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Todayâs Agenda
- Weâre underestimating the [coronavirusâs economic impact](.
- Apple is still [tied to the iPhone](.
- Stocks are [living on borrowed time](.
- Kudos to a semi-serious [Republican climate plan](.
Still getting a handle on things.
Photographer: Getty Images/Getty Images AsiaPac
This Is Your Brain on Coronavirus
The novel coronavirus Covid-19 causes flu-like symptoms in its patients. For the rest of us, it induces a kind of creeping cluelessness.
Markets and economists â frequent bedfellows of bewilderment â assume the economic impact of the coronavirus epidemic will be as neatly V-shaped as in past crises, notes Mohamed El-Erian. But the [slowdown is still widening]( from its epicenter in a hobbled China, making this different from such quickly resolved debacles as the financial crisis. Central banks have promised to carpet-bomb the global economy with cash, but that may be the only hope for markets and will leave them increasingly detached from the real world.
Not even OPEC is immune: The oil cartel, apparently drunk on V-shaped Kool-Aid (which is a thing; donât bother looking it up), is badly [underestimating the hit to demand]( from the virus this year, writes Julian Lee. Its obstinance will only make future supply cuts deeper and more painful.Â
China, meanwhile, appears to be handling this crisis as it has so many others, by simply shoveling fresh credit to struggling companies, notes Anjani Trivedi. But many of these [businesses were already staggering]( under difficult debt loads before the crisis, and Beijingâs reaction will only make its debt problem, and associated zombie-company problem, even worse.
The World Health Organization is the one entity you might expect to competently handle a threat to, you know, world health. But it has been [far too deferential to China]( during this crisis, writes Adam Minter. That has slowed its response and made the epidemic more threatening.Â
To be fair, responding to the disease is made much more difficult by the [inability to track it with perfect accuracy](, notes David Fickling. Last weekâs big jump in the patient tally was a troubling reminder that a world accustomed to letting Big Data handle everything isnât built for this level of chaos.
Unfortunately, though China deserves some criticism for its handling of the disease, [people are taking things way too far](, as usual, and blaming all Chinese people for it, notes Stephen Mihm. Itâs what humans tend to do in pandemics, often with tragic consequences.
But at least one group is behaving wisely in this health crisis. You guessed it: Weâre talking about hedge funds. Bridgewaterâs Ray Dalio and others have sent millions of dollars in aid to China, almost certainly out of the goodness of their hearts. Itâs probably just a coincidence this also [helps them get on Beijingâs good side](, as Shuli Ren writes, where it will be easier to benefit from a stimulus-fueled, post-virus boom.Â
Apple Just Canât Quit You, iPhone
Apple Inc. is certainly feeling the pain of the virus. Today it [warned]( that sales would be hit by the double whammy of slowing China sales and a nearly frozen iPhone supply chain. The warning momentarily [perturbed]( the stock market, which has not fully absorbed how this disease will hurt corporate profits. (Taiwan Semiconductor Manufacturing Co., a key supplier for Apple and other tech giants, will likely [make its own warning soon](, writes Tim Culpan.)
Wall Street generally dismissed this as a one-off problem for Apple, but Alex Webb writes itâs a reminder that, as much as Apple has diversified from the iPhone, it [still depends on the gadget](Â for most of its revenue.Â
Bonus Corporate Bellwether Reading: Walmart Inc.âs disappointing sales report suggests [its struggle with Amazon.com]( Inc. is far from over. â Andrea FelstedÂ
Stocks Now Only Slightly Less Dangerously Overinflated
Despite todayâs mild spot of bother, U.S. stocks are still near record highs. They are also still [wildly overpriced relative to sales](, notes John Authers:
At the same time, corporate profit margins are shrinking. Put the two together, et voila: You have a recipe for disappointing market returns, John writes. Good luck guessing when those will appear, though.
Further Investment Reading:
- Franklin Resources Inc.âs purchase of Legg Mason Inc. [frees it from the purgatory]( of midsize asset managers. â Brian ChappattaÂ
- SoftBankâs [plan to buy listed stocks](, not exactly its area of expertise, deserves a raised eyebrow. â Chris HughesÂ
- Cathie Woodâs Tesla Inc. bet helps [put her in the top tier]( of stock pickers. â Matthew Winkler
It Takes a Village to Fix the Climate
The Republican Partyâs current position on global warming is basically that it is a Chinese hoax designed to murder Americaâs economy. So itâs notable that House Minority Leader Kevin McCarthy [has introduced a climate-change proposal]( at all, writes Justin Fox, much less one that is actually somewhat constructive. Itâs not a great plan. And it will probably anger party die-hards without swaying any environmentalists, Justin notes. But McCarthy deserves credit for producing what could be a template for bipartisan compromise if and when weâre finally ready. No [rush](!
Until then, weâre relying on states, the generosity of billionaires such as [Jeff Bezos](, and the steady pressure of investors on companies such as BHP Group. The worldâs biggest miner has [committed to cutting emissions](, but has the wherewithal to go even further, writes Clara Ferreira Marques.
Further Climate Action Reading:
- Shutting down economic growth [wouldnât help the environment]( or poor countries. â Noah SmithÂ
- Planting trees is great, but [not nearly enough]( to fight global warming. â Faye FlamÂ
Telltale Charts
Europeâs [superstar cities face skyrocketing housing]( prices, and mere handouts to buyers wonât solve the problem, writes Lionel Laurent.
The fight over [investor protections for leveraged loans]( is over, Brian Chappata writes, and investors have lost.
Further Reading
President Donald Trump is laying the groundwork for a [false panic about voter fraud]( to undermine the election. â Francis WilkinsonÂ
Trumpâs budget calls for vouchers that will [hurt both public and charter schools](, though Betsy DeVos loves them. â Andrea GaborÂ
EU regulators hate [Facebook Inc.âs business model](, but arenât doing much to threaten it. â Lionel LaurentÂ
HSBC making [huge cuts under an interim CEO]( will hurt its chances of finding a permanent one. â Nisha GopalanÂ
The Equal Rights Amendment may seem outdated, but its [passage would still have a gravitational effect]( on the law. â Noah FeldmanÂ
A coming [decline in Arab oil wealth]( could actually be healthy for Arab countries. â Amr AdlyÂ
ICYMI
Trump [pardoned everybody](, basically.
Elon [Musk trash-talked Bill Gates](âs Porsche purchase.
East [African locust swarms]( are the size of cities.
Kickers
â[Werewolfâ mouse](hunts scorpions, howls at the moon. (h/t Alexandra Ivanoff)
Seven-thousand-year-old well is the [oldest wooden structure]( ever discovered.Â
[Floating farms may reshape]( our food ecosystem.
Does space exploration [require a lunar pit stop](?Â
Note: Please send pardons and complaints to Mark Gongloff at mgongloff1@bloomberg.net.
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