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It's interesting that all of the current activity is speculation and the actual impact of supply chain disruption really hasn't started to hit yet. Given that w

It's interesting that all of the current activity is speculation and the actual impact of supply chain disruption really hasn't started to hit yet. Given that we're at record levels of corporate debt, I would think we are likely to see a lot of ripples.

Johnny555 7y ago
Apple, for example, already announced they will miss sales targets due to supply chain disruptions, so the market is going to factor that in whether or not the expected delivery was missed. But I think the impact is already being felt -- ports are already reporting a drop in container ships. https://www.wsj.com/articles/port-of-los-angeles-sees-coronavirus-impact-sharply-reducing-imports-11582648931 https://www.wsj.com/articles/port-of-los-angeles-sees-corona... And the lack of incoming ships doesn't just reflect a drop in imports, but it's also affecting exports that were waiting on those ships.
- hogFeast 7y ago
  Los Angeles isn't huge. Arrivals in Shanghai/Shenzen/Ningbo (and to a lesser extent, HK) are definitely down and vessels are staying in port but the world hasn't stopped. Busan is fine, Singapore is fine, Jebel is fine, Rotterdam is fine, etc. Maybe the virus gets worse somehow but when things resume, they will resume quickly. If you look at traffic stats for the Chinese cities above, you will see they improved last week...last Monday Shenzen was actually back to normal. Again, maybe the virus gets worse but the evidence is that we have stabilised.
  - ohazi 7y ago
    The Port of Los Angeles is the busiest container port in the United States. 20% of all US-bound cargo moves through this port.
    - hogFeast 7y ago
      "in the United States"...LA is the #17 biggest port in the world. The top 3 Chinese ports do something like 10x the volume of LA.
    - dehrmann 7y ago
      Also worth noting that the Port of Long Beach is literally next door and handles 40% of the volume of the Port or Los Angeles.
  - Johnny555 7y ago
    I don't know what qualifies as "huge", but around $300B worth of cargo passes through the Port of Los Angeles every year. And other ports are also reporting slowdowns. It takes about 2 weeks for a cargo ship to reach the USA from China, but it can take 30 days or longer to get a shipment through the entire cargo chain from start to finish, so even if things are recovering on the China side, we're still in for at least a few more weeks of disruption. And since cargo is stacking up on both sides, it'll probably take months to get everything back on track.
    - hogFeast 7y ago
      The top port does something like 4x the volume. Los Angeles is in the top 20 (just #17) but it isn't large. I just told you what the volume is (you can check for yourself, all of this is public information) for other ports. It won't take months. That is just not factually accurate, it takes a day or two to load the largest container ships, and they load more than one at once. It isn't "stacking up", that isn't how ports work...if you can't get space, you don't stack your stuff at the port, you just don't send it.
      - ceejayoz 7y ago
        A 5,000 page book is still large if there's a 20,000 page book out there.
  - arcticbull 7y ago
    Evidence is also that the virus just isn't that bad, it's the same order of magnitude as a bad seasonal flu. We definitely didn't know this at the start, so the reaction was justified, but evidence is showing us that this is both (a) likely not a virus we can contain in part because it's just not that bad and (b) that shouldn't really matter to us. Longer term, we'll have a vaccine and it'll be added to the usual seasonal flu vaccine package. Time to accept it: we're all going to get the coronavirus, and you know what? The vast, vast majority of us are going to be just fine. [1] So we're clear, the seasonal flu has killed 80,000 people so far this year vs 3,000 from nCov-19. The transmission rate is a bit higher than H1N1, the fatality rate is a bit higher than H1N1 (0.6% vs 0.45%). Treating this as some sort of ebola pandemic where we're all going to die is a massive overreaction. From the WHO report almost half of people are asymptomatic. Death rate for people under 7 is 0%. Under 40 is 0.2%. Under 50 is 0.4%. For older folks or the immunocompromised, it's naturally higher, because they're older and immunocompromised. Data shows the H1N1 flu is 10% fatal to old folks, too. We've reached peak unsubstantiated fear. [1] https://www.theatlantic.com/health/archive/2020/02/covid-vaccine/607000/ https://www.theatlantic.com/health/archive/2020/02/covid-vac...
    - ookblah 7y ago
      The thing is where is the balance in response to this? I too agree that it's going to just be one of those things we deal with every year like the flu, but the difference between it being manageable vs. out of control relies on everyone collectively having a set of standards. If everyone uses some common sense, washes hands, is on top of their symptoms and goes to the hospital, etc. everything will be fine. If everyone just acts like nothing is wrong you could have cluster outbreaks and seriously affect pockets of people. The fear factor plays in here. The fact that we haven't tested nearly as many in the USA and are acting as more of a passive observer gives me concern.
      - deleted 7y ago
        [deleted]
      - Johnny555 7y ago
        If everyone uses some common sense, washes hands, is on top of their symptoms and goes to the hospital, etc. everything will be fine. Is that true though? Half the country gets a flu shot, yet between 10M and 50M still get the flu each year. And to be honest, I'd be very reluctant to go to a hospital for any reason right now unless I felt I was in danger of dying since everyone that thinks they might have coronavirus is going to be sitting in the waiting room beside me. Is simple handwashing enough top stop the spread of this coronavirus, or is stronger isolation needed? China seems to have a handle on the infection growth but as far as I know, many areas are still on lockdown.
  - Avalaxy 7y ago
    I live in Rotterdam. You better believe the amount of containers coming in has recently drastically decreased.
pmorici 7y ago
Is it really just speculation? The China PMI number for February is being billed as the lowest on record. https://www.cnbc.com/2020/02/29/china-pmi-factory-activity-shrank-at-fastest-rate-on-record-in-february.html https://www.cnbc.com/2020/02/29/china-pmi-factory-activity-s...
nugget 7y ago
Isn't this one utility of free markets, to be a source of predictive consensus about what is likely to happen in the future?
- refurb 7y ago
  Exactly. The equity markets are future predictors. When someone is self-interested in speculation, that also provides a signal to the broader market about what might unfold. That signal helps others plan as well.
- K0SM0S 7y ago
  Yes, the prevailing assumption is that "everything is factored in price", including all the irrational (like some aggregate of our prediction of the future, which includes investors thinking like OP).
alfiedotwtf 7y ago
> really hasn't started to hit yet I guess you don’t talk to people in the construction industry. People have been let go because they can’t get supply. I’ve had multiple first hand accounts just in the past week in different parts of construction (commercial and realestate) saying how bad it is (Australia).
brettproctor 7y ago
The % of corporate debt rated BBB has also exploded. It is likely these companies should really be junk, but are kept alive by reluctant/agreeable rating agencies and historically low rates. "At the same time, the lowest rated part of the investment-grade market has grown particularly quickly. Globally, BBB debt makes up over 50% of the market versus only 17% in 2001." - https://www.blackrock.com/institutions/en-us/insights/investment-actions/assessing-risks-in-bbb-corporate-bonds https://www.blackrock.com/institutions/en-us/insights/invest...
- caleb-allen 7y ago
  Yikes. I've been worried that junk corporate debt would be what triggers the next recession, with the financial "innovation" of the Collateralized Loan Obligation where the mortgage based CDOs previously were
samvher 7y ago
Right - I am by no means an expert on this but I feel far more worried about ripple effects than about the disease or even direct effects of supply chain disruption. In October the IMF warned about corporate debt levels which could cause serious issues with a recession half as bad as what we had in 2008 [1]. This seems like a similar kind of systemic risk as what ultimately caused most of the trouble during that recession, but most people are talking only about the direct effects of quarantine and supply chains. [1] https://mobile.reuters.com/article/amp/idUSKBN1WV1N5 https://mobile.reuters.com/article/amp/idUSKBN1WV1N5

Johnny555 7y ago

Apple, for example, already announced they will miss sales targets due to supply chain disruptions, so the market is going to factor that in whether or not the expected delivery was missed. But I think the impact is already being felt -- ports are already reporting a drop in container ships. https://www.wsj.com/articles/port-of-los-angeles-sees-coronavirus-impact-sharply-reducing-imports-11582648931 https://www.wsj.com/articles/port-of-los-angeles-sees-corona... And the lack of incoming ships doesn't just reflect a drop in imports, but it's also affecting exports that were waiting on those ships.

hogFeast 7y ago
Los Angeles isn't huge. Arrivals in Shanghai/Shenzen/Ningbo (and to a lesser extent, HK) are definitely down and vessels are staying in port but the world hasn't stopped. Busan is fine, Singapore is fine, Jebel is fine, Rotterdam is fine, etc. Maybe the virus gets worse somehow but when things resume, they will resume quickly. If you look at traffic stats for the Chinese cities above, you will see they improved last week...last Monday Shenzen was actually back to normal. Again, maybe the virus gets worse but the evidence is that we have stabilised.
- ohazi 7y ago
  The Port of Los Angeles is the busiest container port in the United States. 20% of all US-bound cargo moves through this port.
  - hogFeast 7y ago
    "in the United States"...LA is the #17 biggest port in the world. The top 3 Chinese ports do something like 10x the volume of LA.
  - dehrmann 7y ago
    Also worth noting that the Port of Long Beach is literally next door and handles 40% of the volume of the Port or Los Angeles.
- Johnny555 7y ago
  I don't know what qualifies as "huge", but around $300B worth of cargo passes through the Port of Los Angeles every year. And other ports are also reporting slowdowns. It takes about 2 weeks for a cargo ship to reach the USA from China, but it can take 30 days or longer to get a shipment through the entire cargo chain from start to finish, so even if things are recovering on the China side, we're still in for at least a few more weeks of disruption. And since cargo is stacking up on both sides, it'll probably take months to get everything back on track.
  - hogFeast 7y ago
    The top port does something like 4x the volume. Los Angeles is in the top 20 (just #17) but it isn't large. I just told you what the volume is (you can check for yourself, all of this is public information) for other ports. It won't take months. That is just not factually accurate, it takes a day or two to load the largest container ships, and they load more than one at once. It isn't "stacking up", that isn't how ports work...if you can't get space, you don't stack your stuff at the port, you just don't send it.
    - ceejayoz 7y ago
      A 5,000 page book is still large if there's a 20,000 page book out there.
- arcticbull 7y ago
  Evidence is also that the virus just isn't that bad, it's the same order of magnitude as a bad seasonal flu. We definitely didn't know this at the start, so the reaction was justified, but evidence is showing us that this is both (a) likely not a virus we can contain in part because it's just not that bad and (b) that shouldn't really matter to us. Longer term, we'll have a vaccine and it'll be added to the usual seasonal flu vaccine package. Time to accept it: we're all going to get the coronavirus, and you know what? The vast, vast majority of us are going to be just fine. [1] So we're clear, the seasonal flu has killed 80,000 people so far this year vs 3,000 from nCov-19. The transmission rate is a bit higher than H1N1, the fatality rate is a bit higher than H1N1 (0.6% vs 0.45%). Treating this as some sort of ebola pandemic where we're all going to die is a massive overreaction. From the WHO report almost half of people are asymptomatic. Death rate for people under 7 is 0%. Under 40 is 0.2%. Under 50 is 0.4%. For older folks or the immunocompromised, it's naturally higher, because they're older and immunocompromised. Data shows the H1N1 flu is 10% fatal to old folks, too. We've reached peak unsubstantiated fear. [1] https://www.theatlantic.com/health/archive/2020/02/covid-vaccine/607000/ https://www.theatlantic.com/health/archive/2020/02/covid-vac...
  - ookblah 7y ago
    The thing is where is the balance in response to this? I too agree that it's going to just be one of those things we deal with every year like the flu, but the difference between it being manageable vs. out of control relies on everyone collectively having a set of standards. If everyone uses some common sense, washes hands, is on top of their symptoms and goes to the hospital, etc. everything will be fine. If everyone just acts like nothing is wrong you could have cluster outbreaks and seriously affect pockets of people. The fear factor plays in here. The fact that we haven't tested nearly as many in the USA and are acting as more of a passive observer gives me concern.
    - deleted 7y ago
      [deleted]
    - Johnny555 7y ago
      If everyone uses some common sense, washes hands, is on top of their symptoms and goes to the hospital, etc. everything will be fine. Is that true though? Half the country gets a flu shot, yet between 10M and 50M still get the flu each year. And to be honest, I'd be very reluctant to go to a hospital for any reason right now unless I felt I was in danger of dying since everyone that thinks they might have coronavirus is going to be sitting in the waiting room beside me. Is simple handwashing enough top stop the spread of this coronavirus, or is stronger isolation needed? China seems to have a handle on the infection growth but as far as I know, many areas are still on lockdown.
- Avalaxy 7y ago
  I live in Rotterdam. You better believe the amount of containers coming in has recently drastically decreased.

pmorici 7y ago

Is it really just speculation? The China PMI number for February is being billed as the lowest on record. https://www.cnbc.com/2020/02/29/china-pmi-factory-activity-shrank-at-fastest-rate-on-record-in-february.html https://www.cnbc.com/2020/02/29/china-pmi-factory-activity-s...

nugget 7y ago

Isn't this one utility of free markets, to be a source of predictive consensus about what is likely to happen in the future?

refurb 7y ago
Exactly. The equity markets are future predictors. When someone is self-interested in speculation, that also provides a signal to the broader market about what might unfold. That signal helps others plan as well.
K0SM0S 7y ago
Yes, the prevailing assumption is that "everything is factored in price", including all the irrational (like some aggregate of our prediction of the future, which includes investors thinking like OP).

alfiedotwtf 7y ago

> really hasn't started to hit yet I guess you don’t talk to people in the construction industry. People have been let go because they can’t get supply. I’ve had multiple first hand accounts just in the past week in different parts of construction (commercial and realestate) saying how bad it is (Australia).

brettproctor 7y ago

The % of corporate debt rated BBB has also exploded. It is likely these companies should really be junk, but are kept alive by reluctant/agreeable rating agencies and historically low rates. "At the same time, the lowest rated part of the investment-grade market has grown particularly quickly. Globally, BBB debt makes up over 50% of the market versus only 17% in 2001." - https://www.blackrock.com/institutions/en-us/insights/investment-actions/assessing-risks-in-bbb-corporate-bonds https://www.blackrock.com/institutions/en-us/insights/invest...

caleb-allen 7y ago
Yikes. I've been worried that junk corporate debt would be what triggers the next recession, with the financial "innovation" of the Collateralized Loan Obligation where the mortgage based CDOs previously were

samvher 7y ago

Right - I am by no means an expert on this but I feel far more worried about ripple effects than about the disease or even direct effects of supply chain disruption. In October the IMF warned about corporate debt levels which could cause serious issues with a recession half as bad as what we had in 2008 [1]. This seems like a similar kind of systemic risk as what ultimately caused most of the trouble during that recession, but most people are talking only about the direct effects of quarantine and supply chains. [1] https://mobile.reuters.com/article/amp/idUSKBN1WV1N5 https://mobile.reuters.com/article/amp/idUSKBN1WV1N5