Thanks for reading my Diary today.

Enjoy the weekend.

And TGIF!

As we enter the weekend I am calling an audible and I just took some nice profits in my (SPY) puts just now (with the S&P Index -60 and the Nasdaq -145).
We are in a newsy market and I feel better without any bold and aggressive option trades over the weekend.
Moreover, this is my second very profitable put trade on Spyders in the last two weeks - I don't want to test my luck.
Bulls, bears, pigs.

As Bob Farrell always pointed out, concentration of performance by a few stocks is not healthy:

* Another lesson learned
* That is, in an interconnected world and in an age of growing uncertainties, we should always consider the unexpected

"Speak a little truth and people lose they mind."
- Ice Cube, Straight Outta Compton

The streets of Wuhan, the epicenter of the coronavirus, are eerie these days.

Only recently the city was unknown to most in our country.

No more.

Once again we learn the lesson that, in a market elevated and artificially influenced by central bankers' liquidity and with so many products and strategies that worship at the altar of price momentum, an unknown factor (that few "talking heads" considered) -- a virus -- would be the straw that breaks The Bull Market in Complacency.

Just as few envisioned that interest rates would move much lower (14 months ago), I know not a soul (save the Perma Bears) that expected, as we entered 2020, a large, potential market drawdown.

Contrary views that lie outside of the herd are always something to pay attention to -- it is the basis and rationale for the publication of my annual Surprise Lists.

Like Diogenes with his lantern, my list of year-end surprises is a cynical search for truth as I engage in my annual assault on the consensus and on "Group Stink."

Here is what I wrote in my15 Surprises for 2020:

Surprise #2: The consensus expectation for 2020 S&P EPS of about $178/share is, for the second year in a row, way off mark as EPS growth falls for the second year in a row because of a continued decline in profit margins that +3% revenue growth can't overcome. 2020 S&P EPS per share falls to modestly below the $163-$165/share recorded in 2019.

Investors, realizing that corporate profits have essentially been flat since 2014, begin to panic at the "new normal" of subpar economic growth. Another year in which earnings growth fails to recover reverses the valuation upwards reset (so conspicuous last year) as market participants grow increasingly concerned about the real economy's secular growth prospects.

Much of the more than +25% 2019 reset (higher) of valuations is reversed in 2020 - as price earnings multiples decline by about -15%, producing a modestly larger full year decline (-17%) in the S&P Index. 2020's market drop is the worst since 2002's fall of -23%.

The S&P Index closed at 3265 on Friday. The year's high is made in the first month of the year (at under 3350), the 2020 low in the S&P Index is 2550 and the close is about 2700.

The Lesson Learned

On Jan. 22, 2020, the S&P Index peaked at about 3325 (less than 1% below my projected peak of 3350 featured above in my Surprise List).

At this moment, the S&P Index is trading at 3229 and is 54 handles lower on the day. That's nearly 100 S&P points below the January high.

The proliferation of the coronavirus (and its impact on the capital markets) provides us with another lesson learned.

That lesson is, that in an interconnected world and in an era of rising political, geopolitical, policy and economic uncertainties, we should always consider the unexpected.

As it is said, the market takes an escalator up and an elevator down.
Risks happens fast.

Caterpillar (CAT) was downgraded to a sell at CFRA (target: $120).

After the mixed bag seen in the regional manufacturing indices, the January Chicago index was the worst of them all coming in at 42.9, 6 points less than expected and the weakest since December 2015. This brings the three month average to 45.9 vs. the 50 breakeven level. 

So no trade deal enthusiasm here as new orders fell 6.1 points to 41.5 while production fell to the lowest since July 2019. Backlogs, the precursor to orders and production, fell to a 4 year low at just 34.6. Inventories fell to the least since May 2016 at 40.2, below 50 for six straight months. Employment stayed below 50 at 47. 

With all the excitement over the USMCA, this question was asked: "Will the signing of the USMCA agreement improve your supplier lines?" The majority (60%) anticipate no improvement at all, while 40% expect little changes.

This number was awful and maybe that means it can only get better from here but with the virus stopping many things in their tracks in Asia, it certainly makes it more uncertain when.

Here is a chart of the Chicago print:

The final January UoM consumer confidence index did rise by +0.7 pts to 99.8 which was better than the initial print of 99.1 and up +0.5 point from December. The components though were mixed as Current Conditions fell -1.1 points while Expectations were higher by +1.6 points. Inflation expectations out one year were 2.5% vs 2.3% in December and 2.5% in November. 

Disappointingly, the Net Income component did soften to match the lowest since January 2018 but "Consumers continued to favorably assess recent changes in their personal finances." To this, employment expectations are the best since November 2018. 

Spending intentions were mixed as those planning on buying a vehicle and major household item fell m/o/m while those wanting to buy a home rose helped by lower mortgage rates. 

Lastly, and likely helping confidence but should be taken with other sentiment gauges, the level of bullishness on the stock market is at the highest level since January 2018 as respondents said there is a 65.6% chance of higher stock prices in the next year. That is the 2nd highest print since this question was first asked in 2002. 

A tight labor market, confidence with personal finances and ebullience with the stock market is why consumer confidence is where it is for this coincident indicator.

Here is a chart on stock bullishness: 

And here is the chart of the University of Michigan consumer confidence numbers:  

Though my conviction level is low (especially in a "newsy" investing backdrop), I am growing increasingly convinced that a multi month high in the averages may have been made in January, 2020 (which was the theme I included in my 15Surprises List).
I am particularly concerned about the message being delivered by the low level of interest rates (with the 10 year U.S. note yielding under 1.53%).
As a result I have purchased a large position of in the money and out of the money Spyder (SPY) puts (February monthlies) this morning.

* The data mattas to this analyst...
I sold out my speculative basket of cannabis stocks recently (for a profit) after the "January effect" (and cessation of selling) coupled with the reality of a still weak (and weakening) fundamental backdrop facing the industry from an (excessive) inventory status, supply and demand (and other) standpoints.
I promised to update my analysis on the cannabis space - and I will do so in the next week.
But for now, the group is an avoid (even at current low levels) - from this observer.
From Harleyjokin: 

Hemp CBD Is a Bust. Farmers Are Disappointed. -- Barrons.com
DOW JONES & COMPANY, INC. 9:00 AM ET 1/31/2020
Symbol Last Price Change
CGC 23.2896up -0.0604 (-0.26%)
TLRY 19.29down +0.07 (+0.36%)
CWBHF 7.54up -0.06 (-0.79%)
CVSI 0.98up -0.03 (-2.97%)
QUOTES AS OF 10:00:26 AM ET 01/31/2020
Many farmers planted hemp last year, hoping for a bit of the billions in sales predicted for the newly legal, nonintoxicating variety of cannabis that yields the soothing stuff called CBD. But demand didn't materialize, so piles of hemp "biomass" sit unsold, and the price of what does sell fell about 30% from December to January, according to researchers at New Leaf Data Services.

It's a glut and it is going to get worse. "[L]arge volumes of biomass remain unsold," says New Leaf's Hemp Benchmarks report for January, "suggesting that further price erosion is possible."

Demand for CBD, or cannabidiol, extracted from the biomass is equally poor. Inventories are growing and cash transactions are rare. When sales of CBD oil did occur, says the report, the price in January was 25% below December's.

Even Republican Sen. Mitch McConnell was a hemp enthusiast when Congress legalized the plant in late 2018, hoping for a new cash crop to make up for declining sales of tobacco in states like McConnell's Kentucky. Cowen & Co. analysts predicted that CBD would prove a $16 billion opportunity for companies like Canopy Growth(CGC) and Tilray(TLRY) . Boosters believed that CBD products would soon line the food, beverage and cosmetics aisles of supermarkets, drugstores, and mass merchandisers. Fashionable people would wear hemp threads. Barron's was skeptical.

See our April CBD feature: CBD Is the New Marijuana. But Don't Buy Into the Craze for Hemp Stocks .

Consumer packaged-goods giants like PepsiCo (PEP) and big retailers like Walmart (WMT) haven't committed to CBD- laced products. A big reason for that is concerns voiced by the U.S. Food and Drug Administration, which says it can't permit the biologically-active ingredient in food and drink without tests of CBD's safety. State health regulators in places such as California are also keeping it off shelves.

Even mail-order specialists like Charlotte's Web Holdings(CWBHF) (CWEB. Canada) blame regulators for stunting CBD's sales growth. The company's stock has slid 60% since our April article, while those of CBD plays CV Sciences(CVSI) and Green Growth Brands (GGB. Canada) are down more than 80%.

CBD may someday become a hot health additive, but for now, farmers are pulling back. Hemp Benchmarks reports that only a fraction of the acreage licensed to grow hemp was harvested in 2019, yet a glut still resulted.

As the 2020 planting season approaches, farmers ought to be buying seeds and starter plants. But in a time of year when demand for those things should be high, the market researchers are finding that their January prices are lower than they were in October.

"Wholesale hemp markets continue to face significant challenges," says Hemp Benchmarks.

Earlier this week I reestablished my short in Apple (AAPL) at $325-$326.

I have just covered the balance of my Apple shares at about $316/share for an unaccustomed gain (in this name!).

Based on yesterday's results I would raise my entry level to buy Amazon (AMZN) from $1750 to a range of $1900-$1950.
Given my (negative) market view I would not be surprised if the stock trades in that range (in a correction).

Another guide lower at Caterpillar (CAT) .
The shares are down by another -$3

* Amazon, the "Supreme Disruptor," has established an insurmountable first-mover advantage and a deepening competitive moat.
* Amazon's profit runway is lengthy and (as witnessed by last night's report) underestimated.
* I previously saw the company about one year away from "hockey stock" EPS growth that I believed would far exceed consensus expectations
* Amazon is 12 months ahead of my schedule
* I continue I expect that AMZN, in the fullness of time, will become the first $2.5 trillion company
* Since late 2018 I have traded Amazon basically two times - with accumulated gains of about $800/share (starting at a base of under $1385/share)
* Given my market view I expect to see some profit taking over the near term (after Amazon's spectacular after hours run to more than $2120) - its currently +$196/share to $2065
* Next time (and hopefully following a broad market decline) I expect to buy and hold this name

"Based on my company analysis, Amazon is about two years away from "hockey stick" earnings-per-share (EPS) growth that will far exceed consensus expectations. The source of my profit optimism and above-consensus growth projections are several fold, but are keyed on an expansion in operating leverage and profit margins produced by a lower rate of growth in expenses and higher top-line results. The latter will be aided by continued above-expected core retail sales gains and the anticipated success in the company's high-margin advertising initiative as well as other emerging businesses."
- Kass Diary,Amazon May Hit $3,000 by 2021 and Surpass $5,000 by 2025


Amazon (AMZN) reported fourth quarter revenues and EPS that meaningfully exceeded investors' expectations.

Importantly, unit growth accelerated to (year over year) +22% compared to only +14% in the year earlier quarter (justifying the previous step up in one day shipping/fulfillment costs). AWS results were a standout (reflecting the $30 billion in performance obligations vs. $27.4 billion in 3Q2019 and $19.3 billion in 4Q2018).

Specifically, the "hockey stick" beat that I expected next year occurred this year - about 12 months ahead of expectations.

Fiscal year 2020 estimates will be dramatically raised (probably to over $43/share compared to $35-$36 previous consensus). Sell-side price targets will be increased based on what we saw 13 months ago when we first bought the shares - a boost in e-commerce operating margins as Amazon grows into its larger infrastructure, optionality for faster than expected free cash flow vis a vis its advertising segment and an upward bias to AWS sales forecasts and a likely more moderate deceleration path as suggested by ongoing capital intensity and rising performance obligations.

Here is my very bullish thesis on Amazon as expressed back in April, 2019:

I purchased Amazon's shares in December, 2018 and added to my Best Ideas List at $1388 in the last week of that year.

After reviewing the Q1 results, Amazon remains my largest and highest conviction long.

The company's profits were well above forecasts, aided by a monumental expansion in operating margins (of 355 basis points, year over year). This was driven by operational efficiencies as well as strong results in advertising (large share gains) and AWS (small erosion in rate of sales growth but a good improvement in division margins). Rising costs associated with the move to a free one day Prime delivery program will halt that expansion in margins in the current quarter (incorporated in slightly lower profit guidance) but it is a brilliant move, nonetheless - and it is supportive of the "hockey stick" improvement in profitability I see in about two years (see quote above from a prior column). The non consensus profit ramp I see is a reflection of operating efficiencies, the relatively early-stage shift of workloads onto the cloud, continued online retail penetration, an unthreatened (regulatory/government) horizontal acquisition strategy and large share gains in advertising (business is expanding at a rate that is about 7x the overall ad industry market growth). 

I expanded on my Bullish thesis and raised my earnings estimates and price targets for the company last spring.

In the annals of U.S. corporate history there is no company that has as large and lengthy runway of opportunity as Amazon.com .

It is that prism of opportunity that supports my strong belief that Amazon's earnings growth will far exceed consensus expectations in the 2019-2022 period.

Here are the keys to my increasingly bullish case:

1. Amazon's first-mover advantage is now impenetrable; the company no longer can be caught by its competitors.

2. Amazon's broad product offerings and technological advantages no longer can be duplicated.
3. Nor is Amazon likely to be caught by regulators. Indeed, the existential threatof more regulation and the possible imposition of growth constraints seem to be sharply diminished probabilities unless a progressive Democratic aspirant captures the White House -- an increasingly unlikely event. (See my prior discussion of this.)

4. On the wings of a nearly zero cost of capital Amazon has expended enormous sums of capital to produce the massive and insurmountable competitive advantage that exists today. That "kindness of strangers"in such scale likely will never be duplicated again by a competing business entity, thus placing Amazon light years ahead of its competition. Indeed, in this marathon of disruptive growth (a marathon approximates 26.2 miles), Amazon is at least 20 miles ahead of its closest competitor.
5. Based on my company analysis, Amazon is about two years away from "hockey stick" earnings-per-share (EPS) growth that will far exceed consensus expectations. The source of my profit optimism and above-consensus growth projections are several fold, but are keyed on an expansion in operating leverage and profit margins produced by a lower rate of growth in expenses and higher top-line results. The latter will be aided by continued above-expected core retail sales gains and the anticipated success in the company's high-margin advertising initiative as well as other emerging businesses.
6. Based on our EPS models and our more optimistic assumptions of top- and bottom- line growth, I anticipated that EPS results for 2019, 2020 and 2021 will exceed consensus forecasts by more than 10% in each of those years -- and possibly considerably more! Also, 2021 is the year when the largest gain relative to expectations is projected. With more than one quarter of this year already in the rear-view mirror, it is not too early to consider results out two years.
7. The shares of Amazon have not been materially embraced and exploited relative to other peer stocks by institutional investors. As an example (and anecdotally), in my Bull/Bear debate with Tobias Lefkovich at Citigroup on Monday, the audience of large institutional investors was asked how many held the shares of Amazon. Only five out of about 30 investors answered the question affirmatively.In terms of the other three FANG constituents, Amazon has the lowest component of institutional ownership:

Institutional Ownership as a Percentage of Shares Outstanding* Facebook 75%* Amazon 57%
*Netflix 77%* Google 81% 8. In emphasizing Amazon's retail, emerging business and operating/financial strengths, I have not even discussed AWS cloud services, which I will save for a further discussion. It's the icing on the cake.


Background

After a series of forays on the short side (some profitable, some unprofitable) over the last few years, I purchased Amazon in late December and added the stock to my Best Ideas List as a long on Dec. 26, 2018, at $1,383. The shares are currently trading at about $1,820. I cited:

"Amazon's business franchise is secure and getting stronger. The competitive threats seem surmountable, and its market share appears to have a widening moat. The company's shares have also already materially discounted a modest threat of heightened regulation, which no longer seems as very threatening in any case."

- Kass Diary, "The Case For Amazon"

At that time, the broad markets were in disarray, there were concerns about the company's previous reporting quarter and the divorce of CEO Jeff Bezos raised vague questions about company control.

My bottom line:

"If a window of opportunity appears, don't pull down the shades."
- Tom Peters

With the risk of the company's growth expansion plans no longer in jeopardy, Amazon's competitive position is firming and its business moat has deepened. Its first-mover advantage and lead has multiplied over time and the company's competitive reach is not likely to ever be challenged.

It is now likely that a "hockey stick" in EPS results will gather speed over the next three years and that the company will produce sales and profit growth that substantially exceed investors' expectations. I expect that Amazon, in the fullness of time, will become the first $2.5 trillion company.Sometimes the best investment opportunities lie right in front of us, and Amazon might be the best example of this phenomenon today.

* I didn't have my pajamas on last night!
* The strong and broad market rally from Thursday morning's lows was aborted last evening as futures fell hard from the night's highs

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."
--Bob Seger, "Night Moves"

Following the big Amazon (AMZN) beat (more on that shortly), S&P and Nasdaq futures continued their spirited rallies post market and into the evening.
But those rallies have failed - in an abrupt way (for now).
Nasdaq futures, in particular, were quite strong (as the QQQs were +$2/share from the close post Amazon report). Nasdaq futures peaked at 9248 last night and are now 9151, -62 handles lower from Thursday's close and nearly -100 handles below Thursday's night's high. QQQs are basically flat from the close.
In evening futures action, S&P futures traded as high as 3297 and are now at 3270, -19 handles lower from Thursday's close and almost -30 handles below Thursday night's high. Spyders (SPY) are more than -$1/share from the close.
I have made it clear that I don't like the overall action but my conviction level is low and I am playing things close to the vest this week.

Tony seems to share my market view -- in "Uncomfortably Neutral With No Edge":

The combination of better-than-expected Q4/19 EPS, strong credit, and an easy Fed makes it hard to be overly negative, while the still overbought tactical condition and unknown macro impact from the spreading coronavirus makes it difficult to be too positive. Indeed, these crosscurrents reinforce our decision to move to a neutral market and sector position on 01/20, and since we have no way to qualify the coronavirus and are waiting for a better tactical entry point, it seems a good time to review Q4/19 EPS results and the status of our key tactical indicators.

Q4/19 EPS look to be positive. Now that the busiest week for Q4/19 earnings season is almost behind us, we thought it would be a good time to highlight the current S&P 500 (SPX) operating earnings estimates (Source: I/B/E/S data from Refinitiv):

--Of the 193 S&P 500 companies that have already reported Q4 earnings, 71% have reported above-analyst estimates and 19.2%have reported below analyst estimates. This is slightly below the average beat of 74% over the past four quarters.

--Q4/19 EPS growth is estimated to be up 0.7% (Figure 1). This is an improvement from the end of last week when the blended earnings estimates were calling for EPS to be down -0.5%. We expect the final growth in EPS could be low single digits as every quarter since 2009 has been revised higher from the first day of EPS reporting season to the end by a median 3.4%.

--The Q4/19 revenue growth estimate is 4.5%, with the Financials and Health Care sectors expected to show the highest revenue growth.

--The Energy sector continues to have an impact on the outlook for Q4 EPS and Revenue growth. If you exclude the Energy sector, the Q4/19 consensus estimate for bottom- and top-line growth would rise to 3.5% and 5.8%, respectively.

Our key tactical indicators are no longer at extreme overbought, but not yet sending an all-clear signal. The recent volatility has started to reverse some overbought conditions in our four favorite tactical indicators. The percent of stocks above 10- & 50-day moving averages and the CBOE Volatility Index (VIX) are no longer at overbought levels hit earlier this month, while the slower indicators, the weekly stochastic and I.I. have begun to pullback. Below are the levels we watch to suggest an oversold condition vs. where they stand today:

--The percentage of S&P 500 Index (SPX) components above their 10- and 50-day moving averages drops to 20% and 40%, respectively. They are at 31%& 57%, respectively.

--The VIX Index jumps to 20 or higher. It rose to 19 earlier this week and close at15 on Thursday.

--The 14-week stochastic indicator drops to 30 or below. This has been pulling back (slowly) from extreme overbought and is at 90.

--Investor Intelligence percentage of bullish newsletter writers drops to below 45% or preferably 35%. Last week's reading pulled back from the highest level in 15 months to 52.8%.

Summary -- We downgraded our market view on January 20 because of the overbought condition and excessive optimism. That decision was reinforced when we looked under the hood of the SPX and found that offense had already been coming off the field when reviewing those areas that were showing weakness relative to the market. This was all before the Wuhan coronavirus came into play. We are sticking with our neutral market and sector positioning until our key tactical indicators give us an all-clear, and we can see some improved clarity on to the spreading coronavirus.

Peter Boockvar has "a few things" to say this morning:

 As each day passes, the virus spreads further and more activities are postponed, we can just about throw out every single economic data point for the next few months and just expect a big Q2 bounce back on the belief it flames out come Spring time. We'll still talk about the data though because we can see at what level things will get impacted from.

China reported its January PMI's but before of course the virus spread became more rampant and parts of their economy literally shutdown.

On easy comps and maybe some stabilization, South Korean industrial production in December rose 3.5% m/o/m, well better than the estimate of up .7%. With China's economy almost shutting down right now, we can throw this one out. Manufacturing was exactly at the flat line at 50 so definitely going below 50 in coming months. Services picked up to 54.1 from 53.5 but that will change in the next read. We all await the opening on Monday of China's markets.

Japan's labor market remained tight in December as the jobless rate held at just 2.2% and the jobs to applicant ratio at 1.57. We know though that numbers like this have not led to faster wage growth and why inflation needs to stay low. On that, helped by the hike in the VAT, CPI in Tokyo ex food and energy rose 0.9% y/o/y, holding at the highest level since 2015. Just keep raising that tax and maybe they can finally get to 2% inflation. Inflation is a tax itself by the way. Japan also saw IP in December exceed expectations.

The eurozone economy grew 1% in Q4 y/o/y, one tenth less than expected and another repeat of that is expected in 2020. I'll argue again that what the ECB is doing is not easing, their policy is restrictive because of the damage they've done to bank profitability in a region where most loan growth is via the banks instead of the capital markets. The French and Italian economies outright contracted in Q4.

CPI in the eurozone in January rose 1.4% headline as expected but the core rate slipped to 1.1% from 1.3% and that was one tenth less than expected. Can we establish here that massive QE and negative rates doesn't always lead to higher inflation which if achieved would slow growth and result in a spike in interest rates?

Danielle DiMartino Booth on the American workers:

• Fourth-quarter GDP growth continues its stable trend with volatility in the metric at a postwar low; absent the flattery of declining imports, reported GDP would have been 0.8% as discretionary spending continued to slow
• Bloomberg's Consumer Comfort Index is reaching new heights beyond even 1999 levels, driven by high school graduates and those aged 45-54; minimum wage earners and owners of stocks are enjoying the highest confidence
• Last year, 50% of U.S. workers did not get a pay raise or switch to a higher-wage job; the sustained rise in continuing jobless claims into 2020 suggests the bifurcation in the job market will persist

If only life was more mathematical. Divide or multiply two negative numbers and out pops a positive. As for life? With a full-throated disclaimer that the following was written as a Scottish proverb in 1721, before colors connoted prejudice, it was said that, "two blacks don't make a white." Did we mention 300 years ago? Etymological purists that we are, we strive to share the truest origins possible. Of course, this saying has long since morphed into "two wrongs don't make a right." You likely first heard this as a child when your parent was counseling you to combat your impulsive inclination towards "an eye for an eye."

Yesterday's advance fourth quarter GDP report was data's testament that two wrongs can make a right. At least that was the mathematical takeaway which parallels subtracting a negative number from a positive number to get an even bigger positive number. Had the drag from sinking imports been transformed into a negative, the GDP you saw hit the wires as a 2.1% print would have been 0.8%. Neat, huh? But we've covered this extensively in recent Feathers, so you get it. As for what did not flatter growth, that would be spending on the things we want, as opposed to need. Net out necessities, listed in today's chart source, and you see that discretionary spending continued to stutter-step down in the fourth quarter.

In the midst of the global spread of the coronavirus, we can fall back on the SARS outbreak for context. Continuing jobless claims, the number of Americans collecting unemployment insurance, had flagged the oncoming recovery in the U.S. economy by 2002's third quarter. When SARS hit, continuing claims reversed course, rising 2% in that year's fourth quarter over the prior 12-month period and by 3.2% in 2003's first quarter. But the scare passed swiftly. By 2003's second quarter, the nascent expansion roared back to life with claims falling for 13 straight quarters until hitting the financial crisis wall in 2007's first quarter.

Financial market historians dubbed that (then extraordinary) period of calm The Great Moderation for that expansion's staying power. As devastating as the recession was that followed, claims "only" rose for 12 quarters throughout.

As detailed in this week's Quill, what followed was The Great Moderation 2.0 - 38 straight quarters of falling continuing jobless claims, a stretch that dispensed with any historic precedent. And then came the end of last year. Continuing claims rose in 2019's fourth quarter for the first time since 2009. They've continued to rise into this year even as the longest expansion in U.S. history carries on.

The weekly also delved into the advent of unprecedented volatility across all markets - FX, bonds, stocks, you name it, which we thought we did. Being the stickler for comprehensiveness he is, Dr. Gates noted we'd omitted the volatility of GDP itself. It would seem that in the three quarters through year-end 2019 wherein growth dutifully lined up as 2.0%, 2.1% and 2.1%, GDP volatility was the lowest in postwar history through the prism of standard deviations. Dr. Gates calls it "Powell's Printing Press Prozac." The calm in the financial markets has bled into economic data.

Of course, there are many moving parts that make up GDP's construct. In the end, though, it all does come down to households' wherewithal to spend. Given the World Health Organization's assurances on the travel front and how quickly they parted the clouds over the stock market, we suspect investors will look at the coronavirus as just another passing disruption. To that end, behold Bloomberg's latest Consumer Comfort Index for the week that ended January 26, well into stocks' initial violent reaction. Not even in 1999 did the index scale such heights.

One thing we did note was that this last week's Index was driven by two cohorts - those aged 45-54 and high school graduates. Our thumbnail - owners of stocks and those making higher minimum wages. But what about those in between?

QI friend Lev Borodovsky, who faithfully puts to bed The Daily Shot when the rest of us are waking, included it in yesterday's email (timestamp 5:37 am). As you can see, half of Americans saw their paychecks grow last year and half did not. This bifurcation gels with QI's theme that the most productive workers will increasingly be the only ones with growing renumeration.

That brings us back to how very far into the cycle we are vis-à-vis the SARS episode, which hit at the outset of a recovery as opposed to the coronavirus black-swaning after a record period of calm, what Dr. Gates has crowned The Greatest Moderation. If financial market suppression the first go-round ended in spectacularly bad fashion, we have to wonder how the Greatest fares once the ink dries. Will two wrongs make a right?