- Kyle Bass Blasts China's "Most Lying, Coercive, Manipulative Government" For "Knowingly Infecting The World"
Kyle Bass Blasts China's "Most Lying, Coercive, Manipulative Government" For "Knowingly Infecting The World"
Authored by Jan Jekielek via The Epoch Times,
With countries around the world in quarantine or lockdown mode to deal with the Wuhan coronavirus or CCP virus pandemic, what can we expect in terms of economic fallout?
What evidence has emerged showing the Chinese Communist Party is culpable?
What will happen to the US, Chinese, and Hong Kong economies as the pandemic wanes?
And why is Hong Kong’s situation particularly perilous?
In this episode, we sit down with Kyle Bass, the founder and chief investment officer of Hayman Capital Management, a Dallas-based hedge fund. Bass is a founding member of the Committee on the Present Danger: China, and he is also Chairman of the Board of The Rule of Law Foundation.
This is American Thought Leaders 🇺🇸, and I’m Jan Jekielek.
This interview has been edited for clarity and brevity… emphasis ours.
Jan Jekielek: Kyle Bass, such a pleasure to have you back on American Thought Leaders.
Kyle Bass: Thank you. Great to be here, Jan.
Mr. Jekielek: Kyle, you’ve been this fierce speaker on the Chinese Communist Party’s culpability behind this virus. We’re going to talk about all sorts of economy-related stuff because this is your wheelhouse and everyone wants to hear.
Mr. Bass: I just think it’s important for the press to really think about, and for the world to think about what really happened in a timeline, and not some conspiracy theory because China won’t allow us in, and won’t allow our scientists to try to find patient zero and origin of the virus. And in fact, you’ve probably seen recent communiques between the Chinese Communist Party and their labs that their lab output has to be censored by the CCP, or that has anything to do with the Wuhan virus, [has to be approved] before it goes to the rest of the world. So, they are very sensitive on this topic—number one.
And number two, if you look back to the timeline, and you understand what happened, China has an enormous culpability. They actually have a legal liability, and one that’s a financial liability. I don’t know if you’ve seen various interviews in the last few days of U.S. legislators but there is a growing tide, of not only resentment, but a growing tide of people in the legislative branch of the U.S. and the UK governments, and now it’s bleeding into Australia and Canada, where they’re starting to say that we need to use the rule of law, the U.S. rule of law, the British Common Law, to start talking about reparations and getting the Chinese government to pay for their malign actions. And I think it’s important to note: on December 31, there were already 104 cases and 19 deaths in Wuhan. The Wuhan scientists, the heroes who first found this strange new pneumonia that was propagating itself so freely in Wuhan, not only were they arrested, and punished, and forced to retract statements that they had put on WeChat, but as you know, since then, one of the doctors who was 33 years old has died from the Wuhan virus.
Secondarily, that all happened in December. So by December 31, the government of Taiwan sent a white paper to the World Health Organization explaining that they had full evidence that there was human-to-human transmission, and that it was going to be a new global pandemic. And if you remember, on January 14, Tedros said to the world in a proclamation on a Tweet that this is not a global pandemic, and that he had just consulted with Xi Jinping and the Chinese, and that there is no evidence of human-to-human transmission—this is January 14. And then January 23, Xi Jinping closed down all air traffic from Wuhan to the rest of China. But he allowed Wuhan air traffic to travel to the rest of the world. Essentially, Xi Jinping knowingly infected the rest of the world. … “If he’s going to go down, the world is going to go down with him,” essentially what he was saying. That is not a responsible actor. That is not a government who’s ideologically aligned with the rest of the West. This is a government that basically covered up the truth. And we all know that they covered up the truth, but now, it’s actually after Neil Ferguson’s Boston Globe article, and now you see that the Chinese Foreign Ministry said on February 2 that it is xenophobic to close anyone’s borders to the Chinese, and that travel restriction shouldn’t be made. Xi Jinping himself shut down Wuhan, January 23; this is February 2, they’re telling the world this.
They are the most lying, coercive, manipulative government in the world, and you and I both know, they are committing the largest crimes against humanity prior to this outbreak of the sinister virus that God knows where it really came from—somewhere between the Wuhan wet market, the Chinese Center for Disease Control, which is right across the street, or maybe 20 miles north, at the Biosafety Level 4 lab in China. But the bottom line is, this disease has been unleashed on the rest of the world, and it was knowingly done so. And that’s why I’m so visibly upset about this.
And I think that you probably saw the Jackson Foundation in the UK, the Harvard professors in the U.S., are starting to set forth a legal framework for which international laws (that) China has broken, and the fact that there is a financial liability. As you remember, Chinese [SMEs] (small-medium enterprises) have businesses, and properties, and stock issued in all the various markets in the West. There is a way that we can go after them and grab their assets. And [Mitch McConnell] this morning in an interview on Maria Bartiromo’s show said that China also owns a trillion dollars of U.S. Treasury bills, and those are just book entry bills. We could actually grab and basically forgive that debt—basically cancel that debt. There are plenty of things the government can do here to make China pay for its actions. And the beauty of all that, Jan, is one thing we’ll never be able to do: the West will never stoop to China’s lows. We will never out-lie, we will never out-cheat, will never out-steal, the Chinese Communist Party—they’re the “best” in the world. But what we can do is we can use the foundational bedrock of our countries, the rule of law, and we can exercise and enforce our laws on them for their malfeasance. And that is the play, that is how we level the playing field, against such a tyrannical lying actor.
Mr. Jekielek: I was aware of all these facts, but the culpability is so obvious, right? It’s almost like it takes an extra level of crazy spin-doctoring to try to say, “No, China is the hero. The Chinese Communist Party took care of everything incredibly well, and now, world, you should probably thank us for that.”
Mr. Bass: I think Xi is overplaying his hand because seeing something like that and seeing something like what (Lijian) Zhao said that it was the U.S. military that brought it to Wuhan, their counterclaims are so outrageous that it makes them look stupid, and I think you have this scenario today where there are really four wars we could be fighting with China, and we’re fighting three of the four. There is the information/ narrative war that they’re active every single day fighting with us and the rest of the West. There is the cyber war, which they’ve been fighting for the last 20 years, and they fight it every single day—they’re on offense in the cyber war mostly. Then there’s the economic war. And then there’s the kinetic war. We’re fighting three or four wars with China as we speak, and one could say that the new battlefield, let’s say the battlefield of the 21st century, isn’t going to be with planes, and tanks, and boats. It’s going to be on the economic front, on the cyber front, on the narrative front.
There are 70-plus official Chinese blue-check accounts on Twitter, and they are either ambassadors or official ministry spokespeople for China. Twitter is banned in China; why do we let them on there? Why don’t we put a red propaganda diagonal sticker across every single thing they say? It is absolutely insane that we allow official Chinese accounts on Twitter without labeling them as propaganda, just like the Global Times, and Xinhua, and [inaudible], and all of these different Chinese propaganda outlets that disguise themselves as media. Again, there’s so many things that we need to do that are really easy to do.
Mr. Jekielek: If there is possibly a silver lining to this whole crazy situation, the suffering inflicted upon the world, … you and I both know this realization has been a long time coming. These aren’t new activities, as you’ve said.
Mr. Bass: Yes, the misery that China has brought to the rest of the world with this virus has really been shining a disinfecting light on global supply chains reliance. Think about this: we have Western democracies relying almost completely on a supply chain in a totalitarian, communistic nation. It’s actually insane when you lay it out like that, right? We could go back to our corporate boards and say, “Did you really do this? Because maybe you really weren’t thinking about the different potential avenues for supply chain connectivity.”
But to your point, there is a silver lining, because number one … you and I know Rosemary Gibson. Rosemary Gibson wrote the book in 2018 about the U.S. over reliance on China for prescription drugs and even OTC, over-the-counter drugs, where they manufacture 90% of the active pharmaceutical ingredients for all U.S. antibiotics. It’s actually crazy that we’ve let this happen. We’ve been with a really good [inaudible] from, let’s say, a microchip perspective, and from the perspective of strategic rivalry in very key technological areas, but we completely missed the drug—a national security problem. Well, the good news is, Jan, we’re not going to miss it anymore. We got this. We are going to legislate drug production here in the United States, so that no communistic sovereign actor can decide whether or not our military gets drugs to the hospital, or not—or population. Think about this: we get 100% of our blood pressure medicine from China. 100%. There are 700,000 people in the United States who take blood pressure medicine every single day. We have a 13-day supply. This is insane. This has to change. That’s the silver lining as these kinds of things will change.
Mr. Jekielek: Talk about leverage on the side of the Chinese Communist Party with just this one thing: the blood pressure medicine. It’s astounding. Tell me a little bit about what you’re seeing with respect to the economic situation globally. I’m looking at a headline right now in which the IMF says that the great lockdown is going to be worse than the global financial crisis.
Mr. Bass: I would name it the “sinister Wuhan virus lock-down”, right? The supernational institutions have all been infiltrated by the Chinese government, and so they call it “COVID-19”, you’re calling it the “coronavirus”—it’s the “Wuhan virus.” That is exactly where it came from. It’s how virus nomenclatures worked for hundreds of years; we should stay with that. And it’s not “racist” to call it something that it is. And so, I think from the perspective of the IMF and the economy, the U.S. alone has already lost 16 million jobs. … We think there’s been 4-5 million new (unemployment) filings last week. So we have 20 million jobs that have been lost today. That 16% unemployment in the US alone. And so, as you know, the better part of 3 billion people are under quarantine, homestays, today, and the global economy is off. And so, when you turn a $23 trillion economy like the U.S. off for between 60-90 days, you’re talking about a $6 trillion hole. We’re going to have to run a 15% or 16% fiscal deficit this year, at the very least. I actually think it will be bigger than that. Next year, it’s going to be north of 10%. During the global financial crisis, we never got wider than a 10% of the GDP fiscal deficit. So, the IMF is right in its numbers. The question is, can we bounce back quickly once we have a vaccine and treatment, and relax our social distancing? I think it’s going to be a little bit more difficult than markets imply at this moment in time.
Mr. Jekielek: I’m sure all your investors are running to asking questions about this: What is this going to look like? What does recovery look like? Is it V-shape? Is it U-shape? How fast are we going to actually be able to bounce back? Do you have any sense of this at this point?
Mr. Bass: It’s my view and our firm’s view that it’s going to be a W. It’s not going to be a U or V, or an L. I think that with people holed up in their apartments, their homes, and not able to work from their place of business, and the restaurants are closed, and the whole service economy’s off. When things start to become loosened, and people get out and start to get back to work, the animal spirits are going to be conjured in a positive way; not in the negative way that this began. But I think we’re going to see a lot of enthusiasm, a lot of optimism, because as Americans, we get out of bed every day and we’re very optimistic, and we have the best intellectual property in the world, the best educational institutions in the world. And so, I think we’re going to hit the ground running pretty hard.
I’m fearful—and I’m very dangerous because all I’ve read (are) a few white papers on the subject; I’m not a virologist by any stretch of the imagination—but it sure looks to me, we have 70 vaccines that are currently under research and review. And at some point in time, I believe that the world, given its intense focus on the subject, is going to develop a vaccine for this hideous Wuhan virus. But I think that’s probably going to take until the end of the year, Jan. So, I don’t know how international travel bounces back because I can tell you, I won’t get on an airplane until there’s no virus, right? I will never cross the pond again, until there’s a vaccine. And so, I don’t think you’re going to see the same level of business activity right away. And so, I say a W because I think we’re going to have an initial spurt, and then the question is when flu season comes back this fall, does it show itself again?
As we’ve seen in Singapore and Hong Kong, we’re having reinfection. And we’re actually having reinfections of those that are believed to have developed an antibody—[people] that have already recovered from the virus. And so, this is going to be a bit of a slog. And I think a W shape recovery is what we’re looking at. And I think, hopefully, Melinda Gates gave an interview a couple of days ago where she said, … “We think we’ll have a vaccine in the next 18 months.” If it’s 18 months from now, it’s a real problem, Jan. If we don’t get people back to work in the next 45-60 days, we’re going to have damage that’s irreparable, and we’re going to have a much longer lasting damage, and it will also damage the psyche of all the participants. If you remember, there was a profound change in the proclivities of those that suffered the Great Depression. … You probably heard from your father, and your father’s father, about an aversion to debt because it wiped people out back then. And not only did it affect that generation, the 1920s, 1930s, 1940s, but it also affected the baby boomers that were born to that generation, right? And so, there were two entire generations whose actions were influenced by one very specific, horrible financial event. And I believe this will be somewhat of a similar event from the perspective of how people operate their lives going forward. It will not go back to where it was.
Mr. Jekielek: Kyle, we just recently had a mental health expert, psychiatrist, pharmacologist, talk about the effect of this lockdown on suicide rates and a whole range of”side effects”. They’re not really “side” because they’re a direct result of what’s actually happening. I couldn’t help but remember this Tweet that you put out recently saying that perhaps there’s been a “delay in reporting” in the Chinese numbers. Well, it looks like there has been a “delay in reporting” the Tiananmen Square numbers, to that point. So, I’m guessing you don’t really believe the Chinese numbers. What are the implications of this?
Mr. Bass: I’d be willing to bet you, Jan, if you did a 100,000-person survey in the United States, every socio-economic group, and you ask them, “Do you believe the Chinese government numbers?” I would be willing to bet you today that would be an 85% super majority, “No.” … From the origin of the virus and 1.4 billion people, not one of them passed away from the virus when it’s on every continent, and we have millions of cases all over the world? And they say, “No official deaths today,” and I thought back, “Well, they haven’t ever officially reported any deaths from the Tiananmen Square incident, so maybe there’s just a ‘lag in reporting’.” It was a little tongue in cheek saying, “Why should we ever believe the Chinese government?” They just lied to the world in January, and they covered everything up, and now the world is where it is today, and somehow they want us to think that Huawei is the savior because Huawei is delivering masks to hospitals in New York City and Washington, DC. That’s it. Their soft diplomacy—”soft” because they’re delivering masks—it’s so clear what their motives are, and what they’re trying to do and take advantage of a situation that they created themselves. And it’s just ugly. And I think that even Joe Sixpack in the United States, even the guy that grabs a six pack of beer and goes to a NASCAR race, understands that the Chinese government is not trustworthy, they’re not our friends, and one could deem them to be our mortal enemy. And at some point in time, I think Wall Street’s view is going to have to change. And I think it’s happening now.
Mr. Jekielek: We were talking about the pharmaceutical industry sourcing just about everything from China. And I’m thinking about the Buy American executive order. It seems like a no brainer to repatriate critical medicine production. Why is this being stalled or slowed down?
Mr. Bass: I’m sure you’ve heard that the Chinese Communist Party decided that anyone that’s to move their supply chains out of China needs a permit to leave. I don’t know if you’ve heard that in the last couple of weeks. But for the last three years, really since the fourth quarter of 2016, when the Chinese completely closed off any kind of external foreign direct investment by rank and file Chinese and even the government—if you remember when they closed the door when they were having a serious currency devaluation problem—companies that do business in China, whether you’re Intel, or Sony, or BMW, or Chevron, those companies haven’t been able to get their dollars out of China, their dollar profits, since the fourth quarter of 2016. I know several of them have hired friends of mine that are former bureaucrats in U.S. administration who have relationships with Wang Qishan, with Xi, with his party, trying to get the money out. They haven’t been able to get the money out for four years, Jan, and now we’re being told that maybe you can’t get your supply chains out.
Shinzo Abe of Japan, as you probably saw, set forward a program of US$2.25 billion to pay the actual moving costs of the Japanese companies that want to move their supply chains back to Japan, from China. And you probably heard, even Larry Kudlow (Director of the United States National Economic Council) said, “We think that’s a great idea and we should do that.” I am all for setting aside and legislating a pool of capital to help our institutions leave China. And I think that’s, again, a moral imperative—I think we should be out of there. All of the cheap tennis shoes, and T-shirts, and trinkets we buy from China is nowhere near the amount of money that they steal from us every year in intellectual property. People say, “Well, if we just disengage with China, it’s going to cost us 2-2.5% of GDP. To that I say, “They steal 2% of GDP from us every year in intellectual property, and they earn a return on that. It’s actually a better deal for us to just stop. I know that sounds hyperbolic, but it’s just a fact.
Mr. Jekielek: You’ve been a big advocate of decoupling—bringing the economy out of China. Has anything changed with respect to that view, or the approach, since all this new information we have?
Mr. Bass: I think the silver lining of this horrible virus is that it’s going to accelerate this decoupling. We’re going to have forced decoupling from a national strategic perspective, let’s say, from our government, and I think there’ll be forced decoupling from many other Western governments. And then you’re also going to see corporate boards … forced to rethink their whole supply chain immediately. So, this is no longer, “Well, we’ll think about it next year, or maybe in our three- or five- year plan. We’ll think about how to maybe open our next factory in Vietnam, or Cambodia, or Mexico, or one of the other competitors to the Chinese factory floor.” Now, it’s forcing everyone to do it right away, and that’s a beautiful thing. So, all this has done is speed up something that had to have been done in the past, (but) people were just dragging their feet.
Mr. Jekielek: Can you foresee a situation where the Chinese Communist Party says, “Sorry, everything that’s in here, we’re keeping it”? They’ve already done that in a few instances—the nationalizing of certain factories and so forth.
Mr. Bass: Yes, I know of a company that I’ll leave unnamed, a very large public company, that has $10 billion in cash on its balance sheet as per its annual filing, and $1.5 billion of that money is in China. They haven’t been able to get it for four years, and I don’t know how they’re ever going to get it out, truthfully. And so, this is what I worry about: our pensions and all of the money that China has figured out how to coerce MSCI and the various index providers, the passive providers, to weigh China so heavily. In the MSCI Asia index, if you include U.S. listed ADRs, they’re now 48% of the index, right? They’re supposedly 15% of global GDP, but less than nine-tenths of 1% of global currency cross border transactions settle in Chinese currency. There is a Potemkin Village here. There is an economy that we give them the credit for because we dollarized it at the current dollar exchange rate… Think about this: They’re supposedly the second largest economy in the world, but they have a closed capital account. They’re not a real country. They are ideologically 100% different than the developed West, and economically, they couldn’t be more closed if you look at their capital account. They only have it open enough to buy the things that they need to buy, that they’re so desperate to buy. They have to buy food, they have to buy energy, they have to buy base materials, and they have to buy base metals. They have to buy those things from the rest of the world and they have to spend dollars. They need blood to fuel the CCP tumor, and that blood is dollars. And all they do, their entire MO with Belt and Road, and with cajoling the index players to figure out how to get U.S. dollars into China, because they need those dollars to buy things. No one will accept Chinese monopoly money because no one trusts the government. The beauty of this is once our government really understands this, we hold all the cards—the U.S. government holds all the cards.
Mr. Jekielek: I want to ask you about the realities of the Chinese economy and the Hong Kong economy. Before we go there, there’s been a number of very high-profile U.S.-listed Chinese companies that have basically lost most of their value because of fraud being discovered. What are the implications of that? Is this the beginnings of some kind of a trend?
Mr. Bass: I think it catches people by surprise. If we were to poll the population of the United States and say, “do you think Chinese companies that are listed on the US stock exchanges are subject to the same audits that US companies are?” They would probably say, “yes.” Well, that’s just not the case. They aren’t subject to the same Dodd Frank compliance features as US companies are. We gave China a pass, right? The whole Nixon-Kissinger view of China was to open up to this totalitarian, dictatorial regime, and let’s give them a taste of Western capitalism. Let’s bring wealth into their country in dollar terms, and what that should make them do, is open up and become more democratized, and also ideologically, maybe become more of a responsible “global actor.”
For anyone that’s questioned whether that’s worked out well or not, I think you see that they have gone the other way.
If you listen to Xi Jinping’s speech in the 19th Party Congress, his entire plan was to build a socialist system. They call it socialism with Chinese characteristics or Marxist, Leninist socialism. They want to build a socialist system to basically show the world that that system is better than Western capitalism. He said that in the 19th Party Congress. He is not trying to converge with the West, he’s trying to teach the West a lesson after their hundred years of being humiliated. Post Opium Wars and Hong Kong and Great Britain, one of those wars. I think it’s important to know that they don’t have any intention to westernize and converge. This is not a race for power. This is a simple ideological difference between two completely different cultures and governmental styles. I actually think it’s intractable. I think this relationship is impossible to solve.
So when we get into the financial aspects of this, this is where the Chinese propaganda machine has been so effective. A lot of people don’t know that every single joint venture with a US or European financial firm in China, the chief Asian economist of that JB has to be a member of the Chinese Communist Party. So when you think about the fact that Goldman Sachs Asia chief economist must be a member of the Chinese Communist Party, and Barclays Bank Asia, … or even the Chinese investment banks. Everything that gets written about the Chinese financial system is through the lenses of the perpetrator, right through the lenses of the propagandists that want to convey a message to the rest of the world. We all just …give them the benefit of the doubt. We say, ‘well yeah, they have a $13 trillion economy, and that is 15% of global GDP.” They are the second largest economy in the world, and if you purchasing power parity, many of the economists say, well, “China’s already wealthier the United States.” That is such complete crazy talk, but we just give them that benefit of the doubt of the US dollar exchange rate, which they manipulate on a nightly basis and a daily basis. They prop up their currency every single night in the foreign exchange markets, and their capital account is closed. Less than 1% of global transactions settle in their own currency. This is a house of cards.
If they were to open their capital account, how many wealthy Chinese people do you know, that can’t wait to buy more real estate in China and send their kids to school in China? They all want to send their kids to the west to learn from real schools, and they want to buy property that can’t be taken away from them because we have a rule of law. So their capital account would collapse them, if they opened it up. Their currency would drop 50%-60%. And then think about what their GDP would be. It wouldn’t be 13 trillion, it would be seven or six. Right? And so it’s important to know that again, we give them the benefit of the doubt of having this monstrous economy. It’s big, alright. And they’re influential to a certain extent, but it’s nowhere near as big as they say. Again, they must have dollars to make it work.
Mr. Jekielek: To your point with these Chinese Communist Party members being the top economists for the Asian operation of all these banks, I think this CCP virus disaster has shown how the political survival of the party is always above all other considerations, even human lives. Never mind talking about honest reporting of financial numbers.
Mr. Bass: That’s exactly right. When you look at a Marxist-Leninist socialist system, or socialism with Chinese characteristics, it’s always for the betterment of the party. They will trample human rights and basic rights of individuals in order to get to that goal and they make no mistake about that. And we know what they’re doing to the ethnic Uyghurs in northwest China and Xinjiang. We know what they did in Tibet, and we know what they’ve done to the Falun Gong and the Christians. They religiously persecute anyone that doesn’t hold President Xi, or Secretary Xi, above your God or whatever religion you want to practice. It’s actually crazy what they do. And again, we give them passes. Can you imagine if you explain to someone that you’re doing business with a regime that has more than a million prisoners of conscience locked up and is executing live organ harvesting on this population of political prisoners on a daily basis, and yet [companies] like Blackstone can’t wait to invest another dollar in China. People like Sheldon Adelson can’t wait to open another casino in Macau. You know why? Because they just let money blind them to the blatant human rights abuses of maybe one of the most tyrannical regimes that has ever lived. It’s crazy.
Mr. Jekielek: Kyle, I’m thinking of something that Alan Leung, one of the perennial pro-democracy people in Hong Kong, said. He said in Hong Kong they have a saying, “if we burn, you’ll burn with us”, i.e., if Hong Kong burns, China will burn as well. You recently showed me your Q1 report for Hong Kong, and honestly, my mouth was wide open. I was kind of feeling the fear. What is the reality around Hong Kong that you can talk about economically right now?
Mr. Bass: I think Hong Kong is the crucible. Hong Kong has always tried to exist as its own sovereign entity with its own rights under British common law. Back when Deng Xiaoping was negotiating the handover with Margaret Thatcher in the late 1970s, early 1980s, that discussion of the handover of Hong Kong, back to the Chinese, which was to happen in July of 1997 was being had in secret in the early 1980s. When it got around to Hong Kong and around Southeast Asia, who had been enjoying British common law, and essentially a vacation to British existence with a real respect for autonomy and human rights and everything that Hong Kong was so good at back then, when it got around that China was going to get its grimy mitts on Hong Kong, what happened? The currency actually collapsed. So between 1980-1983, the Hong Kong currency fell 50% value versus both the dollar and the pound. That’s what precipitated the Hong Kong monetary authority to peg the currency to the dollar because there were front page articles saying Hong Kong is a banana republic, and that it will be handed back to the Communist Party, and no one knows what they’re going to do with it.
So that was a crisis that precipitated the peg. 36 years later we are today. But think about this: July 1, 1997 was the handover of Hong Kong back to the Chinese. July 2 1997, the very next day is the day the Thai Baht broke its peg and collapsed 60% That is not coincidental. If you remember the Asian financial crisis happened during the handoff in 1997-98, you had an Asian crisis where all of a sudden they borrowed a lot of dollars, and their currencies collapsed versus the dollar and it blew apart many of those countries. This was the fear of the handoff of Hong Kong back to the Chinese actually happening.
So you had a crisis that precipitated it, which was a discussion of the handoff. The handoff itself caused another crisis. And here we are today where the Sino-British act of joint declaration of 1984 was signed, whereby China agreed to leave Hong Kong in situ, autonomous until at least 2047. That was the plan 1997 to 2047. They agreed to do it for 50 years. Now in 2047, it was just going to become another city in China. But was going to be a 50-year grace period. In 2019, the Chinese government decided that they wanted to put through a very slick extradition policy whereby any crime the Chinese government alleged anyone in Hong Kong committed they could simply grab them an extradite i.e. take all their personal freedoms away in an extrajudicial environment. That is what precipitated the protests, and that bill floated through the Hong Kong Legco (Legislative Council) in February of 2019, and the protests began in earnest June 1.
So you already have a significant uprising of the Hong Kongers. You saw a massive part of their population peacefully protest in the streets of Hong Kong this last summer, and what did you see happen? You saw their economy in the third and fourth quarter of last year drop north of a 10% real rate of GDP. It was clocking at the end of the fourth quarter down more than 15% of GDP. For those of you that aren’t economists, when you’re down 10% real GDP, that is not a recession, that is a depression. They are the most levered economy in the world. Their banks are 850% of their GDP and assets, and so when you think back to the European crisis, you had Iceland, Ireland and Cyprus. Remember how those dominoes fell? They fell in order of the size of the banking system. Those banking systems were enormous and they went unchecked. And so at the very first sign of loss, it detonated the entire sovereign.
What you have happening here, is you have the worst of all situations for Hong Kong. The Hong Kong leadership, Carrie Lam is a failed leader. She is polling at a 14% approval rating. I say this in my office and laugh. I say my door knob could poll at 14%. You could easily get 14% of 100% with anything. So that’s about as low as a political leader can get. She’s finished. She’ll be replaced one day very soon. The police of Hong Kong have lost the trust of the people. The people don’t trust the police. They don’t trust the leadership. The shelves are bare. They’re in a full quarantine, and it’s a failed state. Their GDP before the Wuhan virus was dropping at an annual rate of 15%. They have the most levered banking system in the world, and they’re entering a full depression.
So what you’re going to see is this concept is crucible of “one country two systems” being a complete failure because ideologically those two systems can’t exist together. These are mutually exclusive of one another. Either you have the heavy hand and rule by law, or you have a rule of law that is respected, everyone’s autonomy and personal freedoms are respected, and so are simple property ownerships and rights. That is all going to be taken away. I don’t know if you saw this, but there is this new person I showed you when you and I talked yesterday, who was just put into place. The butcher of Tibet, Luo Huining, is who the Chinese Communist Party decided should run the relationship between the CCP, China, and Hong Kong. Luo Huining doesn’t even speak Cantonese, and he’s in charge of Hong Kong. So what do you think’s going to happen next? So Hong Kong is this fascinating crucible of these two systems that can’t coexist, finally bashing heads together. This isn’t going to magically get better [where] trust is going to be resumed, and we … go back to the Hong Kong that we knew just about a year ago. Think about January of last year, everything was fine. And look at where we are today. By the way, we haven’t seen any of the numbers since the virus lockdown. So you can’t take an economy that’s 850% levered of GDP in the banks and turn it off, which is what’s happening.
Mr. Jekielek: Kyle, I’ve been speaking with a number of friends in Hong Kong about this. People are deeply worried, including US lawmakers. There has been an outpour of support from the west for Hong Kong. But how can Hong Kong even be helped in this situation? It is a big question mark in people’s minds. What can policymakers in the West do to help this? Or is there anything?
Mr. Bass: The die is cast. The pattern is set. They took on entirely too much leverage. Two of the largest banks in Hong Kong are two British banks with essentially no British depositors and their bankruptcy remote subsidiaries in Hong Kong. I think the die is cast. You can’t lever an economy that much. You can’t have real estate values at astronomical prices, and then all of a sudden turn the economy. You know what happens next, everyone knows what happens next. It doesn’t take a genius to know that they are going to have one of the ugliest banking crises that has ever happened to any country anywhere in the world. That is going to happen this year. Even if we come back from the Wuhan virus in the next few months, Hong Kong is already finished.
So if the good people of Hong Kong have fought the good fight, for those that can leave, I think they should leave. I think that you and I both know the Chinese surveillance state is going to be reviewing all the videos of the protests, and they’re just going to summarily incarcerate people and rip their liberties away from them. Hong Kong is just going to become another failed city within China. That is what’s going to happen. And it is going to happen 27 years too early. We know the people that are going to execute it. I know that is a grim view, but I can’t see another way out of this for Hong Kong. There are 85,000 US citizens and 200,000 British citizens that live in Hong Kong. You can bet this summer that they are all going to leave.
Mr. Jekielek: It is a very difficult situation, any which way you slice it. Hong Kong is basically also the conduit through which the foreign direct investment goes into China. So now let’s sort of open up the lens here. Let’s look at the Chinese economy, and what is happening with it. And how are the indexes responding to all this?
Mr. Bass: The index providers just claim that they practice free speech, very much like the ratings agencies did in the US going into the crisis. Post global financial crisis, the ratings agencies got regulated. These index providers in the US, such as the MSCI the FTSE, all these other ones in the West, are unregulated in the US, and they are actually regulated in Europe. Maybe the US should look to Europe for regulatory oversight, because they set the gold standard. They decide where hundreds of billions of dollars get invested, and they’re basically acting as fiduciaries, but they are not taking fiduciary liability. I think these index providers should be in real trouble going forward. I just believe this money will never come back. I believe that, to your point, much of it will get stuck in China and the relationship between the US and China is only going to worsen going forward.
Mr. Jekielek: What is the reality for the Chinese economy as we speak? They are saying it is business as usual, and everyone has gone back to work. Of course, we don’t trust the numbers. We know that, but there’s certainly been some recovery that has happened. Where do things stand?
Mr. Bass: China’s two largest trading partners by far, are the US and Europe. The US and Europe are off. We are closed. We’re at home. Our unemployment rates are skyrocketing in the mid-double digits. Our businesses are shut down. Who is China selling anything to right now is all I want to know. If their economy is fine, and only down a couple percentage points and “nothing to see here.” It is complete BS. Their banking system is 350% of their GDP. They are uber-levered. The leverage in their banks against real estate in tier one and tier two cities in China is enormous. They are going to have a crisis just like we are. The difference between crisis within China versus crisis out of China is that in China, they control everything. How many times have you heard? They are just China. They do what they want.
Internally, they print more RMB than any economy prints money anywhere in the world. They control the printing press, they control the police, they control the narrative, and they control the government. So internally, they can fix things by printing a lot of their money. Again, that makes their money worth a lot less when and if it ever converts to dollars, euros, yen or pounds. I think it’s important to know that they have an enormous amount of leverage. They have a huge fiscal deficit. Their fiscal deficit was almost 14% of GDP before the crisis. They were running a small current account deficit going into the crisis. Now the world is off. The IMF says global GDP is down 3.5% instead of plus 2-3%. That is a major shift in global GDP. If we get back to work, if we reopen our economy in the next 30-45 days, our GDP will end up dropping 10% or 11%. That’s what I think, and that’s what our numbers show us. If we don’t get back to work in the next 45-60 days, our GDP is going to drop a lot more and it’s going to be a real problem. So just imagine that our banks are one times levered to our economy. And off balance sheet if you include Fannie and Freddie, it’s about 1.3 times. China is 3.5 times levered, and Hong Kong is 8.5 times levered. Just think about the negative convexity of those two situations. They have got their hands full. They have 25 spinning plates, and when one plate drops, they’re all gonna drop.
Mr. Jekielek: Tell it to me like I’m five. Why does that create a more combustible situation?
Mr. Bass: You only need to look back at Iceland, Ireland, or Cyprus where let’s say you have had a GDP, for argument’s sake, of 100 billion dollars, and you had a trillion dollars worth of bank loans in your banks. Just imagine. Your GDP is 100 billion. Let’s say you have foreign exchange reserves of 10 billion dollars, and you have a trillion dollars worth of loans in your banks where 5% of the loans go bad or 10% of the loans go bad. God forbid, 10% of your loans go bad when you enter an economic depression. You are going to lose 100 billion dollars. Just think about that. That is your entire economic output. That is 10 times your reserves you’re gonna lose. So that’s why it’s such an enormous problem when you let your banking system grow unchecked, which is what Hong Kong has done.
Mr. Jekielek: Kyle, do you expect to see any change in the investment activity of some of these larger entities like CalPERS, that uses the indices to guide their investment?
Mr. Bass: You are opening an entire new can of worms here by bringing up CalPERS. I’m sure you know, their chief investment officer is actually a member of the Chinese Communist Party. He is the deputy director of China’s currency administrator. You don’t get a top five job in China unless you are part of the party elite. He managed the entire currency reserves for the Chinese Communist Party when he worked at SAFE, and now he somehow has weaseled his way in to be the CIO of the largest pension fund in the United States and he is shoveling dollars to China. That itself needs a full-scale investigation. He has already admitted to being part of the Thousand Talents Program, which I’m sure your viewers know what that is. There are about 70,000 members of the Chinese Communist Party that are instructed to infiltrate other economies and steal all intellectual property methods, business methods, and any kind of secrets and report back to the Communist Party. In fact, they have an award every year for the best theft and they give 750,000-1,000,000 dollars and you get a plaque. Ben Meng, the CIO of CalPERS, is a part of the Thousand Talents Program and a member of the Chinese Communist Party. That begs the question to me: who is your fiduciary responsibility to? In theory, if you are a Communist Party member, there is no one higher than Xi Jinping, even whatever God you want to worship. Yet, if you are the CIO of a massive pension fund, you must have a fiduciary responsibility to the teachers of California. I’m not sure where his loyalties lie. Actually, I’m pretty sure as to where they lie, and therefore that situation itself is crazy. How does that happen in our country? I’m not sure. And we need to change these things.
Mr. Jekielek: What about the different funds like the military thrift fund? These which, presumably, don’t have the same kinds of challenges that you are describing here, but have still made these decisions based on the indices. Have you heard anything about changes of approach?
Mr. Bass: There is a way to fix this. If I was anointed to be, let’s say, the head securities regulator in the United States, I could fix it with a few waves of a wand. It would actually be pretty easy. Number one, I would say any company that wants to list in the United States, forget about if it’s just from China or from anywhere else in the world, you have to adhere to real audits just like US companies do. You have to adhere to the same standards as US-listed companies. Let’s just level the playing field. That’s not being punitive. That’s not being xenophobic. That’s not being anything other than saying everyone’s going to play by the same rules, and everyone is going to live by the same rule of law. If we did that, 95% of Chinese companies couldn’t be listed, or maybe 99%. When I was in Washington DC, meeting with members of the House Financial Services Committee, the Senate Finance Committee, I was told by one particular member of Congress, “You know, who was sitting in your very seat yesterday telling me why Chinese companies don’t need to be adhering to the same standards as US companies?” I said “who?” He said it was the head of the Chinese Securities Regulatory Commission, the CSRC, which is the Chinese version of the FCC. He was lobbying US Congress members sitting in their offices, explaining to them that it’s a national secret that every person and every audit within any Chinese SOE is a state secret, and therefore it cannot be audited, to which this one member of Congress said, “we have Northrop Grumman and Raytheon and defense companies that have huge amounts of secrets that our auditors audit and we don’t see their secrets.” To which the Chinese regulator had nothing to say. That Chinese regulator is also a professor at Stanford.
They have infiltrated every single aspect of our government and our regulatory system. You wonder why their companies don’t have to adhere to the same standards we do? It is unimaginable to me. You could fix that in a nanosecond. Those kinds of things have to happen. You know, when the Chinese invest in our markets? They invest in venture capital or they invest in stocks? Let’s say they invest in Uber and they make $5 billion. You know how much tax they pay on that investment? Zero. Not a penny. They don’t pay a dime of US tax for capital gains, whether it’s short term or long term, it is zero. How many people that watch Epoch Times know that? That is such a simple thing. When Saudi Arabia invests in companies here in the US, and they use our judicial system to adjudicate wrongs that they think were done against them, how much do they pay in tax? Zero. Our system has to change. Those are simple things that we can do to change it.
Mr. Jekielek: Basically, you are talking about evening the playing field for everyone.
Mr. Bass: Why doesn’t everyone play by the same rules and have the same taxes here? If you want the benefit of the US rule of law, the US fee simple property ownership, a great western democracy and send your kids to school here, you are going to pay the same taxes that US people pay. How about that? If you want your companies to be listed here, you’re going to submit to the same regulatory procedures and audits that US companies do. Does that sound hyperbolic or crazy to you? It’s not.
Mr. Jekielek: The theme throughout all of this has been the horror show that comes out of the Chinese Communist Party operating on its own terms in the US and everywhere. The situation that you are describing economically seems to be a threat to the Communist Party. A number of folks that have been on the show have talked about this. I’m wondering about your thoughts. And we’ll finish up with that.
Mr. Bass: The path to “greatness” that Deng Xiaoping set forth, and that every leader post-Deng followed, whether you are Hu Jintao, Jiang Zemin and now Xi, who has not bided his time and kept his head low like Deng said. Xi is playing his hand out loud and he’s actually playing it in a not-so-smart way in these situations where the globe is in a state of dire stress and he’s overplaying his hand. What I have heard from my contacts within China and the people that I talked to on a daily basis, is the whole faction of Deng Xiaoping and this family. It is the Guangdong elite that are already rattling the cages for change. They believe that Secretary Xi has kind of stuck his head up a little too high and overplayed a bad hand, and I think the larger the economic disruption is, and the more unemployment that ends up coming about in China or let’s say, famine and disease and everything that might come from an economic depression, that could easily unseat this “Emperor for life” and I think his days are numbered, if my economic ideology is even close to being right.
Mr. Jekielek: Do you think they might try to use him as a scapegoat?
Mr. Bass: This is like when the military conducts a coup. As we saw in Turkey, a coup has a binary outcome. Either you’re going to win, or you’re going to die or get thrown in jail. So I think this concept of somehow overthrowing Xi is a very dangerous game for those that play it in China, and I think everyone knows that. I am hearing the rumblings already, and we will see if those come to fruition.
Mr. Jekielek: The reason I’m asking is that just because you change the head doesn’t mean the Chinese Communist Party changes. Right?
Mr. Bass: Right. For all intents and purposes, the modern Chinese Communist Party like to call it [inaudible] 1949. My god, look at the death and destruction that has happened since then, with horrible experiments on their population. This concept of socialism with Chinese characteristics being a better system. It is all a facade, and a closed capital account. Their desperate need for dollars will actually show the world that the whole thing is a facade. I think that’s a positive thing over time, because Western democracies are, I think, the best systems for inalienable human rights and the rights of great nations. Think about every big war that has been fought, has been fought for freedom. The people of China have no freedom. I just can’t imagine that these two ideologies can coexist in some sort of peaceful manner. We are already fighting three or four wars with them. Let’s hope it never goes kinetic but it is bad as it is. These propaganda, economic, and cyber wars that we’re fighting with the Chinese are principally as hard as they get. We are fighting on a daily basis and fighting a good fight. The problem is, we’re playing a game against an intolerant opponent with tolerance.
Until we change our ideology and the manner in which we play the game, we are going to be on the wrong end of that stick which we have been for so long. It feels to me like that narrative and our game plan is changing. I think this sinister virus is going to force that change to happen quicker. So it’s a terrible thing for the hundreds of thousands, and I think eventually millions, of people that will lose their lives because someone in China fumbled the virus football in their own end zone. At some point in time, it will actually change the manner in which we interact with such a tyrannical, awful regime.
Mr. Jekielek: Kyle Bass, such a pleasure to have you on again.
Mr. Bass: Jan, it is a pleasure seeing you.
Tyler Durden
Sat, 04/18/2020 – 23:30 - Is This The Safest Place In America To Hide From COVID-19?
Is This The Safest Place In America To Hide From COVID-19?
As Americans exit major metros, headed for rural communities, in search of remote areas to weather the virus storm, there has been one question on everyone’s mind: Where is the safest place in America to hide during the pandemic?
Well, from our past writings, we noted it could be Joshua Tree National Park in Southern California or a doomsday bunker in Colorado, but now it appears to be a small town situated on a five-square-mile peninsula connected to Canada, according to the UK’s Guardian.
Point Roberts, a pene-exclave of the US, located on the southernmost tip of the Tsawwassen Peninsula, that is south of Vancouver, has a population of approximately 1,300, and is a geographical anomaly – is one of the very few regions on the US mainland to be untouched by the virus.
“It’s probably the safest place to be in the country,” said Pamala Sheppard, 65, who has lived on the peninsula since 1989.
The town found itself isolated last month when the US and Canada agreed to halt travel at the border to all non-essential travel.
“Because our borders are shut, we’re like an island right now,” Sheppard added. “We’re like an island with no boats.”
Christopher Carleton, Point Roberts fire chief, said travel restrictions have dramatically reduced the flow of vehicles from Canada.
With the border shut and the peninsula isolated, the town’s economy has slid into recession:
“Economically, it’s hurting our community, as with any community that’s going through this at this point, but it is in a sense also protecting our community,” Carleton said.
Carleton said there are no virus cases in the town. Travel restrictions and social distancing have kept many residents at home. He warned that people traveling to places in the US where the virus is festering could bring it back, adding that it would be devastating mainly because the community is overwhelmingly populated with baby boomers. If cases develop, the town does not have the proper medical infrastructure to treat patients.
Drone view of Point Roberts’ marina Theresa Coe, 57, who works at the Point Roberts Marina, said the area is a ghost town, and this is “the safest place in probably North America; definitely within the states,” adding that, “You have US customs coming in and Canadian customs going out. Nothing’s going to happen here or very little.”
Tyler Durden
Sat, 04/18/2020 – 23:00 - What Will You Do If They Try To Extend COVID-19 Lockdowns Into Next Year?
What Will You Do If They Try To Extend COVID-19 Lockdowns Into Next Year?
Authored by Michael Snyder via TheMostImportantNews.com,
We are seeing a massive backlash against the coronavirus lockdowns all over the United States, and it is likely that the protests against these lockdowns will only intensify in the days ahead.
But some elected officials are doubling down and are insisting that “shelter-in-place” orders will remain in effect in their jurisdictions for quite a few months to come. I honestly do not know how that is possibly going to work, because after just a few weeks millions upon millions of Americans have become deeply frustrated with these lockdowns. Trying to confine people to their homes for the foreseeable future is likely to spark tremendous explosions of anger, but that appears to be exactly what authorities intend to do in some of our largest urban areas.
For example, New York City Mayor Bill de Blasio just told Fox News that he expects his city will be shut down until July or August…
New York City Mayor Bill de Blasio joined Bill Hemmer today on FOX News Channel.
The mayor told Hemmer he does not expect New York City to open until July or August.
Does he honestly believe that New York City residents will put up with being confined to their homes for another three or four months?
Over on the west coast, California Governor Gavin Newsom recently told the press that there probably will not be mass gatherings in his state “until we get to herd immunity and we get to a vaccine”…
“The prospect of mass gatherings is negligible at best until we get to herd immunity and we get to a vaccine,” Newsom told reporters at his press briefing.
“Large-scale events that bring in hundreds, thousands, tens of thousands of strangers … [are] not in the cards based upon our current guidelines and current expectations,” he said.
It is exceedingly unlikely that we will get to the point of “herd immunity” in the United States this year, and most experts do not anticipate a vaccine until some time in 2021.
Would he really try to keep his state locked down for that long?
L.A. Mayor Eric Garcetti appears to be on the exact same page, and he has already pretty much ruled out all large gatherings in his city “until 2021”…
Los Angeles Mayor Eric Garcetti said Wednesday that large gatherings like sporting events and concerts are unlikely to occur until 2021 due to the coronavirus pandemic, a major blow for one of the world’s major sports and entertainment capitals.
Considering the fact that the NFL has two teams in Los Angeles, this is potentially an absolutely devastating blow for football fans.
Of course it is possible that the Rams and the Chargers could play their games elsewhere, but that is probably not likely.
Especially in liberal bastions on the east and west coasts, fear of large gatherings is likely to persist for a long time to come. Facebook has already canceled all large company events until 2021, and other big tech firms will almost certainly follow suit.
You will find more infographics at Statista
Without a doubt, everyone should be in favor of reasonable measures to help prevent the spread of the virus, but the hysteria that we are seeing in some areas of California right now is off the charts.
For instance, Mendocino County has actually banned people from singing in online worship services. The following is an excerpt from their absurd social distancing directives…
No singing or use of wind instruments, harmonicas, or other instruments that could spread COVID-19 through projected droplets shall be permitted unless the recording of the event is done at one’s residence, and involving only the members of one’s household or living unit, because of the increased risk of transmission of COVID-19.
Of course we aren’t just seeing this sort of insanity here in the United States.
Over in Australia, Prime Minister Scott Morrison is seriously considering extending his nation’s social distancing measures for many months to come…
Australian public life could be constrained for another year because of the coronavirus pandemic, Prime Minister Scott Morrison warned on Friday, as the country’s most populous state mulled sending children to school in shifts.
Australia has so far avoided the high numbers of coronavirus casualties reported around the world after closing its borders and imposing strict “social distancing” measures for the past month.
These lockdowns may be slowing down the spread of the virus to a certain extent, but they are also absolutely crushing economic activity.
Thousands of businesses have been either crippled or destroyed, and tens of millions of jobs have been lost in the United States alone.
Needless to say, business owners and workers all over the nation are sick and tired of not being able to make a living, and President Trump added fuel to their frustration when he called for several states to be “liberated” on Friday…
President Trump made himself the star of the ‘lockdown rebellion’ on Friday by tweeting ‘LIBERATE Minnesota’ and then adding Michigan and Virginia to the list of states that should be freed.
The tweets came one day after the president’s coronavirus taskforce rolled out guidelines that would give governors broad power to decide when states’ economies would open back up amid the coronavirus pandemic.
And instead of waiting for permission, some business owners across the country have decided that they are going to reopen anyway…
Summit Motorsports Park owner Bill Bader Jr. vowed to start holding events with or without government permission, in a Facebook live post earlier this week.
“I’m not asking, I’m opening,” he said in the video and said that he thought that business closures were an overreaction. “If in Huron County, for example, we are able to save every life and limit and ultimately mitigate any outbreaks of Covid-19, but in the process of that we all starve to death, what have we accomplished.”
As I have warned all along, Americans are simply not going to have much patience with these sorts of lockdowns, and this is particularly true in areas of the nation that tend to lean conservative.
You will find more infographics at Statista
But those on the left are pointing out that we are already starting to see a huge surge in confirmed cases in parts of the country that haven’t been locked down…
The bump in coronavirus cases is most pronounced in states without stay at home orders. Oklahoma saw a 53% increase in cases over the past week, according to data compiled by Johns Hopkins University. Over same time, cases jumped 60% in Arkansas, 74% in Nebraska, and 82% in Iowa. South Dakota saw a whopping 205% spike.
Once restrictions start being lifted nationwide, it is probably inevitable that we will see another huge wave of new cases and new deaths.
However, it is important to point out that this virus is going to eventually spread through most of the population no matter what measures we take. Yes, we want to keep our hospitals from being completely overwhelmed, but we also don’t want to completely destroy our economy at the same time.
Our policy makers are going to have some very, very tough decisions in the days ahead, and the truth is that this coronavirus pandemic is just the very beginning of our problems.
The months in front of us are going to be extremely challenging, and life as you have known it will never be the same again.
The good news is that some of the coronavirus lockdowns will start to be lifted in the weeks ahead, and that will enable millions of Americans to start making a living once again.
But in other areas, politicians are warning that the lockdowns could last for many months to come.
If the politicians in your state tried to do that, what would you do?
Tyler Durden
Sat, 04/18/2020 – 22:30 - Goldman Now Sees A 123% Plunge In Q2 S&P Earnings, $850BN Drop In Corporate Cash Spending
Goldman Now Sees A 123% Plunge In Q2 S&P Earnings, $850BN Drop In Corporate Cash Spending
With 9% of S&P 500 firms having already reported Q1 earnings including all of the major banks, results have generally disappointed relative to already tepid expectations. 43% of companies have missed consensus expectations, on pace for the highest rate since at least 1998 with earnings set to drop by 15% Y/Y, but it’s Q2 where the real pain will be with Goldman now expecting S&P 500 to plunge by a record 123% plunge.
As a result, the very same Goldman which last week announced it no longer expects the S&P to retest the lows and pulled its S&P to 2,000 base case while predicting that stocks will surge to 3,000, which would make forward PE multiples just shy of a bizarro-world 30x, now forecasts S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment.
Additionally, Goldman which late last year said that the US is now recession proof and predicted a surge in capital spending, now expects that Capex will decline by 27%, R&D by 9%, and cash acquisition spending by 49%, leading to a 26% plunge in investment for growth, which means a collapse of money in circulation besides that which is injected by the Fed and ends up going directly into risk assets, of course. And, as Goldman first predicted two weeks ago, the bank expects buybacks and dividends will also decline sharply in 2020, falling by 50% and 23%, respectively, which means that once the current CTA-driven rally fades as momentum suffers a “spectacular crash” in the words of Nomura.
Altogether, Goldman – which has flip-flopped so many times in the past month even the bank’s chief equity strategist David Kostin joked at his latest bullish reversal (See “Goldman Mocks The Absurdity Of Its Own “S&P To 3,000” Forecast“) when he said “surprisingly, the largest shock to the global economy in 90 years has left equities only 18% below the record highs of mid-February and roughly in line with the market price in June 2019, just 10 months ago“, now expects aggregate S&P 500 cash usage will plummet by 33% – or $850 billion – to $1.8 trillion in 2020. Investment for growth (capex, R&D, and cash M&A) will fall by 26% to $1.0 trillion and account for 56% of total S&P 500 cash outlays. Buybacks and dividends will fall by a combined 39% to $770 billion and account for 44% of total spending.
Incidentally JPMorgan is not too far behind, and now expects a 35% decline in shareholder payout, just shy of the 50% recorded during the GFC, with Dividends somewhat more resilient than buybacks.
JPM’s forecast may prove quite optimistic, considering that announced buybacks YTD are running at just under the 3-year average.
Below is a breakdown of what Goldman expects will happen to the five key corporate uses of cash: capex, R&D, cash acquisitions, all of which are instrumental for growth, as well as a share buybacks and dividends, i.e., returns to shareholders.
- S&P 500 capex will fall by 27% to $534 billion during 2020. Sell-side analyst estimates revised during the past 45 days indicate S&P 500 capex likely fell by 5% year/year during 1Q. Goldman expects a 33% decline during the remaining three quarters will result in a 27% full-year drop. Capital expenditures fell by 23% from peak to trough during the Global Financial Crisis and 33% after the collapse of the Tech Bubble. Notably, the Energy sector accounted for one third of the index-level decline in capex after the financial crisis. In contrast, the sector accounted for just 15% of 2019 S&P 500 capex. In addition, Energy spending has declined 50% from its 2014 peak, further reducing the likely drag from Energy on total S&P 500 capex.
- R&D is comparatively less cyclical than capex and will fall by just 9% in 2020. Since 1990, research and development only experienced a peak-to-trough decline greater than 5% during 2009, when spending fell by 13%. In that experience, 80% of the index-level decline came from Consumer Discretionary and Health Care. Despite the COVID-related R&D spending boost, Healthcare R&D outlays during 2020 may be worse than many investors expect. Most S&P 500 biopharma firms are conducting research to find a vaccine for COVID-19, but data indicate new clinical trials for non-COVID treatments have fallen by 80% since early March. In addition, a significant portion of vaccine research is being shouldered by governments and NGOs rather than biopharma firms.
- Cash acquisition spending will fall by 49% due to a collapse in transaction volumes and a shift in consideration toward stock-based deals. Completed M&A volume with a strategic, US-based acquirer has fallen by 2% YTD compared to the year-ago period. However, the cash portion of these deals fell by 31% year/year. Announced volumes have collapsed by 56% YTD, with a similar decline in the cash portion of these deals. We believe continued weak announced M&A volumes, a light backlog of deals pending completion, and a shift in consideration away from cash as firms prioritize liquidity will contribute to a sharp decline in cash acquisitions during 2020. Cash M&A declined by 39% during 2019. Goldman’s forecast decline in 2020 cash M&A spending would result in a 70% peak-to-trough decline and is consistent with declines around the recession during the early 1990s (-75%), the collapse of the Tech Bubble (-64%), and the Global Financial Crisis (-81%). And since corporate CapEx is once of the biggest GDP drivers, this is yet another reason why the bulls can forget about a V-shaped recovery.
- Share repurchases will decline by 50% to $371 billion during 2020. Goldman’s review of S&P 500 earnings transcripts consistently reveals that management teams view buybacks as the lowest priority use of cash. Since the beginning of March, 58 S&P 500 companies accounting for 29% of total 2019 buybacks have suspended their repurchase programs. Mounting liquidity constraints and increasing political and social pressure will curtail buyback spending during 2020.
- Aggregate S&P 500 dividends will slide by 23% to $398 billion in 2020. S&P 500 dividends per share (DPS) rose by 9% in 1Q. However, since the start of 2Q, 21 firms accounting for 4% of overall DPS have cut or suspended their dividend. Dividend suspensions, cuts, and eliminations will result in S&P 500 DPS falling by 25% vs. 2019 levels, according to Goldman. For context, futures imply an 18% decline this year. The relationship between changes in S&P 500 DPS and aggregate dividends – which also includes cash preferred dividends – suggests total dividend spending will fall by 23% during 2020. In contrast, bottom-up analyst dividend expectations imply S&P 500 DPS will increase by 2% during 2020. This may be yet another reason why the market will suffer a spectacular second crash as soon as reality collides with sellside narrative fiction again.
That said, not all companies will slash dividends during 2020. In fact, this week JNJ and PG announced dividend hikes of 6.3% and 6.0%, respectively. To reflect the new reality, Goldman has rebalanced its dividend growth basket, which consists of the 50 S&P 500 stocks with the best combination of dividend yields and expected dividend growth; here each company has a payout ratio of less than 75%. There are 25 new constituents in the basket since it was rebalanced in Oct. 2019.
And here something curious: after investors rewarded the biggest trash companies, those with the worst and most levered balance sheets for most of the past decade, the market has shifted and investors instead have started to reward firms with safe balance sheets. Consistent with the YTD outperformance of strong balance sheets, debt reducers have outperformed debt issuers YTD, and Goldman’s Debt Reducers basket has outperformed a comparable basket of Debt Issuers by 8 pp YTD (-18% vs. -26%). The median stock in the basket of Debt Reducers paid down debt equal to 5% of enterprise value during the past 12 months vs. an increase of 5% for the median debt issuing stock and no change for the typical S&P 500 stock.
Then again, with the Fed now explicitly backstopping the riskiest of companies by buying their junk – literally – we fully expect that this brief return to investing sanity will quickly reverse, as algos and millennial traders reward the biggest junk they can find, sparking more short squeezes until everything crashes again and the Fed is forced to start buying stocks.
Tyler Durden
Sat, 04/18/2020 – 22:00 - Reopening Too Soon Could Cause "Exponential Explosion" Of US COVID-19 Cases, MIT Researchers
Reopening Too Soon Could Cause "Exponential Explosion" Of US COVID-19 Cases, MIT Researchers
Authored by Victor Tangermann via Futurism.com,
Researchers at MIT trained a neural network model on data that predicted the spread of the coronavirus from late January to early March, including information on how countries implemented quarantine measures.
The researchers have a dire warning, as detailed in a preprint uploaded to medRxiv earlier this month.
Having positively noted that:
“In the case of the US, our model captures well the current infected curve growth and predicts a halting of infection spread by 20 April 2020.”
The researchers warn that reopening the US too early would lead to a catastrophe.
“We further demonstrate that relaxing or reversing quarantine measures right now will lead to an exponential explosion in the infected case count, thus nullifying the role played by all measures implemented in the US since mid March 2020,” reads the paper.
The researchers’ model focused on four locations: Wuhan, Italy, South Korea and the US — and found some good news.
“Our results unequivocally indicate,” they wrote, “that the countries in which rapid government interventions and strict public health measures for quarantine and isolation were implemented were successful in halting the spread of infection and prevent it from exploding exponentially.”
The neural network was able to closely match the predictions by just feeding it data from January 24 to March 3. It was able to validate the US’s current infected curve growth and was even able to pinpoint a “halting of infection spread by April 20.”
The danger in reopening the gates and relaxing measures is very real.
Singapore experienced a spike in new COVID-19 cases this week after initially seeing major successes after implementing lockdown measures.
The news also comes on the same day that president Donald Trump revealed his plans for “Opening Up America Again,” a guideline document for state governors.
“America wants to be open and Americans want to be open,” he said during today’s announcement. “A national shutdown is not a sustainable long-term solution.”
Epidemiologists found major flaws with the statistics model that the White House’s new guidelines were based on, warning that it was unreliable and misleading for the public and policy makers, according to STAT.
Tyler Durden
Sat, 04/18/2020 – 21:30 - Shocking Report Shows Half The Homeless At Boston Shelter Tested Positive For COVID-19: And None Had Symptoms
Shocking Report Shows Half The Homeless At Boston Shelter Tested Positive For COVID-19: And None Had Symptoms
Researchers and clinicians who have ‘experimented’ with random mass testing for COVID-19 have made some pretty amazing – and amazingly depressing – discoveries. Yesterday, we shared a report about one sweeping antibody testing regime set up by researchers in Santa Clara County in California.
The study found that the estimated level of novel coronavirus penetration in the county was “50-80% higher” than what had been recorded.
If that isn’t enough to terrify every day trader who ratcheted up their exposure heading into the weekend, a news story about another surprising discovery – this time on the East Coast – has just come to our attention.
After a cluster of cases involving residents of a South Boston homeless shelter, Massachusetts public health officials tested every resident of the Pine Street shelter in Boston’s South End.
The results have garnered the attention of the CDC, which is “actively investigating the situation,” according to Boston 25 News.
The CDC is now “actively looking into” into universal COVID-19 testing at Pine Street Inn homeless shelter.
The broad-scale testing took place at the shelter in Boston’s South End a week and a half ago because of a small cluster of cases there.
Of the 397 people tested, 146 people tested positive. Not a single one had any symptoms.
“It was like a double knockout punch. The number of positives was shocking, but the fact that 100 percent of the positives had no symptoms was equally shocking,” said Dr. Jim O’Connell, president of Boston Health Care for the Homeless Program, which provides medical care at the city’s shelters.
O’Connell said that the findings have changed the future of COVID-19 screenings at Boston’s homeless shelters.
The big takeaway, if you couldn’t tell, is that a pattern is developing here: When mass testing is conducting, a shocking number of new cases are being identified, and – what’s even more surprising – often none of them even show any symptoms/.
As we’ve noted several times already today, the theme of under-counting cases and deaths in institutions like nursing homes, prisons, homeless shelters and other settings has been especially prominent lately, as officials try to compensate for missed or undercounted cases and, in some countries, the veracity of the ‘official’ numbers is becoming a hot potato political issue.
The discovery of so many asymptomatic cases, many of which involve individuals who are indigent and presumably at high risk, has, according to the report, changed the way public health officials in Massachusetts are testing.
O’Connell said that the findings have changed the future of COVID-19 screenings at Boston’s homeless shelters.
“All the screening we were doing before this was based on whether you had a fever above 100.4 and whether you had symptoms,” said O’Connell. “How much of the COVID virus is being passed by people who don’t even know they have it?”
The 146 people who tested positive were immediately moved to two different temporary isolation facilities in Boston. According to O’Connell, only one of those patients needed hospital care, and many continue to show no symptoms.
But that’s not all: It’s also forces officials to confront the uncomfortable elephant in the room: what would “the curve” look like if we had the capacity for general testing?
“If we did universal testing among the general population, would these numbers be similar?” said Lyndia Downie, president and executive director at the Pine Street Inn. “I think there are no many asymptomatic people right now. We just don’t know. We don’t have enough data on universal testing to understand how many asymptomatic people are contagious.”
Hundreds of tests are now set to be conducted at additional Boston homeless shelters in the coming days.
“It tells you, you don’t know who’s at risk. You don’t know what you need to do to contain the virus if you don’t actually have the details or facts,” said Marty Martinez, Boston’s chief of Health and Human Services.
What would be the takeaway here? Is the mortality rate in the US, which has lingered at a surprisingly high 5% according to the official numbers, in reality significantly lower? Or is there perhaps even more that we’re missing here?
Tyler Durden
Sat, 04/18/2020 – 21:00 - Exposing The New Fault Lines In A Post-Globalized World
Exposing The New Fault Lines In A Post-Globalized World
Authored by Marshall Auerback and Jan Ritch-Frel. This article was produced by Economy for All, a project of the Independent Media Institute…
The coronavirus pandemic has upended the global economic system, and just as importantly, cast out 40 years of neoliberal orthodoxy that dominated the industrialized world.
Forget about the “new world order.” Offshoring and global supply chains are out; regional and local production is in. Market fundamentalism is passé; regulation is the norm. Public health is now more valuable than just-in-time supply systems. Stockpiling and industrial capacity suddenly make more sense, which may have future implications in the recently revived antitrust debate in the U.S.
Biodata will drive the next phase of social management and surveillance, with near-term consequences for the way countries handle immigration and customs. Health care and education will become digitally integrated the way newspapers and television were 10 years ago. Health care itself will increasingly be seen as a necessary public good, rather than a private right, until now in the U.S. predicated on age, employment or income levels. Each of these will produce political tensions within their constituencies and in the society generally as they adapt to the new normal.
This political sea change doesn’t represent a sudden conversion to full-on socialism, but simply a case of minimizing our future risks of infection by providing full-on universal coverage. Beyond that, as Professor Michael Sandel has argued, one has to query the “moral logic” of providing “coronavirus treatment for the uninsured,” while leaving “health coverage in ordinary times… to the market” (especially when our concept of what constitutes “ordinary times” has been upended).
Internationally, there will be many positive and substantial international shifts to address overdue global public health needs and accords on mitigating climate change. And it is finally dawning on Western-allied economic planners that the military price tag that made so-called cheap oil and cheap labor possible is vastly higher than investment in advanced research and next-generation manufacturing.
This also means that the old North (developed world) versus South (emerging world) division that long preoccupied scholars and policymakers in the post–World War II period will become increasingly stark again, particularly for those emerging economies that have hitherto attracted investment largely on the grounds of being repositories of low-cost labor. They will now find themselves picking sides as they seek assistance in an increasingly divided and multipolar world.
The fault lines of the next economic era have already begun to surface, creating friction with the previous international structure of banking and finance, trade and industry. There is a force beyond elites and critical industries driving this: The proletariat has literally become the “precariat.”
In the U.S. and Europe, the staggering number of service economy workers are going to be quickly politicized by the shortfalls: People have seen a collapse in income, and big failures in education, and health care. Union-busting, pension fleecing, and austerity budgets and new technologies that concentrate wealth away from labor have created a circumstance where ownership and profit models must be revisited to sustain stability. The needs are too acute to be distracted by the lies of Trump, or the inadequate responses in other parts of the industrialized world. The current crisis will likely prompt geopolitical and economic shifts and dislocations we haven’t seen since World War II.
Death of Chimerica, the Rise of New Production Blocs
One of the biggest casualties of the current order is the breakdown of “Chimerica,” the decades-old nexus between the U.S. and Chinese economies, along with other leading countries’ partnerships with Chinese manufacturing. While the geopolitics of blame for the origins of coronavirus continue to shake out, the process that saw a decrease in exports from China to the U.S. from $816 billion in 2018 to $757 billion in 2019 will accelerate and intensify over the next decade.
While a decoupling is unlikely to lead to armed conflict, a Cold War style of competition could emerge as a new global fault line. Much as the Cold War did not preclude some degree of collaboration between the U.S. and the former Soviet Union, so too today there may still be areas of cooperation between Washington and Beijing from climate to public health, advanced research to weapons proliferation.
Nor does this shift necessarily spell the sudden collapse of Chinese power or influence—it has a colossal and still-growing domestic market and is on the international leaderboard for a wide range of advanced indicators. But its status as the world’s most desirable offshore manufacturing hub is a thing of the past, along with the economic stability that steady inflows of foreign capital brought with it. It does show a susceptibility to domestic stress, with the Hong Kong protests last year providing a hint of what is in store as the party leadership can’t pivot to new realities that include slower economic growth and declining foreign investment.
As investment flows turn inward back to industrialized countries, there will likely be corresponding diminution of the global labor arbitrage emanating from the emerging world. In general, that’s a negative for the global South, but potentially a positive factor for workers elsewhere, whose wages and living standards have stagnated for decades as they lost jobs to competing overseas low-cost manufacturing centers (the increase in inequality is principally a product of 40 years of sustained attacks on unions). The jobs won’t be the same, but to be sure, manufacturing incomes exceed those of the service industry.
As each country adopts a “sauve-qui-peut” mentality, businesses and investors are drawing the necessary conclusions. Coronavirus has been a wake-up call, as countries trying to import medical goods from existing global supply chains face a shortage of air and ocean freight options to ship goods back to home markets. Already, the Japanese government has announced its plans “to spend over $2 billion to help its country’s firms move production out of China,” according to the Spectator Index. The EU leadership is publicly indicating a policy of subsidy and state investment in companies to prevent Chinese buyouts or undercutting prices.
Two billion dollars is small potatoes compared to what is likely to be spent by the U.S. and other countries going forward. And it can’t simply be done via research and development tax credits. The state can and must drive this redomiciling process in other ways: via local content requirements (LCRs), tariffs, quotas and/or government procurement local sourcing requirements. And with a $750-billion-plus budget, the U.S. military will likely play a role here, as it ponders disruptions from overseas supply sources.
Of course, if the U.S. does this, other parts of the world—China, the EU, Japan—will likely do the same, which will accelerate the regionalization trends in trade. This may mean that some U.S. firms will have to operate in foreign markets through local subsidiaries with local content preferences and local workforces (that is how it worked in the 1920s—Ford UK was a mostly local British company, different from the U.S. Ford Motor Company, but with shared profits).
An examination of U.S. planning for the post-1945 world reveals the emphasis was on free trade in raw materials mostly, not finished goods. (The U.S. only adopted one-way “free trade” with its Asian and European allies later as a Cold War measure to accelerate their development and keep them in the American orbit.)
Domestically within the U.S., as Dalia Marin writes, the coming declines in interest rates will accelerate “robot adoption” by 75.7 percent, with concentration “in the sectors that are most exposed to global value chains. In Germany, that means autos and transport equipment, electronics, and textiles—industries that import around 12 percent of their inputs from low-wage countries. … Globally, the industries where the most reshoring activity is taking place are chemicals, metal products, and electrical products and electronics.”
As the coronavirus pandemic is illustrating, a viable industrial ecosystem cannot work effectively if it is dispersed to too many geographic extremities or there are insufficient redundancies built into the transportation of goods back into the home market (rail, highway, etc.). Proximity has become a significant competitive advantage for manufacturers, and a strategic advantage for governments. But the U.S. government must play an expanded role in the planning process. The U.S. is still a leader in many high-tech areas, but is suffering the consequences of a generation-long effort to undermine the government’s natural role as an economic planner.
In the form of the regionalized blocs that are being sketched, in the Americas, Mexico is likely to be one of the leading recipients of American foreign direct investment (FDI). It already has a $17 billion medical device industry and is sure to absorb much more capacity from China. This has already started to happen as a result of the U.S.–Mexico–Canada Agreement (USMCA, or new NAFTA). Furthermore, the Washington Post reports that “[a]s demand soars for medical devices and personal protective equipment in the fight against the coronavirus, the United States has turned to the phalanx of factories south of the border that are now the outfitters of many U.S. hospitals.” This is in addition to the thousands of assembly plants already in place in Mexico since the establishment of NAFTA. Indeed, if the jobs that had moved to China move to Mexico, Central America, and South America, this likely addresses many long-standing social tensions in regard to immigration management, currency imbalances and corresponding black market industries (ironically, it also likely means the end of Trump’s wall, as the industrial ecosystem of the Americas becomes more cohesive and widespread).
Big Business Is Good Business
But this will also have significant impacts closer to home: Much as Franklin Delano Roosevelt ultimately prioritized domestic ramp-ups in wartime production over trust-busting, so too national champions are likely to feature more prominently today, as domestic scale and balance sheet strength are given precedence to accommodate the drive to revive employment quickly, and work collaboratively to halt the spread of the coronavirus. The scale of companies will not be regarded as a political problem if they can both deliver for consumers and show the capacity of following political direction for what the public’s needs are. Tech companies like Apple and Google are stepping up to fill the void left by massive federal government dysfunction. The “break up Big Tech” voices are nowhere to be heard at the moment.
We still need a more robust form of regulation for these corporate behemoths, but via a system of regulation that is “function-centric,” rather than size-centric. As co-author Marshall Auerback has written before, this kind of regulation “restricts the range of corporate activities (e.g., structural separation so as to prevent companies like Amazon and Google from owning both the platform as well as participating as a seller on that platform), or the prices such companies can charge (as regulators often do for utilities or railways). These considerations would be ‘size neutral’: they would apply independently of corporate size per se.”
Capitalism has always had its plutocrats, but scaling back America’s overly financialized model (by preventing stock buybacks, to cite one example) would represent a useful reform and prevent a lot of economic waste. Instead of going to enrich executives and shareholders beyond the dreams of Croesus, that measure might help to ensure that the profits of these companies will be directed to the workers’ wages (which also means supporting increased unionization), or plowed back into investment (e.g., increased robotics).
Biodata, Privacy, and an End to Pandemic Profiteering
And there are fault lines in the business world. The pharmaceutical and medical research industries face immense pressure from other businesses to end the pandemic so they can get back to profitability. That means temporarily setting aside profits and pooling intellectual property to encourage collaborative efforts on the part of biotech and pharmaceutical companies to find proper treatments for COVID-19, and make them freely available, especially if governments were to waive antitrust scrutiny in exchange for all of the data Big Pharma companies collectively hold. As the Guardian reports, “[t]here is a precedent. Last June, 10 of the world’s largest pharmaceutical companies—including Johnson & Johnson, AstraZeneca and GlaxoSmithKline—announced they would pool data for an AI-based search for new antibiotics, which are urgently needed as antibiotic-resistant bacteria have proliferated across the world, threatening the growth of untreatable disease.”
Privacy advocates are already expressing concerns about a growing and overweening medical surveillance state. These surveillance concerns lack historical context: From the 19th century on, serious health problems were met by hardline government policies to reduce them. Policies ranging from quarantine to vaccine were not always mandatory, but there was an understanding that personal concessions had to be made to manage a huge population and an advanced society; the Constitution was not a suicide pact. We can further alleviate those concerns today by ensuring that the information uncovered does not become a precondition or additional cost of receiving insurance coverage. In light of coronavirus, cost savings of incorporating biodata into immigration and customs are a no-brainer for governments, and are certain to cause friction with individuals who may not want to give blood or saliva to get a visa or work permit, and agribusiness leaders who know that safety measures cut into profitability. But the scales have tipped in the other direction.
North Versus South
What about the other countries in the developing world that don’t have close geographic proximity to a home market, or abundant supplies of key commodities required for 21st-century manufacturing needs, or even a well-developed manufacturing base (in other words, the countries that have hitherto been large recipients of investment solely on the grounds of cheap labor)? Many of them have faced immediate pressure with the collapse in global trade, unprecedented capital flight that is sure to grow as the coronavirus spreads, all the while coping with COVID-19 with highly inadequate health systems.
In the meantime, the multi-trillion-dollar market for emerging market debt, both sovereign bonds and commercial paper, has collapsed. Many of these countries, via their state pension funds and sovereign wealth funds, have become the ultimate endpoint for many of the newer asset-backed securities that finally revived years after the 2008 financial crisis. This has become the potential new stress point in the $52 trillion “shadow banking” market. The U.S. Federal Reserve has sought to ease the funding stresses of much of the developing economies by offering central bank swap lines. It has also broadened prime dealer collateral acceptance rules, and set up commercial paper swap facilities, all of which have eased short-term funding pressures in these economies that have incurred substantial dollar liabilities.
As the emerging world central banks then start to lend on those lines to their own banks, it should start to alleviate the shortage of dollars in the offshore dollar funding markets. We are starting to see some easing of stresses, notably in Indonesia—because it’s an exporter of resources more than a cheap labor price economy.
But whereas in previous emerging markets crises, China was able to buttress these economies via initiatives such as the “Belt and Road Initiative,” Beijing itself is likely to be buffeted by the twin shocks of declining global trade and a reversal of foreign direct investment, which declined 8.6 percent in the first two months of this year.
Longer-term, many other countries face comparable challenges to China: Capital controls, collapsing domestic currencies, and widespread debt defaults are likely to become the norm. That’s already happened to serial defaulter Argentina again. South Africa has been downgraded to junk status. Turkey remains vulnerable. The so-called “BRICS” economies—Brazil, Russia, India, China and South Africa—are all sinking like bricks. The problem is exacerbated by the fact that coronavirus and likely future pandemics will create additional stresses on developing economies that depend on their labor price advantage in the international marketplace to survive.
By contrast, countries like South Korea and Taiwan have had a “good crisis.” Both have vibrant manufacturing sectors and created successful multiparty democracies. Foreign investment in South Korea continued to grow in the first quarter of this year, as it rapidly moved to contain the spread of COVID-19 through an extensive testing regime (while keeping its economy open). Similarly in Taiwan, by activating a national emergency response system launched in 2004 (following the SARS virus), that country has mounted a thoroughly competent coronavirus intervention of unprecedented effectiveness. The results speak for themselves: as of April 15, in South Korea, a mere 225 deaths, while in Taiwan, an astonishingly low total of six deaths in a country of 24 million people—this despite far more exposure to infected Chinese visitors than Italy, Spain or the U.S.
Of course, the very success of Taiwan’s response revives another potential fault line, namely the tension underlying the “One China” policy. Before COVID-19, it is noteworthy that the WHO “even refused to publicly report Taiwan’s cases of SARS until public pressure prompted numbers to be published under the label of ‘Taiwan, province of China,’” according to Dr. Anish Koka. At the very least, Taiwan’s divergent approach and success at fighting the pandemic will bolster its pro-independence factions.
The question of foreign nations upholding Taiwan’s sovereignty with regard to China is increasingly thorny, given Beijing’s growing military capacities. This will present an ongoing diplomatic challenge to Western parties who seek to increase engagement with Taipei without heightening tensions in the region.
A Recalculation of ‘Economic Value’
We have outlined many fault lines likely to be exposed or exacerbated as a consequence of COVID-19. Happily, there is one fault line likely to be slammed shut: namely, the false dichotomy that has long existed between economic growth and environmentalism. The Global Assessment from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services reports that “land degradation has reduced the productivity of 23 percent of the global land surface, up to US$577 billion in annual global crops are at risk from pollinator loss and 100-300 million people are at increased risk of floods and hurricanes because of loss of coastal habitats and protection.” Likewise, the study cites the fact that as of 2015, 33 percent of marine fish stocks “were being harvested at unsustainable levels,” and notes the rise of plastic pollution (which “has increased tenfold since 1980”), both of which play a key role in degrading ecosystems in a manner that ultimately destroys economic growth.
Finally, repeated pandemics over the past few decades have shown these are not blips, but recurrent features of today’s world. Hence, there is an increasing public appetite for regulation to deal with this ongoing problem. Some industries, such as agribusinesses, won’t like this, but the concerns are well-founded. According to expert Josh Balk, 75 percent of new diseases start in domestic and wild-caught animals, and 2.2 million people die each year from illnesses transferred from animals. The majority of these are transferred from poorly regulated factory farm chickens, cows and pigs; still, the “wet markets” of Asia and Africa, and the trade in potential “transfer species,” such as pangolins, a major driver of the $19 billion-a-year global trade in illegal wildlife, must also be addressed. Beijing has suggested it will ban trade in illegal wildlife and seek tighter regulation of the wet markets. The latter in particular may be easier said than done, according to Dr. Zhenzhong Si, a research associate at Canada’s University of Waterloo who specializes in Chinese food security, sustainability, and rural development. Dr. Si argued that “[b]anning wet markets is not only going to be impossible, but will also be destructive for urban food security in China as they play such a pivotal role in ensuring urban residents’ access to affordable and healthy food.”
To be fair, this isn’t the first time that the sacred tenets of the global economic framework have dealt with a crisis that seemed to usher in a new era. The same thing happened in the aftermath of the financial crisis of 2008. But that was largely seen as a financial crisis, a product of faulty global financial plumbing that nobody truly understood, as opposed to a widespread social collapse closely approximating the conditions of the Great Depression as we have today.
Not only has the current lockdown put the entire global economy into deep freeze, but it also came amidst a backdrop of widespread political and social upheaval, and a faux recovery whose fruits were largely restricted to the top tier. A collateralized debt obligation is not intuitively easy to grasp. By contrast, being forced to stay at home, deprived of vital income and isolated from loved ones, while health care workers perish from overwork and lack of protective gear, is a different order of magnitude.
Even as we re-integrate, it is hard to envisage a return to the “old normal.” Trade patterns will change. Self-sufficiency and geographic proximity will be prioritized over global integration. There will be new winners and losers, but it is worth noting that the model of capitalism we are describing—one that does not feature obscenely overcompensated CEO pay co-existing with serf labor and the widespread offshoring of manufacturing—has existed in different forms in the U.S. from 1945 into the 1980s, and still exists in parts of Europe (Germany) and East Asia (Japan, South Korea, Taiwan) to this day.
Our everyday lives will be impacted as selective quarantines and some forms of social distancing become the new normal (much as they were when we dealt with tuberculosis epidemics). All of this has implications for a multitude of industries: restaurants, leisure, travel, tourism, sporting events, entertainment, and media, as well as our evolving definition of “essential” industries. Even our concept of personal privacy will likely have to be amended, especially in regard to medical matters. Concerns about medical surveillance—stigma (STDs, alcoholism, mental illness) and denial of insurance—can be alleviated if everyone is guaranteed treatment regardless of ability to pay, which will mean greater government intrusion into the lives of citizens and activities of businesses as the public sector seeks to socialize costs.
Taken in aggregate, we are about to experience the most profound social, economic and political changes since World War II.
Tyler Durden
Sat, 04/18/2020 – 20:35 - "Under Siege" – Social Unrest Unfolds As Frustrated Americans Demand Reopening Of Economy
"Under Siege" – Social Unrest Unfolds As Frustrated Americans Demand Reopening Of Economy
We laid the groundwork for readers over the last three weeks that social instabilities could materialize during or after the pandemic. It has become clear that protests in Lansing, Michigan, on Thursday (April 16), was the beginning of the lockdown-backlash that is now unfolding across the country.
Americans are becoming increasingly frustrated with state governments that have closed their economies and issued strict stay-at-home public health orders, resulting in one of the worst economic crashes in the country’s history.
More than 22 million people have lost their jobs in a month, and the true extent of the crash won’t be realized until the second half of the year. The one thing we do know is the financial crash has been so severe that it has forced people to organize on social media to mobilize en mass at their respective state capitol buildings across the country, demanding their governors reopen the economy and return life to normal.
The lockdown-backlash sounds like a revolution is in the making. And, of course, every revolution has a song, and maybe this Nickelback song “Edge Of A Revolution,” already circulating on some pro-Trump feeds, could be it.
As for Saturday’s protests, Infowars’ Owen Shroyer is planning one at the Texas state capitol in Austin. The rally is called “You Can’t Close America,” which is directed at the Texas state government to put an end to the draconian measures that have confined people to their homes for nearly a month.
In Maryland, a protest organization known as Reopen Maryland is already underway in locking down streets around the state capitol building in Annapolis.
“We are the strongest country on the planet and have put a man on the moon, there is no compelling reason why we can’t protect the sick and vulnerable and get our economy back to work,” the Facebook event says.
The group has 13,000 members on Facebook. By Saturday afternoon, dozens of vehicles, presumably from the group, were shutting down streets.
Scene from #ReopenMaryland demonstration today. Lots of honking. Lots. @thedbk pic.twitter.com/0aQxgCXPE0
— Matt McDonald (@MattC_McDonald) April 18, 2020
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Peaceful and CONSTITUTIONAL protest in Annapolis, MD. #1stAmendment #ReopenMaryland @FoxNews @realDonaldTrump @GovLarryHogan pic.twitter.com/DUQUQRwCCh
— kt (@migraininmyhead) April 18, 2020
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From Fox News aerial shot, it appears the #ReopenMaryland #OperationGridlock protest in Annapolis today drew just one lane of maybe 25-30 cars with beeping horns. pic.twitter.com/KOKZXaq5NI
— Politics1.com (@Politics1com) April 18, 2020
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From Oregon, California, Idaho, Minnesota, Michigan, Florida, Virginia, and Maryland, thousands of people are ignoring social distancing rules and are protesting their state governments to reopen the economy on Saturday.
In a series of tweets on Friday, appearing to kick off the protests for this weekend, President Trump tweeted: “LIBERATE MICHIGAN!,” “LIBERATE MINNESOTA!,” and “LIBERATE VIRGINIA, and save your great 2nd Amendment. It is under siege!”
Stephen Moore, a member of President Trump’s council to reopen the country, launched a protest in Wisconsin on Saturday. Here are some scenes from the rally:
it has gotten much larger pic.twitter.com/vaOtRMrnxf
— Zach Walsh (@Zachwalsh9) April 18, 2020
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President Trump released plans on Friday to reopen individual states in phases that were currently experiencing a flattening in the cases and deaths.
The president is eager to reopen the economy to save it from a crushing depression. The danger of reopening an economy too soon is that it could spark a second wave.
And maybe now is not the best time to reopen, considering deaths across the US are surging once more…
People are protesting across the country, ignoring social distancing rules and lacking proper health gear, which could result in a further spread of the virus. Nevertheless, the attempt to reopen will be a failure, just look at what’s happening in China… However, we suspect the protests will grow over the next couple of weeks.
Tyler Durden
Sat, 04/18/2020 – 20:10 - CLOs Face "Extinction Level Event" As Moodys Prepares To Downgrade A Fifth Of All CLO Bonds
CLOs Face "Extinction Level Event" As Moodys Prepares To Downgrade A Fifth Of All CLO Bonds
Over the past month, in its quest to bailout the richest Americans and the country’s financial system, the Fed has unleashed an unprecedented array of actions meant to backstop capital markets, going so far as buying investment grade, high yield bonds and even AAA-rated CLO bonds.
It won’t be enough.
In what would mark the most draconian and widespread ratings action since the financial crisis, on Friday Moody’s warned it may cut the ratings on $22 billion of U.S. collateralized loan obligations – a fifth of all such bonds it grades – as a result of the collapse in cash flows due to the Covid-19 pandemic.
The ratings agency took action on 859 bonds from 358 CLOs that package leveraged loans into securities of varying degrees of risk and return. The step – which according to Bloomberg affects about 19% of Moody’s-rated CLOs that purchase broadly syndicated loans – comes as the underlying debt gets downgraded at a record pace.
Earlier in the week, Moodys reported that its “B3 Negative and lower list” soared to its highest tally ever — 311 companies. That tops a former peak of 291 companies, reached during the credit crisis of 2009 and the commodity-related downturn in April 2016. At 20.7% of the total rated spec-grade population, the list also shot up above its long-term average of 14.8%, and closing in on its all-time high of 26.1%. This spike is the result of the confluence of a coronavirus outbreak, plunging oil prices, and mounting recessionary conditions, which created severe and extensive credit shocks across many sectors, regions and markets, the effects of which are unprecedented.
And with the underlying bonds set to suffer an unprecedented collapse in solvency, it is only a matter of time before the products where they are packaged are also hammered.
Which brings us to what some have called a possible “extinction level event” for the CLOs space, and not just the lowest rated tranches. On Friday, Moody’s warned that as a result of a surge in expected losses on the CLO securities which have “increased materially,” it could downgrade an unprecedented 20% of all CLOS, with more than 40% of the bonds on review having an investment-grade rating, with 13 rated A, and 355 rated at the Baa level. The rest have sub-investment ratings through to CCC.
While we have discussed the importance of CLOs for both the US loan markets – and Japan’s banks and insurance companies – on numerous previous occasions (here, here and here), in a nutshell CLOs are the biggest buyers in the $1.2 trillion leveraged loan market, which in recent years fueled a boom in debt-fueled buyouts and other transactions. But the loans have been particularly hard-hit in the market rout triggered by the pandemic, with a benchmark index plunging last month to the lowest level since the global financial crisis (although the index has recovered some of its losses in recent weeks when the Fed stepped in to partially backstop the sector).
As Bloomberg notes, the extent of losses that CLO bonds incur depends on the deals’ exposure to downgrades and other negative ratings actions on the underlying loans, as well as the bonds’ priority in the capital structure. How much cushion the bonds have either from asset coverage or cash flow diverted from riskier debt that sits below them is also a factor.
In any event, the more severe the downgrades, the greater the impairments for structured investors, with losses potentially stretching deep into the A-space. And while Moody’s said it usually tries to conclude its ratings reviews within 90 days, the “high degree of uncertainty” of the current environment may mean it takes longer.
Or not: in summarizing the surge in deep junk rated companies, the rating agency said that “key indicators flashing red on an alarming rise in spec-grade credit stress, increasing defaults” and added that “a wide range of industry outlooks turned negative in the first quarter of 2020, based in large part on the economic consequences of the coronavirus outbreak.” Worse, “the share of companies carrying B3 ratings is much higher than at the start of 2009, providing tinder to fuel future downgrades. These companies will find it difficult to refinance debt in deteriorating economic conditions and, once downgraded, could ultimately face a default if markets remain shut to lower-rated issuers.”
Moody’s warning comes just hours after S&P also on Friday put 155 CLO bonds on review, accounting for about 6.3% of its rated CLO securities.
And while some may say the Fed will fix it, recall that the expanded Term Asset-Backed Securities Loan Facility (TALF) announced by the Fed last Thursday only buys AAA-rated bonds of CLOs, which after the Moody’s downgrade is complete, will not only collapse in nominal size but will mean that any further attempts to stabilize the CLO space will require yet another Fed backstop of even riskier – i.e., rated AA and lower – structured products.
Tyler Durden
Sat, 04/18/2020 – 20:10 - COVID-19 Could Change Travel Behavior Forever… Putting 3 Million b/d Oil Demand At Risk
COVID-19 Could Change Travel Behavior Forever… Putting 3 Million b/d Oil Demand At Risk
Authored by Daniel Klein via S&P Global Platts Inisghts blog,
Global air, road and rail travel have been massively reduced as governments attempt to limit the spread of coronavirus, taking a heavy toll on short-term oil demand.
Clearly, the mandated restrictions will lift when the pandemic eases and low oil prices will further aid in stimulating oil demand. However, it is possible that consumer behavior could be altered structurally, with impacts that persist even once the pandemic has ended.
For oil demand, the two sectors most at risk from a potential change in behavior are light-duty transportation and aviation. These risks are investigated in depth in the report Quantifying Risk: How COVID-19 could change consumer behaviors and impact long-term oil demand, issued by S&P Global Platts Analytics’ Scenario Planning Service on March 24.
For light duty transportation, a key risk is reduced oil demand from fewer workers commuting if there is a structural shift towards working from home. After mandated restrictions are lifted, businesses may question the cost of physical offices and offer more flexible working from home arrangements or even mandate employees to work from home.
Clearly, the potential to work from home is limited to certain segments as many industrial and service sector employees have virtually no flexibility to work from home. Even some white collar workers may not be able to work from home due to a lack of ubiquitous telecommunications and home computing.
Based on country-specific employment data and an analysis of commuting patterns, Platts Analytics estimates that 5% of commuting vehicle miles travelled are at risk from a structural shift to more of the labor force working from home. Over the long term this could wipe out as much as 193 billion miles travelled globally by 2030.
Aside from commuting to work, other light duty transportation activity has declined due to the COVID-19 outbreak. Consumers are being forced to reduce the number of trips to grocery and other stores and purchase goods online during the outbreak. These behaviors may persist after restrictions are lifted, particularly if cost savings are identified. Most major online retailers have made great strides in using big data and algorithms to predict consumer behavior to optimize supply and delivery chains. On balance, a shift to online shopping will lower overall vehicle miles travelled.
Additionally, many of these retailers have their own delivery fleets, and there is a shift toward electrifying these delivery trucks, illustrated by the landmark partnership between Amazon and EV manufacturer, Rivian. This has the potential to further compound overall oil demand losses. Platts Analytics estimates the resulting potential loss in oil demand in road transportation from a greater prevalence in working from home and changing shopping patterns at 1.9 million b/d by 2040.
The aviation sector has also been severely impacted by the coronavirus outbreak and is susceptible to structural behavioral changes after the crisis is over if there is a desire to fly less. Like road transportation, a portion of aviation demand is secure from a potential change in consumer preferences, such as air freight.
For passenger aviation, recent surveys suggest that 40% of airline passengers travel for business purposes. Businesses are currently being forced to experiment with ways to conduct operations without travel, and may make long-lasting changes to travel policies to push more vigorously for virtual meetings to reduce costs, lower CO2 emissions and, improve environmental, social and governance (ESG) scores.
Platts Analytics believes that business travel is the most susceptible to a change in behaviour from the COVID-19 outbreak. For leisure travel, virtual tourism and voice or video calls with distant loved ones are poor substitutes for the real thing, and this segment of air travel may prove to be the most secure.
The aviation sector has been on a strong upward trend due to a rising middle class, particularly in Asia. Before coronavirus struck, Platts Analytics assumed long-term oil demand growth in aviation at 2% per annum due to prevailing economic and travel trends. A scenario where aviation growth is half this original expectation would result in 1.8 million b/d less oil demand by 2040.
The impacts of coronavirus will ultimately be determined by the length and severity of the outbreak. However, the longer consumers and businesses adjust to restrictions and identify potential cost savings, the greater the probability these changes will become structural and long-lasting.
Tyler Durden
Sat, 04/18/2020 – 19:45 - Los Angeles County Suffers Deadliest Day Yet As COVID-19 Kills 81: Live Updates
Los Angeles County Suffers Deadliest Day Yet As COVID-19 Kills 81: Live Updates
Summary:
- Spain death toll tops 20k, joining US & Italy
- Report claims 7,500 died uncounted in UK nursing homes
- US total cases passes 700k, deaths near 40k
- NYPost claims nursing home deaths in NY went uncounted
- South Africa reports largest daily increase so far
- LA reports record jump in deaths
- Spain extends lockdown by 2 weeks
- Saudi Arabia reports record new cases for 4th day in a row
- Cali releases data on nursing home outbreaks
- NJ Gov: “we’re flattening the curve”
- Sweden reports 606 new cases
- Belgium reports 1,000+ cases
- Cali reports latest update
- Cuomo reports fewer than 500 deaths in NYS
- Japan case total passes 10k
- Italy reports drop in new cases, deaths, hospitalizations
- Phoenix TV station warns of undercounting of deaths
- Dr. Fauci says tests ‘aren’t everything’ when reopening states
- Iran death toll crosses 5k as country’s reopening begins
- UK reports another ~900 deaths
* * *
Update (1910ET): No sooner did we highlight the rash of new deaths and cases reported in California nursing homes than LA County revealed that it suffered its deadliest streak yet during the last 24 hours, reporting 81 deaths, along with a huge jump in cases (642).
That brings the total to 576 deaths and 12,021 cases.
In a statement, Dr. Barbara Ferrer, the director of the Department of Public Health, specifically cited nursing homes as a source of particular concern for county health officials.
“Today marks a very sad milestone for our county, we are reporting the highest number of COVID-19 deaths for any one day since the beginning of the pandemic, and our deepest condolences go out to each and every person grieving the loss of their loved ones,” she said in a statement.
She also pointed out that the number of deaths in the county have doubled in a week, a trend that has been seen in other hot spots around the country.
“In this last week we have doubled the number of deaths that occurred among L.A. County residents,” she said. “We are especially concerned about the overwhelming number of residents residing in our nursing homes who have passed away.”
Ferrer noted that she’s requested additional support from the state and federal governments to ensure that nursing homes are as safe as possible for residents and employees.
“This includes asking for supplementary staffing and PPE, increased ability to test residents and employees, and improvements in infection control capacity at nursing homes,” she explained.
Of the total 576 deaths, 89% had underlying health conditions, Ferrer said. Information about race and ethnicity was available for 498 victims or about 93%. Of the deceased, 36% were Latinx residents, 29% were white, 17% were Asian, 16% were African American, and 3% identified as other races.
Outside of the US and Europe, South Africa reported 251 new COVID-19 infections, its largest single-day jump yet, bringing its total to 3,034 cases.
Coronavirus update, Africa:
– South Africa: 251 new cases
– Ghana: 193 new cases
– Egypt: 188 new cases
– Morocco: 121 new cases
– Algeria: 116 new cases
– Ivory Coast: 113 new cases
– Nigeria: 49 new cases
– Mali: 45 new cases
– Sudan: 33 new cases
– Kenya: 16 new cases— Norbert Elekes (@NorbertElekes) April 18, 2020
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Slowly but surely, the virus is spreading across Africa.
* * *
Update (1600ET): California reported 87 new deaths, bringing its statewide total to 1,072.
Watch Gov Newsom’s press briefing below:
TUNE IN NOW. https://t.co/3UyYQD1o6a
— Gavin Newsom (@GavinNewsom) April 18, 2020
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California has confirmed 28,963 cases of COVID-19, Newsom said. Of those, 3,221 of those cases are in our hospitals, with 1,173 of those in the ICU.
Meanwhile, as the issue of outbreaks in nursing homes and the lack of transparency and accountability becomes an international issue, the LAT reported earlier on Saturday that the Department of Health for the state of California has released new numbers on nursing home outbreaks, mirroring a move earlier by the State of New York.
More than 30% of patients who died in LA County were residents of assisted-care facilities, while more than 70% of deaths in Long Beach were nursing home residents. The California Health Department listed the names of 261 skilled-nursing facilities across the state with more than 3,000 positive cases among residents and staff. However, the “snapshot” only included 86% of the state’s 1,224 skilled-nursing facilities that have reported data within the last 24 hours.
One of the worst-hit homes was Brier Oak on Sunset in LA, where 80 residents and 62 staff members have tested positive. The Country Villa South Convalescent Center in Palms has had 58 patients and 15 staff infected, while the Garden Crest Rehabilitation Center in Silver Lake has had 35 each of patients and staff.
Earlier, we noted today’s giant jump in Singapore’s case total illustrating how ridiculous the idea of reopening the economy seems right now.
* * *
Update (1545ET): Illinois Gov. JB Pritzker is holding today’s press briefing…
— Governor JB Pritzker (@GovPritzker) April 18, 2020
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The state also reported 1,259 new cases and 125 new deaths, bringing its total cases closer to 30k, and its death toll closer to 1.5k.
As we wait for more news out of Springfield, as well as the capitals of other midwestern and west-coast states, here’s a reminder of today’s good news from NY:
Good news from New York:
– Number of new cases down
– Number of new deaths down
– Number of hospitalized down
– Number of ICU patients down
– Number of intubations down
– Number of new people tested up— Norbert Elekes (@NorbertElekes) April 18, 2020
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* * *
Update (1540ET): Cuomo has finally released the new case numbers for Saturday, reporting 7,090 new cases, bringing the total to 13,362. As we reported earlier, the state confirmed only 540 coronavirus-linked deaths on Thursday, the lowest number since April 1.
Total of 236,732 cases and 13,362 deaths.
* * *
Update (1445ET): Once again, as expected, Spain has officially extended what has been a five-week coronavirus lockdown until May 9, adding another 2 weeks, but plans to relax the lockdown, one of the most strict in the world, to allow children out of their homes before the end of this month.
Meanwhile, in yet another alarming acceleration in new cases, Sweden reported 606 cases of COVID-19 over the last 24 hours, and 111 deaths, bringing its totals to 13,822 cases and 1,511 deaths.
Sanchez said Saturday night in an address that he would ask the Parliament to extended the state of alert, which have given Sanchez the extraordinary – some might say almost fascist – unilateral power to impose and enforce the lockdown, which Spain has down, dramatically lowering the number of newly confirmed cases, even if deaths have remained stubbornly high.
In New Jersey, the spread of coronavirus continued to slow, as hospitals reported more patients leaving than entering.
During a Saturday press conference, Gov. Phil Murphy said: “We are flattening the curve”…adding that NJ has recorded a slower rate of new infections and a slower rate of new hospitalizations…progress, even if there’s still a long way to go.
As we look around for more signs that the death toll or case count in the US might be undercounting by thousands, we found a report aired by a Phoenix area news station claiming that first responders don’t have a protocol for reporting dead bodies suspected of dying from COVID-19, meaning dozens of these cases – the city’s firefighters have reported an unprecedented spike in dead body reports, likely due to COVID-19 – aren’t being marked as COVID-19-linked deaths.
* * *
Update (1350ET): In his latest troll to Democratic states like NY demanding more from the federal government (and, it seems, Republicans in general), President Trump tweeted this photo of a shipment of ventilators to be distributed to the states.
Great news, thank you! https://t.co/hp4TCZQW9r
— Donald J. Trump (@realDonaldTrump) April 18, 2020
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* * *
Update (1330ET): Even as the number of new cases in Italy have slowed, a jump in the UK and France has helped push the European case total past 1,000,000 on Saturday.
France looks set to be the next country to see its case total pass 150k and confirmed deaths past 20k.
France saw 642 more deaths over the past 24 hours health officials said Saturday, bringing the countrywide total to 19,323, the fourth-highest tally in the world, although the number of people in hospital declined for a fourth day running. France’s public health authority said in a statement that the total number of patients in ICU units across the country also declined for the 10th day in the row to 5,833 – the lowest level since March 31.
France has been in virtual lockdown since March 17 as part of efforts to curb the outbreak.
As South Korea prepares for the start of baseball season with the prospect of winning over legions of new American fans, the country’s health officials on Saturday reported 18 new cases of coronavirus, 9 of which were purportedly imported. It was the lowest total since February, and the latest evidence that the local officials in Westchester County, Suburban Seattle, and parts of California can and have taken the right states to suppress the outbreak. China also reported a low total on Saturday, with more than half the cases imported, while Singapore, in its most alarming report yet, confirmed 942 new cases of coronavirus, bringing its total to 5,992 cases in total, a roughly 15% increase in one day and the biggest single-day jump by far. Just when observers think the outbreak has finished accelerating, even more cases are reported as officials begin to fear that nearly all of the migrant workers living in densely populated highrises in parts of the city state have been infected.
Over in NY, Cuomo said there were “about” 2k cases confirmed in the last day, about even with the last few weeks. Cuomo also continued to bash the federal government over what he described as a critical shortage of tests.
* * *
Update (1240ET): Some good numbers were just reported out of Italy.
Countrywide, officials reported 3,491 new cases and 482 new deaths, bringing the totals for cases to 175,925 and deaths to 23,227. Compared with yesterday, that marks a drop in new cases and deaths, while the number of patients hospitalized and the number in the ICU also declined.
Meanwhile, 45k have now recovered from the illness – including a handful of centenarians – across Italy.
Looking back at Cuomo’s press conference, it seems the most important number reported overnight was the continued decline in hospitalizations.
Though, to be sure, the pace of new hospitalizations remained steady compared with yesterday, but more deaths and recoveries, combined with fewer new cases, means less stress on NYC’s hospitals, most of which were seeing capacity stretched pretty thin.
Once again, Belgium on Saturday reported more than 1,000 new cases in 24 hours, with 1,045 new cases of the virus, and 290 new deaths, for a total of 37,183 cases and 5,453 deaths, as Belgium, the Netherlands and several other countries in Europe, as well as Russia, report a startling acceleration in the virus.
In the US as a whole, more than 700k cases have been confirmed, along with more than 35,000 deaths.
* * *
Update (1220ET): President Trump probably managed to kill two birds with one stone by delegating control of the reopening process to the governors: He made what truly appears to be the best move for the country, and the move that was most politically palatable. For once during Trump’s presidency, those two imperatives were obviously and dramatically aligned, and the president – likely feeling a ton of pressure from the public during a legacy-defining moment (this is all for the history books) – overcame his natural inclination toward sometimes-reckless confrontation, and took a step back.
However, by sticking his nose in the process and commenting – as he did yesterday with a series of tweets calling on governors to “LIBERATE!” certain states – he is putting what was truly a big win for him and his campaign (not to mention the country) at risk.
Asked about the demonstrations taking place at state capitols across the country, the president offered a tacit word of encouragement, calling the crowds “very responsible people.”
President Trump said this about demonstrators across the country protesting stay-at-home orders: “They seem to be very responsible people” pic.twitter.com/slYYkelqfn
— QuickTake by Bloomberg (@QuickTake) April 18, 2020
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While these crowds are likely packed with his supporters, and Trump has never shied away from a shoutout in exchange for gestures of loyalty, right now, he’d probably be better served by staying quiet, and focusing on the real task at hand: How is his administration going to replenish the ‘PPP’ and work with the states to reopen the US in a way that doesn’t cause the outbreak to come roaring back.
* * *
Update (1215ET): New York Governor Andrew Cuomo is holding Saturday’s daily press briefing.
Holding a briefing with updates on #Coronavirus. Watch Live: https://t.co/Ve9pC6fDBa
— Andrew Cuomo (@NYGovCuomo) April 18, 2020
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In keeping with established practice, Cuomo revealed the number of COVID-19-linked deaths recorded across the state over the last 24 hours. Fortunately, he reported a less than 500 deaths, marking a slowdown from highs reached over the prior week.
* * *
Update (1155ET): As expected, the US and Canada have agreed to extend the closure of their shared border as the global coronavirus outbreak has now sickened more than 2.2 million people, and killed roughly 155,000.
Here’s more on that from the FT:
Canada and the US will extend their border closure agreement for at least another 30 days, the prime minister Justin Trudeau said. The nearly 9,000km frontier is closed except to trade, essential workers and citizens returning home. The deal is “another example of the excellent collaboration between our two nations,” Canada’s Mr Trudeau said on Saturday at his daily briefing.
In the UK, health officials reported almost 900 more COVID-19-linked deaths over the last 24 hours, according to the Department of Health and Social Care.
As of 9am 18 April, 460,437 tests have concluded, with 21,389 tests on 17 April.
357,023 people have been tested of which 114,217 tested positive.
As of 5pm on 17 April, of those hospitalised in the UK who tested positive for coronavirus, 15,464 have sadly died. pic.twitter.com/yZmas1wSvS
— Department of Health and Social Care (@DHSCgovuk) April 18, 2020
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Though the rate of new cases remained steady at roughly 5k.
* * *
Investors cheered and pundits dared to speculate that the worst just might be over Friday evening after US stocks finished the week with a blowout rally into the close (a rally that, sadly, appears to have been driven by misplaced optimism among retail investors, while hedge funds that were long GILD have cashed out).
A sketchy report touting unexpectedly promising results from one leg of an international study of Gilead’s anitviral remdesivir, a drug that was developed to treat ebola but hasn’t been approved by the FDA to treat…well…anything. Which is why several patient trials are being conducted around the world, to try and determine ASAP whether this might be the ‘miracle cure’ Trump and everybody else has been hoping for. Just days after CPC officials shut down two trials in mainland China because of a ‘shortage’ of ‘eligible patients’ (likely a hilarious ruse), Statnews reported late Thursday that a trial at the University of Chicago had essentially cured every patient in the trial except for 2.
The market took that story and ran with it, ignoring warnings from Gilead itself that the connotations of the data had been exaggerated by the story, and that this is only one trial out of many, with evidence of the drug’s efficacy remaining mostly ‘anecdotal’. Remdesivir has been given to enough COVID-19 patients at this point that, if the drug truly were a ‘miracle cure’, doctors would have known by now.
Thanks to a revision in new numbers coupled with a rash of deaths in the US and UK that have cleared out hospital beds and ICUs, while still likely falling well short of the ‘real’ numbers, it appears that the world about to experience a rapid rise in the virus’s global death toll, which topped 150k as of Friday. Late Thursday evening, the US reported a massive jump in deaths over the last 24 hours, driven by NJ, NY and Michigan, along with several other of the worst hit states.
Splashed across the front-page of the Saturday edition of the Telegraph is a story claiming the number of deaths in nursing homes is ~3,700% higher than government figures reflect.
Citing a seemingly authoritative – if ‘unofficial’ – survey of patients from one of the UK’s largest care-home associations, the Telegraph claimed that as many as 7,500 elderly patients have passed away from COVID-19 in nursing homes and other assisted-living facilities across the UK. That contrasts with the roughly 217 care-home deaths recorded by the Office of National Statistics, which is responsible for compiling data for the Department of Health and Social Care. It’s also roughly 5x higher than a previous estimate of 1,400 released by the organization earlier this week.
Around the world, more than 2.2 million cases of COVID-19 have been confirmed, and nearly 155k have died, as of Saturday morning in the US. And deaths have continued to accelerate, even as the pace of newly reported cases has slowed.
Source: FT
That initial report helped spark a national conversation about undercounting at UK nursing homes that has become a huge problem for Health Secretary Matt Hancock as Boris Johnson continues to recover from COVID-19 (Hancock was also infected).
The number of care home residents who have died of suspected coronavirus may have reached 7,500, according to the latest estimate, The Telegraph has learned.
New data collated by Care England, the country’s largest representative body for care homes, suggests the number of deaths from Covid-19 is far higher than its previous estimate of 1,400 from earlier this week.
The number is also far in advance of the official figure from the Office for National Statistics (ONS), which has recorded 217 care home deaths from the virus up to April 3 – the most recent date for which official data is available.
Of course, without testing, it’d be extremely difficult to say with any degree of certainty exactly how many have died. The only thing that seems almost certain is that the official number is a serious under-representation.
The notion that deaths have almost certainly been undercounted not just in the UK, but also in the US, Spain and around the world has become a major scandal in some countries because it makes so much sense. The US isn’t alone in not having enough tests: Shortages abound; even China struggled for months and is still likely exaggerating its real testing capacity. Earlier this week, NYC Mayor Bill de Blasio added nearly 4k deaths to the roll that included patients who died at home, or who died in the hospital of COVID-19-liked symptoms, but were never tested.
When supplies are limited, wasting precious resources on the dead solely for record-keeping purposes hardly seems sensible, and we can understand why hospitals wouldn’t want to waste those resources. We understand it – and so should everybody else. De Blasio’s revision followed pressure from the NYT. And just yesterday, health authorities in Wuhan “revised” its official numbers, claiming the decision was made as officials reconcile numbers across different data sets and so forth, stuff they didn’t have time to do when the crematoriums were running at full tilt back in February and March.
The WHO quickly stepped up to defend the decision, claiming Beijing simply won’t rest until it accounts for every single COVID-19 related death. Much of the world, including – of course – President Trump, but also many who have been persistent Trump critics, suspect that China has undercounted the number of cases and deaths in Wuhan by several orders of magnitude, not by a few thousand. You saw the pictures, remember? People were literally dropping dead in the streets – that’s how overwhelmed Wuhan’s hospitals were at the time. Video showed dying patients lying in hospital hallways and splayed out across packed rooms. The evidence was so glaringly obvious that not even the CPC, which had permitted thousands of foreign journalists into the city, could hide it. In fact, in terms of information suppression, it seems the best the part could do in Wuhan was “disappear” a few local citizen journalists.
In Spain, the opposition is accusing the socialist-led government of PM Pedro Sanchez of being reckless in reopening the country, a process Spain has already tentatively started, and accusing the government of deliberately lying about the deaths. The country’s health ministry reported more dismaying news on Saturday as the country’s death toll has climbed above 20k, even as the number of new cases reported each day is half what it was two weeks ago. With a mortality rate of roughly 10%, Spain’s outbreak has become one of the deadliest in the world.
And it’s only the third country (after the US and Italy) to report more than 20,000 deaths.
As one Twitter wit points out:
No country in Europe is really certain how many people are lost to the pandemic due to a large number of nursing homes for elderly not filing reports. In Spain, the count has become unfairly political.
Spain’s official death toll, remains among the world’s highest, 20,000.— HollieTheCard (@HollieTheCard) April 18, 2020
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Per the Health Ministry, the number of new coronavirus cases in Spain rose by 4,499 people in the last 24 hours, pushing the countrywide total to 191,726 as the government continues to “review” its process for reporting the data. The official death toll is now 20,043 deaths, since another 565 people have reportedly died in the last 24 hours. That’s roughly in line with this week’s data, although the ministry hasn’t clarified discrepancies in the number of deaths reported yesterday.
Across the Atlantic, the New York Post reported in its Saturday edition that the outbreak has ravaged the city’s nursing homes to such a horrifying degree that even de Blasio’s revisions earlier this week didn’t fully cover it. Citing new data released Friday by the New York State Department of Health (likely, we suspect, handed to the NYP to undercut de Blasio), the paper cited several alarming examples that we imagine the mayor will be forced to address during his next press briefing.
In one Brooklyn facility – the Cobble Hill Health Center – 55 patients have died during the outbreak, the highest single-facility number in the whole state. 45 patients at the Kings Harbor Multicare Center in the Bronx have died, the next highest death toll among the city’s nursing homes. Another 40 people died at the Holliswood Center for Rehabilitation in Queens. Starting to get the picture?
Here’s the latest data broken down by the NYP…
The partial breakdown only includes 72 nursing homes across the state that reported more than five deaths. Of those, 42 reported at least 10 deaths. There are more than 600 nursing homes in New York State.
More than 1,100 residents cumulatively died just at these 72 facilities.
Overall, 3,316 elderly nursing resident residents died at either nursing homes, adult day care facilities or hospitals from COVID-19. Of that total, the virus killed 2,056 nursing residents in New York City.
There are 6,475 confirmed COVID-19 positive cases in licensed nursing homes.
…and to prove that even these numbers are still woefully incomplete, the Post added that several homes in the city that reportedly suffered dozens of deaths weren’t even listed in the state database.
But two other nursing homes highlighted by The Post as having dozens of deaths combined amid the pandemic — the Chateau at Brooklyn Rehabilitation & Nursing Center in Sheepshead Bay and the King David Center for Nursing and Rehabilitation in Gravesend — were not listed in the tally.
Cuomo signed an executive order Friday requiring these facilities report deaths to families within 24 hours to prevent the kind of terrible confusion that occurred at one suburban Seattle nursing home in Kirkland that found itself at the center of Washington state’s first outbreak.
While an abundance of tests would certainly have helped health authorities all over the world keep better track of cases and deaths, the fact remains that, looking forward, Dr. Fauci, Dr. Birx and their team believe that the US is now approaching the testing capacity that we need for some parts of the country to enter the initial phases of reopening which, remember, is all that they’re currently planning to do. For all the talk about starting back up before May, it seems May 1 is a real line in the sand for most states. And President Trump has repeatedly attacked Cuomo (during last night’s press conference and in tweets sent earlier in the day) for complaining too much about the ‘lack’ of tests, pointing out that the state did the same complaining about the lack of beds and ventilators, only to find that the social distancing worked better than the projections indicated.
That’s nobody’s fault, and it’s an unmitigated win for America. But do governors and the mainstream media need to make such a massive deal about the shortage of tests? Sen. Angus King, an Independent from Maine who caucuses with the Dems, accused VP Pence of a “dereliction of duty” during a phone call last night, a comment that was promptly leaked and played up in the press.
Speaking of undercounting, health authorities in Japan reported on Saturday that the number of confirmed cases in the country had finally topped 10k, NHK reports.
The case count continues to climb by stunning margins just days after PM Abe extended a state of emergency to the entire nation in an attempt to slow the spread of the virus and promised to hand out nearly $1,000 in Japanese yen to the entire country. He pleaded with Japanese to stay indoors as cases reported in Tokyo hit a record high. Abe, too, expressed fears about the virus spreading in nursing homes, but given Japan’s large population of elderly, its official death rate – well below 1% – seems far too low to be realistic.
Finally, one new study out of Santa Clara County found some astonishing data suggesting the number of cases that weren’t counted among the county’s residents could be many times higher than currently believed.
And in Iran, officials reported another 73 deaths on Saturday, raising the official death toll to 5,031, breaking above 5k, just as officials warn that the country’s return to work doesn’t mean citizens should cease taking social distancing precautions. Overall, Iran has reported 80,868 cases, though the totals for both deaths and cases are suspected of being much higher.
Tyler Durden
Sat, 04/18/2020 – 19:20 - China Emerges As A Major Obstacle In Japan's Quest To Triple Stockpile Of Abe's "Miracle" COVID-19 Drug
China Emerges As A Major Obstacle In Japan's Quest To Triple Stockpile Of Abe's "Miracle" COVID-19 Drug
Many Americans probably don’t realize this, but President Trump isn’t the only world leader with a “favorite” experimental drug intended to treat COVID-19.
Japanese Prime Minister Shinzo Abe has been pushing a medication called Avigan, which, like remdesivir and hydroxychloroquine, has shown some efficacy in treating the worst symptoms of COVID-19, especially administered early.
As a reminder, he’s a reminder of all the potential therapies and vaccines in the works to try and treat COVID-19, courtesy of Reuters:
- Remdesivir
- Hydroxychloroquine / chloroquine
- Actemra (tocilizumab)
- Kevzara (sarilumab)
- Jakavi (ruxolitinib)
- mRNA 1273
- Convalescent plasma
- Kaletra (lopinavir/ritonavir)
- NKG2D-ACE2 CAR-NK cells
- NVX-CoV2373
- RhACE2 APN01
- Lentiviral Minigene Vaccines (LV-SMENP)
- BCG tuberculosis vaccine
- INO-4800
- Camostat mesylate
- IFX-1
- AD5-nCov
- Aspirin, Clopidogrel, Rivaroxaban, Atorvastatin, Omeprazole
- ChAdOx1
- Serology / Antibody Testing
And, unfortuantely for Japan, Abe and his government are quickly discovering that widely distributing the drug to the population to try and stave off a brutal resurgence of the virus that could pose a serious problem not just for Japan’s elderly population, but for its neighbors in Asia who have resorted to extreme measures to keep the outbreak from spreading.
The government has taken steps to ramp up production of some ingredients for the medication as it seeks to triple its stockpile of the drug as quickly as possible. These steps have included enlisting Fujifilm, a diversified Japanese conglomerate, to effectively conscript other Japanese corporate giants into producing some of the ingredients needed to make the medication.
Here’s more on that according to Nikkei Asian Review:
Japan’s push to triple its stockpile of anti-flu medicine Avigan for coronavirus treatment has proven a challenge as the lack of a raw ingredient from China forces Fujifilm Holdings to switch to a domestic supplier.
The frantic scramble for a production boost has highlighted Japan’s heavy reliance on foreign-sourced ingredients as well as the nation’s slow drug approval process — issues both the government and pharmaceutical sector will have to grapple with.
As patents for Avigan have expired overseas, China has already begun producing generic versions for domestic use, making it impossible for Fujifilm to continue sourcing a chemical called malonic acid from that country.
Few doubt the efficacy of the drug to treat at least some patients. However, one problem is that for a successful course of treatment, patients often require triple the amount of Avigan as compared with Tamiflu, the prescription medication used to treat the flu virus (and, for some readers, commonly confused with the over-the-counter medication Theraflu).
Reports suggest Avigan can prevent the replication of the new coronavirus inside the body. But treating a coronavirus infection appears to require three times more Avigan than the flu, which means the country’s stockpile designed for 2 million flu patients covers only 700,000 COVID-19 patients.
While Japanese firms are working diligently to fill the orders, they’re running up against a shortage of essential raw ingredients produced – guess where?
Fujifilm has asked Japanese chemical company Denka to manufacture the acid domestically, aiming to boost local Avigan production starting in July. Denka retreated from malonic acid production in 2017, but the company retained its manufacturing sites and can resume output once enough workers are secured.
Kaneka, a Japanese chemical company, also announced on Thursday that it will start manufacturing pharmaceutical ingredients that go into Avigan for supply to Fujifilm in July in response to a request from the latter. Kaneka will strengthen its domestic plant capacity through capital expenditure and securing employees to prepare for production.
The government, eager to build a supply chain at home, acted as a go-between to prod Denka into resming production. Denka says it does not plan capacity increase at this point and will makes future plans based on the production volume of Avigan.
As explained in one of the above quotations, the recent expiration of a patent on the medication has led China to start ramping up production of generics, consuming much of the global supply of a chemical called malonic acid, which China sources domestically. With demand higher in China, those companies get preferred access thanks to the No. 2 economy’s widespread rigging of markets in favor of domestic firms. In Japan, meanwhile, the scramble continues to simply produce more of the stuff in Japan, or rely on sources outside of China.
But all of those things will take a while. It’s difficult to say exactly how long. It’s just another reminder that the US isn’t the only country struggling with sudden export restrictions imposed by China and India on essential materials, drugs and medical equipment.
It’s important to remember that one of the reasons producing these resources has moved abroad is that synthesizing some of these ingredients creates toxic waste that must be subjected to special treatments to dispose of it. These treatments cost almost 10x as much in Japan as they do in China and India, according to Nikkei.
Manufacturing costs are expected to surge as well.
Tablets and other nonprescription drugs are produced through chemical syntheses, necessitating the costly treatment of toxic gases and contaminated water.
Processing water discharges for medicines in Japan costs tens or even hundreds of yen per kilogram, reportedly 10 times higher than in China and India. As a result, producing 50 yen (46 cents) worth of drug in Japan could actually cost over 100 yen.
Japan’s generics industry simply can’t compete with the raw material prices abroad, and because of this massive discrepancy, only roughly 30% of Japan’s supply of generic Avigan is produced using materials 100% produced in Japan.
Producing drugs to treat 2 million patients is achievable as long as the raw material is produced at home. But the government will need to set a price consummate with manufacturing costs and keep it at that level.
Leading anti-flu drug Tamiflu carries a price of about 2,700 yen for two doses daily over five days. If Avigan is priced the same as Tamiflu, a patient will have to pay 8,100 yen because the drug needs to be administered three times more often. For 2 million people, the cost would be 16.2 billion yen, or about $150 million.
Japan’s reliance on foreign-made materials is a structural problem. Generic drugs made entirely of materials produced in Japan accounted for only 30% of total shipment value, according a health ministry survey in 2013, while the remaining 70% relied on at least some imported ingredients.
Of the imports, 30% came from India, along with 24% from China and 26% from South Korea. As Japan moves to further reduce government-set drug prices, the percentage of ingredients sourced overseas is expected to increase even further.
The US isn’t the only country that’s learning the hard way what happens when corporations apply the principles of ‘comparative advantage’ to critical strategic assets like drugs and medical products, as we are learning. That being as it may, it’s still unclear to what degree changes can be made for the long-term, especially when sustainability – not just financially, but in terms of natural resources as well – is taken into account.
Tyler Durden
Sat, 04/18/2020 – 19:20 - Von Greyerz: A Hyperinflationary Depression Has Always Been The Inevitable Endgame
Von Greyerz: A Hyperinflationary Depression Has Always Been The Inevitable Endgame
Authored by Egon von Greyerz via GoldSwitzerland.com,
A Hyperinflationary Depression has always been the inevitable end to the biggest financial bubble in history. And this time it will be global. Hyperinflation will spread from country to country like Coronavirus. It could start anywhere but the most likely first countries are the US and the EU or ED (European Disunion). They will quickly be followed by many more like Japan and most developing countries. Like CV it will quickly jump from country to country with very few being spared.
CURRENT INTEREST RATES ARE A FALSE INDICATOR
Ever since the last interest cycle peaked in 1981, there has been a 39 year downtrend in US and global rates from almost 20% to 0%. Since in a free market interest rates are a function of the demand for credit, this long downtrend points to a severe recession in the US and the rest of the world. The simple rules of supply and demand tell us that when the price of money is zero, nobody wants it. But instead debt has grown exponentially without putting any upside pressure on rates. The reason is simple. Central and commercial banks have created limitless amounts of credit out of thin air. In a fractional banking system banks can lend the same money 10 to 50 times. And central banks can just print infinite amounts.
Global debt in 1981 was $14 trillion. One would have assumed that with interest rates crashing there would not have been a major demand for debt. High demand would have led to high interest rates. But if we look at global debt in 2020 it is a staggering $265 trillion. So debt has gone up 19X in the last 39 years and cost of debt has gone from 20% to 0% – Hmmm!
CORONAVIRUS IS THE CATALYST BUT NOT THE CAUSE
The crisis that the world is now encountering has not been caused by the Coronavirus. As I have stressed in many articles recently, CV is just the catalyst, albeit the most vicious one which could have hit the world. The real cause of the Greatest Financial Crisis in history is the Central Banks. They have been pouring fuel on the fire for 50 years by continuously reducing the cost of money until it became free in 2008 when rates were reduced to ZERO. Since then we have also seen negative rates around the world.
Negative rates are not just a total paradox but also absolute lunacy. Bankrupt sovereign nations around the world have been issuing debt at no cost or have even been paid for it. The whole purpose of interest is to be paid for the risk of lending money. As governments around the world have issued virtually unlimited debt which will never be repaid, the risk of lending to them has increased exponentially. But instead of much higher rates, to reflect the massive increase in debt plus severely elevated risk, central banks have got away with defying the laws of nature buy falsely manipulating rates..
FALSE MARKETS WITH NO REAL PRICES
Money is a commodity and the price should be a direct function of risk plus supply and demand. But since we currently have a false financial system with fake money and false markets, there are no real prices. So through constant manipulation and intervention central banks together with a few accomplices can totally rig most markets and prices.
Therefore, the cost of money today neither reflects the risk nor the demand. All it represents is malicious manipulation to serve governments and their masters the central bankers. But like all fake markets, also this one will end, not just badly but catastrophically.
THE SITUATION IS DESPERATE FOR BUSINESSES AND INDIVIDUALS
As I discussed in last week’s article, we now have the perfect storm. Virtually every government in the world is now committing billions and trillions of dollars, euros etc in fruitless attempts to save a collapsing world economy. In many countries, 50% or more of industry is shut. Most service industries are in a total lockdown and so is aviation, transport and most small businesses. Unemployment is approaching rates not seen since the 1930s depression. All businesses need assistance, from major corporations to small firms. The majority of individuals haven’t got savings for more than a couple of weeks living and for the ones who are now becoming unemployed, the situation is desperate.
Many major US corporations need assistance from the government. Very few of these have put aside profits to reserves for a rainy day. Instead management has been too generously rewarded as well as the shareholders. Since 2009, S&P 500 companies have spent $5.4 trillion in share buybacks. Instead of asking government for assistance, management should pay back their bonuses and shareholders who have received major payouts should recapitalise the companies. But this will obviously not happen. Just like in 2006-9, profits are privatised and losses are socialised.
Businesses are haemorrhaging cash and so are individuals. All that becomes a vicious circle with bills not being paid including rents, mortgages and taxes. Estimates predict a 40-50% fall in Q2 2020 GDP in the US. The problem is that this is not a temporary crisis. This means that GDP will see permanent erosion of a major magnitude in most countries.
SECULAR DOWNTURN LEADING TO HYPERINFLATIONARY DEPRESSION
So what we are experiencing is the start of a secular downturn which soon will become a hyperinflationary depression. This was always the inevitable end to this cycle as I have discussed in many articles for over 20 years.
A crisis of this magnitude is always a debt crisis. Very soon we will see debt around the world come under enormous pressure as borrowers start defaulting. This will lead to bonds crashing and rates surging. Central banks will then lose control of interest rates as long rates first go up and soon also pulling the shorter rates up. Rates can easily go to 15-20%. Many bonds will go to zero and rates to infinity. I have previously talked about paying 21% on my first mortgage in the UK in 1974. So I have personal experience of high inflation but never hyperinflation.
Since the majority of the $1.5 quadrillion derivatives market is interest related, this market will also blow up. All this will lead to unlimited money printing and currencies crashing fast to their intrinsic value of ZERO. At that point the entire financial system will be unrecognisable and parts of it nonexistent. All of this could happen very quickly, possibly within the next 6 -18 months.
2006-9 WAS A REHEARSAL
Could my Cassandra forecast be wrong. Yes, of course it could. But let’s be clear that the rehearsal of what I am predicting took place in 2006-9. Nothing was resolved at that point, just temporarily deferred. This is now the real thing and whatever money central banks print this time will have no effect. So I doubt very much that our banker “friends” can pull another trick out of the hat again. Because the only trick they know, to print more money, can never solve a debt problem.
MARKETS
Stock markets, in their first leg down of the new secular bear market, reached a 40% loss in most countries and that in less than 4 weeks. We are now seeing a typical correction that can go a bit higher. But when that is finished which could take 1-3 weeks, the next devastating downleg will start. Anyone trying to catch this falling knife will be slaughtered.
Bond markets might hold up for a bit longer with massive central bank manipulation and money printing. Junk bonds will first start crashing and constant downgrades will turn a lot of debt to junk. Much of corporate debt will go the same way and within 6-12 months also sovereign debt will come under attack.
Property markets are a major bubble and are already starting to disintegrate. Industrial, commercial, retail and residential, no sector will be spared. There will be no buyers, no financing and many forced sellers. A perfect recipe for a collapse.
Before the secular bear market has bottomed in these three markets, prices will be down 90-100% in real terms. And real terms means in constant purchasing power like gold.
We must remember that markets will bottom long before the economy. The likely development is first a hyperinflationary depression that could come and go very quickly within the next couple of years. Thereafter we will most probably see a deflationary implosion of all assets and a collapse of most of the financial system.
But we mustn’t believe that this is the end. It is just another phase in the world economy to correct excesses of the 100 or 300 years or even 2000 years. Once debt has imploded and all asset prices have come down from current fantasy valuations, a new system will emerge built on sound values and principles. And then the cycle starts all over again.
GOLD
There are currently severe pressures in both the paper gold market and the physical market. The Comex and LBMA are making noises that everything is under control. LBMA is giving the illusion that they have plenty of gold in their vaults. But virtually all of that gold is already committed. Comex, the gold futures exchange is under tremendous pressure since they can’t deliver more than a small fraction in physical when paper holders of gold demand delivery. And that day is not far away.
The 3 biggest refiners in the world based in Ticino, Switzerland have been closed for 2 1/2 weeks, representing at least 50% of world production. The refiners have just opened this week but at a very reduced capacity of 25-33%.
If we just take the Gold ETFs as an example, they increased their holdings by 93 tonnes in the last 4 weeks. That represents a total value of $5 billion
It is today virtually impossible to get hold of physical gold so you wonder where the ETFs have bought their gold.
The answer is of course simple. It was lent to them by LBMA banks which are custodians for the biggest gold ETF GLD. These banks also hold central bank gold and all they need to do is to lend the same gold yet one more time to the ETFs. So if you hold a gold ETF, which you mustn’t, you know that it is unlikely to be backed by gold for more than a small portion of the fund total.
In a world where prices of most assets are about to implode, gold is life insurance and virtually the only asset that will maintain its value in real terms. Silver is also likely to do very well and will most probably outperform gold. But gold is safer and much less volatile.
As the 20 year gold chart shows above, gold is in an extremely strong uptrend. In all currencies but US dollars, gold has surpassed the 2011 highs. The gold price in dollars has just broken out and is now likely to go to $1,700 on its way to the old high of $1,920 and thereafter much, much higher.
As I have expressed before, I have been standing on a soap box for 20 years in my attempt to inform investors of the critical importance of gold for wealth preservation purposes. Fortunately many investors have listened but they still represent less than 0.5% of world financial assets. Since we started 18 years ago, gold is up 6-7X depending on the currency. That rise is insignificant compared to what is coming next.
But remember you are not holding gold to measure the gains in debased paper money. Instead you are holding physical gold as insurance against a broken financial system that is unlikely to be repaired for a very long time.
Tyler Durden
Sat, 04/18/2020 – 18:55 - Retail Sales Were Bad; The Reality Is Catastrophic
Retail Sales Were Bad; The Reality Is Catastrophic
Last week’s retail sales print was – just like the rest of recent economic data – dismal, with the year-over-year drop of 6.2% the largest since September 2009.
Alas, it appears that the government data may have dramatically underrepresented the full severity of the recent plunge. As a reminder, the Census Bureau takes unadjusted numbers and smooths them through the X-14-Arima goalseekarator, which however has never before had to apply a Fourier transformation to an economy which overnight entered a hard stop. That’s why the unadjusted data is far more important to get a true sense of the severity of the current plunge. And since consumer spending accounts for 70% of US GDP, having an accurate read of just how far it has fallen is critical not only to gauge the change in GDP, but corporate profitability which as JPMorgan calculated previously, has a 7x beta to changes in GDP.
To do that, we used Bank of America’s credit and debit card data for the month of March. What it showed is that while the standard measure of spending – retail sales ex-autos – was down just 1.6% month-over-month (mom) seasonally adjusted, total card spending was down a severe 11.5% mom SA. The difference speaks to the composition of each measure as retail sales ex-autos exclude the hardest hit sectors from COVID-19 such as travel and other types of services.
And since the year over year drop was also greater than the depths of the 2008 financial crisis, expect not only March data to be far worse than initially reported, but April – when the entire economy was shut down for the full month – to be absolutely abysmal.
Looking ahead, BofA expects the weakness “to persist through April and become more apparent in the narrow measures as well.” And indeed, when examining the latest daily debit and credit card spending in the first week of April 10th, BofA finds that total card spending was down an average of 30% yoy.
The continued drop took place despite a “meaningful improvement in online retail card spending, which was up 50% yoy in the 7-day period ending April 10th.” This partly reflects a shift to online ordering for food with online grocery store spending up 162% yoy and restaurant orders placed online up 85% yoy over the same 7-day period. Some more good news: online discretionary spending also improved, with further gains in online electronics as well as modest improvement in online clothing and department stores.
On the other side, a number of categories continue to show virtually no spending, including airlines, lodging and entertainment services.
Restaurants and clothing stores have stabilized, with % yoy down around 50% and 60%, respectively. Even spending at grocery stores has cooled from a very strong March as people shelter at home.
There was a paradoxical silver lining in that if looking at just the GDP-defining control group (retail ex-autos, building materials, restaurants and gasoline), the aggregate actually increased in the month. This reflects the fact that core control nets out restaurants and gasoline which were both down sharply, and leaves a more narrow measure of spending where grocery store spending – which was up 31% mom SA – has a larger weight.
And speaking of paradoxical, the breakdown of spending by income group shows something even more strange: spending slowed down the most for the highest income group, to just 0.3% in March from 2.7% in February. This could reflect the fact that higher income households have a larger share in discretionary spending which saw the biggest drop. It would also mean that the economy could be hit even more severely than some of the latest fire GDP forecasts which expect as much as a 50% drop in GDP growth.
Below we present some more charts to show the dramatic transformation to consumer spending which the covidepression has triggered within the US economy, first for just the month of March…
… and then also for the first ten days of April.
Tyler Durden
Sat, 04/18/2020 – 18:30 - US Builds Up Naval Forces In Caribbean In Pressure Campaign Against Maduro
US Builds Up Naval Forces In Caribbean In Pressure Campaign Against Maduro
Authored by Jason Ditz via AntiWar.com,
US Southern Command chief Admiral Craig Faller said in an interview that the growing US buildup in the Caribbean does not represent a change in Venezuelan policy, and is not aimed at removing President Maduro from power.
Faller said that the US continues to want to oust Maduro through “economic and diplomatic pressure,” and not military force, though other officials have said the US would not rule out the use of military force to do so.
File image: US Navy, Flickr As the AP writes:
“This is not a shift in U.S. government policy,” said Faller, who nonetheless celebrated that enhanced interdiction efforts would hurt Maduro’s finances and staying power. “It’s not an indication of some sort of new militarization in the Caribbean.”
The deployment announced this month is one of the largest U.S. military operations in the region since the 1989 invasion of Panama to remove Gen. Manuel Noriega from power and bring him to the U.S. to face drug charges. It involves assets like Navy warships, AWACS surveillance aircraft and on-ground special forces seldom seen before in the region.
When the US started this latest buildup in the Caribbean, it was done nominally to fight drugs, and came immediately after the US put a bounty on Maduro accusing him of drug smuggling. Attorney General Barr created the legal basis for this.
Venezuelan President Nicolas Maduro meets with Russia’s ambassador Sergey Melik-Bagdasarov at Miraflores Palace in Caracas, Venezuela, March 30, 2020. Via Reuters This was why there was substantial concern about a US military invasion, as Barr had similarly constructed the pretext to invade Panama in 1989 and remove Manuel Noriega.
It was conceivable, after failing to oust Maduro other ways, that they might revisit the old tactic.
Tyler Durden
Sat, 04/18/2020 – 18:05 - Here's Why A Coronavirus Vaccine Might Not Happen Within 18 Months
Here's Why A Coronavirus Vaccine Might Not Happen Within 18 Months
With much of the world under some form of lockdown to slow the spread of COVID-19, and debates rage over when, and how, to reopen the global economy in order to avoid the next great depression, the light at the end of the tunnel has been top-down predictions of a vaccine within 18 months.
JPMorgan, for example, makes a core assumption that “it could take 12-16 months for a vaccine to be under mass production,” and that the US will go through cycles of increased distancing measures followed by virus flare-ups, which require more lockdowns.
Yet after bold predictions and vaccines rumored to be ‘just around the corner,’ Dr. Anthony Fauci, director of the US National Institute of Allergy and Infectious Disease who sits on President Trump’s coronavirus task force, offered a less enthusiastic view – saying in early March that a vaccine might be available in 12 – 18 months.
“The whole process is going to take a year, a year and a half, at least,” said Fauci.
Fauci has to tamp down on vaccine expectations which causes the President to ask him to talk about therapeutics pic.twitter.com/gUrOVs0l8H
— Acyn Torabi (@Acyn) March 3, 2020
https://platform.twitter.com/widgets.js
And while Fauci has been accused of fear mongering – relying on wildly-pessimistic models while advising President Trump on lockdown measures, he may have been wise to downplay the vaccine timeline.
According to a new report by Australia’s ABC, the creation of a vaccine may be incredibly difficult for several reasons, as this particular coronavirus is ‘posing challenges that scientists haven’t dealt with before.’
According to Ian Frazer of the University of Queensland – who was involved in the creation of the HPV vaccine, coronaviruses are particularly difficult to create safe vaccines before because the virus infects the upper respiratory tract, which our immune system isn’t particularly adept at protecting.
There are several reasons why our upper respiratory tract is a hard area to target a vaccine.
“It’s a separate immune system, if you like, which isn’t easily accessible by vaccine technology,” Professor Frazer told the Health Report.
Despite your upper respiratory tract feeling very much like it’s inside your body, it’s effectively considered an external surface for the purposes of immunisation.
“It’s a bit like trying to get a vaccine to kill a virus on the surface of your skin.” –ABC News
In other words, because the upper respiratory tract is effectively “outside” of the body, and the outer layer of (epithelial) cells in the tract is our natural barrier to viruses, it’s difficult to produce an immune response which can reach them.
Complicating matters is that if a vaccine causes an immune response that doesn’t benefit the target cells, the result could potentially be worse than no vaccine at all.
“One of the problems with corona vaccines in the past has been that when the immune response does cross over to where the virus-infected cells are it actually increases the pathology rather than reducing it,” said Frazer. “So that immunisation with SARS corona vaccine caused, in animals, inflammation in the lungs which wouldn’t otherwise have been there if the vaccine hadn’t been given.”
Antibodies, meanwhile, don’t last forever
The human immune system releases antibodies to neutralize threats such as viruses. With the coronavirus, those who have been infected have shown varying degrees of antibody production – with some weak and some strong. That said, antibodies don’t last forever.
“Yes, you get antibodies after a [cold] infection, and yes it lasts for a while, but it’s not lifelong… sort of months rather than years,” said Frazer. “I think it would be fair to say that the natural immunity that you get after infection from this coronavirus is probably going to turn out like the coronaviruses we’ve seen in the past.”
That said, “The good news is that if you get reinfected with the virus a second time some months down the track, there will probably be enough immunity there to stop you becoming seriously ill.”
Vaccines under development
Current efforts to find a cure have ranged from the use of deactivated virus fragments like we do with influenza, to using mRNA to induce an antibody response. Many will fail before a successful treatment is found, according to the report.
Professor Frazer’s prediction is that the most likely candidate will be a vaccine that uses a part of the virus attached to a chemical to induce an immune response, or “subunit” vaccine.
“That [vaccine type] has been successful in animal models for coronaviruses in the past and that is of course where the money is being put in large measure at the moment,” he said.
“Another sort of vaccine would be just antibody transferred from somebody who had been infected already and had got rid of the infection.
“Which would be an immunological means of preventing infection, and could probably be more quickly developed than an actual vaccine.”
This sort of vaccine was tested with SARS in 2003 and resulted in reinfected lab monkeys having a nasty immune response, which is why many groups working on a vaccine for Sars-CoV-2 are going for a very specific antibody response.
Professor Frazer said the narrow, targeted approach is fine, unless you pick the wrong specific antigen — the substance that stimulates an immune response which antibodies bind to — in which case you could end up with the same problem. –ABC News
Perhaps the best minds in the world focusing all of their efforts on COVID-19 will be able to crack the code and develop a successful vaccine. Then again, we also don’t have vaccines against HIV and cancer despite decades of efforts.
“I think it would be fair to say even if we get something which looked quite encouraging in animals, the safety trials in humans will have to be fairly extensive before we would think about vaccinating a group of people who have not yet been exposed to the virus,” according to Frazer.
“They might hope to get protection but certainly wouldn’t be keen to accept a possibility of really serious side effects if they actually caught the virus.”
Tyler Durden
Sat, 04/18/2020 – 17:40 - The Timeline Of WHO's Cover-Up Exposed
The Timeline Of WHO's Cover-Up Exposed
Authored by Peter Svab via The Epoch Times,
The World Health Organization (WHO) is facing a flurry of criticism for its response to the CCP virus pandemic, and much of the problem can be attributed to the growing influence the communist regime in China has on the organization.
Critics mainly point out that the WHO was too slow to recommend travel restrictions and some other preventive measures, and also that the agency accepted information from China at face value, despite numerous red flags.
While China experts were sounding alarms about a coverup, the WHO continued to praise China’s response and never warned the world that data coming from the regime was suspect.
WHO, an agency of the United Nations, has long been swayed by Beijing’s political preferences. Its current head, Dr. Tedros Adhanom Ghebreyesus, is a former member of a Maoist group in Ethiopia.
As The Epoch Times previously documented, China has been increasing its power over U.N. institutions for years. Beijing’s clout has now gone so far, it undermines WHO’s basic functions, such as providing timely and accurate information about the world’s health situation.
Case in point: the CCP virus.
Timeline
The CCP virus, commonly known as the novel coronavirus, broke out in the central Chinese city of Wuhan around November 2019, before spreading across China and the world.
As of April 14, there are some 2 million confirmed cases of the virus, which causes the disease COVID-19. Almost 130,000 deaths have since been attributed to the disease worldwide.
The WHO has said that Chinese authorities first informed it about the outbreak on Dec. 31, 2019. While that would have been a golden opportunity to mitigate the spread of the virus worldwide, the WHO conveyed none of its information to the world that day.
It appears that only one country had its ear close enough to the ground at that point to respond meaningfully—Taiwan.
By Dec. 31, the island nation off the coast of mainland China had already started monitoring travelers coming on flights from Wuhan. Taiwan authorities also told the WHO that day that Taiwanese doctors had learned from their mainland counterparts that health care workers had been falling ill with the mysterious new virus.
That was crucial information, since it indicated the virus was spreading from person to person. The WHO, however, ignored it, Taiwan officials later said.
It was to be expected of the WHO to ignore that warning. The CCP considers Taiwan a breakaway province and has pressed the U.N. to ignore Taiwan’s existence as an independent country.
Taiwan has been denied membership in the WHO, whose personnel are prohibited from using documents or even information from official Taiwan sources without prior special permission, according to a leaked 2010 WHO memo.
Such permission would involve “coordination with the Permanent [UN] Mission of China in Geneva,” the memo stated.
While Taiwan was getting its response to the virus underway, the situation in Wuhan was quickly deteriorating.
On Jan. 2, The Epoch Times reported on the efforts of the CCP to block information about the outbreak and the high levels of anxiety spreading throughout the city.
A Wuhan Health Commission directive prohibited all medical facilities in the city “from publicizing medical information without permission,” and online discussions about the outbreak were quickly censored. On Jan. 1, Wuhan police said that they had detained eight locals who had spread “rumors” about the outbreak.
As it turned out, at least some of the suppressed whistleblowers were doctors who had tried to warn colleagues about the new virus.
Panicked locals cleared Wuhan pharmacies of surgical masks and over-the-counter preventive Chinese medicines. China expert and physician Tang Jingyuan warned a government coverup might exacerbate the spread of the virus.
Meanwhile, the WHO remained silent.
By Jan. 3, the WHO was informed by Chinese authorities of 44 cases, 11 of them severe.
That was likely the tip of the iceberg.
On Jan. 5, The Epoch Times reported, citing multiple experts, that the CCP had likely been covering up information about the virus, which was detrimental to controlling the outbreak.
That day, the WHO commented for the first time about the outbreak, disclosing that it had known about an outbreak of a “pneumonia of unknown cause” in Wuhan for five days and recommending that it should be “handled prudently.” But the agency didn’t recommend “any specific measures for travelers.”
Instead, it did the opposite.
“WHO advises against the application of any travel or trade restrictions on China based on the information currently available on this event,” it said.
Five days later, the WHO addressed the outbreak again.
“From the currently available information, preliminary investigation suggests that there is no significant human-to-human transmission, and no infections among health care workers have occurred,” the agency stated, contradicting information that had been provided by Taiwan.
“WHO does not recommend any specific health measures for travelers,” WHO said. It instead released general information on how to deal with virus infections.
On Jan. 12, WHO said there was “no clear evidence of human-to-human transmission,” slightly adjusting its language.
“Preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission,” WHO announced two days later, never expressing a shadow of a doubt about the Chinese communist regime’s official statements.
At this time, Taiwan had already arranged for its own fact-finding team to travel to Wuhan.
“They didn’t let us see what they didn’t want us to see, but our experts sensed the situation was not optimistic,” Taiwanese government spokesperson Kolas Yotaka told NBC News.
Soon after the team returned, Taiwan initiated testing and reporting requirements for its hospitals.
“Looking after itself, not listening to the WHO in this particular case, I think actually helped,” said Dr. William Stanton, vice president of the National Yang-Ming University of Taiwan and a former U.S. ambassador to China, in a recent interview with The Epoch Times’ Jan Jekielek.
The WHO only managed to get its team to Wuhan for “a brief field visit” on Jan. 20.
On Jan. 17, the U.S. Centers for Disease Control and Prevention (CDC) sent personnel to screen travelers coming from Wuhan to three major U.S. airports – JFK, Los Angeles International, and San Francisco International, which were getting the highest traffic from the outbreak’s epicenter.
More airports were added to the list in subsequent weeks.
On Jan. 20, China confirmed human-to-human transmission.
On Jan. 23, the day the CCP put Wuhan on lockdown, the WHO announced that, despite some internal disagreements, it wouldn’t declare the outbreak a “public health emergency of international concern.”
By then, cases had already started to crop up around the world, including in the United States.
Three days later, Taiwan banned flights from Wuhan and arranged special flights to return its people from the city.
On Jan. 28, while visiting China, the WHO’s Tedros urged the countries of the world “to remain calm and not to overreact,” expressing confidence in the CCP’s epidemic control, Chinese state-run media reported.
On Feb. 3, three days after President Donald Trump prohibited foreigners who had recently been in China from traveling to the United States, Tedros voiced opposition to travel bans, saying measures that would “unnecessarily interfere with travel and trade” weren’t needed.
In a March 20 tweet, Tedros repeated CCP propaganda, saying that “for the first time, #China has reported no domestic #COVID19 cases yesterday.” While for China experts, the news all but confirmed that the CCP numbers were fake, Tedros touted it as “an amazing achievement, that gives us all reassurance that the #coronavirus can be beaten.”
Statistical modeling, eyewitness accounts, and documents provided to The Epoch Times have shown that Chinese authorities concealed the true scale of the outbreak in Wuhan and other parts of China.
Tedros, however, repeatedly praised China for “transparency” in its response to the outbreak—something experts and government officials around the world have emphasized as being the most lacking.
The Victims of Communism Memorial Foundation, a nonprofit established in the 1990s by the U.S. government, published on April 10 a detailed timeline of the CCP’s coverup of the epidemic and of the WHO’s culpability in it. The organization also announced it would be adding the global CCP virus deaths to the historical death toll of communism.
“The WHO has abdicated its responsibility to the entire world population in order to carry water for the Chinese Communist regime,” the foundation’s executive director, Marion Smith, said in a release.
A Personal Connection
While part of the CCP’s influence over the WHO was coming from the U.N., another part of it was played by Tedros himself.
Tedros is a former Politburo member of the Tigray People’s Liberation Front, a Maoist group that had waged a guerrilla war in the 1980s against the Soviet-backed Mengistu regime in Ethiopia.
“The nearest you would put [Tigray’s ideology] to would be North Korea today,” according to Trevor Loudon, an expert on communist movements and front groups.
In the early 1990s, as the regime at the time lost financial support from the collapsing Soviet Union, a coalition of Tigray and other groups overthrew it and ruled the country until 2019.
While on the surface, the government embraced market reforms and democratic elections, ideologically it remained socialist, Loudon said, especially in terms of foreign policy.
“They still keep up their foreign communist connections,” he said in a telephone interview with The Epoch Times.
Tedros, a former health and later foreign minister of the African nation, naturally maintained strong ties with the CCP, embracing projects such as the “Belt and Road” initiative, which serves the CCP to expand its geostrategic influence.
Tedros scored the WHO’s top post in 2017 with strong backing by the CCP’s lobby, despite allegations that he had covered up three cholera outbreaks during his tenure as health minister.
“Chinese diplomats had campaigned hard for the Ethiopian, using Beijing’s financial clout and opaque aid budget to build support for him among developing countries,” Sunday Times columnist Rebecca Myers wrote at the time.
Tedros denied covering up the cholera outbreaks, saying it was just “acute watery diarrhea.”
He has proven adept at playing into Western sensitivity to accusations of oppression.
When an adviser to his British opponent for the WHO leadership brought up the cholera coverups, he accused him of having a “colonial mindset.”
When Taiwan called him out for ignoring its information about the CCP virus, Tedros accused Taiwan of racist attacks.
That accusation seems to have done little to deflect the criticism; a petition calling for Tedros’s resignation has garnered nearly a million signatures.
Meanwhile, the Trump administration is considering cutting off its funding to the WHO – the United States is by far the largest benefactor of the organization, providing more than $110 million a year in regular funding, plus hundreds of millions more in voluntary contributions.
In Stanton’s view, the WHO, “as currently constituted,” should lose its funding.
“I think we have to take a much harder line in terms of how the WHO has handled this virus,” he said. “Because it’s clearly been simply a mouthpiece, in my view, of the PRC [People’s Republic of China] government.”
Tyler Durden
Sat, 04/18/2020 – 17:15 - US Abruptly Ends Continuous Bomber Presence In Guam Days After B-52 'Show Of Force'
US Abruptly Ends Continuous Bomber Presence In Guam Days After B-52 'Show Of Force'
Coming as a likely surprise to US enemies and rivals at a moment regional tensions with China are once again on the rise, and just days after a major aircraft “elephant walk” show of force was conducted at Anderson Air Force Base in Guam, the Air Force has announced it will end its continues bomber presence in Guam.
This ends an ongoing bomber rotation since 2004, as The Drive reports: “Five B-52H Stratofortresses left yesterday with no replacement aircraft in place, bringing an end to what the service had called the Continuous Bomber Presence Mission.”
B-52 bombers at Guam, file image, Pinterest. A US Strategic Command (STRATCOM) statement confirmed the bombers are now to be “permanently based in the United States” after returning to American soil.
“In line with the National Defense Strategy, the United States has transitioned to an approach that enables strategic bombers to operate forward in the Indo-Pacific region from a broader array of overseas locations, when required, and with greater operational resilience, while these bombers are permanently based in the United States,” STRATCOM said.
“U.S. strategic bombers will continue to operate in the Indo-Pacific, to include Guam, at the timing and tempo of our choosing,” the statement added.
Our diverse bomber fleet – B-52, B-1 & B-2 – allows us to respond to global events anytime, anywhere. Whether they’re launched from Louisiana, Guam, or the U.K., long-range strategic bombers have and will remain a bedrock of our deterrence! #DynamicForceEmployment pic.twitter.com/2dQmcNGOmw
— US Strategic Command (@US_Stratcom) April 16, 2020
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Per Air Force Magazine, a major adjustment was expected:
The last deployment ended April 16, just three days after the elephant walk, as B-52s returned to Minot Air Force Base, N.D. The long-expected change comes as service leaders, including Air Force Chief of Staff Gen. David Goldfein and Air Force Global Strike Command boss Gen. Timothy Ray have said dynamic deployments of task force-size groups of bombers will be more effective in the future.
“Yes, we are absolutely adjusting our presence in theater when it comes to bombers,” Goldfein said April 1.
A separate STRATCOM statement late this week additionally said the bomber fleet allows the US to “respond to global events anytime, anywhere”.
USAF B-52Hs SEEYA01, 02, 03, 04 & 05 departed Andersen AFB, Guam en route home to Minot AFB, North Dakota. pic.twitter.com/woOBYDT8fq
— Aircraft Spots (@AircraftSpots) April 16, 2020
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“Our diverse bomber fleet – B-52, B-1 & B-2 – allows us Whether they’re launched from Louisiana, Guam, or the U.K., long-range strategic bombers have and will remain a bedrock of our deterrence!” – the statement posted on Twitter said.
Tyler Durden
Sat, 04/18/2020 – 16:50 - The Government Shows Little Respect For Our Tax Dollar
The Government Shows Little Respect For Our Tax Dollar
Authored by Bruce Wilds via Advancing Time blog,
Hard-working Americans that pay taxes should be more than angry over how little respect the politicians in Washington have for their tax dollars...
An article that appeared on MarketWatch details what people that receive an undeserved 1,200 dollar stimulus checks under the CARES Act should do. The answer appears just over halfway down on the page in answer to the following question;
Question: I believe that my adult son received a $1,200 EIP, via automatic deposit to his checking account, that he was not entitled to because he is my tax-return dependent. Will the IRS go into his checking account and debit it to get the money back?
Answer: No. The statutory language in the CARES Act that set the whole EIP scheme in motion says that anybody who gets more money than they are actually entitled to can keep the excess. I endorse that concept: any money that gets into people’s hands is fair game.
In the above case, it appears the fella received the money in error but I have heard, and I’m also under the impression the same issue exists in the case where a check is sent to somebody that is deceased. The article explains the Feds are using our beloved Internal Revenue Service to distribute these so-called Economic Impact Payments (EIPs). The IRS is not currently processing 2019 returns because the agency is swamped with all the new COVID-19-related tasks it has been given.
The article also states the IRS’s data processing systems were notoriously inadequate even before getting overwhelmed with all these new tasks.
Apparently to those in our government, 1,200 dollars isn’t worth the time it takes to do the administrative job of reclaiming it.
From what I understand we are talking about checks that total several billions of dollars. This type of waste is just another example of why people don’t like paying taxes.
Tyler Durden
Sat, 04/18/2020 – 16:25
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