* But a buying opportunity may shortly be at hand
With the benefit of hindsight, I was very fortunate to have sold my entire large Disney (DIS) position for a good-sized profit at $111-$112 late last week.
The shares are down $3.30 to $97.75 in the after hours.
Disney is omitting its first half dividend -- not a good thing. Its large buildup of debt (accumulated during its aggressive acquisition program over the last two years) is now weighing on one of America's favorite companies.
The good news is that we probably will get a great buying opportunity in the shares sometime in the next week or two. I would be an aggressive buyer in the $90-$95 area.
It is also good news that Disneyland Shanghai will be reopening on May 11.  (This is a positive potential catalyst I have previously mentioned).
Thanks for reading my Diary today and enjoy the evening.
Be safe.

Not surprisingly, Disney (DIS) missed both the top and bottom line.
The Covid-related losses/costs were somewhat higher than I expected -- but not materially so.
Subject to any surprising news released during the conference call (beginning shortly), I suspect the shares to move little on the earnings per share release.

Predictit odds of the November Presidential election.

I shorted (IWM) at $126.45, bringing me back to net short (small).

I shorted (QQQ) at $218.55, and I am now back to market neutral.

I shorted (SPY) at $288.04, taking down my net long exposure to small-sized.

Bruce Kamich provides a technical analysis of Berkshire Hathaway (BRK.B) this afternoon.
He is bearish on the share price.

Papa John's (PZZA) shares are up another +$2.90/share to $75.60 - and that's another 52 week high.

Last week I moved from medium-sized to small-sized.

Investors, according to the CNN Fear & Greed Index, are neither fearful nor greedy.

Canadjuneh • edited

RE: Disney (DIS). trying to envision what travel will look like in the next few years. People will still want to vacation perhaps even more so. The choices? Overseas trips look challenging either by ship or air so the idea will be you go where you can drive. American theme parks like DIS should do well with proper safeguards in place; so should stocks like WGO (your hotel on wheels..much safer?); Airbnb also appeals since they are not hotels with crowds and elevators; and both Mexico and Canada will likely see more tourist traffic from the US.If I had to go a cruise, the river cruise appeals..small (120 to 130 passengers) and companies like Eclipse and Viking are gearing up for North American river cruises and Great Lakes Cruises.
Idle thoughts. I note WGO is up 8% today. Another question: travel insurance premiums? going up.

My pal Lee Cooperman and I routinely share market and company views. Lee gave me permission to publish the email he recently sent me - you will notice we share several similar near term concerns:

I am optimistic on solving the virus problem and that the economy will start opening up in May, but I am concerned about the long-term implications of what we have gone through. Why?

1. Capitalism as we have known it will likely be changed forever. When the government protects you on the downside, they have the right to regulate the upside.
2. The country is moving to the left and taxes are going up - quickly if Biden wins and more slowly if Trump wins.
3. As I have been saying for three years, low interest rates are indicative of a troubled economy and in themselves not bullish. We have negative rates in Japan and Europe, yet their [price-to-earnings (P/E) ratios] are lower than ours.
4. Debt is growing much more rapidly than the economy and thus more of our national income will have to be devoted to debt service.
5. Demand is likely to come back slowly. We will need a vaccination with a card to get access to sporting events and concerts - at least a year away.
6. Businesses will incur substantial compliance costs.
7. There will be substantial equity issuance to replace lost capital (e.g., UAL move).
8. Stock repurchases, which lifted [earnings per share ("EPS")], are over!
9. Profit margins were at an historic peak in January and they tend to be mean reverting.
10. Credit is cheaper than stocks. High yield, excluding energy, is yielding 7.25% - this equates to 14x earnings.
11. I'm a watcher of Buffett and Munger for good reason. Uncharacteristically Buffett sold airlines into weakness and he doesn't seem to be too active despite his liquidity. If the greatest investor in my generation can't figure it out, who am I to be bold?

My bottom line: a fair P/E on the S&P 500 500 is 17x - higher than historical but low relative to interest rates. I apply that to normalized earnings of $150 and it gives me fair value of 2,550 presently (versus yesterday's close of 2,843). I'm allowing for an undershoot and an overshoot and assume 2,200 to 2,800.

PS - Individual stocks with some hair are better than the S&P 500!

Everyone stay safe and healthy and help others less fortunate than yourself!

I have made no trades today and I remain between small- and medium-sized net long in exposure.
We are closing in, again, towards the high end of my trading range forecast, but I plan to give Mr. Market a wide berth before I reestablish my Index shorts and/or long puts.

While we shift to the S&P, technicals wasn't as pronounced as expected, it was nonetheless effective. Market probably now trying to build a short-term base, which bulls will attempt to try to add another potential leg up.

Oil did favor the bulls slightly as U.S. shutdown starting to wind-down. They should remain in testing phase as attempt to build a base continues.

Arthur

I sold out my Disney (DIS) position late last week at $111.50. The shares were recently trading at $103.48.
This morning Rich Greenfield downgrades Disney to sell ($85 target) as leverage could hit 5x as earnings plummet:Downgrading Disney to SELL $85 Target; Leverage Could Hit 5x as Earnings PlummetOur April 15th report on Disney titled Disney's Unique Vulnerability to COVID-19 Should Keep Investors Away centered on how we thought about fiscal (September) 2021 earnings relative to fiscal 2019, acknowledging that 2020 would likely be ignored by investors. Yet, the more we have learned in the past few weeks and thought about how we modeled 2021, we believe our estimates were still far too aggressive (and we were below everyone else). In turn, we are significantly cutting our 2021-2022 estimates, with 2021 now expected to be below 2020 as shown below...

* On the consumer's likely weakness and its role on recovery.

* Corona virus scams.

* On private debt. 

Peter looks for a "hall pass":

It gets debated every day and I certainly get questioned as to why the stock market is where it is in light of the state of the economy. I mean with the S&P 500 at around the same level of last October, wasn't the world a much different place then. For sure but what we have here, for now, is a hall pass for stocks in a sense for the next month because bad economic data is seen as old news as we look to broader reopenings in May when the economic data will obviously change. Of course some things won't reopen until next year but hopefully much will in the coming 4-6 weeks. I believe this market view is the case every where as other economies reopen as well. As I said last week, the stock market I believe is focused on the direction of the economy off the bottom which is up while Treasuries seem more worried about the degree of the rebound which will be slow with the 10 yr yield still yielding well below 1%. I expect though sometime in June or July or maybe not until September for this situation to get reconciled and since I'm not expecting much with respect to the economy, remain of the belief that we are still at the upper end of an establishing wide trading range. This said, we get some good therapeutics and progress on a vaccine in coming months, we'll reevaluate and that is when bonds could be under pressure and inflation starts to be a topic.

A good measure of this reopening at least in the US will be the price of oil as more people start driving again. This at the same time that more production globally gets shut in. The June WTI contract is up for a 5th straight day. I still like the big oil companies as my contrarian blood runs deep, for better or for worse.

Ahead of the US ISM services index at 10am, we saw some more April PMI's overseas. Australia's services PMI was slightly revised lower to 19.5 from the initial print and that is down from 38.5 in March. Thailand's manufacturing PMI fell to 36.8 from 46.7. The UK services PMI was revised to 13.4 from the 1st April print of 12.3 but that is down from 34.5 in March and 53.2 in February. That's an unprecedented collapse but self inflicted and what happens when things stop.

The euro is weaker this morning after a German constitutional court basically said that the Bundesbank has to stop buying German bunds under the ECB's QE program unless the ECB can prove that it is necessary. It was essentially the German court's opportunity to say that EU treaties don't legally back QE. The ECB has 3 months to respond and we know the Germans have been against this policy. I don't expect much to come of this and the German 10 yr yield is little changed but we are seeing again selling in Italian, Spanish and Portuguese bonds. I believe this is because the ECB's QE program is being called into question and you can only imagine where Italian yields would be if it wasn't for the ECB and that would be much higher.

GERMAN 10 yr/ITALIAN 10 yr yield spread

* My revised levels

I don't want there to be any ambiguity about the size of my positions or about my buy and short levels as I strive for as much transparency as possible.

"When the time comes to buy, you won't want to."

--Walter Deemer

"When the time comes to sell, you won't want to."

--Walt Deemer

I promised to update my "levels" at least once a month. The last update was on April 8.

Today's iteration has a number of reduced buy levels (in the more cyclical names) reflecting the growing and continued global economic uncertainties (mainly associated to the possible further spread of Covid-19) discussed in my opening missive today. 

Here are some of my new individual buy/short levels of stocks that I want to add to or re-establish on weakness, and in the case of shorts, to sell on strength:

BUYS

-- Facebook (FB) $180

-- Amazon (AMZN) $2,150

-- Alphabet (GOOGL) $1,200

-- Papa John's (PZZA) $64

-- FedEx (FDX) $118

-- Hartford Financial Services (HIG) $35

-- Goldman Sachs (GS) $177

-- Twitter (TWTR) $26

-- Macy's (M) $6

-- Dillard's (DDS) $30

-- Kohl's (KSS) $18

-- VanEck Vectors Vietnam ETF (VNM) $12

-- Comcast (CMCSA) $35

-- Bank of America (BAC) $23

-- Citigroup (C) $46

-- JPMorgan Chase (JPM) $92

-- Wells Fargo (WFC) $29

-- Procter & Gamble (PG) $112

-- SPDR Gold Shares (GLD) $155

-- Kraft Heinz (KHC) $30

-- ViacomCBS (VIAC) $16

-- Walt Disney (DIS) $100

-- Morgan Stanley (MS) $34

-- Verizon (VZ) $53

-- Micron (MU) $40

-- T. Rowe Price (TROW) $98

-- Penn National Gaming (PENN) $11

-- Hilton Worldwide (HLT) $67.50

-- Hyatt Hotels (H) $48

-- Vornado Realty Trust (VNO) $34

-- General Electric (GE) $6.75

-- PNC (PNC) $98

-- TreeHouse Foods (THS) $51

-- JM Smucker (SJM) $117


SHORTS

-- Apple (AAPL) $280

-- KKR & Co. (KKR) $26

-- Blackstone Group (BX) $50

-- Caterpillar (CAT) $115

-- T Rowe Price (TROW) $112

-- Franklin Resources (BEN) $24

-- SPDR S&P 500 ETF (SPY) $290

- Invesco QQQ (QQQ) $217

- Bonds (TLT) $162.50

__________

Long C (large), BAC (large), WFC (large), PNC (large), GS (large), VIAC (large), TWTR (large), M (small), KSS (small), GE (large), KHC (large), SJM (large), THS (large).

Short CAT (large), AAPL (large), TLT.

* A further look at Warren Buffett's actions suggests that there are more uncertainties today regarding the trajectory of economic and profit growth than existed in March, 2009
*Stocks may have a short term bias slightly higher (bearsh positioning, curve flattening and medical innovation) - and could move back towards the higher end of the recent trading range
* I "think" stocks are generally fairly valued to slightly overvalued today
* I start the day between a small- and medium-sized net long exposure
* My portfolio investment positions look attractive from an intermediate term perspective - I believe many of my holdings are trading at a S&P Index equivalent of 2200 (or so)

"Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security."
- John Allen Paulos

We can distill Warren Buffett's message of keeping a large war chest at Berkshire Hathaway (BRK.B)  into two core reasons:

* Berkshire Hathaway's empire has grown appreciably over the years - as whether measured by the size of its revenues or its growing asset base. As such, it needs more money to support its portfolio of fully owned companies in the event Covid-19 spreads further in 2020-21.
* There is optionality in a large cash position ($1 today may be more valuable than $1 in the future) to buy back Berkshire's stock, do a sizable acquisition and/or to opportunistically acquire more equities for Berkshire's stock portfolio.

Warren views the pandemic as a Black Swan, an unexpected and multiple sigma event that has risen many standard deviations above a normal distribution of events.

In other words, these are very uncertain times.

My April 30th column, "A Time to Plant And a Time to Pluck Up That Which Is Planted" outlined about 15 of the uncertainties investors face:

* The Value Proposition No Longer Exists - At the core of my reversal of market view is price - more specifically a changing upside reward vs. downside risk, that has been turned on its head as a result of the scope and (brief) duration of the rally from the March lows. With the recent 31% rise in the S&P Index, valuations are once again stretched relative to my S&P EPS estimates contained below.

* Sell The News - The last leg higher in the market has been delivered by some scientific progress (delivered by Gilead Sciences (GILD) Remdesivir drug yesterday) and by the continued evidence of curve flattening evident over the last 10 days. I expected this six weeks ago and bought very aggressively, I am selling the news that I anticipated.

* Did Investors Jump The Shark on Remdesivir? - On Wednesday, I was surprised by the misleading way in which the press reported a statement by Dr. Fauci about the drug remdesivir. The headline in the Huffington Post read, "Drug Proves Effective Against Coronavirus as Economic Damage Rises." Politico's headline read, "A drug can block this virus: Fauci Hails Covid-19 treatment breakthrough." Wonderful news - if true. But do we really have an "effective treatment" against coronavirus? No, we do not. Here is what Dr. Fauci actually said in a much-hyped White House announcement:

"The data shows that remdesivir has a clear-cut significant positive effect in diminishing the time to recovery . . . The mortality rate trended towards being better in the sense of less deaths in the remdesivir group - 8 percent versus 11 percent in the placebo group. It has not reached statistical significance, but the data needs to be further analyzed."

I am not a statistician, but let me share my lay understanding of Dr. Fauci's statement about remdesivir's effect on the mortality rate: If something "has not reached statistical significance," the outcome is indistinguishable from an outcome determined by chance. (Dear readers who are statisticians: I know the precise definition involves sampling error, testing hypotheses, and the null hypothesis, but those concepts won't add clarity here.) As to the "positive effect" cited by Dr. Fauci, he was describing a reduction in the mean duration of hospitalization from 15 days to 11 days. That is good, but hardly "an effective treatment against coronavirus" or a "drug that can block the virus" as the HuffPo and Politico headlines blared this morning.

* A Fall Back? - Though an arguably scientifically ignorant President confidentially predicts that if we have "ambers burning" in the fall "we will put them out," if citizens prematurely abandon "stay at home" practices and fail to continue to adopt "social distancing" and utilitizing masks (something the President and Vice President reluctantly do not conform to) - a return of Covid -19 in the fall (something Dr. Fauci "guaranteed" yesterday) could be devastating economically and socially.

* My Baseline Case of An Erratic and Unsteady Profit Improvement in 2020-21 Remains In Place - Through my company contacts, Directorships, etc., I have a good view of the corporate revenue and profit outlook over the next 18 months. Consensus recovery estimates appear too optimistic given the cyclical and secular uncertainties and challenges. Specifically, we will not likely return to or above 2019 S&P EPS ($164/share) until 2023. My 2020 EPS (e) is about $110/share, 2021 EPS (e) $135-$140/share and 2022 EPS (e) $155/share.

* My S&P EPS Estimates Are Well Below Consensus - The bottom up consensus for 2020 S&P EPS, according to Refinitive's David Aurelio, is a lofty $134/share - well above my forecast of only $110 share and in line with my forecast a year later (in 2021).

* Secular Concerns and Economic Challenges Are Plentiful - Many important industries (travel, hotels, leisure, entertainment and others), have been damaged structurally and will take much time to stabilize and improve to anywhere near they were pre Covid-19.

* Market Structure Has Likely Exacerbated The Recent Rally (As It Exaggerated the February-March swoon) - As I have repeatedly noted, "buyers live higher and sellers live lower," in a world dominated by the rebalancing of ETFs and quant strategies and products that worship at the altar of price momentum. As I did in mid-March, I want to capitalize on the stock price artificiality of passive investors today - with the movie in reverse (machine buying now, machine selling then).

* Market Positioning May No Longer Be "Market Friendly" - My sense and (more importantly) the sense of my institutional trading contacts, is that a lot of short covering has occurred in the last 3-5 trading sessions. This is in marked contrast to many points in the late March-April rally, in which many confidently suggested that a retest of the lows was in the offing, and many shorted into that belief.

* Extreme Bearish Investor Sentiment Readings Have Receded - Investors, as they are want to do with rising prices, have become more optimistic in the last two weeks.

* The Fed's Bazooka, Unexpected in Might Six Weeks Ago, Is Now Well Recognized - We are probably at or near "Peak Fed Influence" - for if the Fed has gone "all in," that means it may not be able to be expansively forever.

* There Is a Limitation to the Magnitude of the Fed's and The Treasury's Monetary and Fiscal Responses - Lowering interest rates into negative grounds (which is essentially near where we are today) will gut our banking and pension plan systems.

* I Am Not Confident That The Implementation of Fiscal Programs Will Be Smooth and Efficient - It is no secret that I have a low view and esteem for the quality of human capital in the Administration. Already a lot of bottlenecks have been uncovered with the delivery of the fiscal assistance to consumers and small businesses. The hand-off will not likely be smooth.

* But The Unprecedented Rise in The National Deficit and in Federal Debt Comes at a Cost - Slowing Domestic Economic Growth Debt is a governor to growth, which will be exacerbated by any rise in interest rates. Should inflation percolate (not currently a concern over the near term) our economy would be in dip doo doo.

* Given Our Government's Wanton Spending, Will Our Currency Lose Its Meaning and Reserve Position?

* The Country Is Moving to The Left - A Democratic President Win Could Be "Market Unfriendly"- Trump's polling, in swing states (especially in the Upper Midwest and Florida), has materially deteriorated in recent weeks. The President's path to a second term is growing less likely. A Democratic Administration will bring on some kind of VAT tax and a marked rise in marginal tax rates for the wealthy in order to make a dent on the deficit and national debt load. I recently wrote (facetiously) that the next president, Joe Biden (with the support of Treasury Secretary Mike Bloomberg), will take marginal federal tax rate up by +10% at least in his first year in office, with smaller gains implemented over the next several years of his Administration. In 2024 the then President Amy Klobuchar or President Kamala Harris might raise it by +10% or more to accomplish the same objectives.

* Buyback Activity (The Dominant Force In The Demand For Stocks Over the Last Few Years) Will Likely Be Markedly Curtailed Over the Balance of 2020 - And a Democratic November Presidential win could curtail the prospects (for company repurchases over the next several years). So will a disappointing trajectory of profit recovery reduce the willingness and ability to buyback shares.

* The Chances of a "TINA Ripper" Are Moderating - While short term Treasuries have collapsed, we must keep a keen eye on the cost of (corporations') capital. While there has been an improvement from the lows, the costs of borrowing (across the credit spectrum) remain very elevated against levels of two months ago.

* Pension Plan Problems Are Accumulating at Breakneck Speed - Lower than expected interest rates (for longer) coupled with lower revenues and profits (in the private and public, especially state level) pose large risks.

* The Divergence Between The Messages of Bonds and Stocks Has Widened - Peter Boockvar puts it well this morning, "The discrepancy between the stock market and the US Treasury market is glaring again just as we've seen before. I believe the stock market seems to be mostly focused on the direction of the economic improvement that will come with a reopening while the Treasury market is likely more focused on the degree of that improvement."

* Private equity holds a large cash horde of over $1 trillion for future leveraged buyout deals

* Antagonism Between the U.S. and China Appears to Be Accelerating and Could Worsen In The Months Ahead - I would not be surprised that, particularly if the President's popularity slumps (and in light of his desire to strengthen his base), that Trump will look more to China as a Covid-19 scapegoat. A growing rift could undermine a global economic recovery especially if the Administration attacks China (and raises trade tariffs).

For the above reasons I took down my overall exposure last Thursday - with emphasis on reducing my cyclical investments (like Federal Express (FDX) , Disney (DIS) , Micron (MU) , Verizon (VZ) - yes, its cyclical!), and my entire list of energy long rentals.

Warren's message was clearly one of uncertainty. The Oracle might have effectively said that, in a flat (and flattening) and interconnected global economy, the domino effect of Covid-19, or anything else that is multiple standard deviations from the norm, is a greater threat than at any time in history.

Warren is maintaining his war chest because he recognizes that the domino effect might be more debilitating for a longer period of time than at previous points in history.

The Oracle simply doesn't know what the trajectory of economic and profit growth will look like, with certainty. Indeed, it appears that will remain uncertain for a while.

At the core of my investing is the notion that I can, with reasonable accuracy, pinpoint the intrinsic value of an individual equity or of the Indices.

My methodology, looking at 3-5 separate scenarios (of interest rates, inflation, domestic and global economic growth, policy, profits, valuation, etc.) that is weighted by probabilities.

An individual fair market value is calculated.

But the aforementioned uncertainties that Buffett and others see, underscores the deficiency of having a specific number as an estimate of value because of the multiple, growing and unusual character of Covid-19 and its influence.

Given these uncertainties, perhaps what I should really produce is a range of intrinsic value - and I might do this in the future.

For example, it might be more appropriate, rather than to deliver a precise 2800 S&P fair market value, to use a range of 2700-2900.

For now I am going to stick with a specific figure (2800) as well as continuing my estimate of a 3-6 month trading range (2550-2950) - but I think you all get my point.

(As noted by Warren), the unusual nature of Covid-19 will produce a wider range of outcomes, rendering precision of forecast ever more difficult.

This morning's lesson? The only certainty is the lack of certainty.

From Danielle DiMartino Booth:

• Pre-COVID-19, nearly two-thirds of U.S. small and medium size businesses had insufficient profits to cover their interest expenses and a cost of debt twice that of large firms; larger firms were able to capitalize on the Fed's easy money via their access to capital markets
• While PPP appears to be reaching truly small businesses, the new guidelines for the Fed's undeployed "Main Street" Lending Program cater to large firms; the increased size eligibility and tax treatment appear to benefit Wall Street and Private Equity over Main Street
• Tightening lending standards for small businesses coincided with mounting collectability concerns on the part of credit managers; profitability, especially for regional banks, has been subjected to shrinking loan books, record low interest rates and spiking loan loss provisions

Have you ever thought of something in a British accent just because it felt right? Take "Mind your Ps and Qs." Need we say more? The origin of the idiom is not nearly as fun as the folklore that's since followed. But in the spirit of veracity, as long as the English alphabet has existed, circa 7th century or thereabouts, we suspect school marms have wagged their fingers, admonishing school children to not inadvertently reverse those two lower-case letters.

And then came Johannes Gutenberg in 1440 with his printing press. Profitability assumed the helm, dictating that typesetters mind those easily confused letters, averting costly errors. But it's the pub version we fancy. Drinkers were advised to mind the tally of the pints and quarts they consumed, lest the barkeep sneak a few extra onto the chalkboard thus inflating the bill. And you thought it was all about minding your manners.

These days, small businesses across America are minding the long queues for Ps of a different sort, as in the Paycheck Protection Program (PPP) which seems to have a habitual tendency to exhaust itself. Early March's PPP was so popular that the $349 billion carved out of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act was depleted in a matter of days. So high was the unrequited demand, an encore was rolled out a week ago. To date, $175 billion of the additional $310 billion earmarked by Congress has been deployed. With so many applicants stranded in the queue, politicians assure us a third installment is in the works.

As the headlines screamed in outrage, the PPP initially was tapped by large public corporations that didn't need the emergency funding but took it initially before returning the money. The program was created to help small businesses, the backbone of the U.S. economy and labor market contributing 44% of GDP and accounting for 47% of the workforce. Thankfully, the Small Business Administration (SBA) has directed approvals for smaller loans, a sign that more support is making its way to Main Street.

Let's quantify "Main Street." The first round of the PPP saw an average loan size of $206,000; more than 1.2 million approved loans that were $150,000 and under. The second round hit even closer to home with an average size of $79,000. More than 1.5 million approved loans came in south of the $50,000 threshold.

While the PPP has clearly reached rightful recipients, there is something about the Fed's "Main Street" Lending Program (MSLP) that smacks of politicking of the most despiteful crony ilk. The MSLP is not yet operational, but on April 30, the Fed announced revised terms, some of which can be seen as kissing stock and corporate bond markets' arses. Two key changes explain our air quotes above. As detailed in the National Law Review:

• "Increased size of eligible borrowers. Businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible to borrow under the MSLP (increased from 10,000 employees and $2.5 billion in revenue)." This's more Wall Street than Main Street.
• Partial relaxation of dividend prohibition. The program's restrictions on dividends and other capital distributions will not apply to distributions made by a tax pass-through entity "to the extent reasonably required to cover its owners' tax obligations in respect of the entity's earnings." This reeks of Private Equity.

Today's chart inset illustrates the financial vulnerability of U.S. small and medium enterprises before the COVID-19 shock: In 2019, nearly two-thirds had insufficient profits to cover their interest expense and were servicing debt at 9.76%, more than twice that paid by large firms. That's the rub of the Fed's easy money policy -- then and apparently now. Credit can be cheap, but only for firms with unfettered access to capital markets.

Shocking we know, but cash flow has come under extreme pressure. As seen in today's main chart, the National Association of Credit Management's April survey revealed an unprecedented decline in sales to 20.0 (on a 50 breakeven), and a collapse in new credit applications and dollar collections (blue line) to 31.1 and 35.5, respectively. Cash is such a precious commodity, NACM noted that companies, "have not been concerned with keeping current with their (trade) credit." Lower dollar collections represent deteriorating cash flow for "selling" firms and a compromised ability to pay for "buying" firms.

No surprise, regional banks are minding their Ps and Qs when it comes to small business lending, leaving the U.S. Treasury and Fed as backstops of last resort. Outside of the PPP loan flow, the coronavirus' cash flow crunch is manifest in the record tightening in small business loan standards (yellow bars) in 2020's second quarter. The combination of shrinking loan books, spiking loan loss provisions and interest rates at the zero bound promise to continue pressuring bank earnings.