchases of TBills dropped substantially from March to April. What would happen if the emerging markets and China suddenly stopped funding US debts? They’ve already indicated they may re-allocate to other currencies such as Euro or hard assets such as gold. What if they’re forced to sell reserve assets to bail out their own industries and banks? If the US economy is slowing or already entering a recession as some have suggested, this would seem to be worst-case scenario for China and another hit on the dollar, regardless of what the Fed does. The Fed has already lost control of the housing market, and the US Consumer is about to fall off the chart.
Regardless of whether the bird flu story started the sell-off, Bloomberg is now saying that traders are starting to connect the two:
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aBFe4E6EmdlE&refer=news_index
Is the gradual evolution of this virus, coupled with all the denial, leading to a “boiled frog” scenario?
Please also note that all the little arrows on the “Asia Pacific” section of “Major World Indices” over at Yahoo Finance have now turned red and are pointing in the downward direction, with the exception of Australia, New Zealand and Taiwan.
“The downside momentum is slowing!”
If I see a red candle on a chart with an extremely long tail up and no tail at the bottom, it stands to reason that the sellers dominated the buyers at every point on the candle. So says the chart. So says Lowry’s buying and selling power statistics, which reached new lows and highs for the year respectively on Monday.
No Turnaround Tuesday. On to Wishful Wednesday.
Morning data supports what I read a few days ago. Hard landing for the US and really hard landing for China? Might be temporary but I doubt it. This real estate scenario is likely going to play out hard.
Fred, we all have our opinions but I really discount this dollar dumping scenario. Especially since it appears our government wants the dollar to decline. China would be cratering the Asian economies and I just don’t think they want to shoot themselves any more than their economic policies already have. They likely have the biggest challenge of any country globally by magnitudes. China could diversify and if I were them, I might do so as well at some point…IF I had reformed my own economy to create a consumer class. But, they haven’t and won’t.
Oh, and Larry Kudlow wants a strong dollar and supports a strong dollar policy of Reagan as he waxed nostalgic yesterday with Laffer. Where was Larry when Reagan presided over the biggest dollar revaluation down-as policy of the Plaza Accord-in the last 25 years. And the person responsible for the strategy, Martin Feldstein, supports a weaker dollar today.
We all have selective memories and tend to rewrite history to our liking.
Others credit the late day selloff to a program trader gone postal.
This is interesting not just in terms of bird flu, but trading psychology (ie, the how do you know what you do, and what don’t you know) and investment education.
For those wanting to dismiss it outright, several thoughts from cumberland: that the Asians were more in tune with it than the Europeans and Americans (how much do you know about this, and does the fact its not an issue here lead you to dismiss it as an issue elsewhere?). And, portfolio managers had people on the ground reporting back to them before news outlets covered it (again, what do you know and don’t know?)
Whether bird flu did cause the selloff or not, the fact that portfolio managers have people on the fgound monitoring this should be a head’s up to people. Further, given the ‘sell the rumor’ mentality, this concern about mutated versions that spread beyond bird could have some recurring impacts on emerging markets.
Thanks very much fo rthis post, Barry (much more important than iTunes and Nike). Personally, I’ll be reading through some of the other comments at Cumberland about this issue, writing for their package of information and giving some thought to asset allocation.
As a bit of a followup – the Washington Post also covered this story. The headline indicates no evidence of mutation, and the story discusses genetic screening done on the deceased which supports the headline. But the concern is that a family of 8 all died from it.
The article notes: “”This is the most significant development so far in terms of public health,” Peter Cordingley, spokesman for the West Pacific region of the WHO, told Reuters Television in the Philippine capital.
“”We have never had a cluster as large as this. We have not had in the past what we have here, which is no explanation as to how these people became infected.”
“”We can’t find sick animals in this community and that worries us,” he added.”
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052300967.html
I don’t want to bust your chops too much Paul but headlines are seldom ever the market movers. They are what the ill-informed press latches on to because of what may have been on the agenda that day. Bird flu was the headline yesterday. And, might I add, Wall Street loves it that way. Oh, and the markets started this decline well before any new news of bird flu. That includes the general decline started a few weeks ago and that of yesterday. Kotock’s comments are interesting but in a trial, he’d be crushed because the timelines simply don’t align.
I guess it had nothing to do with the four year cycle, internals deteriorating, speculative excess not seen in six years, a massive blow off in metals, the economy slowing, dollar-trade crisis potential, commodities in the biggest bubble in 100 years, global real estate bubbles, Russia up 130% in a few months, middle east stock market crashed, currency blow ups, concern of inflation, concern of deflation, a rise of 60% in long term rates, certain market sectors so overpriced they haven’t seen these levels in decades, emerging markets up 100s of percent in a year, liquidity being drawn down and on and on and on.
It’s nice to be a contrarian or to use trading psychology but this seems a little too much of an attempt to out contrarian the contrarians or maybe more aptly, out dupe the dupers. I don’t buy it. It’s no different than people telling me metals are in a secular bull or we are running out of oil. What did Gorbachev say? Trust but verify. I think more like don’t trust and verify.
Now that said, I would never minimize the potential mess should something happen. But, talk to a statistician or a medical researcher or both and this is a little overblown at this point. Not that I want our government to take it lightly.
If this mutates into something that can spread person-to-person easily, it will have a huge effect on the global economy. Governments will probably attempt quarantines for at least a while, which will wreak havoc on everybodys just-in-time supply chains. The current fatality rate of infected people is 50%, though it will probably drop before it can spread very well. If it becomes pandemic, it will probably kill 5-10% of the world’s population.
This is something that the governments of the world should be very concerned about. We can probably develop an effective vaccine if we put money into it (at most a few billion, which is less than we’ve spent on bridges to nowhere this year). We can certainly produce more tamiflu and other medicines, which will probably be effective.
Beyond that, there isn’t much any individual person can do. If it starts spreading between people easily, which it probably will given the history of the flu virus, then either the world governments will be prepared or they won’t be. If they aren’t, you will either die or survive and know people that die. 5 years later it will be over and people will be talking about the next thing that is going to kill humanity.
The stock market will decline in the recession that we’ll get if this becomes pandemic before we are ready for it. But it seems premature to sell out of fears of the flu. The last pandmeic flu was just before the roaring 20’s. There is no reason to think this will cause long-lasting harm to the global economy. It’s more of a humanitarian problem than an economic one.
B – to be clear, my argument isn’ t the Post headline had anything to do with selloff; it was just for more info.
Certainly the emerging markets are hot, way up, way overbought. Seems to me rumor/news of alarge cluster of deaths related to the avian flu that has no explanation – well, that may have been a sell signal for some. There are less rational reasons for big sell-offs.
My real commment here was that it wouldn’t hurt to know more about it, esp given the comments in the Cumberland commentary about the Asians being more in touch with than us. That makes sense, and suggests to me if I have $ invested in the region, I might want to understand the local mindset and problems better. Seems like the portfolio managers are doing that by having people on the ground there. I can’t replicate that knowledge, but I can increase my awareness of the issue.
I was thinking and see a dog that didn’t bark element here.
As noted by some above, there are no infected birds in the area. Sounds ominous at first. But think about it. How did the first person get sick? If she got it from someone outside of her family ie outside of a group in close contact with each other, then why only her and not others? Until they can clarify how the original case in the cluster was transmitted, there is every reasonable possibility that there was a source of infected birds whereby all 8 sufferers were exposed to as a family unit. And therefore no human to human transmission at all.
Matter of fact it appears that senior WHO officials are now stepping back from the original hysterical headline grabbing attention this got. Probably some overzealous local spouted off without having the full facts or someone with an agenda started an unjustified hysteria here.