- Why The COVID-19 Model That Inspired UK's Lockdown May Be "The Most Devastating Software Mistake Of All Time"
Why The COVID-19 Model That Inspired UK’s Lockdown May Be “The Most Devastating Software Mistake Of All Time”
Tyler Durden
Mon, 05/18/2020 – 02:45While Democrats in the US and progressives in the UK continue to push back against efforts to gradually reopen their respective economies, more evidence is emerging that calls into question the models (what the public often refers to as the “science”) which inspired governments across the world to impose crippling lockdowns on their populations.
Case in point: Since Neil Ferguson and the authors of the Imperial published its modeling for non-pharmaceutical intervention for COVID-19, a number of data scientists have taken a close look and found gaping oversights that seriously undermine the model’s credibility. Of course, this isn’t the first time we have written about Ferguson and his exploits.
Neil Ferguson
In this weekend’s Telegraph, two of these critics, David Richards, the founder and CEO of global big data leader WANdisco which is jointly headquartered in Silicon Valley and Sheffield, and Dr. Konstantin Boudnik, a pioneering big-data engineer, WANdisco’s VP of architecture and author of 17 US patents, published an editorial in which they carefully examined the model’s shortcomings. Keep in mind, the Imperial model is what ultimately inspired PM Boris Johnson to make a U-turn and adopt what has been an economically devastating lockdown – was nothing short of a catastrophe. Millions have been plunged into hardship and poverty unnecessarily, they explained. Johnson himself was infected by the virus and the public is furious with the government over its rollout of a plan to reopen.
Given the influence the model had during the early days of the outbreak, the two men argued that the software issues underpinning the model could be ‘the most devastating software mistake of all time’.
Apparently, the model’s problems are rooted in its most fundamental components. The model was written using a coding language called Fortran which has been in use for decades.
Due to its age and inflexibility, Fortran has many inherent problems. But on top of the language itself, the code in the model was sprawling, sloppily written and extremely inefficient, the two men said, claiming it would never pass muster in the private sector.
Using straightforward, jargon-free language, the two authors explain how the model ran into a problem called “CACE”, or, ‘changing anything changes everything’ – a problem that software engineers and data scientists trying to model, well, anything, really, often encounter.
The approach ignores widely accepted computer science principles known as “separation of concerns”, which date back to the early 70s and are essential to the design and architecture of successful software systems. The principles guard against what developers call CACE: Changing Anything Changes Everything.
Without this separation, it is impossible to carry out rigorous testing of individual parts to ensure full working order of the whole. Testing allows for guarantees. It is what you do on a conveyer belt in a car factory. Each and every component is tested for integrity in order to pass strict quality controls.
It’s just the latest reminder that President Barack Obama’s advice to this year’s graduates rings true: You can’t just blindly accept what the experts and the people in charge tell you.
Read the full editorial below:
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In the history of expensive software mistakes, Mariner 1 was probably the most notorious. The unmanned spacecraft was destroyed seconds after launch from Cape Canaveral in 1962 when it veered dangerously off-course due to a line of dodgy code.
But nobody died and the only hits were to Nasa’s budget and pride. Imperial College’s modelling of non-pharmaceutical interventions for Covid-19 which helped persuade the UK and other countries to bring in draconian lockdowns will supersede the failed Venus space probe and could go down in history as the most devastating software mistake of all time, in terms of economic costs and lives lost.
Since publication of Imperial’s microsimulation model, those of us with a professional and personal interest in software development have studied the code on which policymakers based their fateful decision to mothball our multi-trillion pound economy and plunge millions of people into poverty and hardship. And we were profoundly disturbed at what we discovered. The model appears to be totally unreliable and you wouldn’t stake your life on it.
First though, a few words on our credentials. I am David Richards, founder and chief executive of WANdisco, a global leader in Big Data software that is jointly headquartered in Silicon Valley and Sheffield. My co-author is Dr Konstantin ‘Cos’ Boudnik, vice-president of architecture at WANdisco, author of 17 US patents in distributed computing and a veteran developer of the Apache Hadoop framework that allows computers to solve problems using vast amounts of data.
Imperial’s model appears to be based on a programming language called Fortran, which was old news 20 years ago and, guess what, was the code used for Mariner 1. This outdated language contains inherent problems with its grammar and the way it assigns values, which can give way to multiple design flaws and numerical inaccuracies. One file alone in the Imperial model contained 15,000 lines of code.
Try unravelling that tangled, buggy mess, which looks more like a bowl of angel hair pasta than a finely tuned piece of programming. Industry best practice would have 500 separate files instead. In our commercial reality, we would fire anyone for developing code like this and any business that relied on it to produce software for sale would likely go bust.
The approach ignores widely accepted computer science principles known as “separation of concerns”, which date back to the early 70s and are essential to the design and architecture of successful software systems. The principles guard against what developers call CACE: Changing Anything Changes Everything.
Without this separation, it is impossible to carry out rigorous testing of individual parts to ensure full working order of the whole. Testing allows for guarantees. It is what you do on a conveyer belt in a car factory. Each and every component is tested for integrity in order to pass strict quality controls.
Only then is the car deemed safe to go on the road. As a result, Imperial’s model is vulnerable to producing wildly different and conflicting outputs based on the same initial set of parameters. Run it on different computers and you would likely get different results. In other words, it is non-deterministic.
As such, it is fundamentally unreliable. It screams the question as to why our Government did not get a second opinion before swallowing Imperial’s prescription.
Ultimately, this is a computer science problem and where are the computer scientists in the room? Our leaders did not have the grounding in computer science to challenge the ideas and so were susceptible to the academics. I suspect the Government saw what was happening in Italy with its overwhelmed hospitals and panicked.
It chose a blunt instrument instead of a scalpel and now there is going to be a huge strain on society. Defenders of the Imperial model argue that because the problem – a global pandemic – is dynamic, then the solution should share the same stochastic, non-deterministic quality.
We disagree. Models must be capable of passing the basic scientific test of producing the same results given the same initial set of parameters. Otherwise, there is simply no way of knowing whether they will be reliable.
Indeed, many global industries successfully use deterministic models that factor in randomness. No surgeon would put a pacemaker into a cardiac patient knowing it was based on an arguably unpredictable approach for fear of jeopardising the Hippocratic oath. Why on earth would the Government place its trust in the same when the entire wellbeing of our nation is at stake?
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Source: The Telegraph
- The 2006 Origins Of The 'Lockdown' Idea
The 2006 Origins Of The ‘Lockdown’ Idea
Tyler Durden
Mon, 05/18/2020 – 02:00Authored by Jeffrey Tucker via The American Institute for Economic Research,
Now begins the grand effort, on display in thousands of articles and news broadcasts daily, somehow to normalize the lockdown and all its destruction of the last two months. We didn’t lock down almost the entire country in 1968/69, 1957, or 1949-1952, or even during 1918. But in a terrifying few days in March 2020, it happened to all of us, causing an avalanche of social, cultural, and economic destruction that will ring through the ages.
There was nothing normal about it all. We’ll be trying to figure out what happened to us for decades hence.
How did a temporary plan to preserve hospital capacity turn into two-to-three months of near-universal house arrest that ended up causing worker furloughs at 256 hospitals, a stoppage of international travel, a 40% job loss among people earning less than $40K per year, devastation of every economic sector, mass confusion and demoralization, a complete ignoring of all fundamental rights and liberties, not to mention the mass confiscation of private property with forced closures of millions of businesses?
Whatever the answer, it’s got to be a bizarre tale. What’s truly surprising is just how recent the theory behind lockdown and forced distancing actually is. So far as anyone can tell, the intellectual machinery that made this mess was invented 14 years ago, and not by epidemiologists but by computer-simulation modelers. It was adopted not by experienced doctors – they warned ferociously against it – but by politicians.
Let’s start with the phrase social distancing, which has mutated into forced human separation. The first I had heard it was in the 2009 movie Contagion. The first time it appeared in the New York Times was February 12, 2006:
If the avian flu goes pandemic while Tamiflu and vaccines are still in short supply, experts say, the only protection most Americans will have is “social distancing,” which is the new politically correct way of saying “quarantine.”
But distancing also encompasses less drastic measures, like wearing face masks, staying out of elevators — and the [elbow] bump. Such stratagems, those experts say, will rewrite the ways we interact, at least during the weeks when the waves of influenza are washing over us.
Maybe you don’t remember that the avian flu of 2006 didn’t amount to much. It’s true, despite all the extreme warnings about its lethality, H5N1 didn’t turn into much at all. What it did do, however, was send the existing president, George W. Bush, to the library to read about the 1918 flu and its catastrophic results. He asked for some experts to submit some plans to him about what to do when the real thing comes along.
The New York Times (April 22, 2020) tells the story from there:
Fourteen years ago, two federal government doctors, Richard Hatchett and Carter Mecher, met with a colleague at a burger joint in suburban Washington for a final review of a proposal they knew would be treated like a piñata: telling Americans to stay home from work and school the next time the country was hit by a deadly pandemic.
When they presented their plan not long after, it was met with skepticism and a degree of ridicule by senior officials, who like others in the United States had grown accustomed to relying on the pharmaceutical industry, with its ever-growing array of new treatments, to confront evolving health challenges.
Drs. Hatchett and Mecher were proposing instead that Americans in some places might have to turn back to an approach, self-isolation, first widely employed in the Middle Ages.
How that idea — born out of a request by President George W. Bush to ensure the nation was better prepared for the next contagious disease outbreak — became the heart of the national playbook for responding to a pandemic is one of the untold stories of the coronavirus crisis.
It required the key proponents — Dr. Mecher, a Department of Veterans Affairs physician, and Dr. Hatchett, an oncologist turned White House adviser — to overcome intense initial opposition.
It brought their work together with that of a Defense Department team assigned to a similar task.
And it had some unexpected detours, including a deep dive into the history of the 1918 Spanish flu and an important discovery kicked off by a high school research project pursued by the daughter of a scientist at the Sandia National Laboratories.
The concept of social distancing is now intimately familiar to almost everyone. But as it first made its way through the federal bureaucracy in 2006 and 2007, it was viewed as impractical, unnecessary and politically infeasible.
Notice that in the course of this planning, neither legal nor economic experts were brought in to consult and advise. Instead it fell to Mecher (formerly of Chicago and an intensive care doctor with no previous expertise in pandemics) and the oncologist Hatchett.
But what is this mention of the high-school daughter of 14? Her name is Laura M. Glass, and she recently declined to be interviewed when the Albuquerque Journal did a deep dive of this history.
Laura, with some guidance from her dad, devised a computer simulation that showed how people – family members, co-workers, students in schools, people in social situations – interact. What she discovered was that school kids come in contact with about 140 people a day, more than any other group. Based on that finding, her program showed that in a hypothetical town of 10,000 people, 5,000 would be infected during a pandemic if no measures were taken, but only 500 would be infected if the schools were closed.
Laura’s name appears on the foundational paper arguing for lockdowns and forced human separation. That paper is Targeted Social Distancing Designs for Pandemic Influenza (2006). It set out a model for forced separation and applied it with good results backwards in time to 1957. They conclude with a chilling call for what amounts to a totalitarian lockdown, all stated very matter-of-factly.
Implementation of social distancing strategies is challenging. They likely must be imposed for the duration of the local epidemic and possibly until a strain-specific vaccine is developed and distributed. If compliance with the strategy is high over this period, an epidemic within a community can be averted. However, if neighboring communities do not also use these interventions, infected neighbors will continue to introduce influenza and prolong the local epidemic, albeit at a depressed level more easily accommodated by healthcare systems.
In other words, it was a high-school science experiment that eventually became law of the land, and through a circuitous route propelled not by science but politics.
The primary author of this paper was Robert J. Glass, a complex-systems analyst with Sandia National Laboratories. He had no medical training, much less an expertise in immunology or epidemiology.
That explains why Dr. D.A. Henderson, “who had been the leader of the international effort to eradicate smallpox,” completely rejected the whole scheme.
Says the NYT:
Dr. Henderson was convinced that it made no sense to force schools to close or public gatherings to stop. Teenagers would escape their homes to hang out at the mall. School lunch programs would close, and impoverished children would not have enough to eat. Hospital staffs would have a hard time going to work if their children were at home.
The measures embraced by Drs. Mecher and Hatchett would “result in significant disruption of the social functioning of communities and result in possibly serious economic problems,” Dr. Henderson wrote in his own academic paper responding to their ideas.
The answer, he insisted, was to tough it out: Let the pandemic spread, treat people who get sick and work quickly to develop a vaccine to prevent it from coming back.
AIER’s Phil Magness got to work to find the literature responding to this 2006 and discovered: Disease Mitigation Measures in the Control of Pandemic Influenza. The authors included D.A. Henderson, along with three professors from Johns Hopkins: infectious disease specialist Thomas V.Inglesby, epidemiologist Jennifer B. Nuzzo, and physician Tara O’Toole.
Their paper is a remarkably readable refutation of the entire lock-down model.
There are no historical observations or scientific studies that support the confinement by quarantine of groups of possibly infected people for extended periods in order to slow the spread of influenza. … It is difficult to identify circumstances in the past half-century when large-scale quarantine has been effectively used in the control of any disease. The negative consequences of large-scale quarantine are so extreme (forced confinement of sick people with the well; complete restriction of movement of large populations; difficulty in getting critical supplies, medicines, and food to people inside the quarantine zone) that this mitigation measure should be eliminated from serious consideration…
Home quarantine also raises ethical questions. Implementation of home quarantine could result in healthy, uninfected people being placed at risk of infection from sick household members. Practices to reduce the chance of transmission (hand-washing, maintaining a distance of 3 feet from infected people, etc.) could be recommended, but a policy imposing home quarantine would preclude, for example, sending healthy children to stay with relatives when a family member becomes ill. Such a policy would also be particularly hard on and dangerous to people living in close quarters, where the risk of infection would be heightened….
Travel restrictions, such as closing airports and screening travelers at borders, have historically been ineffective. The World Health Organization Writing Group concluded that “screening and quarantining entering travelers at international borders did not substantially delay virus introduction in past pandemics . . . and will likely be even less effective in the modern era.”… It is reasonable to assume that the economic costs of shutting down air or train travel would be very high, and the societal costs involved in interrupting all air or train travel would be extreme. …
During seasonal influenza epidemics, public events with an expected large attendance have sometimes been cancelled or postponed, the rationale being to decrease the number of contacts with those who might be contagious. There are, however, no certain indications that these actions have had any definitive effect on the severity or duration of an epidemic. Were consideration to be given to doing this on a more extensive scale and for an extended period, questions immediately arise as to how many such events would be affected. There are many social gatherings that involve close contacts among people, and this prohibition might include church services, athletic events, perhaps all meetings of more than 100 people. It might mean closing theaters, restaurants, malls, large stores, and bars. Implementing such measures would have seriously disruptive consequences…
Schools are often closed for 1–2 weeks early in the development of seasonal community outbreaks of influenza primarily because of high absentee rates, especially in elementary schools, and because of illness among teachers. This would seem reasonable on practical grounds. However, to close schools for longer periods is not only impracticable but carries the possibility of a serious adverse outcome….
Thus, cancelling or postponing large meetings would not be likely to have any significant effect on the development of the epidemic. While local concerns may result in the closure of particular events for logical reasons, a policy directing communitywide closure of public events seems inadvisable. Quarantine. As experience shows, there is no basis for recommending quarantine either of groups or individuals. The problems in implementing such measures are formidable, and secondary effects of absenteeism and community disruption as well as possible adverse consequences, such as loss of public trust in government and stigmatization of quarantined people and groups, are likely to be considerable….
Finally, the remarkable conclusion:
Experience has shown that communities faced with epidemics or other adverse events respond best and with the least anxiety when the normal social functioning of the community is least disrupted. Strong political and public health leadership to provide reassurance and to ensure that needed medical care services are provided are critical elements. If either is seen to be less than optimal, a manageable epidemic could move toward catastrophe.
Confronting a manageable epidemic and turning it into a catastrophe: that seems like a good description of everything that has happened in the COVID-19 crisis of 2020.
Thus did some of the most highly trained and experienced experts on epidemics warn with biting rhetoric against everything that the advocates of lockdown proposed. It was not even a real-world idea in the first place and showed no actual knowledge of viruses and disease mitigation. Again, the idea was born of a high-school science experiment using agent-based modelling techniques having nothing at all to do with real life, real science, or real medicine.
So the question becomes: how did the extreme view prevail?
The New York Times has the answer:
The [Bush] administration ultimately sided with the proponents of social distancing and shutdowns — though their victory was little noticed outside of public health circles. Their policy would become the basis for government planning and would be used extensively in simulations used to prepare for pandemics, and in a limited way in 2009 during an outbreak of the influenza called H1N1. Then the coronavirus came, and the plan was put to work across the country for the first time.
The Times called one of the pro-lockdown researchers, Dr. Howard Markel, and asked what he thought of the lockdowns. His answer: he is glad that his work was used to “save lives” but added, “It is also horrifying.” “We always knew this would be applied in worst-case scenarios,” he said. “Even when you are working on dystopian concepts, you always hope it will never be used.”
Ideas have consequences, as they say. Dream up an idea for a virus-controlling totalitarian society, one without an endgame and eschewing any experienced-based evidence that it would achieve the goal, and you might see it implemented someday. Lockdown might be the new orthodoxy but that doesn’t make it medically sound or morally correct. At least now we know that many great doctors and scholars in 2006 did their best to stop this nightmare from unfolding. Their mighty paper should serve as a blueprint for dealing with the next pandemic.
- Chinese NEV Sales Plunge 43%, Falling For The Tenth Straight Month
Chinese NEV Sales Plunge 43%, Falling For The Tenth Straight Month
Tyler Durden
Mon, 05/18/2020 – 01:00The auto industry has been under pressure from all angles as a result of the global coronavirus lockdowns. And it looks as though while Elon Musk has been busy melting down, faux-libertarian style, about the re-opening of his California factory, things may have taken a turn for the worse for the EV market overseas.
In addition to the pandemic crippling demand, there seem to be far too many players in China’s NEV market, and that has caused sales to come under pressure, according to Automotive News. China’s market now has about 50 established EV startups competing with larger companies like Geely and Tesla.
In fact, new energy vehicle sales fell for a tenth straight month in April, plunging 43%.
Brian Gu, president of Alibaba-backed Xpeng Motors said: “The difficulties that EV start-ups have encountered, such as the auto sales decline, harsh fundraising environment and subsidies reduction, all started last year. The outbreak will aggravate these issues that already had existed.”
He continued: “Only the top-tier EV makers will be able to attract attention from investors in this environment.”
Experts believe the hit to the EV market could get even worse with the plunging price of oil, even despite subsidies and tax breaks.
One anonymous investor said: “Those who had not launched mass production of their car models by 2019 would probably die. The outbreak is going to accelerate their death.”
The headwinds could make it difficult for China to reach its goal of having EVs account for 25% of all auto sales by 2025, according to the report. Currently, the number stands at about 5%.
We’ve previously noted that auto dealers in the U.S. are losing billions of dollars in fleet sales, which we documented just last week.
The lack of fleet sales, combined with a massive demand drop off, has led to a massive inventory glut for auto dealers, who are being forced to consider major incentives across the board to try and sell vehicles when the consumer makes their way back to the showroom.
The inventory glut has gotten so bad that we reported on ships of SUVs coming from Japan being turned away at California ports several weeks ago.
- Goldman Spots A Huge Problem For The Fed
Goldman Spots A Huge Problem For The Fed
Tyler Durden
Sun, 05/17/2020 – 23:57Update: In implicit confirmation of everything said below, in his 60 Minutes appearance, Jerome Powell said that “There’s a lot more we can do. We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot,” he said. Powell noted the Fed can increase its emergency lending programs and make monetary policy more supportive through forward guidance and by adjusting the Fed’s asset-purchase strategy. Which, as explained extensively below, is precisely what the Fed will have to do: by as much as $3 trillion in additional QE just to offset the flood of new debt coming to the market in the next 6 months.
And just to remove confusion, there was this exchange which the “pajama traders” appear to have focused on:
Scott Pelley: Fair to say you simply flooded the system with money?
Jerome Powell: Yes. We did. That’s another way to think about it. We did.
Scott Pelley: Where does it come from? Do you just print it?
Jerome Powell: We print it digitally. So we– you know, we– as a central bank, we have the ability to create money digitally and we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.
To give Powell the credit, at least he was being somewhat honest: unlike Bernanke who claimed the Fed does not “print” digital bills, Powell no longer felt compelled to make the obvious lie. And judging by the ongoing surge in gold and silver overnight, the market seems to appreciate Powell’s honesty.
* * *
Last week, the Treasury shocked the world when it announced that in the current quarter (the 3rd of the fiscal year), the US will need to sell a mindblowing, record $3 trillion (pardon, $2.999 trillion) in Treasurys to finance the US money helicopter.
This, after selling $807 billion in the first half of the fiscal year, and another $677 billion in the quarter ending Sept 30.
And since it is just a matter of time before Congress has to pass yet another fiscal package which will be at least another trillion dollars, and up to $3 trillion if the Democrats get their wish, one can say that Guggenheim’s projection of over $5 trillion in debt issuance this calendar year will be wildly conservative.
Now here’s the thing: as Deutsche Bank recently showed, so far this new debt avalanche was entire monetized exclusively by the Fed, whose debt purchasing operations have been far greater than the net Treasury issuance.
But this was only the case when the Fed was buying a massive $75 billion in TSYs per day in the late March crash, when Powell dumped a monetary nuclear bomb on the market to stabilize the biggest panic selling an entire generation of traders had ever seen, and nearly doubling the Fed’s balance – which is now just shy of $7 trillion, in a few months:
Since then, however, the Fed’s daily and weekly POMO has shrunk substantially, and as discussed earlier, it is down to just $30BN in Treasury purchases per week as of next week, which amounts to around $1.5 trillion per year.
There’s just one problem: $30BN per week in TSY monetization is nowhere near enough to consume the trillions in Treasury issuance that is about to hit. In fact, all else equal, the Fed will very soon have to find a pretext to aggressively ramp up its treasury purchases.
As Goldman writes overnight, putting the problem in its proper context, “Central banks have been purchasing sovereign bonds at a rapid pace (Exhibit 1), faster than past QE programs in most cases. These purchases are occurring against a backdrop of a surge in fiscal deficits, which will require enormous amounts of additional sovereign supply to finance them.”
Which makes sense, of course: after all helicopter money, which is what we have now that MMT (Magic Money Theory) has been shoved down everyone’s throat without any debate, only works when there is coordination between the Treasury and the central bank. And while until now Fed purchases have generally offset Treasury issuance, that coordination is about to end. As Goldman puts it, “Central bank buying should absorb a substantial amount of upcoming issuance, though we expect increases in “free float” across most markets, most notably in the US, which adds to the medium-term case for higher yields and steeper curves there.”
Next, Goldman estimates this so-called free float, defined as the amount of sovereign debt outstanding less central bank and foreign official holdings, across major DM markets, and shows it in the chart below. Through the end of last year, free float was on a downward trend in Germany and Japan, as ECB and BoJ purchases absorbed the bulk of new supply. In contrast, free float had been trending higher for much of the year in the US and UK.
So with record fiscal deficits and resumption of asset purchases in several markets, where is free float headed this year? In Exhibit 3, Goldman lays out its expectations for total purchase amounts on a net basis along with net supply. It finds the largest increase in free float in the US, as Fed purchases continue to slow; in fact according to Goldman calculations the US public (now that foreign investors have hit the breaks on US TSY purchases), will be on the hook to fund the $1.6 trillion needed to bridge the full amount of US funding needs.
A similar picture emerges in the Euro area, where supply is also expected outpace ECB purchases, particularly in Italy, Spain and France (absent further increases in ECB purchases). Bizarrely, a similar picture emerges in Japan where even the always ravenous BoJ is expected to absorb a large portion (about ¥25tn) of incoming supply in the upcoming year as Japan is boosting its debt sales by 18.2 trillion yen ($170 billion) to fund a spending package equivalent to a fifth of its annual economic output; but according to Goldman, the scale of supply is likely to exceed even the BOJ’s QE purchases.
It continues: foreign-ownership of New Zealand sovereign debt has fallen to 50% from 70% just five years ago as central bankers in Wellington snap up bonds as part of a quantitative-easing program.
In short, even with central banks unleashing $7.9 trillion in QE so far in 2020 (according to Bank of America calculations) of which the Fed accounts for over $2.8 trillion in debt purchases alone, this won’t be enough to monetize the tsunami of debt that is coming to fund the biggest global rescue operation in history, and if investors find that suddenly the bond market has to clear without the only true backstop – the central bank – willing and able to mop up all the supply, a critical precondition for the continuation of “helicopter money”, the outcome could be disastrous.
Incidentally, we first warned about the urgent need for the Fed to aggressively step up and boost its QE (instead of continuing to taper it by $1 billion week after week as it did again today) on Wednesday when we quoted Curvature Securities’ rates strategist and repo expert Scott Skyrm, who calculated that “there are $689 billion net new Treasurys settling during the month of May and $992 billion net new Treasurys settling between now and June 15. Yes, almost one trillion new Treasury securities hitting the market within the next month!”
His conclusion: “That means the market needs to come up with about one trillion dollars to pay for those securities over the next month.” Which, of course, is a euphemism because we all know who in the market needs to come up with one trillion dollar – the only one who literally prints money: the Federal Reserve.
Conveniently, Goldman’s argument allows us to recycle our conclusion from two days ago, in which we said that here is the layman’s version of what was just said: “the Fed has flooded the system with liquidity… and it is not enough, because the way helicopter money works, is that liquidity supply (the Fed), and liquidity demand (Treasury via debt issuance) go hand in hand, and periods of too much supply, as was the cash with the Fed’s massive QE in late March and early April, are promptly followed by periods of dramatic liquidity demand, such as the next month when $1 trillion in liquidity will be drained to fund the US government “money helicopter.”
Goldman’s own calculations suggest that the shortfall net of the Fed’s ongoing QE tapering could be as much as $1.6 trillion.
As a result, Powell faces a two-fold problem: since the Fed chair has taken negative rates off the table, Powell has no choice but too boost QE again, and unleash another firehose of debt monetizing liquidity in the financial system. However, any such reversal to the Fed’s current posture of shrinking QE will be met with howls of rage, especially among what’s left of the conservative political establishment. Which means that, just like in March when the Fed used the first pandemic-induced market crash to unleash unlimited QE, the Fed will soon have to go for round 2 and spark a new market crash, one which it then uses as an alibi for the next massive liquidity injection. Failing to do that, watch as the dollar takes off as markets sniff out that another major dollar squeeze is imminent. And since this will accelerate the liquidity crunch, one way or another, the coming $1.6 trillion in Treasury issuance – which has already been generously greenlighted by Congress – will serve as a trigger for the next market shock, one which the Fed will quickly reverse by expanding the already unlimited QE by trillions on very short notice.
The only question we have is whether this will be the market crash that the Fed uses to unveil it will also buy equity ETfs next, or if Powell will save this final bullet in its ammo for whatever comes next.
Finally, it’s not just us reaching this conclusion: yesterday – one day after our dire assessment – Bloomberg reached the same conclusion, and in “An $8 Trillion Spree Sets Clock Ticking for Bonds’ Judgment Day” in which it wrote that “investors are mopping up the sales as long as central banks engage in so-called quantitative easing, buying an unlimited amount of debt to counter the ravages of the pandemic. But at the first whiff of a recovery, or a pullback from policy makers, all bets may be off. Throw in the threat of inflation amid a global fiscal splurge exceeding $8 trillion, and bond investors look set for a toxic cocktail of risks in the not-too-distant future.”
Well, today we got another pullback when the Fed tapered its weekly QE to just $30BN from $35BN last week, and a record $75 billion per day two months ago.
“Given the massive central bank easing, which includes a lot of bond-buying QE in many places, there will be a lot of demand right now to buy government bonds,” said Eric Stein, co-director of global income at Eaton Vance Management, effectively describing what can simply be called “frontrunning” the Fed, a strategy that even BlackRock said is the only one left in this idiotic market.
“However, if it was a year or two from now and the economy was picking up and inflation had started to pick up, the story could be different.”
Actually, the economy doesn’t even have to be picking up: an unexpected – and unexplained – slowdown in the pace of the Fed’s “unlimited QE” purchases would be sufficient to throw the bond market into unprecedented turmoil as all those socialists who pretend that MMT makes sense, realize that the only thing permitting their idiotic “theory” to persist is the Fed’s money printer.
Yet while the Fed’s QE expansion is just a matter of time, whether catalyzed by another market crash or not, the bigger question is what happens after that?
“Can governments continue to borrow at such record levels? No,” said George Boubouras, head of research at hedge fund K2 Asset Management. “Central-bank support is key in the massive bond buying we’ve seen for now. But if they blink then at some point, in the medium term, it will all likely unravel – with unforgiving consequences for some countries.”
Ironically, this also means that an end to the coronavirus crisis is the worst possible thing that could happen to a world that is now habituated to helicopter money and virtually unlimited handouts, which however need a state of perpetual crisis.
“Once there is an end to the crisis in sight, they will be less and less willing to provide support and it will fall more on the street to absorb paper,” said Mediolanum money manager Charles Diebel, who’s adding bond steepeners in anticipation of a coming inflationary supernova.
That, incidentally, would be the endgame for the current monetary regime, which is why anyone hoping that officials, policymakers and the establishment in general, will allow the coronavirus crisis to simply fade away, is in for the shock of a lifetime.
- China's Disappeared Heroes & The Silence Of The West
China’s Disappeared Heroes & The Silence Of The West
Tyler Durden
Sun, 05/17/2020 – 23:55Authored by Giulio Meotti via The Gatestone Institute,
Three Chinese internet activists have disappeared and are believed to have been detained by police. They have reportedly been charged with preserving articles that were removed by China’s online censors. Chen Mei, Cai Wei and Cai’s girlfriend went missing on April 19.
A few days earlier, Beijing police formally arrested retired professor Chen Zhaozhi for “picking quarrels and provoking trouble” in a speech about the pandemic. The former Beijing University of Science and Technology professor had posted comments online, including that “Wuhan pneumonia is not a Chinese virus but Chinese Communist Party virus”. In addition, Wang Quanzhang, a Chinese human rights lawyer, who ended his prison sentence after more than four years for “subversion against the state”, immediately after leaving the penitentiary, was placed in “quarantine“, meaning under arrest.
These are just the latest Chinese dissidents who were concerned about the virus that began in Wuhan, the ground zero of the Covid-19 pandemic, who have vanished. They were evidently “disappeared” because they were searching for, and telling the truth about, what happened, as well as the Chinese regime’s attempt to bury it.
Frances Eve, deputy director of research at the Hong Kong-based watchdog group, Chinese Human Rights Defenders, said:
“Everyone who has disappeared is at very high risk of torture – most likely to try to force them to confess that their activities were criminal or harmful to society. Then, as we’ve seen in previous cases, people who have been disappeared will be brought out and forced to confess on Chinese state television”.
A Chinese citizen journalist, Li Zehua, recently reappeared after having vanished two months previous, while investigating the Wuhan coronavirus cover-up. The Chinese regime made him tame and silenced him. In contrast to the tone of his reporting from Wuhan, Zehua’s new video shows him heaping praise on the regime that detained him:
“Throughout the whole process, police officers acted civil and legally, making sure that I was resting and eating well, they really cared for me, I had three meals a day, felt safe with guards, and got to watch the news every day.”
His video shows the tragic consequence of China’s repression.
In his pre-arrest reports from Wuhan, Zehua had a far more aggressive tone against the authorities:
“I don’t want to remain silent, or shut my eyes and ears. It’s not that I can’t have a nice life, with a wife and kids. I can. I’m doing this because I hope more young people can, like me, stand up.”
These Chinese journalists know that the price will be terrible. Beijing just sentenced a journalist, Chen Jieren, to a 15-year prison term for “vilifying the Chinese Communist Party” after state media released his “confession”. China, the world’s largest prison for journalists, has been accused of now having entered a “total censorship era“.
The “patient zero” of this Chinese repression was Dr. Li Wenliang, an ophthalmologist, who was the whistleblower for Covid-19, and who died, purportedly of the virus, at the age of 34. First, was detained by police in Wuhan for “spreading false rumors” and, for telling the truth, forced to sign a document that he had “told untruthful information online.” Hours after state media reported Dr. Li’s death,” noted Physicians for Human Rights, “official censors scrubbed the Chinese Internet of any mention of his passing without explanation.”
Another doctor from Wuhan, Ai Fen, head of the emergency room at Wuhan Central Hospital, was apparently also one of the whistleblowers, who had “sounded the alarm” about the virus on December 30, 2019. Ai Fen was “disappeared” after criticizing the censorship concerning the epidemic. “If I had known what was to happen, I would not have cared about the reprimand. I would have fucking talked about it to whoever, where ever I could”, she said. She has not been seen or heard from since early April.
Chen Qiushi, a citizen journalist who reported from Wuhan, has also been missing since February. “I’m scared, I have the virus in front of me and behind me China’s law enforcement”, Chen said in a video dated January 30. “But I will keep my spirits up, as long as I’m alive and in this city I will continue my reports. I’m not afraid of dying. Why should I be afraid of you, Communist Party?”
A Wuhan clothing salesman, Fang Bin, apparently committed the crime of counting “too many” body bags. “This is too many, so many dead”, Bin said in a 40-minute video about the virus outbreak. He then disappeared as well. Bin filmed bodies piling up at a crematorium. Two months later, the world discovered that China had lied about the number of victims in Wuhan. Bin was right and Beijing had to raise its coronavirus official death toll in Wuhan by 50 percent.
A university student in Shandong, Zhang Wenbin, called on President Xi to step down. “When I look at the courage with which Hong Kong and Taiwan stand up to the Communist Party, I want my own voice to be heard”, he said. “I call on you all to look upon the true colors of the Communist Party, and stand together to bring down this wall”. Then Zhang Wenbin disappeared.
A property tycoon in Beijing, Ren Zhiqiang, also disappeared after writing an essay in which he described Chinese President Xi Jinping as a “clown,” and suggested that the Communist Party’s attack on freedom of speech had exacerbated the epidemic.
Wang Fang, a native of Wuhan, who won China’s prestigious Lu Xun Literary Prize, faces harassment and death threats after publishing a diary in the West about what happened in her native city. “I have fought the good fight, I have finished the race, I have kept the faith”, Fang wrote, quoting the Bible. She explained that today’s China reminds her of the Cultural Revolution, when Mao Zedong imposed fanaticism and obedience in the country and when dissidents were humiliated in public, killed by mobs or forced to commit suicide on streets.
A Chinese law professor at Tsinghua University, Professor Xu Zhangrun, was also placed under investigation after publishing an essay that railed against repression under President Xi. “I don’t know what they’ll do next,” Professor Xu said. “I’ve been mentally preparing for this for a long time. At the worst, I could end up in prison”. He also published a long essay in which he denounced Xi Jinping and the Communist Party. “The coronavirus epidemic has revealed the rotten core of Chinese governance”, Professor Xu wrote. He added that the Chinese system now “values the mediocre, the dilatory and the timid” and that the mess caused by officials in Wuhan who covered up early signs of the virus “has infected every province and the rot goes right up to Beijing”.
Friends say that since those remarks were published, Professor Xu’s social account was suspended, his name scrubbed from Weibo, a Chinese blogging platform, and that now only articles from official websites show up on the country’s largest search engine, Baidu.
A prominent Chinese legal activist, Xu Zhiyong, who urged Xi Jinping to resign — “You’re just not smart enough,” he said — was also arrested.
A pro-democracy activist, Ren Ziyuan, was sent to administrative detention for criticizing the government’s management of the epidemic, Freedom House reported. Additionally, Tan Zuoren, an online activist and former political prisoner, has received multiple visits by police and had his account on the WeChat social media platform frozen. Former professor Guo Quan , after publishing articles about the outbreak, was also arrested for “inciting subversion of state power”.
These intrepid dissidents showed how fragile, vacuous and dangerous is the edifice of the Chinese regime. The Chinese Communist Party “is the biggest and most serious virus of all”, said the blind activist and dissident Chen Guangcheng, now a refugee in the US. “It is time”, he said, “to recognize the threat the Chinese Communist Party poses to all humanity. The CCP represses and manipulates information to strengthen its hold on power, regardless of the toll on human lives”. Also apparently regardless of the number of victims in the world.
An open letter from parliamentarians, academics, advocates and policy leaders states:
“As an international group of public figures, security policy analysts and China watchers, we stand in solidarity with courageous and conscientious Chinese citizens including Xu Zhangrun, Ai Fen, Li Wenliang, Ren Zhiqiang, Chen Qiushi, Fang Bin, Li Zehua, Xu Zhiyong, and Zhang Wenbin, just to name a few of the real heroes and martyrs who risk their life and liberty for a free and open China”.
The letter was signed by, among others, Judith Abitan, Executive Director of the Raoul Wallenberg Centre for Human Rights; Lord Alton of the British House of Lords; the French historian Jean-Pierre Cabestan of the Hong Kong Baptist University; Irwin Cotler, Emeritus Professor of Law at McGill University and former Minister of Justice and Attorney General of Canada; and Giulio Terzi di Sant’Agata, Italy’s former minister of Foreign Affairs.
While many in the West thought that the Soviet Union was a heaven, it only took a handful of heroes beyond the Iron Curtain to let us know about the gulags, the secret police, the hunger, the repression — in short, they showed us that the heaven was a hell. These heroes included, the Czech writer Václav Havel, the nuclear scientist Andrei Sakharov and the author Alexander Solzhenitsyn in the Soviet Union; and the physicist Robert Havemann in East Germany, to name just a few. They paid with arrest, exile, prison and even their lives, such as Czech philosopher Jan Patočka, who died after being interrogated.
Today, similarly, if we know something about China, we owe it to China’s vanished heroes. We have, horribly, chosen to abandon them. Very few in the very free West call out the Chinese authorities and ask these great men and women to be released. For its acquiescence, the West will pay dearly.
The University of Queensland, Australia, which has close links to China, is actually trying to take disciplinary action, including the possible expulsion, against a student, Drew Pavlou, for his criticism of Beijing. Are we already playing Beijing’s game of repressing dissent?
Bloomberg News is said to censor articles that might anger China and expose Xi’s personal wealth. And the European Union recently softened criticism of China in a report on disinformation about the pandemic. The EU’s High Representative for Foreign Affairs, Josep Borrell, admitted that China had “pressured” Brussels.
“We’re almost extinct,” said Liu Hu, a journalist detained for nearly a year after investigating corrupt politicians. “No one is left to reveal the truth”.
It looks as though free thought is more valued among China’s daring dissidents than in many corners of the West.
To paraphrase Leon Trotsky: You may not be interested in China, but China is interested in you.
- Portland To Vote On $2.5 Billion Homeless Aid Tax Amid COVID Economy
Portland To Vote On $2.5 Billion Homeless Aid Tax Amid COVID Economy
Tyler Durden
Sun, 05/17/2020 – 23:30As the COVID-19 pandemic continues to bring the economy to a screeching halt, progressive cities dealing with a large and growing homeless populations face increased pressure to provide assistance amid budget shortfalls and dwindling or delayed tax revenues.
“Businesses and households are racking up huge amounts of debt. You have people who aren’t paying their rent and who are delaying their mortgages,” according to Eric Fruits, a research director at the Cascade Policy Institute.
Given this backdrop, voters in Portland, Oregon will decide on Tuesday to approve taxes on personal income and business profits which would raise $2.5 billion over a decade for the city’s homelessness initiatives, according to KATU.
The ballot measure was planned before the pandemic reduced the U.S. economy to tatters. Proponents, including many business leaders and major institutions, argue the taxes are needed now more than ever in a region that has long been overwhelmed by its homeless problem.
How voters in the liberal city react amid the pandemic will be instructive for other West Coast cities struggling to address burgeoning homeless populations as other sources of revenue dry up. The measure is believed to be one of the first nationwide to ask voters to open their wallets in a post-COVID-19 world. –KATU
Instead of housing, the money would be spent on so-called “wrap around services” to help with rent assistance, job training, mental health and substance abuse treatment, and case management and outreach.
“I think it’s really going to give you a sense about how concerned are people, still, about homelessness as an issue — and what are they willing to pay in to solve that issue,” said Marisa Zapata, head of the Homelessness Research & Action Collaborative (HRAC) at Portland State University.
“We know government budgets are going to be eviscerated, so what does this mean for additional revenue-raising opportunities?” she added. “Who could we turn to to bear some of that responsibility and how will voters react?”
According to HRAC, there are approximately 40,000 people in the greater Portland area who have experienced at least one period of homelessness, and 105,000 households which face housing insecurity.
Those who oppose the $2.5 billion bill are shocked that organizers continue to push the effort while the economy is stalled and much of Oregon’s population remains under lockdown.
“People are frustrated. They’re out of work, they’re angry and the last thing they’re thinking about right now is raising taxes,” according to Amanda Dalton, legislative director of the Northwest Grocery Association.
Voters in the three counties that make up the greater Portland metro region will be asked to consider a 1% marginal income tax on the wealthiest residents and a 1% tax on gross profits for the region’s biggest businesses.
The measure would apply to individual filers with a taxable income of more than $125,000 or joint filers with taxable income of more than $200,000. Joint filers making $215,000 a year, for example, would be taxed 1% on $15,000, or $150 a year. –KATU
Approximately 90% of Portland residents and 94% of businesses will be exempt from the tax, says Angela Martin, campaign director for HereTogether – the organization which created the measure.
Supporting the bill is the Portland Business Alliance, whose members have repeatedly cited homelessness as a ‘critical factor affecting its ability to expand and recruit,’ according to the report. Also backing the measure are the Portland Trail Blazers and other major sports franchises, as well as several local government leaders.
Last week Gov. Kate Brown asked all state agencies to find a way to cut nearly 20% of their budgets, while the city of Portland is expecting a $75 million drop in revenue.
- "Overshoot" – Understanding Our Pandemic-Economy Predicament
“Overshoot” – Understanding Our Pandemic-Economy Predicament
Tyler Durden
Sun, 05/17/2020 – 23:05Authored by Gail Tverberg via Our Finite World blog,
The world’s number one problem today is that the world’s population is too large for its resource base. Some people have called this situation overshoot. The world economy is ripe for a major change, such as the current pandemic, to bring the situation into balance. The change doesn’t necessarily come from the coronavirus itself. Instead, it is likely to come from a whole chain reaction that has been started by the coronavirus and the response of governments around the world to the coronavirus.
Let me explain more about what is happening.
[1] The world economy is reaching Limits to Growth, as described in the book with a similar title.
One way of seeing the predicament we are in is the modeling of resource consumption and population growth described in the 1972 book, The Limits to Growth, by Donella Meadows et al. Its base scenario seems to suggest that the world will reach limits about now. Chart 1 shows the base forecast from that book, together with a line I added giving my impression of where the economy really was in 2019, relative to resource availability.
Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil,” with dotted line added corresponding to where the world economy seems to be have been in 2019.
In 2019, the world economy seemed to be very close to starting a downhill trajectory. Now, it appears to me that we have reached the turning point and are on our way down. The pandemic is the catalyst for this change to a downward trend. It certainly is not the whole cause of the change. If the underlying dynamics had not been in place, the impact of the virus would likely have been much less.
The 1972 model leaves out two important parts of the economy that probably make the downhill trajectory steeper than shown in Figure 1. First, the model leaves out debt and, in fact, the whole financial system. After the 2008 crisis, many people strongly suspected that the financial system would play an important role as we reach the limits of a finite world because debt defaults are likely to disturb the worldwide financial system.
The model also leaves out humans’ continual battle with pathogens. The problem with pathogens becomes greater as world population becomes denser, facilitating transmission. The problem also becomes greater as a larger share of the population becomes more susceptible, either because they are elderly or because they have underlying health conditions that have been hidden by an increasingly complex and expensive medical system.
As a result, we cannot really believe the part of Figure 1 that is after 2020. The future downslopes of population, industrial production per capita, and food per capita all seem likely to be steeper than shown on the chart because both the debt and pathogen problems are likely to increase the speed at which the economy declines.
[2] It is far more than the population that has overshot limits.
The issue isn’t simply that there are too many people relative to resources. The world seems to have
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Too many shopping malls and stores
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Too many businesses of all kinds, with many not very profitable for their owners
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Governments with too extensive programs, which taxpayers cannot really afford
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Too much debt
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An unaffordable amount of pension promises
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Too low interest rates
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Too many people with low wages or no wages at all
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Too expensive a healthcare system
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Too expensive an educational system
The world economy needs to shrink back in many ways at once, simultaneously, to manage within its resource limits. It is not clear how much of an economy (or multiple smaller economies) will be left after this shrinkage occurs.
[3] The economy is in many ways like the human body. In physics terms, both are dissipative structures. They are both self-organizing systems powered by energy (food for humans; a mixture of energy products inducing oil, coal, natural gas, burned biomass and electricity for the economy).
The human body will try to fix minor problems. For example, if someone’s hand is cut, blood will tend to clot to prevent too much blood loss, and skin will tend to grow to substitute for the missing skin. Similarly, if businesses in an area disappear because of a tornado, the prior owners will either tend to rebuild them or new businesses will tend to come in to replace them, as long as adequate resources are available.
In both systems, there is a point beyond which problems cannot be fixed, however. We know that many people die in car accidents if injuries are too serious, for example. Similarly, the world economy may “collapse” if conditions deviate too far from what is necessary for economic growth to continue. In fact, at this point, the world economy may be so close to the edge with respect to resources, particularly energy resources, that even a minor pandemic could push the world economy into a permanent cycle of contraction.
[4] World governments are in a poor position to fix the current resource and pandemic crisis.
In our networked economy, too low a resource base relative to population manifests itself in a strange way: It appears as an affordability crisis that leads to very low prices for oil. It also appears as terribly low prices for many other commodities, including copper, lithium, coal and even wholesale electricity. These low prices occur because too large a share of the population cannot afford finished goods, such as cars and homes, made with these commodities. Recent shutdowns have suddenly increased the number of people with low income or no income, pushing commodity prices even lower.
If resources were more plentiful and very inexpensive to produce, as they were 50 or 70 years ago, wages of workers could be much higher, relative to the cost of resources. Factory workers would be able to afford to buy vehicles, for example, and thus help keep the demand for automobiles up. If we look more deeply into this, we find that energy resources of many kinds (fossil fuel energy, nuclear energy, burned biomass and other renewable energy) must be extraordinarily cheap and abundant to keep the system growing. Without “surplus energy” from many sources, which grows with population, the whole system tends to collapse.
World governments cannot print resources. What they can print is debt. Debt can be viewed a promise of future goods and services, whether or not it is reasonable to believe that these future goods and services will actually materialize, given resource constraints.
We are finding that using shutdowns to solve COVID-19 problems causes a huge amount of economic damage. The cost of mitigating this damage seems to be unreasonably high. For example, in the United States, antibody studies suggest that roughly 5% of the population has been infected with COVID-19. The total number of deaths associated with this 5% infection level is perhaps 100,000, assuming that reported deaths to date (about 80,000) need to be increased somewhat, to match the approximately 5% of the population that has, knowingly or unknowingly, already experienced the infection.
If we estimate that the mean number of years of life lost is 13 years per person, then the total years of life lost would be about 1,300,000. If we estimate that the US treasury needed to borrow $3 trillion dollars to mitigate this damage, the cost per year of life lost is $3 trillion divided by 1.3 million, or $2.3 million dollars per year of life lost. This amount is utterly absurd.
This approach is clearly not something the United States can scale up, as the share of the population affected by COVID-19 relentlessly rises from 5% to something like 70% or 80%, in the absence of a vaccine. We have no choice but to use a different approach.
[5] COVID-19 would have the least impact on the world economy if people could pay little attention to the pandemic and just “let it run.” Of course, even without mitigation attempts, COVID-19 might bring the world economy down, given the distressed level of today’s economy and the shutdowns experienced to date.
Shutting down an economy has a huge adverse impact on that economy because quite a few workers who are in good health are no longer able to make goods and services. As a result, they have no wages, so their “demand” goes way down. If the economy was already having an affordability crisis for goods made with commodities, shutting down the economy tends to greatly add to the affordability crisis. Prices of commodities tend to fall even lower than they were before the crisis.
Back in 1957-1958, the Asian pandemic, which also started in China, hit the world. The number of deaths was up in the range of the current pandemic, relative to population. The estimated worldwide death rate was 0.67%. This is not too dissimilar from a death rate of 0.61% for COVID-19, which can be calculated using my estimate above (100,000 deaths relative to 5% of the US population of 33o million).
Virtually nothing was shut down in the US for the 1957-58 pandemic. When doctors or nurses became sick themselves, wards were simply closed. Would-be patients were told to stay at home and take aspirin, unless a severe case developed. With this approach, the US still faced a short recession, but the economy was soon growing again. Populations seemed to soon reach herd immunity quite quickly.
If the world could somehow have adopted a similar approach this time, there still would have been some adverse impact on the economy. A small percentage of the population would have died. Some businesses might have needed to be closed for a short time when too many workers were out sick. But the huge burden of job loss by a substantial share of the economy could have been avoided. The economy would have had at least a small chance of rebounding quickly.
[6] The virus that causes COVID-19 looks a great deal like a laboratory cross between SARS and HIV, making the likelihood of a quick vaccine low.
In fact, Professor Luc Montagnier, co-discoverer of the AIDS virus and winner of a Nobel Prize in Medicine, claims that the new coronavirus is the result of an attempt to manufacture a vaccine against the AIDS virus. He believes that the accidental release of this virus is what is causing today’s pandemic.
If COVID-19 were simply another influenza virus, similar to many we have seen, then getting a vaccine that would work passably well would be a relatively easy exercise. At least one of the vaccine trials that has been started could be reasonably expected to work, and a solution would not be far away.
Unfortunately, SARS and HIV are fairly different from influenza viruses. We have never found a vaccine for either one. If a person has had SARS once, and is later exposed to a slightly mutated version of SARS, the symptoms of the second infection seem to be worse than the first. This characteristic interferes with finding a suitable vaccine. We don’t know whether the virus causing COVID-19 will have a similar characteristic.
We know that scientists from a number of countries have been working on so-called “gain of function” experiments with viruses. These very risky experiments are aimed at making viruses either more virulent, or more transmissible, or both. In fact, experiments were going on in Wuhan, in two different laboratories, with viruses that seem to be not too different from the virus causing COVID-19.
We don’t know for certain whether there was an accident that caused the release of one of these gain of function viruses in Wuhan. We do know, however, that China has been doing a lot of cover-up activity to deter others from finding out what actually happened in Wuhan.
We also know that Dr. Fauci, a well-known COVID-19 advisor, had his hand in this Chinese research activity. Fauci’s organization, the National Institute for Allergy and Infectious Diseases, provided partial funding for the gain of function experiments on bat coronaviruses in Wuhan. While the intent of the experiments seems to have been for the good of mankind, it would seem that Dr. Fauci’s judgment erred in the direction of allowing too much risk for the world’s population.
[7] We are probably kidding ourselves about ever being able to contain the virus that causes COVID-19.
We are gradually learning that the virus causing COVID-19 is easily spread, even by people who do not show any symptoms of the disease. The virus can spread long distances through the air. Tests to see if people are ill tend to produce a lot of false negatives; because of this, it is close to impossible to know whether a particular person has the illness or not.
China is finding that it cannot really contain the virus that causes COVID-19. A recent South China Morning Post article indicates that roughly 14 million people are to be tested in the Wuhan area in the next ten days to try to control a new outbreak of the virus.
It is becoming clear, as well, that even within China, the lockdowns have had a very negative impact on the economy. The Wall Street Journal reports, China Economic Data Indicate V-Shaped Recovery Is Unlikely. Supply chains were broken; wholesale commodity prices (excluding food) have tended to fall. Joblessness is increasingly a problem.
[8] If we look at deaths per million by country, it is difficult to see that lockdowns are very helpful in reducing the spread of disease. Masks seem to be more beneficial.
If we compare death rates for mask-wearing East Asian countries to death rates elsewhere, we see that death rates in mask-wearing East Asian countries are dramatically lower.
Figure 2. Death rates per million population of selected countries with long-term exposure to the virus causing COVID-19, based on Johns Hopkins death data as of May 11, 2020.
Looking at the chart, a person almost wonders whether lockdowns are a response to requests from citizens to “do something” in response to an already evident surge in cases. The countries known for their severe lockdowns are at the top of the chart, not the bottom.
In fact, a preprint academic paper by Thomas Meunier is titled, “Full lockdown policies in Western Europe countries have no evident impacts on the COVID-19 epidemic.” The abstract says, “Comparing the trajectory of the epidemic before and after the lockdown, we find no evidence of any discontinuity in the growth rate, doubling time, and reproduction number trends. . . We also show that neighboring countries applying less restrictive social distancing measures (as opposed to police-enforced home containment) experience a very similar time evolution of the epidemic.”
It appears to me that lockdowns have been popular with governments around the world for a whole host of reasons that have little to do with the spread of COVID-19:
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Lockdowns give an excuse for closing borders to visitors and goods from outside. This was a direction in which many countries were already headed, in an attempt to raise the wages of local workers.
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Lockdowns can be used to hide the fact that factories need to be closed because of breaks in supply lines elsewhere in the world.
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Many countries have been faced with governmental protests because of low wages compared to the prices of basic services. Lockdowns tend to keep protesters inside.
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Lockdowns give the appearance of protecting the elderly. Since there are many elderly voters, politicians need to court these voters.
[9] A person wonders whether Dr. Fauci and members of the World Health Organization are influenced by the wishes of vaccine and big pharmaceutical companies.
The recommendation to try to “flatten the curve” is, in part, an attempt to give vaccine and pharmaceutical makers more time to work on their products. Is this really the best recommendation? Perhaps I am being overly suspicious, but we recently have been dealing with an opioid epidemic which was encouraged by manufacturers of Oxycontin and other opioids. We don’t need another similar experience, this time sponsored by vaccine and other pharmaceutical makers.
The temptation of researchers is to choose solutions that would be best from the point of their own business interests. If a researcher gets much of his funding from vaccine and big pharmaceutical interests, the temptation will be to “push” solutions that are beneficial to these interests. In some cases, researchers are able to patent approaches, even when the research is paid for by governmental grants. In this case they can directly benefit from a new vaccine or drug.
When potential solutions are discussed by Dr. Fauci and the World Health Organization, no one brings up improving people’s immunity so that they can better fight off the novel coronavirus. Few bring up masks. Instead, we keep being warned about “opening up too soon.” In a way, this sounds like, “Please leave us lots of customers who might be willing to pay a high price for our vaccine.”
[10] One way the combination of (a) the activity of the virus and (b) our responses to the virus may play out is as a slow-motion, controlled demolition of the world economy.
I think of what we are experiencing as being somewhat similar to a toggle bolt going around and around, moving down a screw. As the toggle bolt moves around, I picture it as being similar to the virus and our responses to the viruses hitting different parts of the world economy.
Figure 3. Image of how the author sees COVID-19 as being able to hit the economy multiple times, in multiple ways, as its impact keeps impacting different parts of the world.
If we look back, the virus and reactions to the virus first hit China. China’s recovery is moving slowly, in part because of reduced demand from outside of China now that the virus is hitting other parts of the world. In fact, additional layoffs occurred after Chinese shutdowns ended, because it then became clear that some employers needed to permanently scale back operations to meet the new lower demand for their product.
Commodity prices, including oil prices, are now depressed because of low demand around the world. These low prices can be expected to gradually lead to closures of wells and mines extracting these commodities. Processing centers will also close, making these commodities less available even if demand temporarily rises.
As one country is hit by illnesses and/or shutdowns, we can expect supply lines for manufacturing around the world to be disrupted. This will lead to yet more business closures, some of them permanent. Debt defaults tend to happen as businesses close and layoffs occur.
With all of the layoffs, governments will find that their tax collections are lower. The resulting governmental funding issues can be expected to lead to new rounds of layoffs.
Natural disasters such as hurricanes, tornadoes, floods, earthquakes and forest fires can be expected to continue to happen. Social distancing requirements, inadequate tax revenue and broken supply lines will make mitigation of all of these disasters more difficult. Electrical lines that fall down may stay down permanently; bridges that are damaged may never be repaired.
Initially, rich countries can be expected to try to help as many laid-off workers as possible with loans and temporary stipends. But, after a few months, even with this approach, many individual citizens and businesses will likely not be able to pay their rent. Default rates on home mortgages and auto loans can be expected to rise for a similar reason.
We can expect to see round after round of business failures and layoffs of employees. Financial systems will become more and more stressed. Pensions are likely to default. Death rates will rise, in part from epidemics of various kinds and in part from growing problems with starvation. In fact, in some poor countries, lower-income citizens are already having difficulty being able to afford adequate food. Eventually we can expect collapsing governments (similar to the collapse of central government of the Soviet Union) and overthrown governments.
Longer-term, after this demolition ends, there may be some surviving pieces of economies. These new economies will be much smaller and less dependent upon each other, however. Currencies are likely to be less interchangeable. The remaining people will need to learn to make do with many fewer goods than are available today. It will be a very different world.
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- Can't Make This Up: Beijing Begins Construction Of A P-3 Biolab
Can’t Make This Up: Beijing Begins Construction Of A P-3 Biolab
Tyler Durden
Sun, 05/17/2020 – 22:56As the new trade/tech/diplomatic/cultural (in fact, everything but kinetic) war between the US and China is heating up by the hour, one would think that China would do everything in its power to defuse one of the core accusations by the Trump administration, namely that the Wuhan Institute of Virology (WIV) in China was the source of the global coronavirus pandemic (going so far as to spark unofficial demands for hundreds of billions in reparations from Beijing for its “criminal” actions), an allegation which Peter Navarro on Sunday expanded when he accused China of deliberately “seeding” the world with the “China virus”:
“The Chinese behind the shield of the World Health Organization – for two months – hid the virus from the world and then sent hundreds of thousands of Chinese on aircraft to Milan, New York and around the world to seed that,” Navarro said on ABC. “They could have kept it in Wuhan. Instead it became a pandemic.”
Well, one would be wrong, because in a “completely unexpected” twist – assuming China was indeed telling the truth and that the WIV had nothing to do with the original viral release – on Friday, a senior Chinese official confirmed Secretary of State Mike Pompeo’s allegation that Beijing had told labs in the country to destroy coronavirus samples in early January.
Recall that in a May 6 press briefing, Pompeo accused China of covering up the Covid-19 outbreak as it emerged in the central city of Wuhan, saying China’s National Health Commission had ordered destruction of samples of the virus on Jan. 3.
Asked about those comments at a press briefing in Beijing on Friday, NHC official Liu Dengfeng confirmed that the commission had issued these guidelines at that time “for pandemic prevention and control, which also played an important role in preventing biosafety risks.”
“If the laboratory conditions cannot meet the requirements for the safe preservation of samples, the samples should be destroyed on the spot or transferred to a professional institution for safekeeping,” said Liu, supervisor of the commission’s Department of Health Science, Technology and Education.
Chinese law has clear rules for the handling of highly pathogenic samples, he said, and we are sure that it does… but wait a gosh darned minute? According to Dengfeng, China is basically admitting that the coronavirus samples – which were held in China’s P-4 rated, top “biosafety” lab in Wuhan which incidentally is also where the virus was leaked from according to a mountain of circumstantial evidence – were not safe in the Wuhan lab and thus had to be destroyed?
Considering that one of the core arguments made by the Trump administration (and this website) is that the virus (whether genetically engineered or otherwise) was released (hopefully without premeditation although there is no way of knowing for certain) by the Wuhan lab, China’s actions essentially confirm that the Wuhan Institute of Virology was unsafe, and thus every last sample of the virus had to be destroyed.
Of course, the real reason why China destroyed the samples was different, and it had to do with not only destroying all the evidence but crushing any hope of finding what the real source of the pandemic was. As the WSJ reported, “Public health experts say it is likely too late to investigate the role of the market in Covid-19’s spread and that proving its origin might now be impossible.” And with China destroying the last remaining coronavirus samples, well – there goes any hope of proving or disproving that the virus emerged from the Wuhan Institute of Virology.
Just as China wanted.
So with all that in mind, and with China’s track record in biotechnology, “gain of function” experiments and reputation of deadly viral “containment” destroyed, what does China do? Why it plans to build an entirely new biolab, only this time not in the industrial backwater of Wuhan, but in the capital itself.
According to the Global Times, China’s capital Beijing will build its own, P-3 rated laboratory “to improve and explore infectious disease detection capacity” Lei Haichao, director of Beijing Municipal Health Commission, said at a press conference on Sunday, Chinanews reported.
There is no P-3 laboratory in Beijing now, while the nation’s only P-4 lab – which as a reminder is the highest level of biosafety precautions, and is appropriate for work with “agents that could easily be aerosol-transmitted within the laboratory and cause severe to fatal disease in humans for which there are no available vaccines or treatments” – remains in Wuhan.
When COVID-19 emerged, the nation’s capital had 17 facilities equipped with nucleic acid testing capabilities. Within two months, 70 institutions had added testing capabilities necessary to conduct 51,000 tests daily, Lei said.
Recently, the highest number of tests completed in one day is 30,000, indicating ample reserve capacity. However, the ability of Beijing laboratories to target infectious diseases needs to be explored and improved in the long term, according to Lei.
Of course, testing is just one of the many aspects that a biosafety level 3 lab does. According to the CDC’s “Biosafety in Microbiological and Biomedical Laboratories” manual, P-3 labs are appropriate for work involving microbes which can cause serious and potentially lethal disease via the inhalation route. This type of work can be done in clinical, diagnostic, teaching, research, or production facilities. Here, the precautions undertaken in BSL-1 and BSL-2 labs are followed, as well as additional measures including:
- All laboratory personnel are provided medical surveillance and offered relevant immunizations (where available) to reduce the risk of an accidental or unnoticed infection.
- All procedures involving infectious material must be done within a biological safety cabinet.
- Laboratory personnel must wear solid-front protective clothing (i.e. gowns that tie in the back). This cannot be worn outside of the laboratory and must be discarded or decontaminated after each use.
- A laboratory-specific biosafety manual must be drafted which details how the laboratory will operate in compliance with all safety requirements.
In addition, the facility which houses the BSL-3 laboratory must have certain features to ensure appropriate containment. The entrance to the laboratory must be separated from areas of the building with unrestricted traffic flow. Additionally, the laboratory must be behind two sets of self-closing doors (to reduce the risk of aerosols escaping). The construction of the laboratory is such that it can be easily cleaned. Carpets are not permitted, and any seams in the floors, walls, and ceilings are sealed to allow for easy cleaning and decontamination. Additionally, windows must be sealed, and a ventilation system installed which forces air to flow from the “clean” areas of the lab to the areas where infectious agents are handled. Air from the laboratory must be filtered before it can be recirculated.
So after Wuhan and the whole “coronavirus thing”, what do Beijing residents have to look forward to?
According to the CDC, biosafety level 3 is commonly used for research and diagnostic work involving various microbes which can be transmitted by aerosols and/or cause severe disease. These include Francisella tularensis, Mycobacterium tuberculosis, Chlamydia psittaci, Venezuelan equine encephalitis virus, Eastern equine encephalitis virus, Coxiella burnetii, Rift Valley fever virus, Rickettsia rickettsii, several species of Brucella, chikungunya, yellow fever virus, West Nile virus, Yersinia pestis.
Oh, and the SARS coronavirus, SARS-Cov-2, and MERS coronavirus. Just in case the world really needs that second wave.
- The Top 4 Themes And Trends From Q1 Earnings Conference Calls
The Top 4 Themes And Trends From Q1 Earnings Conference Calls
Tyler Durden
Sun, 05/17/2020 – 22:40Every quarter, Goldman Sachs published its so-called Beige Book (not to be confused with the Fed’s publication by that name) in which the bank gathers anecdotal evidence of fundamental and thematic trends from the earnings transcripts of companies in the S&P 500. Obviously, the latest, Q1 edition, spotlights commentary around the coronavirus outbreak. As Goldman’s David Kostin summarizes, there were four key themes to emerge across sectors:
- Business outlook (uncertainty, earnings guidance withdrawal, U- or L-shaped path more likely than a V);
- Accelerating revenue model changes (digitalization, DTC, automation initiatives);
- Corporate operations and labor force changes (WFH, cutting labor costs);
- Cash use priorities (liquidity paramount, suspending buybacks and dividends).
Some more observations on these four key themes:
Theme 1: An uncertain recovery
Many corporate managers highlighted extreme uncertainty around the path to recovery. Amid the ongoing stay-at-home mandates, business closures, and social distancing measures, roughly 180 companies pulled earnings guidance. The bottom-up consensus estimate of 2020 S&P 500 EPS has been revised down by 27% since the start of the year.
Overall, managements anticipated activity would trough in 2Q 2020, but firms had mixed views on how long the financial impact of the pandemic would last. Only a few companies posited a V-shaped rebound while most others expected a U- or L-shaped recovery. Unsurprisingly, companies facing greater exposure to travel and requiring face-to-face interactions expected a longer stretch of time before business activities would return to normal. In contrast, companies in market segments like construction, business supplies, and data centers expected faster normalization. Although some companies gained insight from their business recovery experience in China, others were wary to extrapolate China’s rebound to other countries due to varying national responses and governing systems.
Selected examples:
- Uncertainty around financial guidance: AKAM, CMS, FB, KSU, MDLZ, MMM, PKG, UPS
- Anticipated 2Q trough: ADM, AMGN, APTV, DD, HLT, JNJ, LDOS, NEM, REGN
- U or L more common than V-shaped recovery: ABBV, ABT, ADP, CE, ECL, EMR, HBAN, IDXX, PNC, PPG, RF, WHR, WY
- Wary of extrapolating China’s recovery: APH, ETN, IEX, ZTS
- Pockets of optimism: AXP, BAC, FOXA, IQV, V
Theme 2: Accelerating digitalization, direct-to-consumer, and automation strategies
Executives highlighted digital transformation as their top priority given online engagement has skyrocketed following stay-at-home mandates and government-mandated business closures. Digitalization solutions centered around shifting consumer behaviors within the low mobility, contact-less environment. Among the broad span of businesses that accelerated digitalization: Restaurants added online order-and-pay services, retailers turned to digital marketing and e-commerce, patient care pivoted to telemedicine, work-from-home mandates boosted collaborative technologies, and banks further invested in mobile financing capabilities. Companies within consumer sectors, in particular, overwhelmingly cited spikes in online sales. Video chat apps (+1,485%), home fitness apps (+288%), grocery apps (+214%) and e-commerce apps (+116%) have all more than doubled the number of app downloads since last year .
Direct-to-consumer channels experienced a similar surge as retail customers found alternative ways to purchase goods. Executives highlighted sustained or increased direct-to-consumer sales, with many consumer-facing companies aggressively pivoting to sell directly to their end-market customers.
Managements also escalated automation strategies into their operations and supply chains. Automation technologies were cited as long-term strategies to permanently lower operating costs. Reduced headcount and social-distancing measures within facilities further increased the demand for automation to help firms sustain or increase operational efficiency.
Selected examples:
- Digitalization: ACN, AKAM, ANTM, AOS, C, CDW, CFG, CHD, CHTR, CMCSA, CMG, CVS, EL, FB, GE, GM, GOOGL, GPC, HBI, HSY, ICE, KEY, KO, LEN, MA, MGM, NKE, NOW, TSCO, UPS, WBA, WRK
- Direct-to-consumer: AFL, CHTR, CL, DRE, GRMN, LEG, MKC, STZ, WHR
- Automation: AME, OXY, SEE, SLB, TEL, XYL, YUM, ZBRA
Theme 3: A changing workforce
Amid the economic and health crisis, many companies reduced labor costs through layoffs, furloughs, and pay cuts. Actions on labor costs were widespread and were not confined to the industries that were most acutely impacted by government-mandated social distancing. Pay cuts were a common labor cost reduction lever, especially at the executive level. In April alone, 20.5 million jobs were lost and the US unemployment rate spiked to 14.7%. Many companies indicated actions on labor costs were intended to be temporary, suggesting that the lasting economic effects of job losses may be limited at the moment.
Companies able to transition employees to working-from-home did so, with mixed results. Some companies called out sustained or improved efficiency from their remote employees and potential opportunities for some of their employees to continue working remotely long-term, whereas other companies discussed diminished productivity and operational challenges. Firms with employees still on-site incurred additional costs associated with ensuring employee safety.
Selected examples:
- A remote workforce: AEP, APD, APTV, CDNS, COF, CTXS, GPN, HCA, LHX, NEM, OMC, SLG, SPGI, VRSK
- Cutting labor costs: BWA, CAT, CHRW, EMR, L, LH, LKQ, MGM, NWL, TDG
- COVID-19 related employee expenses: AIZ, CVS, SYF, TSN, YUM
Theme 4: New cash spending priorities
Management teams prioritized liquidity and balance sheet strength. Heightened uncertainty prompted companies to reduce capital expenditures, buybacks, and dividends. Many companies, however, committed to their dividends, emphasizing the importance of dividend payments to shareholders and their priority of maintaining their long track record of paying dividends.
Goldman also notes that some companies were also opportunistic around M&A given the current environment, and the bank’s Strong Balance Sheet basket (GSTHSBAL) outperformed its Weak Balance Sheet basket (GSTHWBAL) by 24 pp YTD (2% vs. -22%), but trades at a forward P/E of 32x, representing a 3 standard deviation premium vs. history. As a reminder, Goldman recently forecast S&P 500 buybacks will fall by 50% and dividends by 25% in 2020.
Selected examples:
- Liquidity: AIG, BA, CDW, DVN, HSIC, MDLZ, SWK, WAB
- Cutting out of caution: CHRW, IVZ, MCO, NTRS
- Commitment to dividends: CAT, ETN, FANG, FLIR, KSU, PEG, PG, TRV, WM
- M&A opportunities: BAX, CERN, JKHY, LVS, SYK, XRX
* * *
In addition to these four key themes, Kostin also highlights 4 core trends that emerged during Q1 conference calls:
First, S&P 500 earnings are partially insulated relative to the economy given its large-cap tilt and high weight in non-cyclical industries.
Concentration within the equity market has been growing. The ongoing crisis has exacerbated the “winner-takeall” nature of the equity market, acutely affecting small companies with less operational and balance sheet flexibility than their larger peers. While S&P 500 EPS fell by 14% in 1Q, small-cap Russell 2000 EPS fell by 90%. Furthermore, the S&P 500 carries large earnings weights in non-cyclical industries, which posted positive EPS growth in 1Q and are expected to post much stronger full-year EPS growth relative to the broad index. Software & Services share of S&P 500 EPS has grown to 9%, led by MSFT. Health Care and Consumer Staples account for 16% and 7% of S&P 500 EPS, respectively.
Second, online platforms and shifting business models will partially offset the revenue declines in in-person consumption.
The consumer accounts for 70% of the US economy and has been impaired by restrictions on face-to-face transactions. Consumer Discretionary sales excluding AMZN fell by 6% in 1Q and US retail sales fell by 16% in April. However, restrictions have expedited the shift to e-commerce and other online services. For example, online retailer Wayfair (W) reported that gross revenues 2QTD have grown by 90% year/year, Target (TGT) reported 275% growth in digital sales MTD through April 23, and Chipotle (CMG) reported that, while in-store ordering plunged by 75%, delivery and order-ahead sales surged by
150% and 120%. Video chat apps (+1,255%), grocery apps (+134%) and ecommerce apps (+118%) have all more than doubled the number of downloads since last year. Several companies have also adjusted their business models. In mid-April, Best Buy (BBY) reported that it had retained 70% of sales by enhancing curbside pickup offerings despite all US stores being closed to customer traffic.Third, increased costs associated with maintaining or resuming business activity will continue to pressure profit margins.
S&P 500 net margins fell by 107 bp in 1Q. Several brick-and-mortar companies have highlighted increased costs associated with coronavirus. Target (TGT) noted that costs were expected to be higher because of investments in pay and benefits as well as additional cleaning of stores and distribution centers. Even Amazon (AMZN), a relative revenue beneficiary, guided for $4 billion of extra costs related to COVID-19, including worker safety measures, virus testing, and higher labor costs.
Fourth, several companies noted that revenue declines stabilized in April and there were pockets of improvement in early 2Q.
Commentary on signs of stabilization was present in a variety of sectors, such as Consumer Discretionary (e.g., MAR, BKNG, YUM), Industrials (e.g., URI, WM), and Info Tech (e.g., FIS, IT, ADP). Several firms leveraged to consumer spending, such as payment processors V, MA, and GPN, even highlighted sequential improvements in April and May. On Thursday, MA noted that it believed it was starting to see the transition from the “stabilization” phase to the “normalization” phase in some markets. This pattern is consistent with data from Opportunity Insights, which tracks consumer spending, and also our own observations form last week.
Their measure of total consumer spending stabilized at -30% in the first half of April and has improved to -20% at the end of April. While this nascent improvement is encouraging, it certainly reflects the direct consumer payments under the CARES Act, which will prove temporary. However, even outside of the consumer, FB noted that after an initial steep decline in March ad revenue was roughly flat during the first three weeks of April vs. the same period a year ago.
- Chinese Ambassador To Israel Found Dead In Home, Sparking Avalanche Of Rumors Amid Tensions With US
Chinese Ambassador To Israel Found Dead In Home, Sparking Avalanche Of Rumors Amid Tensions With US
Tyler Durden
Sun, 05/17/2020 – 22:21China’s Ambassador to Israel has been found dead inside his home near Tel Aviv Sunday morning, Israel’s Foreign Ministry has confirmed.
57-year old ambassador Du Wei had only assumed his post in February 2020 in the midst of the coronavirus pandemic, due to which he entered a two week mandatory self-quarantine upon his arrival. He’d previously been China’s envoy to Ukraine and is survived by his wife and son, who were not yet in the country.
China’s ambassador to Israel Du Wei, file image, Police were reported outside his residence in Herzliya, which lies just north of the Israeli capital, conducting an investigation but have told the media Wei’s death isn’t being treated as suspicious. However, a number of commentators are highlighting the context of tensions between the US and China inside Israel as being essentially in a state of behind-the-scenes diplomatic war after Secretary of State Mike Pompeo’s visit there last week.
Pompeo sought to urge the Israelis against trading or investing with China, especially the agreement for China to start operating Haifa Port in 2021. As multiple reports underscored:
On Wednesday, Mr Pompeo denounced Chinese investments in Israel and accused China of withholding information about the coronavirus outbreak.
Washington has sought to strip China of ability to exercise influence in this strategically key part of the Mediterranean where the US Navy’s 6th fleet often docks and restocks.
Chinese Embassy in Tel Aviv, Wiki Commons. Du Wei reportedly specifically condemned Pompeo’s anti-China rhetoric on the embassy’s official website days ago.
While there was no immediately forthcoming statement on the ambassador’s death out of the Chinese Foreign Ministry, it is likely Beijing has yet to rule anything out in terms of the suspicious timing of it all.
#China’s ambassador to #Israel Du Wei was found dead in his home on Sunday sparking rumors and an avalanche of media coverage. https://t.co/oWVmpmD56Z
— The Jerusalem Post (@Jerusalem_Post) May 17, 2020
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Meanwhile, Israeli newspapers were quick to underscore that the immediate rapid spread of the news across global press almost immediately after the discovery of the death was accompanied by widespread rumors and speculation.
“The level of conspiracies and anti-China comments after the death of the ambassador reached a crescendo on Sunday afternoon,” Jerusalem Post wrote. This is also due to it being rare that an ambassador dies while on the job, as multiple reports have noted.
- The US Is Caught In An Economic Death Spiral, And One Group Is Being Hit Particularly Hard…
The US Is Caught In An Economic Death Spiral, And One Group Is Being Hit Particularly Hard…
Tyler Durden
Sun, 05/17/2020 – 22:15Authored by Michael Snyder via The Economic Collapse blog,
Many have been warning for years that our economic bubble would eventually burst and that a collapse was inevitably coming, but the ferocity of this new economic crisis has caught just about everyone off guard. And even though some states have been attempting to “reopen” their economies in recent days, the job loss tsunami just continues to roll on. Prior to this year, the all-time record for the most new unemployment claims in a single week was 695,000. That record was set all the way back in 1982, and it had survived all the way until 2020. But now we have been absolutely dwarfing that number week after week. On Thursday, we learned that another 2.9 million Americans filed initial claims for unemployment benefits last week, and that brings the grand total for this pandemic to more than 36 million…
New filings for unemployment claims totaled just shy of 3 million for the most recent reporting period, a number that while still high declined for the sixth straight week, according to Labor Department figures Thursday.
The total 2.981 million new claims for unemployment insurance filed last week brought the coronavirus crisis total to nearly 36.5 million, by far the biggest loss in U.S. history. The count announced last week count was revised up by 7,000 to 3.176 million, putting the weekly decline at 195,000 between the two most recent reports.
To put that in perspective, at the lowest point of the Great Depression only 15 million Americans were unemployed.
Of course our population is quite a bit larger today, and so it isn’t a straightforward comparison.
But what everyone can agree on is the fact that we have never seen a two month spike in unemployment like this in all of U.S. history.
And according to the Federal Reserve, low income workers are getting hit harder than anyone else…
The Federal Reserve Bank on Thursday reported just how unequally the coronavirus-induced economic downturn is hitting Americans.
On one hand, lower-income people are getting slammed. Nearly 40% of those with a household income below $40,000 reported a job loss in March, according to the Economic Well-Being of US Households report.
Sadly, this is what seems to happen every time that there is an economic downturn.
The powerless people on the bottom of the food chain get hurt the most, but the fat cats with political influence are able to get the big bailouts.
Millions of newly unemployed low income workers used to be employed by the restaurant industry, but that industry has been absolutely decimated by this crisis…
The National Restaurant Association says some $30 billion was lost by its members in March, and $50 billion in April.
In the last week alone, several restaurants have announced that they won’t re-open, including the buffet chain Souplantation and Sweet Tomatoes, Jen’s Grill in Chicago and Ristorant Franchino, which has been serving patrons in the San Francisco area for over 32 years.
Of course most restaurant closings will never even make the news because they are small independent operations without corporate backing.
In the days ahead, we are going to see a “restaurant apocalypse” like we have never seen before in American history. If you can believe it, one industry expert just told Bloomberg that about one-fourth of all U.S. restaurants will be closing down permanently…
Your favorite restaurant, now closed or only accepting take out orders due to the coronavirus, may never reopen, according to a top exec with reservation service OpenTable.
Steve Hafner, CEO of Booking Holdings’ OpenTable and travel site Kayak, told Bloomberg that one out of every four restaurants won’t come back.
This is truly a great tragedy, and it is going to be so depressing to see so many buildings sitting empty in communities all across the nation.
And things will be much, much different for the restaurants that are able to stay open. For example, just check out the changes that are happening at McDonald’s…
When McDonald’s restaurants reopen their dining rooms, customers should expect stickers on the floor encouraging social distancing and the closure of self-serve beverage bars. Workers wearing masks might check in with a thumbs up, or kindly ask you to move away from others.
If that is what a trip to McDonald’s is going to be like, I don’t think that I will be visiting one for a long time to come.
What we really need is for the country to try to return to normal, but in some of the more liberal areas of the U.S. that is not going to happen for the foreseeable future.
So the U.S. economy will continue to be caught in this death spiral, and Fed Chair Jay Powell is warning that we could soon see a “wave of bankruptcies” from coast to coast…
Federal Reserve Chief Jay Powell warned Wednesday of a potential “wave of bankruptcies” that could cause lasting harm to the world’s largest economy, and said more fiscal support may be needed to prevent the devastation, despite the massive cost.
Powell, who has launched a host of key programs to support credit markets and provide funds directly to companies, said there are limits to how far the Fed can go.
In particular, keep a close eye on the commercial real estate industry.
In order to service their loans, owners of commercial property need to successfully collect rent from their tenants, and right now many of those tenants are not able to pay.
For example, just look at the numbers that one New York City commercial landlord is reporting…
A major New York City commercial landlord collected just 73 percent of its April office rent from tenants, with an increasing number defaulting on payments amid growing uncertainty over whether corporate buildings will become a thing of the past.
Empire State Realty Trust, owner of the Empire State Building, collected only 73 percent of its office rents and 46 percent of its retail rents due in April.
Unless there is some sort of a bailout, we are going to see commercial real estate carnage on a scale that is far greater than anything we have ever seen before.
Of course just about every industry needs a bailout at this point, and not everyone is going to get one.
Fear of COVID-19 did not create the conditions for this new economic crisis, but it did finally burst the debt-fueled economic bubble that was keeping conditions relatively stable the past few years.
Now that our economy has begun to spiral out of control, nobody is going to be able to put the pieces back together again, and the truth is that this is just the very beginning of our problems.
So many of the things that I have been warning about are starting to happen, and without a doubt our economy will continue to fall apart in the months ahead, but that does not mean that your life is over.
Yes, the days ahead will be exceedingly challenging, but heroes are born when things are at their darkest.
- US Headed For Another 'Tanker War' With Iran – This Time Off Venezuela's Coast
US Headed For Another ‘Tanker War’ With Iran – This Time Off Venezuela’s Coast
Tyler Durden
Sun, 05/17/2020 – 21:50Iranian state TV has announced at least five least five Iranian-flagged tankers are transporting fuel to Venezuela through the Atlantic Ocean and plan to break the American blockade on the Latin American country.
Iran has warned that any US attempt at intercepting its fuel tankers “would have serious repercussions for the Trump administration ahead of the November elections.”
File image via National Iranian Oil Tanker Company (NITC) State-funded PressTV underscores that “Iran is shipping tons of gasoline to Venezuela in defiance of US sanctions on both countries in a symbolic move guaranteed by Tehran’s missile prowess.”
Both countries have been targeted under US sanctions and various levels of covert military action of late. President Trump has taken a personal interest in renewed pressure on Maduro, within the past months reportedly pushing his generals to go forward with a ‘naval blockade’ of the socialist nation.
State media has further emphasized that the Iranian fuel tankers will not attempt to conceal their presence or mission: “Iran has intentionally hoisted its own flag over the huge tankers which are navigating through the Atlantic before the eyes of the US Navy,” according to the report.
Reuters has also reported that US defense officials are planning a potential response:
The United States has a “high degree of certainty” that Venezuelan President Nicolas Maduro’s government is paying Iran tons of gold for the fuel, the official said, speaking on condition of anonymity.
“It is not only unwelcome by the United States but it’s unwelcome by the region, and we’re looking at measures that can be taken,” the official said.
The contentious issue of closer ties between Tehran and Caracas became center stage after in April a series of sanctioned Iranian Mahan Air flights landed in Venezuela to transport badly needed equipment to fix fuel refining plants for domestic gas consumption amid a severe national shortage.
Exclusive: U.S. weighs measures in response to Iran fuel shipment to #Venezuela – source https://t.co/qKmL0z7hWH pic.twitter.com/PwoDniCEBW
— Reuters Venezuela (@ReutersVzla) May 14, 2020
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Secretary of State Pompeo at the time called on all countries to block airspace for such ‘banned’ flights. In the past months the US administration reportedly ordered a naval build-up in the Caribbean in order to thwart ‘illegal’ sanctions-busting activities involving Venezuela.
With the Iranians now brazenly advertising their efforts, and with Trump apparently in the mood to renew counter-Maduro efforts, things look headed toward another ‘tanker war’ showdown such as played out in the Persian Gulf and Mediterranean last summer (when the UK and Gibraltar captured an Iranian tanker, but then Tehran returned the favor with the IRGC capture of the Stena Impero tanker).
But given such a scenario could repeat in what the US sees as its own backyard of the Caribbean, things would get much messier and likely more aggressive.
- "Dying Economy, Fed Incompetence" – Robert Kiyosaki Sees Bitcoin At $75k In 3 Years
“Dying Economy, Fed Incompetence” – Robert Kiyosaki Sees Bitcoin At $75k In 3 Years
Tyler Durden
Sun, 05/17/2020 – 21:25Authored by Jeffrey Albus via CoinTelegraph.com,
Robert Kiyosaki predicts that Bitcoin’s price will rise nearly 100% per year over the next three years.
Image courtesy of CoinTelegraph
Robert Kiyosaki, businessman and best selling author of the book Rich Dad, Poor Dad, has taken to Twitter once again to proclaim his bullish position on Bitcoin.
His prognosis? BTC’s price is heading to $75,000 in three years.
How Kiyosaki values each asset
In a viral May 16 tweet, Kiyosaki states that his fear of a dying economy has led him to purchase more of three assets that he ostensibly considers valuable outside of the traditional financial system: Gold, Silver, and Bitcoin (BTC).
“ECONOMY [is] dying. FED incompetent. Next BAILOUT trillions in pensions. HOPE fading.”
The author’s tweet outlines just how valuable he thinks each asset will be in the coming years. He reveals:
“Bought more gold silver Bitcoin. GOLD [currently] at $1700. Predict $3000 in 1 year. Silver [currently] at $17. Predict $40 in 5 years. Bitcoin [currently] at $9800. Predict $75000 in 3 years.”
By the numbers, this prediction reflects an expected yearly increase of approximately 76%, 19%, and 97% for gold, silver, and Bitcoin respectively. This indicates that, at least by Kiyosaki’s reckoning, Bitcoin has the most favorable profit potential out of the three.
A growing interest in Bitcoin
This isn’t the first time that Robert Kiyosaki has used his platform to expound on the virtues of Bitcoin and the Blockchain. In recent months, the businessman has spoken out on his faith in the future of the tech numerous times.
In an April appearance on Anthony Pompliano’s podcast, Kiyosaki praised Bitcoin, saying:
“The reason I endorse Bitcoin is just for one frickin reason — you’re not part of the system,”
Noting also that “gold and silver are God’s money, and Bitcoin is open-source people’s money.”
- Goldman Quietly Cuts Q3, Q4 EPS Forecasts, Now "Values" Market Off 2023 Earnings
Goldman Quietly Cuts Q3, Q4 EPS Forecasts, Now “Values” Market Off 2023 Earnings
Tyler Durden
Sun, 05/17/2020 – 21:19So much for the V-shaped recovery. With even Jerome Powell warning that the US economy won’t fully recover until the end of 2021 (assuming no second infection wave; should that happen it’s pretty much game over), Goldman has quietly gone from V to U, and in the penultimate paragraph of David Kostin’s latest Weekly Kickstart report, the Goldman strategist writes that he is further cutting his forecast for corporate profitability this year (which perhaps is why futures are on a rampage on Sunday night; not really – it’s just because retail investors have gone batshit insane and are buying every fractional share they see, even as hedge funds remain paralyzed in dread at what’s coming).
Validating the scariest – for bulls – chart, namely the one showing that 2-year (not 1-year forward) valuations are now the highest on record…
… Kostin writes that while he maintains his 2020 S&P 500 EPS estimate of $110 (-33%), he is adjusting his quarterly path of earnings growth in Q3 and Q4 substantially lower: “we still expect that 2Q will represent the trough in EPS growth, driven in part by further reserve builds in Financials, but we lift our 2Q growth estimate from -123% to -70% yr/yr given the relative health of several major stocks accounting for 20% of EPS.” However, at the same time, Goldman is lowering its EPS growth estimates for 3Q to -30% (from -21%) and no longer sees a full recovery in the fourth quarter, instead expecting Q4 EPS to be down -17%Y/Y (from +27%) “to reflect a more gradual recovery with quarterly EPS remaining below 2019 levels for the full year.”
Looking beyond 2020, the Goldmanite writes that “investors remain focused on how quickly lost earnings can be recouped” and for his part, has a “base case” forecast for S&P 500 EPS to reach $170 in 2021, just barely above the level from 2019 ($165), and which as a reminder was virtually unchanged with 2018 due to all the trade war tension and turmoil in 2019 which meant the only source of upside was multiple expansion. However, further bifurcating a market that is largely a reflection of just 5 megatech stocks (FAAMGs), the “recovery” would continue to be uneven, “with EPS in cyclical sectors unlikely to recover to 2019 levels by 2021″ if ever.
An even worse, case, however, is Goldman’s downside scenario where S&P 500 EPS falls to $70 this year and reach just $115 in 2021…
… which would mean that the S&P is now trading at a 25x multiple not on 2020 earnings by 2021!
“We envision this downside scenario occurring either because the path to economic normalization is slower than we now expect or because of lingering economic impact even after the spread has been controlled. “
The silver lining is that consensus bottom-up EPS estimates remain more closely aligned to Goldman’s optimistic base case than its downside case; 2021 consensus estimates have been cut by 16% YTD to $165. Alas, consensus is always wrong, which means that within a few months, the talking heads will be on TV desperately seeking to justify why 3000 on the S&P make sense based on a 150 EPS in 2021.
And since fundamentals no longer matter, but fundamental analysts still have to somehow justify absolutely idiotic valuations, Goldman has done what until recently would have been deemed idiotic by most, and now admits that EPS are unlikely to return to previous peaks until 2023, which means that the
goalseeked“proper” forward PE multiple one should use is no longer based on 2020 EPS, or 2021, or even 2022 for that matter… but 2023!In other words, we have now teleported into some batshit insane world, where one has to look at earnings 3.5 years into the future (which, needless to say, one has no hope in hell of accurately predicting… which is precisely why Goldman is using them) to “justify” current market valuations.
- 'Most Isolated Person On Planet': Sailor Emerges After 9-Month Solo Trip To Find COVID-Altered World
‘Most Isolated Person On Planet’: Sailor Emerges After 9-Month Solo Trip To Find COVID-Altered World
Tyler Durden
Sun, 05/17/2020 – 21:00Dubbed the “safest man on the planet,” Canadian sailor Bill Norrie has been on a solo yachting expedition for the past nine months. And since a brief resupply stop off South Africa three months ago he’s traversed the treacherous Southern Ocean, when he first heard the term coronavirus via a satellite phone call from the water to his wife back in Canada.
The 67-year old finally arrived last Thursday on New Zealand’s coast at Canterbury’s Lyttelton Harbour, and after clearing customs he was caught up to speed over his first steak and beers in months.
He emerged from the risky solo trip across the ocean to find a vastly different society altered by the pandemic.
Canadian sailor Bill Norrie, via stuff.co.nz ”It’s still unreal to me because I’ve only heard text messages from my wife about how’s it all shut down [everything]. I’m very thankful New Zealand let me come in,” he said.
His solo trip began last September, which took him around South America, Africa and Australia, ultimately around the entire globe.
After so long at sea he was shocked by what he found upon finally completing his trip in New Zealand:
When he finally arrived in Christchurch, he said he was surprised to hear harbor officials ask where he would be self isolating for the next two weeks.
“Initially they said, ‘You can’t come here,’ so I was like, ‘Where am I gonna go, right,’” he said with a laugh. “I was the most isolated person on the planet, they didn’t want to let me in. It was too funny!”
Canadian sailor Bill Norrie on his British Channel Cutter yacht, Pixie. Image source: via stuff.co.nz In the end authorities did let him in and even waved the isolation period, after he proved he hadn’t had human contact throughout his solo tour.
He told New Zealand broadcaster TVNZ of his initial difficulty in processing the ‘new normal’ of social distancing and learning more of the global shutdowns first-hand: “it’s still sorta strange to me,” he said.
A local news crew had captured the moment he finally jumped off his boat and knelt on the ground after not having been on dry land for multiple months.
“I never thought it was going to happen!” Norrie said while getting emotional. He had been stunned upon his first communication with the port, not realizing the crisis could be such that they might not even let him dock.
Apparently he’s actually at this point prepping a return voyage to his home in Canada. The fact that much of the globe and its economies are shut down means he likely feels better off at sea anyway.
- The Silver Lining…
The Silver Lining…
Tyler Durden
Sun, 05/17/2020 – 20:35Authored by Robert Gore via StraightLineLogic.com,
Who will fight for your rights?
…we are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.
Ayn Rand, Capitalism, The Unknown Ideal, Appendix, “The Nature of Government,” 1967
We are no longer fast approaching the stage of the ultimate inversion, we’ve arrived. It is the stage of which every would-be dictator dreams, where his whims are absolute, and everything everyone else says, does, or thinks must comport with those whims, even – impossible though it would be – when they are contradictory.
Science is anti-whim. Nature, as Francis Bacon observed, to be commanded must be obeyed. Nothing illustrates the ultimate inversion of the official coronavirus response better than its leaders’ assault on science in the name of their “science.”
Doctors have been discouraged or prohibited from administering hydroxychloroquine, by itself or in conjunction with other medications, vitamins, and zinc compounds, to treat Covid-19. They have observed and documented the effectiveness of such remedies—mitigation or elimination of the disease’s symptoms—but their observation and documentation are dismissed. Only the validation procedure mandated by the medical bureaucracy—the expensive and complex multistage tests required of new drugs to establish their efficacy and safety—will suffice for official permission. It’s what their “science” demands of a cheap and seemingly effective remedy that’s been on the market for years as a treatment for lupus, rheumatoid arthritis, and malaria.
So where were the tests and control-group studies for the pandemic models, lockdowns, social distancing, masks, flattening the curve, closing businesses, and contact tracing that have been the official coronavirus responses? Projections are hypotheses, but only one class of hypotheses was officially accepted—disaster scenarios that fed panic and paved the way for further expansion of governments’ power. The doomsday models have been discredited; cases and deaths have been orders of magnitude less than projected.
Countries that haven’t instituted lockdowns have fared no worse than countries that have. Andrew Cuomo, governor of hard-hit New York, recently expressed surprise that two-thirds of hospitalized coronavirus patients had been sheltering in place. As if locking people down—often families under close quarters—in apartment buildings that can’t control cockroaches would somehow protect dwellers against a microscopic, easily spread, fast replicating, and virtually infinite virus.
No science at all supports social distancing; six-feet is an arbitrary construct (i.e., whim) of some medical would-be dictator. Masks force the rebreathing of your own respiratory waste, weakening your immune system for the dubious benefit of that all-powerful totem: public health. The health you’re supposedly protecting is certainly not your own. It’s like eating your own feces or drinking your own urine for a purported public benefit.
Flattening the curve to ensure adequate hospital space for the wave of coronavirus patients that hasn’t happened has flattened the hospitals, leading to empty rooms and wards and layoffs for medical workers. Bankruptcies will follow.
Lost jobs and shuttered businesses are just collateral damage for our would-be emperors, who have waged senseless wars and inflicted grievous collateral damage on other countries for decades. Now the devastation and misery they’ve left in their wake have come home. Americans who’ve never asked themselves how it felt to be a victim of their government’s senseless wars are now victims of their government’s senseless war on a germ. After an unsustainable debt-propelled respite, the Greater Depression has resumed (it started in 2008) and will last for years. Its poverty and devastation will sicken and kill multiples of the people who will ultimately be afflicted by the coronavirus.
All this supposedly guided by “science,” yet its proponents commit the most unscientific offense—they corrupt their own data. By their own admission the tests they use give both false negatives and false positives. By their own admission they’re corrupting the death count. Doctors have been instructed to list Covid-19 as a cause of death if the deceased had any of the symptoms associated with Covid-19, even though those symptoms characterize a number of other diseases that singly or in combination kill people, especially people with compromised immune systems. Hospitals have a financial incentive to perpetuate this fraud. They receive $13,000 from Medicare for each Covid-19 patient and $39,000 for each patient put on a ventilator (Links here and here).
The coronavirus tyranny has nothing to do with science, medicine, or health, and everything to do with establishing that ultimate inversion: the government is free to do anything it pleases, while the citizens may act only by permission. These past few weeks we’ve seen how our rulers attempted to discard the last fig leaf—democracy—covering their creeping, now galloping, totalitarianism and complete lack of legitimacy.
A camarilla within the nation’s intelligence services, the Department of Justice, and members of the previous administration, including Barack Obama, attempted to depose the democratically elected president of the United States. Such coups are the province of two-bit plotters in banana republics that make no pretense of observing or protecting rights, where might alone makes right. The United States has gone full banana—the stage of rule by brute force.
Democracy is tyranny of the majority, a system that inevitably destroys individual rights. For the history-challenged, individual rights were the still revolutionary concept on which the idea—although not always the reality—of the United States was established. The logical consequence of the full protection of individual rights is the freedom to live your life as you see fit, as long as you don’t abridge the rights of others. Society or any other group of people has no rights apart from the rights of the individuals that comprise it. Governments have no rights, only the duty to protect the rights of individuals to live peaceably and freely. Government must be the servant, not the master, of its citizens. (See the Ayn Rand Appendix cited above, “The Nature of Government,” for a more detailed exposition of the proper role of government.)
We’re light years from that ideal. Individuals must receive permission to, among other things, leave their homes, hold a job, assemble with other individuals, attend houses of worship, visit parks and beaches, or patronize businesses. The governor of my state, Michelle Lujan Grisham, just decreed that masks must be worn by everyone outside of their own dwellings (I wrote STOP MLG’S TYRANNY on mine). Breathing fresh air is now at the sufferance of our overlords. Civilly disobedient soul that I am, I have yet to don my mask. Don’t think sheep don’t get angry—I get murderous looks from mask-wearers.
With every decree issued since this repression began, those who advocate for their individual rights or actually exercise them by violating the decree are denounced, shamed, censored, and in some cases arrested. Anyone who disagrees by word or deed is “selfish,” unwilling to sacrifice for the common good.
What do they mean by selfish? Is it selfish to fight for your rights? Is it selfish to want to work and produce? Is it selfish to be more concerned with your own welfare and the welfare of your family and friends than with the welfare of strangers, the public, or the government that supposedly represents that public? Is your desire for freedom selfish?
There are those who will tie themselves in intellectual knots answering those questions in the negative, but nevertheless asserting that individual rights and their exercise—free expression, free inquiry, free production, and free exchange—can all be justified as conferring the greatest public good. They then wonder why they never win arguments with those pushing collectivized notions of the public good. When might makes right, the public good is whatever the collective’s masters say it is—argument over.
Fighting for one’s freedom and all that flows from it is selfish, profoundly so. If you don’t fight for that which is yours—the individual rights that are the essential condition of your existence—who’s going to do it for you? Anthony Fauci? Bill Gates? Nancy Pelosi? President Trump? Joe Biden? George Soros? Jerome Powell? Adam Schiff? Mark Zuckerberg? Eric Schmidt? Santa Claus? The Tooth Fairy? When was the last time you even heard the term “individual rights” in polite, mainstream discourse? When individual rights are mentioned at all, they’re treated as a quaint anachronism.
And what do they mean by sacrifice? They mean that instead of selfishly fighting for your rights and freedom, you are to unselfishly place them on the sacrificial altar known as the public good. You’re selfish for resisting the sacrifice of that which is rightfully yours, but those collecting what is not rightfully theirs are selfless saints. If you voluntarily board that cattle car, you’ll secure your spot in the Unselfish Hall of Fame, along with millions of others who have lost their property, happiness, freedom, and lives without selfish protest or resistance. You might even be designated a Hero of the Public Good, posthumously of course.
If you find the world’s descent into evil unfathomable, it’s time to rethink the premises that the selfless is the good and the selfish is evil. Collectivist butchers, including the ones pushing the coronavirus hoax, always demand fealty to some cause greater than one’s self. Fall for that one and you’ve already lost two important parts of yourself—your self-respect and your ability to reason.
The precautionary principle—that no risks can be assumed if someone or something somewhere might be harmed—is anti-mind and anti-life, absurdly evil on its face. That philosophical abomination now excuses wholesale violation of individual rights and deadly economic devastation based on projections, bureaucratic whim, and political expediency. The precautionary principle would, if consistency applied, bring human progress to a halt, eventually rendering the human race extinct. Nothing is as unsafe as an insistence on absolute safety.
Risk is what makes life worth living—it’s the driver of human knowledge and progress. Imagine the choices that confronted early humans as they made their first choices. If we build a fire, will it warm us and cook our meat…or consume us? If we eat oysters, will they nourish or kill us? Will the canoe we’ve built float or sink? The forward steps of both our individual and humanity’s journeys have always involved unanswered questions, hypotheses, risk, experimentation, trial and error, tragedy, and triumph. It takes no imagination at all to envision potential risks. Make fear and safety paramount and none of those steps could have or will be taken.
To believe that risks can be eliminated by arbitrary edicts is delusional; to enforce those edicts tyrannical; to comply with them suicidal. Wars are always fought and tyrannies always established in the name of somebody’s safety. The betrayal of individual conscience and surrender of individual rights to a collective for safety’s sake never produces safety, only misery, destruction, despair, terror and death. That’s a lesson we’re set to relearn as we proceed through one of those darkest periods of human history.
There is a silver lining in all this: the curtain has been lifted, we now know exactly what we confront. Present governments and their many bootlickers and minions do not recognize—much less protect or hold themselves subordinate to the protection of—individual rights. Nor should we expect that they will do so within our lifetimes. Absent their replacement via revolution or abandonment via secession, we will continue to live in a political order where they are free to do as they please while we may act only by permission.
If we want our rights, our freedom, and our lives, we’re going to have to fight for them with word and deed. It has ever been so; it will ever be so. Those who choose to fight will have one important ally: rule by brute force is the agent of its own collapse. It has always failed, it always will. Whether we have the virtue and wisdom to replace it with it’s antitheses—freedom and individual rights protected rather than destroyed by government—remains to be seen.
Stay sane.
- First Wave Out, Second Wave In: Where The World Is On The Corona Curve
First Wave Out, Second Wave In: Where The World Is On The Corona Curve
Tyler Durden
Sun, 05/17/2020 – 20:10Global infection growth slowed from 20% W/W to 16% W/W last fortnight (total infections: 4,443,986, deaths: 302,468, 6.8% mortality rate). And as the rate of new infections is slowing, concerns emerge about a second wave of the coronavirus pandemic.
As JPMorgan’s MW Kim writes, China and South Korea are in the stage of full “recovery” from the first infection curve as 99.9%/ 91% of cumulative infections have been removed from the infection pool.
If we assume that the infection is just one-time outbreak, both countries’ progress in the infection cycle and large relaxation of social distancing should be plausible. However, based on both the bank’s conservative assumptions and epidemiologist observations, a full removal of COVID-19 would be almost impossible until the vaccine is available to the larger public. This suggests that increasing human mobility/ business activities would pose the risk of a second wave outbreak by way of faster transmission rate increase.
As China and Korea are heading toward being first-out of the curve, both countries have relaxed social distancing measures/ city lockdowns in April ahead of European/ ASEAN countries. Unfortunately, over the last 10 days, we are observing growing risk of a second wave in both countries as new infections start to increase. Thus, JPMorgan is now evaluating the risk of a second wave risk in China and South Korea.
Based on JPMorgan’s assessment, Korea looks to be entering into the stage of second wave as new infection growth looks faster and larger scale. Therefore, the bank introduces the second curve forecast into its existing epidemiology modelling in Korea.
Separately, China’s new infection trend post the test outcome of China’s Wuhan city will also be closely watched by JPMorgan. As MW Kim notes, “as we factor this potential risk under the pessimistic scenario in epidemiology modelling in China, should there be a greater number of infections monitored, we would consider plugging this fine-tuning into the pessimistic scenario.” That said, he notes that “the second infection wave could be smaller scale in terms of total infections, mortality rate, and having a shorter period from infection to recovery. This is due to the government having experience from first wave infection management and the public largely being aware of potential infection risks with experience of social distancing.”
China: Rising daily new infections
Daily new local infections in China have started to rise since May 9th. 17/14 new infections were reported on May 9th and 10th and among those, 10/12 cases were local infections and mainly from Ji Lin and Hubei provinces. On May 10th, Shu Lan city of Ji Lin province announced city lockdowns again due to increasing local new infections. On May 11th, Wuhan government announced testing of the full population (~11M) in 10 days. China government’s surprising measures on new infection control may be read as an early wake-up call of the larger-scale second wave possibility instead of pre-emptive control measures.
At this stage, it is almost impossible to forecast the potential size of new infections including asymptomatic cases as current statistics suggest Wuhan is almost a COVID-19 free city through full recovery (based on official data which as has been repeatedly observed, is bogus at best). Therefore, after this large scale test is done, expected outcomes include (1) better understanding of potential infections out of total population post the curve-end; (2) % of immunity groups post one infection curve in the society; and (3) recurrence rate. These should be important statistics globally to gauge the risk of the second wave as many countries are planning to reopen the economy under relaxed social distancing measures
Shu Lan city of Ji Lin province lockdowns from May 10th
On May 7th, one local new infection was reported in Shu Lan city, Ji Lin province after 73 days of no new local infections province wide. On May 9th, 11 new local cases were reported, all in Shu Lan city and three new cases in Ji Lin city on the 10th. The risk level in Shu Lan city was raised from low to medium on the 9th and subsequently raised again from medium to high on the 10th. On May 10th, Shu Lan city government announced a city lockdown with strict control on mobility.
There has been one connected case found in Liao Ning province (a nearby province) that’s related to Shu Lan city’s confirmed case. At this stage, it is uncertain where the origin of the second wave in Ji Lin province came from. As Ji Lin province is located in the northeast of China and borders Russia, it is likely that imported cases have led to spread of the virus in the local community, at least if one believes the official government narrative.
South Korea: Emergence of second infection wave
Korea relieved its strict social distancing measures starting from Apr 20, and relaxed them further on May 6, partially lifting work from home measures, and resuming activities in malls, parks etc. However in the past week, there has been a rise in daily new infections from the previous single-digit new cases per day to ~30 cases per day.
Total infections in the country stood at 11,018, as of May 15, with 260 total deaths. The recent outbreak is expected to add another 2,000 new infection to the curve and this should delay the curve end to mid August from the end of May.
Those cases, according to JPMorgan, “illustrate the risk of a second wave in the process of economic reopening” and “considering the first-in first-out (FIFO) concept of the infection curve, similar experiences perhaps are likely to be replicated in other countries in the recovery stage.”
- An Anatomy Of Long-Term US Dollar Cycles
An Anatomy Of Long-Term US Dollar Cycles
Tyler Durden
Sun, 05/17/2020 – 19:40Authored by Viraj Patel, FX & Global Macro Strategist at Arkera, originally posted by the author’s Medium page.
Over the last 45 years, a typical US dollar trend cycle has lasted around 6 to 7 years — with the Broad Real Dollar index posting an average change of 34% per cycle. Assuming that we’re in the midst of a dollar bull run that started in August 2011 — the current upswing to date has posted a 36% rally and is almost 9 years in duration. So, is the dollar about to peak and embark on a multi-year bear trend?
In short, no — at least not yet. When we look at the cyclical and structural macro conditions that have underpinned major downswings in the dollar since 1975, none of these are currently being met. Instead, the backdrop that is set to prevail in the initial stages of the COVID-19 global economic depression is likely to remain supportive for dollar haven flows.
Characteristics of a Dollar Bear Trend
Taking a deeper look into the factors that have underpinned major cyclical moves in the dollar — we see that bear trends typically show the following 6 common characteristics:
- A substantial decline in the USD’s relative interest rate advantage — with the dollar always exhibiting negative carry
- Stronger GDP growth in the Rest of the World (RoW) relative to the US — thus declining US-RoW growth differentials
- Rising US twin deficits driven by a joint widening of fiscal and current account deficits (bear cycles start 2–3 years after initial widening)
- High global trade and manufacturing activity (periods of above-trend world trade growth)
- Money being put to work in RoW assets — driven by relative underperformance of US equities and low market volatility
- Official US Treasury FX intervention (prior to 2000) — coordinated across major countries with the aim of achieving a weaker dollar
Aside from the Fed’s balance sheet, there’s very little working against the dollar at present. There is too much uncertainty to confidently say whether the RoW will be able to recover from the Global Coronavirus Pandemic materially faster than the US — whilst global trade uncertainty driven by a protectionist US administration is likely to continue weighing on cross-border activity and RoW asset performance for the foreseeable future. The dollar is normally the best place to hide in the FX world when there is this level of uncertainty around in global markets.
If anything, the relationship between the Fed’s balance sheet and the dollar mirrors the 2008/2009 crisis playbook — where the USD continued to strengthen even after the Fed’s initial QE intervention. The broader macro backdrop of a global recession, weak cross-border trade and relative underperformance of RoW assets also lends support to the idea that the dollar will behave in 2020 just like it did in 2008/2009. The main difference, however, is that back then the dollar entered the crisis from a much fundamentally weaker standpoint — the BIS USD REER index was around 15% below its 10-year average in July 2008. In February 2020, the dollar was just over 14% overvalued based on the same measure. This, coupled with the Fed’s relatively more aggressive response, may prove to be a strong limiting factor for how much the dollar can strengthen in the current crisis relative to 2008/2009.
What is needed to set in motion a multi-year dollar bear trend?
If the 6 common characteristics of a USD bear trend are anything to go by — then the next few years would need to see a distinctly different cyclical and structural backdrop for the dollar if it is to experience a 20–30% decline in line with historical bear trends. This would involve: (1) deeply negative US rates and persistently weak US GDP growth relative to the RoW; (2) a wider US current account deficit and above-trend global trade growth; and (3) underperformance of US equities and low market volatility. We explore the likelihood of each of these scenarios unfolding below.
1. Deeply negative US rates and relatively weaker US GDP needed to see a weaker dollar
Whilst the Fed’s aggressive easing actions so far have eliminated the USD’s carry advantage — it may not be enough to see a weaker dollar.
US relative rate differentials against major trading partners have declined around 180bps since Oct 2018. But it’s still not enough to see negative USD carry given the number of developed countries either at the Zero Lower Bound (ZLB) or with Negative Interest Rate Policy (NIRP). The Fed has an impossible task of driving US rates low enough to materially impact the dollar — especially when we’re in midst of a race to the bottom across global central banks. As we’ve seen in New Zealand last week, most developed market central banks are not done easing yet — we should certainly expect more from the ECB, BoE and BoJ in the coming months. On the flip side, we think the Fed will be hesitant to take policy rates below 0% given the market structure in the US and the negative implications for banks and money market funds — meaning we’ve reached a point where US rate differentials (even when adjusted for relative central bank balance sheet expansion) have likely bottomed out for now. If that’s the case, the 180bps adjustment in rate differentials in the last 18 months is not sufficient to trigger a USD bear cycle — the past two major dollar downswings have seen a downward adjustment in relative US rate differentials by around 300bps.
Look for ‘Fed last to hike’ or Yield Curve Control for a weaker dollar heading into 2021. Policy divergences may become more apparent as we transition from the global downturn to the global rebound phase — with economies exhibiting different recovery paths based on domestic factors (COVID-19 second wave, ability to successfully reopen economies, varying hysteresis effects). As short-dated global yields begin to recover, one way US rates could be anchored lower for longer is if the Fed adopts some form of Yield Curve Control (or flexible QE) — that sees the pace of asset-buying marginally increased to curb any pre-emptive shift higher in the US yield curve. Certainly, if any ‘Fed last to hike’ sentiment were reflected in market pricing — then short-term US rate differentials could move lower in a way that would see a weaker USD. But given where we are today — and still grappling with the fallout from the crisis — we may be a good 6–12 months away from even considering this scenario from being priced into markets.
On the growth side, the US economy is not currently expected to be hit worse than the RoW from the Corona Crisis — although it really is too early to call. Our Dollar Smile Theory work shows that global economic recessions yield a strong dollar environment — and this should be the baseline for how the dollar performs in 2020. Beyond this, the US economy would have to materially underperform the RoW for the dollar to weaken over the next few years — and it may require something like a US health policy mistake (opening up the economy too fast) for this divergence to occur. RoW-US growth differentials tend to widen by around 2ppts during USD bear cycles. Even if the US recovers slower than other major economies (not the consensus scenario), it is highly unlikely that we’ll any significant divergence in the recovery paths that would warrant a substantially weaker US dollar.
2. A wider US current account deficit and above-trend global trade growth are necessary for a dollar bear trend
Unlike in 2010, ongoing US-China trade uncertainty puts a dampener on the prospects of a big post-crisis global trade rebound
A bigger twin deficit in the US is almost certain for the next few years — not least given the large fiscal stimulus that has been deployed by Congress to fight the US economic lockdown. The US government primary deficit is expected to reach 13.5% of GDP in 2020 (versus 3.6% in 2019) — on par with what was seen during the Great Financial Crisis. However, there is a high degree of uncertainty over how the current account deficit evolves in the coming years given the current US administration’s protectionist policy stance.
Global trade growth has already been on a declining path since 2019 following the onset of US tariffs on Chinese imports. With US-China trade and geopolitical uncertainty set to continue in the run-up to the November 2020 US Presidential Elections — one has to question the ability and extent to which global trade can rebound in 2H20. Indeed, the minor USD bear trend that followed the GFC between March 2009 and July 2011 was underpinned by several years of above-trend global trade growth. Given the circumstances, it is highly likely that this time may be different.
3. Global investors need to put money to work in cheap RoW assets for the dollar to weaken
US equities continue to outperform in 2020 despite their relatively expensive valuations — suggesting that global investors still see US stocks and credit as the best of a bad bunch
The recent USD bear trends of 2002–2008 (-25%) and 2009–2011 (-17%) were both characterised by greater global portfolio shifts towards RoW assets — with US equities underperforming during these periods. Of late, however, there has been a clear preference by global investors for US equities — with the S&P 500 posting an average annual outperformance of 9.8% since August 2011 versus its global peers. This relative outperformance has only accelerated since the Corona Crisis hit global markets (albeit stock markets across the world have been very choppy). There’s little to suggest that this trend will turn on its head anytime soon — much like the US relative growth story, there would need to be an idiosyncratic US shock from the current crisis that clearly impedes the US recovery relative to the RoW. With the Fed also making sure this doesn’t happen by buying just about anything it can get its hands on — it is highly unlikely that US policy inertia will be such an idiosyncratic shock. Instead, one would have to look to arguments such as a greater risk of a second COVID-19 wave in the US or a bigger US corporate default cycle to justify US equities from materially underperforming the RoW from here. It’s too early for anyone to make this their central scenario right now.
And what about the possibility of official US Treasury FX intervention to weaken the dollar…?
The Broad Real Dollar Index has never embarked on a multi-year bull run when it has been more than 7% overvalued in the last 50 years. That’s because the 1980s and 1990s were defined by large-scale coordinated FX interventions across major economies — aimed at either weakening or strengthening the dollar whenever it reached extreme levels of misvaluation.
The idea of official US Treasury FX intervention to weaken the dollar has gained greater airtime in recent years — not least due to anti-strong dollar comments by President Trump. This debate certainly needs its own separate article (see here for a quick primer). But here’s the bottom line. Is it possible for the US to unilaterally intervene in FX markets to weaken the dollar? Yes. Will they? Highly doubt it. As the experience over the 1980s and 1990s shows, official FX interventions by authorities tend to do more harm than good. There are solid reasons why the dollar is strong right now — not least portfolio-related flows. Governments attempting to correct any arbitrary concept of misvaluation would only create more uncertainty in an already highly uncertain investment environment. But another 10% rally in the dollar — and, well, the idea of unilateral US FX intervention stands a greater chance of becoming a reality.
- US And Its Allies Will Confront China, Demand Investigation During Tomorrow's Annual WHO Summit
US And Its Allies Will Confront China, Demand Investigation During Tomorrow’s Annual WHO Summit
Tyler Durden
Sun, 05/17/2020 – 19:15Since the coronavirus outbreak, the profile of the World Health Organization has skyrocketed, and so have suspicions about its motives and alliances. Which is why this year’s annual meeting of the organization’s members – which is slated to begin on Monday – should get interesting.
As the US, Australia and other skeptical western states are expected to confront China and about the possibility of an investigation into Beijing’s and the WHO’s handling of the outbreak during its earliest days.
The coronavirus will be the focus for the World Health Assembly meeting, to be attended by all 194 WHO member states plus observers, and where policies and budgets are reviewed and approved.
But all eyes will be on how countries – including the US, Australia, Canada, France and Germany – pursue an investigation into China’s handling of the pandemic within the framework of the global health body. That could include taking the Chinese government to the international court.
Leaders of these countries have already made clear that they want an inquiry, including investigating the origin of the virus, whether it was initially covered up by China, and if Beijing was slow to tell the world that the virus was being transmitted between humans.
The WHO has itself been under fire, attacked for praising China’s pandemic response as “transparent” despite Beijing’s suppression of whistle-blowers and information at the start of the outbreak.
Beijing has, of course, rejected accusations that it covered up the virus during the initial weeks after the outbreak, as well as claims the virus might have leaked or, worse, been purposefully released, by a biolab in Wuhan. And while the CCP has said it would support a WHO-led inquiry into the virus’s origins, it has simultaneously slammed Australia, the US and other countries that have insisted on an investigation in the face of Beijing’s reticence and obvious reluctance by accusing them of “politicizing” the outbreak (language that, like CCP criticism of phrases like “Chinese virus” and “Wuhan virus”, has found its way into the rhetoric of the American left).
However, hypothetically speaking, even if the WHO authorized an investigation, which stumbled upon some new evidence or a ‘smoking gun’ to suggest that China is much more culpable than initially believed, there’s little the WHO could do to hold China to account. Legally speaking, the WHO has the power to refer cases to the International Court of Justice in the Hague. However, China has already flouted the ICJ once, a gesture which underlined the fact that the ICJ has no power to enforce any of its decisions, as the SCMP reminds us.
The last time the Chinese government was sued in the international court was in 2016, when the Permanent Court of Arbitration ruled in favour of the Philippines over the South China Sea. It said Beijing’s territorial claims to the area lacked legal basis and were contrary to an international maritime convention. Beijing did not take part in the trial and has rejected the legitimacy of the ruling.
Thanks to its position as a permanent member of the UN Security Council, China is effectively immune to any kind of legal or police action from an international standpoint. A decision against China by the ICJ would require a vote by the Security Council to approve enforcement, a vote which China would obviously veto.
Another mechanism, though it has also never before been used (just like the WHO has never actually referred a case to the ICJ), is the International Health Regulations. Enacted and adopted by all WHO members in 2005, the IHR “suggests” – a key word – that all conflicts brought before the WHO should be resolved in a matter “related to its interpretation or application through negotiation, meditation and conciliation.”
But the IHR has already been repeatedly violated by almost every WHO member (travel restrictions are one example).
“The WHO has never taken another state to the ICJ, and I do not anticipate that,” said Steven Hoffman, professor of global health, law and political science at York University’s Global Strategy Lab in Toronto. “If it happens it will be unprecedented.”
[…]
“There are a lot of challenges as to how countries can successfully resolve disputes. Dozens of countries have violated regulations under the IHR in the Covid-19 pandemic and even back in the days during Ebola,” he said.
“When countries imposed targeted trade and travel restrictions on a particular country, it was already a clear violation of Article 43 of the IHR. There is no effective way to complain or seek recourse among countries. China has been subjected to such restrictions and in theory they can take those countries to the ICJ, but I also do not think they will,” he said.
With few obvious alternatives, politicians in the US have been pushing to pass a federal law that would allow plaintiffs to sue the Chinese state in US courts. Last month, Missouri became the first state to sue the Chinese government since the outbreak began. The lawsuit, filed in the US District Court for Eastern Missouri, alleges Beijing’s denials and cover-ups led to a pandemic that caused “enormous loss of life, human suffering and economic turmoil.” Republican Senators have introduced a bill that would allow US citizens to sue, potentially creating an avenue for those infected and the families of survivors to sue.
Gian Luca Burci, adjunct professor of international law at the Graduate Institute Geneva, said national lawsuits and unilateral actions by the US government would do more reputational than legal harm to China. “While there’s a low legal risk, there is a political and reputational risk here,” he said.
“Negative repercussions could be multifarious and damaging. China is concerned that there will be any kind of international investigation – China would have to consent to one, but it is not clear they would,” he said. “There is a need for a fact-finding mission to confirm what happened, and what went wrong, in China and around the world.”
Certainly, tomorrow’s meeting is bound to be unbelievably tense considering the continuing escalation between the US and China. The 73rd World Health Assembly begins Monday and will continue on Tuesday. We suspect it will draw far more interest from investors and the public than in years past.
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