VRA Update: I May Be Crazy, But the Zika Virus Concerns Me FAR More Than it Does Wall Street
/Feb 04, 2016
Since we're all friends here I can speak honestly. I'm either going crazy or the whole of Wall Street is badly missing the risk that is the Zika virus.
I know, I know...the uproar over the Ebola virus was short-lived and it didn't really hurt the stock market.
WRONG!
In less than one month, during October of 2014, the Dow gave back over 1100 points...a crushing 6.6% decline, as Ebola was feared to become a global epidemic...it absolutely freaked the world out (in case you've forgotten, like everyone in the investing world has, apparently).
I can find pretty much NO ONE that is talking about the investing risks from Zika. I think this is a mistake...possibly a very big one.
Question: now that Zika has it's first confirmed US transmission via sex (Austin, TX), we know with near certainty that it can be passed from person to person 'readily" through bodily fluids (and of course, mosquitos), let me ask all of our female readers this; "Knowing that the virus can cause children to be born with terrible birth defects, would you travel to another country where you could be exposed to the Zika virus? Would you allow your daughters to travel to these countries?"
I think we all know the answer to these questions....not no but HELL no!
But it gets much worse. Because men can get Zika as well, they in effect can become carriers, and then infect women. Question for men: "knowing these risks, would you travel to a country where you might get the Zika virus?" Now, most guys tend to think they are bullet proof...so the percentage might be a bit lower than women...but not my much...at least that's my view.
Don't Believe Me? Ask the CEO of Royal Caribbean (RCL), who appeared on CNBC earlier this week, just as his stock price was whacked by 17%...in a single hour of trading...and right after the company reported earnings that were actually pretty good.
I watched the interview carefully, and what I saw was a CEO that was desperate to convince viewers that Zika had "nothing to do with RCL's stock price getting hammered". He actually said something like "no, we're not hearing from customers that Zika is a concern". I call major BS on this guy! The truth was written all over his perspiring face. Trust me...he gets it. I think we should as well.
VRA Market Update
The near 300 point loss in the DJ was the real deal. I am seeing clear signs of things starting to break down...a market that's looking very broken. And the wheels are really coming off overseas and in high yield debt, currency markets.
Check this out; Wall Street earnings reports have become a joke to those of us in the industry. During the QE driven bull market, more than 80% of co's reporting beat their estimates. They should beat them...these same co's spoon feed the numbers to the analysts...and they do it just right...to ensure that they "beat the street estimates", ensuring that their stock price will "pop".
But all of this has changed now. But again, I can find very few on WS talking about this....still in denial, is my best guess.
Here's the deal: Through yesterday, less than 55% of all reporting co's have reported EPS beats. Worse yet, fewer than 40% are beating their revenue estimates! This is bigger than big, and it tells us corporate earnings are MUCH worse than anyone really wants to talk about.
You know my thoughts...the bear market highs are behind us. The coming move lower should take us to fresh cycle lows...and it should not take long.
Finally, every up open in the stock market is a gift to us short sellers...this is exactly when you want to initiate, or add to, existing VRA market short positions.
BTW....I want to be dead wrong about Zika...somehow, I don't think that will be the case. Just another black swan risk to add to the pile.
Stay Frosty,
Kip
