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Bad News Banks, coronavirus redux hammer Friday stock market action

Written By | Jun 26, 2020
Unemployment drop, coronavirus spike, Bad News Banks, coronavirus redux

Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect. (See link in article)

WASHINGTON – Today’s stock market villains: A. The same reportage that goosed the banks Thursday reversed itself with terrible news this morning, as the Feds slapped at least some Bad News Banks; and B: Good-old headline risk, as COVID-19 cases suddenly got a boost in a few red states that had thus far avoided calamity. All of which gets us right back to the Democrats’ favorite message: We’re all gonna die, because, GOP, Trump, coronavirus redux and anything else we don’t like. Convenient and fun. Rinse, repeat.

More on those Bad News Banks

Thus, after what seemed like a brief reprieve Thursday after investors game the banking industry a big thumbs-up, we find all three major averages in mid-crash mode as of 2 p.m. Friday afternoon. The Dow, the S&P 500 and the NASDAQ are all down 2% or thereabout at the moment, with the Dow getting the worst of it as usual.

The big bad news for the banks today: Current Fed stress-testing indicated today that, given the ongoing Covid-19 fallout, mortgage defaults and other unpleasant banking things might end up worse than expected, leaving banks potentially short of the kind of cushioning they’ve been supposed to carry since draconian bank reforms were enacted during Barack Obama’s first administration.

Meaning that, at worse, banks might have to pause returning capital to investors and / or hold dividends at current levels. Or even cut them. Cue spooky music with added theremin effects. Of the big banks, only magnificently mismanaged Wells Fargo could end up cutting its dividends. And perhaps Virginia-based Capitol One is another of those Bad News Banks that might need to cut its dividend, too. Big deal. This, too, shall pass.

I used today’s big bank swan dive to pick up a couple more shares of America’s kingpin bank, JP Morgan Chase (trading symbol: JPM). Little by little. Jamie Dimon & Co. will win as usual. I just wish Jamie would consider altering his politics a bit. Otherwise, he’s risking his winning streak.

Coronavirus redux panic: It’s ba-a-ack!!!

Moving on from the Bad News Banks… Let’s check out the rest of the market and today’s coronavirus redux swan dive. Look, just when things start looking good, we get another wave of Covid-19 negativity in the media. Yes, Covid-19 panic is back, Second Wave edition. Imagine that! Here’s a current CNBC headline:

Dow slides 600 points after Texas rolls back reopening amid spike in coronavirus cases

And here’s a snippet of the story.

“Stocks fell Friday amid concerns over the rising number of coronavirus cases in the U.S. and its impact on the economic recovery…

“Texas Gov. Greg Abbott said Friday the state will roll back some of its reopening measures as coronavirus cases and hospitalizations continue to rise. ‘At this time, it is clear that the rise in cases is largely driven by certain types of activities, including Texans congregating in bars,’ Abbott said in a release.”

Missing in the governor’s assessment, however, was the fact that all major cities in Texas experienced substantial and lengthy Antifa / BLM riots, with mass quantities of unprotected thugs raining destruction (and likely coronavirus particles) down on these cities and each other. But even in bright Red Texas, pointing this out might cause another pre-planned riot, so, fuhgeddabouddit.

“Florida announced it would suspend ‘on premises consumption’ of alcohol at bars in the state after reporting a surge of nearly 9,000 new virus cases. In Arizona, the number of cases jumped by 5.4%, topping a seven-day average of 2.9%.”

Note: All major cities in these states also experienced “unprotected” riots as well. Social distancing was not observed in any of these riots. Just look at any videos taken at these “events.” And don’t bother sending me spurious comments.

More on the latest coronavirus redux panic in the media

“‘Coronavirus cases are spiking and reopenings are being delayed, which at a minimum will impact earnings,’ said Tom Essaye, founder of The Sevens Report. ‘The resurgence in coronavirus cases is raising concerns that the rebound may be short-lived as voluntary or potentially more government mandated economic shutdowns are becoming increasingly likely.’

Tom may be right. But we’ll almost certainly have repeated economic “concerns” right up to and through the night of Election 2020. It all makes the Trump administration look bad, which is precisely the point.

Let’s look at Covid-19 and political reality here

A certain percentage of the rise in Covid-19 cases is simply due to the fact that increased testing is discovering many more infections that never resulted in a full-blown case of Covid-19.

According to an article appearing in several sources today, scientists are also discovering that a substantial number of people came down with the disease in early March, PRIOR TO the Big Lockdown.

Although it’s little reported, it’s very clear that the coronavirus had begun infiltrating the US as early as Thanksgiving, 2019. The first Chinese cases apparently surfaced over there in September 2019. But we never heard about it until late January, give or take. All these early cases have likely never been tracked. I think a lot more people have encountered this virus already than anyone can imagine.

All of which means we need to forget about all this dire “Phase 2” nonsense. The virus is here to stay and will stay here as long as it wants to. There is no coronavirus redux, Phase 2, Phase 3, whatever. Federal and state governments are too much in love with “phase” terminology to look at the actual time-space continuum of this desease.

To wit: Eventually, pretty much everybody in the US will get exposed to Covid-19 by, say, this winter at the latest. And, as usual, some will not be affected at all; some will come down with something like a bad cold for a few days; some will come down with a nasty flu; and the disease will kill a small number of already ailing unfortunates.

Another US lockdown on the way?

For most Americans, this latest coronavirus redux surge is just part of the ongoing flow of America’s New Flu. It will stay here until it doesn’t. And Americans will not likely put up with another complete business shutdown again because of it. This one was bad enough. And too many American workers are still out of work to begin with. They were enjoying the uninterrupted Trump Resurgence. Even though they may not all want Trump again this fall, they want those good times back, and aren’t about to shut things down completely again. But we hope they’ll understand that if they go for Slow Joe, there won’t be any Biden Resurgence. Not when the Obama apparatchiks reactivate in January of 2021.

Also Read: Fed says near zero interest rates to remain thru 2022. But GDP will soar

No matter what kind of “resurgence” we may experience now or later, business in America will continue to recover unless a new administration openly thwarts it with fat tax increases and an avalanche of new, crippling rules. True, a few more economic burps like the one we’re currently seeing are endangering what still looks like  greatly desired V-shaped recovery. So, okay, it will be a U-shaped recovery. But, more than likely, the recovery remains on track in some way, shape or form. Unless we change horses in the middle of the stream, always a clear and present danger.

And how about that Blue Flu? Has anyone learned anything in Minneapolis or Seattle?

Despite the limp-wristed responses to Antifa-inspired violence in Seattle, Minneapolis and a few other True Blue cities, most Americans of all political persuasions want to get back to the productive, full-employment they’d been experiencing until March 15 rolled around. They want it back.

But for those in blue cities and states, to achieve the same after June’s massive binge of leftist destruction, voters there may need to think the unthinkable this fall – and not just at the presidential level. They need to think long and hard about turning out their beloved Democrat Party. That much-altered party has run these jurisdictions, often for many decades. And how much protection did they offer small businesses and individual constituents when avowed Marxist thugs invaded their cities to destroy the American way of life.

An attitude change in these cities and states could alter the political map this fall, a highly desirable outcome for citizens and investors alike. But I won’t hold my breath.

 –  Headline image:  Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17