May 25

Today’s News 25th May 2020

  • Escobar On China: One Country, Two Sessions, Three Threats
    Escobar On China: One Country, Two Sessions, Three Threats

    Tyler Durden

    Sun, 05/24/2020 – 23:30

    Authored by Pepe Escobar via The Saker blog,

    The key takeaways of the Two Sessions of the 13th National People’s Congress in Beijing are already in the public domain.

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    In a nutshell: no GDP target for 2020; a budget deficit of at least 3.6% of GDP; one trillion yuan in special treasury bonds; corporate fees/taxes cut by 2.5 trillion yuan; a defense budget rise of a modest 6.6%; and governments at all levels committed to “tighten their belts.”

    The focus, as predicted, is to get China’s domestic economy, post-Covid-19, on track for solid growth in 2021.

    Also predictably, the whole focus in the Anglo-American sphere has been on Hong Kong – as in the new legal framework, to be approved next week, engineered to prevent subversion, foreign interference “or any acts that severely endanger national security.” After all, as a Global Times editorial stresses, Hong Kong is an extremely sensitive national security matter.

    This is a direct result of what the Chinese observer mission based in Shenzhen learned from the attempt by assorted fifth columnists and weaponized black blocs to nearly destroy Hong Kong last summer.

    No wonder the Anglo-American “freedom fighter” front is livid. The gloves are off. No more free lunch. No more paid protests. No more black blocs. No more hybrid war. Baba Beijing’s got a brand new bag.

    The three threats

    It’s absolutely essential to position the Two Sessions within the larger, incandescent geopolitical and geoeconomic context of the de facto new Cold War – hybrid war included – between the US and China.

    So let’s focus on an American insider: former White House national security adviser Lieutenant General HR McMaster, author of the upcoming Battlegrounds: The Fight to Defend the Free World.

    This is as clear cut as it gets in terms of how the “free world,” in Pentagonese, perceives the rise of China. Call it the view of the industrial-military-surveillance-media complex.

    Beijing, per McMaster, is pursuing a policy of “co-option, coercion and concealment,” centered on three axes:

    1. Made in China 2025;

    2. the New Silk Roads, or Belt and Road Initiative;

    3. and a “military-civil fusion” – arguably the most “totalitarian” vector, centered on creating a global intel network in espionage and cyber-attacks.

    Call these the three threats.

    Whatever the spin across the Beltway, Made in China 2025 remains alive and well – even if the terminology has been skipped.

    The target, to be reached via $1.4 trillion in investments, is to profit from the knowledge accumulated by Huawei, Alibaba, SenseTime Group and others to design a seamless AI environment. In the process, China should be reinventing its technological base and restructuring the entire semiconductor supply chain to be domestic-based. These are all non-negotiables.

    Belt and Road, in Pentagonese, is synonymous of “economic clientelism” and a “ruthless debt trap.” But McMaster gives away the game when he describes the cardinal sin as “the goal of displacing the influence of the United States and its key partners.”

    As for the “military-civil fusion,” in Pentagonese, that’s all about fast tracking “stolen technologies to the army in such areas as space, cyberspace, biology, artificial intelligence and energy.” It amounts to “espionage and cyber-theft.”

    In sum: “pushback” is essential against those China’s commies becoming “even more aggressive in promoting its statist economy and authoritarian political model.”

    Chinese diaspora speaks

    Apart from this binary, quite pedestrian assessment, McMaster does make an interesting point:

    “The US and other free nations should view expatriate communities as a strength. Chinese abroad – if protected from the meddling and espionage of their government – can provide a significant counter to Beijing’s propaganda and disinformation.”

    So let’s compare it with the insights of a true master in Chinese diaspora: the redoubtable professor Wang Gungwu, born in Surabaya in Indonesia, who will be 90 years old this coming October and is the author of a delightful, poignant book of memoirs, Home is Not Here.

    For outsiders there’s no better explanation of the predominant frame of mind across China:

    “At least two generations of Chinese have learnt to appreciate that the modern West has valuable ideas and institutions to offer, but the turmoil of much of the 20th century has also made them feel that the Western European versions of democracy might not be that important for China’s national development. The majority of Chinese seem to approve of policies that place order and stability above freedom and political participation. They believe that this is what the country needs at this stage and resent being regularly criticized as politically unliberated and backward.”

    Wang Gungwu stresses how the Chinese think quite differently from the “universalist” trajectory of the West, and thus reaches the heart of the matter:

    “Should the PRC succeed in providing an alternative route to prosperity and independence, the US (and elsewhere in the West) would see that as a fundamental threat to its (and Western European) dominance in the world. Those who feel threatened would then do everything they can to stop China. I think this is what most Chinese believe is what American leaders are prepared to do.”

    No US Deep State assessment can possibly stand when ignoring the wealth of Chinese history:

    “The nature of China’s politics, whether under emperors, warlords, nationalists or communists, was so rooted in Chinese history that no individual or group of intellectuals could offer a new vision that could appeal to the majority of the Chinese people. In the end, that majority seemed to have accepted the legitimacy of PRC’s victory on the battlefield coupled with the capacity to bring order and renewed purpose to a rejuvenated China.”

    Remixed long telegram

    Federal prosecutor Francis Sempa, author of America’s Global Role and an adjunct professor of political science at Wilkes University, has compared McMaster’s assessment of the China “threat” to the legendary “long telegram” written by George Kennan in 1947, under the pseudonym X.

    The “long telegram” designed the subsequent strategy of containing the Soviet Union, complete with the building up of the North Atlantic Treaty Organization. It was the prime Cold War blueprint.

    The current, pedestrian long telegram remix might also have long legs. Sempa, to his credit, at least admits that “McMaster’s timid policy recommendations will not lead to the gradual break-up or mellowing of Chinese Communist power.”

    He suggests – what else – “containment,” which should be “firm and vigilant.” And he recognizes, to his credit, that it should be “based on an understanding of Chinese history and Indo-Pacific geography.” But then, once again, he gives away the game – in true Zbigniew Brzezinski fashion: what matters most is “the need to prevent a hostile power from controlling the key power centers of the Eurasian landmass.”

    It’s no wonder the US Deep State identifies Belt and Road and its spin-offs such as the Digital Silk Road and the Health Silk Road across Eurasia as manifestations of a “hostile power.”

    The whole fulcrum of US foreign policy since WWII has been to prevent Eurasia integration – now actively pursued by the Russia-China strategic partnership. New Silk Roads across Russia – part of Putin’s Great Eurasia Partnership – are bound to merge with Belt and Road. Putin and Xi will meet again, face-to-face, in mid-July in St. Petersburg, for the twin summits of BRICS and the Shanghai Cooperation Organization, and will further discuss it in extensive detail.

    So presiding, in silence, over the Two Sessions, is the understanding by the Chinese leadership that getting back to domestic business, fast, is essential for a renewed push on the grand chessboard. They know the industrial-military-surveillance-media complex will pull no punches to deploy every possible geopolitical and geoeconomic strategy to sabotage Eurasia integration.

    Made in China 2025; Belt and Road – the post-modern equivalent of the Ancient Silk Road; Huawei; China’s manufacturing pre-eminence; breakthroughs in the fight against Covid-19 – everything is a target.  And yet, in parallel, nothing – from a remixed long telegram to stale ruminations on the Thucydides Trap – will derail a rejuvenated China from hitting its own targets.

  • Get Ready For Disinfected Dice As Vegas Plans Reopening 
    Get Ready For Disinfected Dice As Vegas Plans Reopening 

    Tyler Durden

    Sun, 05/24/2020 – 23:00

    Nevada’s gaming industry could reopen as soon as June 4, Gov. Steve Sisolak stated Friday. The Nevada Gaming Control Board will meet next week with health officials to determine which sanitation protocols are needed at casinos before reopening. 

    “The board is firmly aware of its statutory duty to protect the public health and welfare of the Silver State’s citizenry while allowing the gaming industry to flourish through strict regulation,” Sisolak said in a statement.

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    Casinos are expected to submit reopening safety plans to the board next week. When gamblers step inside the casino floor, they will be immediately greeted by staff and screened at temperature check stations. All employees and patrons will be required to wear masks. Table games will have reduced capacity, for instance, there could be three players per blackjack table instead of six. Also, one could expect sanitation stations across the entire property — a move to limit the spread of the virus. 

    While playing games, dice will be disinfected between shooters, chips, and cards will be routinely swapped out. Resort guests at some casinos will go all-digital via their smartphone — this means phones will be used for touchless check-in, used as room keys, and even used to read menus at the facility’s restaurant(s). 

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    “You’re going to see a lot of social distancing,” Sean McBurney, GM at Caesars Palace, told AP News. “If there’s crowding, it’s every employee’s responsibility to ensure there’s social distancing.”

    Wynn Resorts properties and The Venetian will deploy thermal cameras on gaming floors to intercept people with feverish conditions. 

    Bill Hornbuckle, CEO and president of MGM Resorts International, said his company is losing $10 million per day during the shutdown. He said only 2 of its 10 Strip properties would open first: Bellagio and New York-New York.

    Hornbuckle said because of social distancing and new rules, and there will be a lot “fewer people, by control and by design” in his casinos. 

    Caesars Entertainment is expected to reopen Caesars Palace and the Flamingo Las Vegas, then Harrah’s Las Vegas and the casino floor at The LINQ hotel-casino.

    Robert Lang, executive director of the Brookings Mountain West, a think tank at the University of Nevada, said large crowds are not expected to return quickly to the Vegas strip. 

    Lang is correct, just like the airline industry – which Boeing CEO’s Dave Calhoun recently warned air travel growth might not return to pre-corona levels for several years – the same should be noted for Vegas. 

    With Vegas imploded, and 1 in 3 jobs in the state tied to the resort industry, Nevada’s unemployment rate has jumped to almost 30% in nine weeks, the worst-ever unemployment rate in state history and the highest in the country. 

    Read: “Money Is Running Out” – Vegas Struggles To Survive Shutdown

    Getting back to normal, or merely revisiting 2019 growth rates, for the Vegas casino industry and or the economy as a whole, will take several years or more. 

  • China Sets Yuan Fix At Weakest Since 2008
    China Sets Yuan Fix At Weakest Since 2008

    Tyler Durden

    Sun, 05/24/2020 – 22:32

    Just hours after China’s Foreign Minister Wang Yi warned that “some” in America were pushing relations to a “new Cold War”, Beijing made it clear how it intends to retaliate in this new paradigm: by doing the one thing that infuriates Trump more than anything, devaluing its currency.

    After the PBOC fixed the yuan at 7.0939 on Friday, the PBOC set the Monday USDCNY midpoint at 7.1209, which was not only weaker than the expected fix of 7.1205 but the weakest fixing since 2008.

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    Zooming in on the past 10 days shows the sharp bounce in the past three days in both the fixing, the onshore and the offshore yuan, the last of which is now just shy of the lows hit during the March crash, if still below the all time lows hit on Sept 2, 2019 when the USDCNH spiked as high as 7.1940 in response to the escalating trade war.

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    That said, some – such as Bloomberg – had a different expectation for the fixing, which they saw as 7.1220, which would in turn mean a stronger than expected fixing, and one suggesting that the PBOC has activated its countercyclical buffer to slow the drop of the onshore yuan as the offshore yuan slumps. Their conclusion, which is counter to sellside expectations, is that this marks a shift in the PBOC’s countercyclical adjustments and “could be seen as a warning shot toward speculators betting on a weaker yuan.”

    Whether Bloomberg’s fixing model is correct, or consensus expectations for a stronger fix are right, remains to be seen however if indeed it is China’s stance to devalue the yuan in response to the sharp deterioration in Sino-US relations then expect the offshore yuan to take the lead and to keep sliding, giving the PBOC cover for further devaluation and telegraphing how it plans on responding to the “cold war” and any future escalations by the US.

    Ironically, the very same Bloomberg, in a different report, notes that “the spread between spot USD/CNH and USD/CNY is likely to become more volatile in coming days, driven by a widening bias. A combination of U.S.-China political tension and unrest in Hong Kong will provide a negative feedback loop into the offshore yuan.”

    The PBOC can be expected to maintain a tight grip on the daily yuan fixing and enforce the 2% fluctuation range. But there is no such constraint for the offshore yuan, which is free to roam, only being pulled back into line by FX arbitrageurs or in response to speculation about central bank intervention.

    As author Mark Crankfield writes, “the CNH forwards curve can also be expected to see an upward trajectory. The spread spiked to more than 10 big figures several times during previous periods of yuan turbulence. A similar outcome is likely in the near term, as investors consider what the threat of a new cold war will mean for risk assets.“

    One thing to note: the last time the offshore yuan was here, the S&P was at 2,300.

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    Finally, here is a reminder from Rabobank’s Michael Every why in the current environment of escalating hostility between the US and China, the only thing that matters is the Yuan, and why in the not too distant future, the Chinese currency may have a 10-handle in front of it.

    This time last year, when we were all still going abroad regularly (right now just ‘outside’ is becoming a psychological barrier if I am honest) I was traveling with a presentation titled “Clause is Cause”. This argued that from a geostrategic ‘Von Clausewitz’ perspective, not a neoliberal “Let’s assume world peace” version, the US would at some point realise the USD/Eurodollar was a weapon it could wield vs. China, and when it did we would see three key strings cut: trade; tech; and then capital flows. The first was evident during the trade war – which has not been concluded is likely to get far worse soon; the second is also abundantly clear on a variety of fronts, much to Silicon Valley’s chagrin; and potentially, now we see the start of that third step – because if the US does block this first USD50bn going in, other such steps will follow, just as they did on the previously unthinkable idea of US tariffs on China.

    CNH is right to be selling off, albeit in a traditionally limited fashion, because if you don’t buy from China and you don’t help China up the value-chain and you don’t invest in China then China is not going to be getting much USD liquidity at all. The US hawks probably don’t get the Eurodollar iron logic there; they are likely just pressing buttons in anger. The outcome would be the same nonetheless.

    I can hear the market bulls and technocrats of the world saying “But China has USD3 trillion in reserves!” Perhaps. Most think it’s far lower than that. And not earning USD means you have to dig into that stockpile. And when you do, the PBOC either has to contract the local money supply (because every USD is backed by 7.xx CNY on the other side of the balance sheet) or it just creates new CNY anyway and supply-demand sees CNY move sharply lower – as we have been seeing in all other EM FX. Looking at the drop in BRL, ARS, ZAR, TRY, etc., or even THB, this would be how we would get to the ‘unthinkable’ 8 (9? 10?) handle in CNY. That would also crush those other EM crosses in tandem – and AUD and NZD, as the former tries to navigate its own geopolitical spat with Beijing.

    And so with the Fed having taken over most US capital markets which have now lost most if not all of their discounting and signaling capabilities, keep an eye on that USDCNH: ironically, it may be the last true market stress indicator left.

  • Dreaming Of Visiting Japan? The Government Might Pay Half Your Expenses To Jumpstart Tourism
    Dreaming Of Visiting Japan? The Government Might Pay Half Your Expenses To Jumpstart Tourism

    Tyler Durden

    Sun, 05/24/2020 – 22:30

    Authored by Elias Marat via TheMindUnleashed.com,

    If you’re currently stuck at home and facing government lockdown orders in response to the coronavirus pandemic, we won’t blame you if you’re currently fantasizing about the vacations you want to take once the world returns to relative normalcy.

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    While books, YouTube travel vlogs, and even open world video games offer great distractions, in many ways they also offer serious fuel to our wanderlust – inspiring us to do nothing more than get out of our current environs and delve deep into other cultures, climes, and cuisines.

    And of all the most amazing tourist destinations out there, one country stands tall with its dazzling combination of ancient culture and stunning modernity – and that country is Japan.

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    And now, Japanese officials are reportedly considering a plan that would see the government potentially step up to pay half of the travel expenses of foreign travelers to the Land of the Rising Sun.

    However, the plan is merely just a proposal – at least for the time being.

    Since the coronavirus pandemic became a global concern earlier this year, the brakes have been hit on global travel – as well as the lucrative tourism industries of various countries.

    This has been no less true in Japan, where a mere 2,900 tourists visited the country this April – a vast and precipitous drop from the 2,926,685 people who visited the country last April, according to leading Japanese newspaper The Mainichi. On a nationwide level, the country has seen a staggering 99.9 percent year-on-year drop in tourism.

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    To prevent the continuation of the brutal collapse of tourism, the Japanese government is now considering giving the green light to a 1.35 trillion yen (over $12.5 billion USD) fund to lure back foreign visitors. Japanese Tourism Agency chief Hiroshi Tabata said that the scheme could begin as soon as July if COVID-19 infections continue to subside.

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    It remains unclear what exactly would be covered under the plan in terms of airfare or which categories of hotels and lodging.

    Japan is currently facing its lowest number of visitors from abroad since 1964. Normally, spring is one of the country’s most popular tourist seasons, especially because it’s cherry blossom season, when the blossoming trees around Tokyo, Kyoto and Mt. Fuji attract thousands of sightseers. This year, however, visitors have largely been restricted to these deer – which, needless to say, doesn’t do much for the tourism industry in terms of generating revenue.

    Additionally, Japan has barred entry to nationals and passenger flights from roughly 100 nations. This includes China – one of Japan’s major tourism markets, which had been hitting record highs during the winter amid warming people-to-people relations between the Chinese and Japanese people, who have been plagued by poor bilateral ties in the past.

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    To make matters worse, Japan has also been forced to postpone the upcoming 2020 Summer Olympic Games that were due to take place in Tokyo.

    The country’s other landmarks and attractions have also been temporarily closed, including Tokyo Disneyland, Tokyo DisneySea, Universal Studios Japan, and a number of museums, festivals, and other mass events.

    However, in a sign that good news may be on the horizon, only three new coronavirus infections were reported in the capital on Friday – the lowest figure since the government declared a state of emergency in April.

    So while Japan is not quite out of the woods yet – as is the case in much of the rest of the world – the reported plan to slash travel expenses in half for tourists does seem tantalizing.

    After all, where else can we be treated to the priceless scenery of Japan’s villages, the brilliant natural beauty of the country’s mountains and islands, or the irreplaceable flavors of genuine Japanese cuisine?

    Well, this might just be the chance you’ve been waiting for.

  • Gun Battle Unfolds At Residential Complex Near Moscow
    Gun Battle Unfolds At Residential Complex Near Moscow

    Tyler Durden

    Sun, 05/24/2020 – 22:05

    A gun battle unfolded at a residential complex called “Yasny” in the south region of Moscow on Sunday, reported TASS News. Residents saw men firing AK-47s and other weapons on the streets below their windows. 

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    “On the territory of Yasnoy, unidentified people opened fire on each other. At present, the police put on the wanted list cars that are supposedly hiding the incident participants – Mercedes, Ford, Toyota,” a law enforcement agency spokesperson told TASS. 

    The spokesperson said at least eight people were involved in the shootout. 

    “They shot at each other with traumatic pistols and, presumably, from the Saiga and Vepr hunting rifles.” 

    So far, the incident has resulted in “no casualties, and a police search has been launched for at least eight people,” said RT News. Police have yet to release a motive behind the gun battle. 

  • "Nothing Can Justify This Destruction Of People's Lives"
    "Nothing Can Justify This Destruction Of People's Lives"

    Tyler Durden

    Sun, 05/24/2020 – 21:40

    Via Spiked-Online.com,

    Countries across the world have been in lockdown for months in response to the coronavirus pandemic. The costs of the policy are enormous – in terms of life, liberty and the economy. But is it worth it to save lives?

    Yoram Lass was once the director-general of Israel’s Ministry of Health. Lass is a staunch critic of the lockdown policy adopted in his native Israel and around the world. He has described our response to Covid-19 as a form of hysteria. spiked caught up with him to find out more…

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    spiked: You have described the global response to coronavirus as hysteria. Can you explain that?

    Yoram Lass: It is the first epidemic in history which is accompanied by another epidemic – the virus of the social networks. These new media have brainwashed entire populations. What you get is fear and anxiety, and an inability to look at real data. And therefore you have all the ingredients for monstrous hysteria.

    It is what is known in science as positive feedback or a snowball effect. The government is afraid of its constituents. Therefore, it implements draconian measures. The constituents look at the draconian measures and become even more hysterical. They feed each other and the snowball becomes larger and larger until you reach irrational territory. This is nothing more than a flu epidemic if you care to look at the numbers and the data, but people who are in a state of anxiety are blind. If I were making the decisions, I would try to give people the real numbers. And I would never destroy my country.

    spiked: What do the numbers tell us, in your view?

    Lass: Mortality due to coronavirus is a fake number. Most people are not dying from coronavirus. Those recording deaths simply change the label. If patients died from leukaemia, from metastatic cancer, from cardiovascular disease or from dementia, they put coronavirus. Also, the number of infected people is fake, because it depends on the number of tests. The more tests you do the more infected people you get.

    The only real number is the total number of deaths – all causes of death, not just coronavirus. If you look at those numbers, you will see that every winter we get what is called an excess death rate. That is, during the winter more people die compared to the average, due to regular, seasonal flu epidemics, which nobody cares about. If you look at the coronavirus wave on a graph, you will see that it looks like a spike. Coronavirus comes very fast, but it also goes away very fast. The influenza wave is shallow as it takes three months to pass, but coronavirus takes one month. If you count the number of people who die in terms of excess mortality – which is the area under the curve – you will see that during the coronavirus season, we have had an excess mortality which is about 15 per cent larger than the epidemic of regular flu in 2017.

    Compared to that rise, the draconian measures are of biblical proportions. Hundreds of millions of people are suffering. In developing countries many will die from starvation. In developed countries many will die from unemployment. Unemployment is mortality. More people will die from the measures than from the virus. And the people who die from the measures are the breadwinners. They are younger. Among the people who die from coronavirus, the median age is often higher than the life expectancy of the population. What has been done is not proportionate. But people are afraid. People are brainwashed. They do not listen to the data. And that includes governments.

    spiked: Do the lockdowns have any positive effect on people’s safety?

    Lass: Any reasonable expert – that is, anyone but Professor Ferguson from Imperial College who would have locked down everybody when we had swine flu – will tell you that lockdown cannot change the final number of infected people. It can only change the rate of infection. And people argue that by changing the rate of infection and ‘flattening the curve’, we prevented the collapse of hospitals. I have shown you the costs of lockdown, but this was the argument in favour of it. But look at Sweden. No lockdown and no collapse of hospitals. The argument for the lockdown collapses.

    spiked: Why have some countries suffered so much more than others from Covid-19?

    Lass: For example, you can compare Italy to Israel. In the Middle East, this virus is not really working. There are two reasons. One is that there is a very young population, and the other is that the climate is different. In the latitude of 50 degrees, which is Europe, and 40, which is the north-eastern United States, the virus is much more viable. Italy has the oldest population in the world apart from Japan. Italians are also are heavy smokers and very social people – they keep hugging and kissing. If you look at the numbers, in 2017, 25,000 Italians died from flu complications. Now you have around 30,000 dying from coronavirus. So it is a comparable number. You should not ruin a country for comparable numbers.

    spiked: What has it been like in Israel?

    Lass: In Israel, we have two layers of fear. The hysteria is similar to the rest of the world. However, we have a prime minister who has been resuscitated by coronavirus by adding another layer of fear. I do not think there is any other prime minister who has spoken about coronavirus in terms of the medieval Black Death, the Holocaust and the end of humanity in this way. Did Boris Johnson mention the Black Death? I do not think so. That is the special situation in Israel.

    spiked: How does coronavirus compare to past pandemics?

    Lass: If you look at the 1950s, we had the Asian flu. In the 1960s, there was the Hong Kong flu. These were worse than this pandemic. Also, look at the story of swine flu in 2009, which began exactly the same as coronavirus. A new virus originated in Mexico. There was no vaccine so it was very frightening. It spread all over the world. It infected one billion people. A quarter of a million people died. But there was no lockdown, no Ferguson, nothing – people were far more interested in the economic crisis that hit a year before in 2008. They did not have time to give attention to this nonsense.

    spiked: Will the pandemic be over soon?

    Lass: The virus, like the influenza virus, is saying farewell to western Europe for sure. The same in the Middle East. In the United States, we do not know yet, so we should talk in a month from now. But nothing can justify this destruction of people’s lives. It is unbelievable.

  • The Fed Is Now The Proud Owner Of Bankrupt Hertz Bonds
    The Fed Is Now The Proud Owner Of Bankrupt Hertz Bonds

    Tyler Durden

    Sun, 05/24/2020 – 21:27

    On March 23 – the day the S&P dropped to its cycle low of 2,237 –  the Fed stunned capital markets when it announced it would purchase investment grade corporate bonds, traversing a Rubicon into secondary market intervention that not even  Ben Bernanke had dared to cross. A few weeks later, on April 9, the Fed doubled down by announcing it would purchase not only junk bonds from “fallen angel” issuers (an announcement which came just days after a quarter in which a record $150BN in investment grade bonds were downgraded to junk, starting the long awaited tsunami of “fallen angels”), but would also buy junk bond ETFs such as HYG and JNK.

    This is what the Fed’s Secondary Market Corporate Credit Facilities term sheet said on this topic:

    The Facility also may purchase U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds

    Naturally, the news cheered beaten down markets, and was enough to send junk bond ETFs such as JNK and HYG soaring.

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    One month later, following a surge in inquiry including from the bond king Jeff Gundlach as to when the Fed would actually start buying corporate bond ETFs, the Fed realized it would not be able to jawbone markets any more and would have to put its money where its term sheet was, and on May 11 the NY Fed said it would “begin purchases of exchange-traded funds (ETFs) on May 12.”

    And while the central bank said the focus of its ETF purchases would be on IG-focused ETFs, the New York Fed also disclosed it would start buying junk bonds ETFs as well:

    As specified in the term sheet, the SMCCF may purchase U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.

    Then, last Thursday, we reported that as part of the Fed’s record balance sheet, which for the first time ever surpassed $7 trillion, the Fed disclosed that it also held $1.8 billion under Corporate Credit Facility holdings, the line item that include purchases of both investment grade (LQD) and junk bonds ETFs (HYG, JNK, etc).

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    This came two days after Powell defended the Fed’s program to buy junk bonds during his testimony before the Senate Banking Committee, which asked how purchases of junk bonds is “helping folks on Main Street.” Powell flagged that the Fed allowed for buying bonds from so-called “fallen angels” to ensure there is “no cliff” between the two lending markets (even though as we pointed out previously, a clear cliff has formed), saying “we don’t want to have a cliff there to where investment grade markets are working well, but the leveraged markets are not, non-investment grade markets are not.”

    He then added that “we made a very limited, narrow set of actions to support market function in these markets, including buying ETFs, and that’s had an effect to improve market function there.”

    Powell concluded by saying “we’re not buying junk bonds generally across the board at all,” which of course is correct: he is merely buying ETFs that have junk bond constituents.

    And this is where the Fed’s first major test of directly manipulating and intervening in market functioning is about to take place.

    While the Fed’s H.4.1 statement does not breakdown how much of the $1.8 billion in ETF holdings is allocated to  investment grade and how much is junk, it is safe to say that at least $1 dollar of that amount has been allocated to purchases of Junk ETFs.

    That will be a problem for Powell, because a quick scan of the holdings of both HYG and JNK reveals that these junk bonds ETFs own, among the hudnreds of other securities, several bonds from the just defaulted rental giant, Hertz.

    Here are HYG’s holdings of HTZ bonds: they amount to just over $50MM in face value across 4 bonds (out of a total of $23.3BN in holdings across just over 1,000 bonds).

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    And here is JNK: just under $$30MM in notional across 3 CUSIPs out of a total of $11.55BN in total assets in the ETF.

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    And yes, for those asking, both ETFs hold that infamous Hertz bond that was issued last November and that will default before paying a single coupon.

    To be sure, we can only extrapolate but it is safe to say that the Fed’s holdings of both these ETFs are modest for the time being, and we assume that the bulk of ETF purchases have targeted the investment grade, LQD ETF; still the fact is that as of this moment, the Fed is a holder, via BlackRock and via HYG and JNK, of bonds which are in default, and which make the Fed a part of the Hertz post-petition equity once it emerges from bankruptcy!

    This means that unless the Fed somehow manages to divest of Hertz bonds that comprise its HYG and JNK holdings, the US central bank is as of this moment a stakeholder in the Hertz bankruptcy process, and assuming there is no liquidation, will end up owning a pro-rata stake of the post-petition equity once the company emerges from bankruptcy in the not too distant future.

    What happens then nobody knows: will the Fed take a vocal position in the company’s future? Can the Fed even own equities via a debt-to-equity swap? What happens when hundreds of other junk bonds default and the Fed ends up owning billions in post-petition equity pro forma for equitization?

    We don’t know; we doubt anyone on Wall Street or in Congress knows. And we are certain that the Fed itself doesn’t know, because in its scramble to stabilize the bond market, it forgot that once companies file for bankruptcy (certainly there is no discussion in the Fed’s term sheets of what happens once its corporate bond holdings default) the Fed will – sooner or later – end up being an equityholder.

    As a reminder, the ECB was faced with a similar scandal in Dec 2017 when it ended up holding bonds of insolvent Steinhoff, but back then Mario Draghi quickly liquidated the bonds and the market pretended nothing ever happened. The problem for Powell is that one look at the HYG and JNK holdings reveal dozens if not hundreds of companies which will file for bankruptcy within months if not weeks, suggesting the Hertz debacle is just the start of a bankruptcy flood in which the Fed will emerge as a key actor in bankruptcy court and Powell will have to explain away why it is now an equity stakeholder of bankrupt companies.

    We eagerly look forward to Powell answering all these questions, hopefully as soon as this Friday when the Fed chair holds yet another video conference.

  • Young People Are Rushing To Leave Big Cities In Favor Of "Less Infected" Suburbia
    Young People Are Rushing To Leave Big Cities In Favor Of "Less Infected" Suburbia

    Tyler Durden

    Sun, 05/24/2020 – 21:15

    There’s no doubt that the long-lasting impact of the coronavirus pandemic will include a major shift in how consumers look at homebuying. In fact, have already reported here on Zero Hedge about how many are leaving the city in favor of life in the suburbs, since the virus has spread faster in city areas.

    Now, it looks as though the younger generation is following the cues of the older generation and doing the same. The effects could be pronounced, especially since the younger generation was responsible for the boom in many U.S. cities over the last decade. 

    That includes people like Desiree Duff, who Bloomberg highlighted late last week. A former NYC bartender, she has left her apartment in Brooklyn to move back in with her parents in South Carolina. She is currently using unemployment to pay her part of the rent and says that she is stuck “rethinking” the appeal of living in the big city.

    She said: “Not knowing what my future there looks like does make me reconsider. Maybe after my lease is done I should move elsewhere, to a smaller city that was less infected, as much as that breaks my heart.”

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    Duff/BBG

    Her move is a microcosm of a larger shift for the younger generation, which is leaving apartments empty in cities across the U.S. 

    Deniz Kahramaner, the founder of data-driven real estate brokerage Atlasa said: “The draw of the city is the social life, the dating scene, bars, restaurants, the ability to do fun things on the weekend. Without those attractions, it makes a lot of sense to just abandon ship and go back to your parents.”

    Charley Goss, government and community affairs manager at the San Francisco Apartment Association said: “It’s a really hard time for the renter, but it’s a really hard time for the housing provider, too.” 

    Goss conducted a survey and found that 17% of landlords in the San Francisco area have had tenants break leases or give 30 day “move out” notices. 

    Another example is Alexa Lewis, a 24 year old that was living in San Francisco when the city locked down. By the end of April, her roommates had left and she was all alone. She was stuck with a $4,900/month rent bill and no clue what to do. “There were a lot of calls with my family to talk out everything and ask for advice/cry,” she said. She was able to negotiate temporary concessions with her landlord.

    And the rental market is expected to stay soft even as the economy recovers. “People won’t need to be in a job center if they can work from home. I would expect to see less demand and that corresponds to lower rents,” Goss said. Rents are even expected to decline in places like New York City.

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    A new StreetEasy report stated: “Residents moving out of the city, even temporarily, could drive rents across the city down.” The report referenced a 10% decline in rents during the 2008 crisis. 

    Jonathan Miller, president of appraiser Miller Samuel Inc. said the difficulty of breaking leases could slow the pain in starter apartments. He also said that he expects rental activity in the suburbs to tick higher. 

    Atlasa’s Kahramaner said about the San Francisco market: “People are leaving San Francisco to try to buy a house in Marin or East Bay. People have a renewed interest in the suburban life.”

    Daniel Chandross, a 23 year old that works for Google, is paying rent on an empty apartment after moving back with his family in the Midwest. Their lease is ending soon and it doesn’t look like they will renew. “We’re throwing around the option of moving our stuff into a storage facility. No reason to waste money on rent if we can live/work at home,” he concluded.

  • Hong Kong Erupts: Tear Gas Deployed As Thousands Fill Streets To Oppose China's National Security Law
    Hong Kong Erupts: Tear Gas Deployed As Thousands Fill Streets To Oppose China's National Security Law

    Tyler Durden

    Sun, 05/24/2020 – 20:55

    After months of relative quiet amid the coronavirus pandemic, thousands of protesters flooded the streets of Hong Kong, defying the city’s ban on gatherings to voice their opposition to a new “national security” law proposed by Beijing which would threaten the city’s autonomy and the civil liberties of its residents.

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    The protesters, most of whom could be seen donning masks, were hit with tear gas less than an hour after the start of the demonstrations which resulted in at least 120 arrests – including 40 of which were people accused of blocking Gloucester Road. A water cannon truck was also deployed according to SCMP.“

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    The first rounds of tear gas were fired around 1:30 p.m. local time outside a Causeway Bay shopping mall. 20 minutes later, the first arrest was made, according to the Epoch Times.

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    Beijing unveiled details of the law on Friday, which would most likely grant the Chinese Communist Party (CCP)’s security services jurisdiction over matters in Hong Kong – which drew condemnation from Taiwan, the United Kingdom, the EU, Australia, Canada and the United States, according to the report. It also drew immediate protest from opposition lawmakers.

    The national security law would bypass the city’s legislture, which is expected to enact a ban on subversion, secession and sedition against Beijing. It will also enable mainland Chinese national security agencies to operate on city soil for the first time.

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    On Sunday, Chinese Foreign Minister Wang Yi said that Beijing must enact the law without delay, and that it is the role of China’s central government to enforce national security.

    “We must get it done without the slightest delay,” said Wang, who added that the law would ‘create more stability and confidence’ in the Special Administration Region as well as a better environment for security.

    Shortly after the announcement, Hong Kong residents took to social media to organize a march on Hong Kong Island from Causeway Bay to Wan Chai at 1 p.m. local time on Sunday.

    Some protesters were chanting “Liberate Hong Kong, revolution of our times,” while others chanted “Hong Kong independence, the only way out,” according to CNN.

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  • Trump Has Won the Propaganda War With China
    Trump Has Won the Propaganda War With China

    Tyler Durden

    Sun, 05/24/2020 – 20:50

    Authored by Tom Luongo via The Strategic Culture Foundation,

    Donald Trump has finally won a war. It’s a war he’s uniquely suited to fight, a propaganda war, and he’s successfully waged it on China through his command of Western media.

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    Stating this doesn’t imply any kind of judgment on my part as to whether he should or should not have waged this war with China. He has and he has emerged victorious, thanks to his reframing the threat from COVID-19 as an evil Chinese plot to kill millions of people.

    Now, I’m convinced that the circumstances surrounding COVID-19 were a plot by evil people to kill millions of people and usher in a bleak, authoritarian nightmare they’ve had legislation and action plans written to execute for years. I’m just not convinced it was China that was wholly behind it.

    In fact, my fundamental problem with Trump’s China propaganda war vis-à-vis COVID-19 is that it lets the real culprits for how it unfolded around the world off the hook. But, ultimately, that’s a different discussion.

    Today’s discussion is about where things stand between the U.S. and China and what’s on tap for the future. Why do I think Trump has won his war against China?

    Simple, the numbers.

    A recent poll by Bloomberg found that 78% of Americans are willing to spend more for products made in “Not China” than in “China.” Moreover, that poll goes onto say that 40% of Americans now say they won’t buy anything at all from China.

    I can tell you that more people I talk with personally here in the U.S. are at this point. I’m not one of them. While, personally, I’d prefer my food, clothing and basic necessities be made as close to home as possible it has nothing to do with antipathy with China or Chinese people.

    To me that’s just wise, defensive living. In times of crisis, basic necessities should have supply chains as short as possible. Honestly, I would say the same thing about stuff made in California or Idaho. But economic reality is that Idaho is better at growing potatoes and California almonds than Florida is and therefore those supply chains aren’t likely to change much.

    That doesn’t mean, however, my wife isn’t growing potatoes this year or that I’ll miss them if my local Winn-Dixie is out of them because the truck was late or the harvest poor.

    It’s called comparative advantage and it is the basis for all productive economic interactions. And in some areas of the economic sphere China is superior to the U.S. currently, and until the dynamic changes people will complain about “Made in China” but they will still buy what they need, especially in a country with 40+ million people out of work being acutely price-sensitive.

    But that said the poll numbers found by Bloomberg will rise over the next couple of years because things will get that desperate here in the U.S. and people want to work and be willing to work for less.

    That can only happen, however, if the barriers to local commerce are lifted. And that lies at the feet of government at all levels, which are, by definition, funded by the private sector. Like it or not, folks, government has no money of its own. Everything it has it has after taking it through taxes.

    Trump is clearly pursuing policies to decouple the U.S. and China’s economy to as great an extent as possible to help the U.S. economy regain its domestic productive capacity. And he’s been very systematic about it. This propaganda war and his attacks on China over their handling of COVID-19 are just the next stage of this.

    He began the process with his tax cut plan which cut corporate taxes as well as small business and self-employment taxes, reversing decades of ruinous policy designed to destroy the American middle class and offshore U.S. productive capacity. He’s quietly been slashing federal department budgets and staff and lifting mandates on states.

    That process is slow, very slow, during normal operations.

    But that wasn’t nearly enough and now he’s faced with the next task, which is to cut taxes again and incentivize the onshoring of manufacturing. His Chief Economic Adviser Larry Kudlow floated that idea last week. Republicans in Congress didn’t like it. And one has to wonder why?

    It’s not like the current budget looks anything like what tax receipts are going to total this year or next. The deficit will be above World War II levels. More likely they would rather dole out checks of funny money than not collect the money in the first place. That way the power continues to flow through D.C. rather than go back to the people themselves.

    But to change the direction of a now floundering U.S. it is going to take more than that and Trump’s willingness to use his broader powers under the auspice of the COVID-19 national emergency to cut government regulation and red tape is the next step forward on this path.

    Never let a crisis go to waste right? Well, the Democrats are pushing for a China-esque total surveillance state and Green New Deal all rolled into one $3 trillion monstrosity, which, if passed, would only make the U.S. even more uncompetitive and hasten its demise.

    Trump is finally doing the same thing, by going in the complete opposite direction.

    The key to reversing China’s comparative advantages over the U.S. is removing the barriers to commerce which make local production unattractive. It’s that simple. And with oil prices now very low and low for a long time to come, Trump is now fighting lower shipping costs from overseas.

    The U.S. maintains an extravagant government at not only the federal level but state and local as well. The American people can follow Trump blaming China all they want, but China is the symptom, government is the disease.

    To solve this problem they have to look at themselves and admit this addiction to government itself is the barrier to them getting back to productive, happy lives.

    I generally lay that blame for this extravagance at the feet of the cozy relationship between the Federal Reserve and the Treasury department creating money like crazy and allowing Congress and Presidents for two generations now to bribe voters with handouts from our future.

    That future is now here.

    And as individuals we have to face that.

    I’ve said for a long time that anywhere from 20-40% of U.S. GDP is a phantasm born of fake money. It is waste and sloth within a system designed to hollow out the middle class and roll wealth up to an international oligarch class. Remove it and you get a better sense of what GDP and the cost basis for production truly is.

    The same thing goes for China, by the way. Strip out the financialization and how much real economy is left?

    That oligarch class just pulled the plug on that portion of the U.S. economy and I have no doubt that China had a hand in helping that along. It would be in their strategic interest to do so.

    Thanks to Trump’s ham-fisted propaganda the American people now get this in the broadest terms.

    And he’s willing to do both great and terrible things to change the dynamic. This much he has shown in spades. This war with China he’s waging has only just begun. He has the American people on his side, now he just has to convince the chattering class in D.C. that the old way of doing things is over.

  • Summer Vacation Spending Is Expected To Plunge 66% This Year
    Summer Vacation Spending Is Expected To Plunge 66% This Year

    Tyler Durden

    Sun, 05/24/2020 – 20:25

    Memorial Day weekend not only kicks off the start of summer but also, for many Americans, kicks off travel and vacation season. But this year will obviously be different, with millions stuck sheltering in place at home, due to the global coronavirus pandemic.

    As a result, travel spending for the weekend is expected to fall 66% to $4.2 billion, according to Bloomberg. 

    Even though some areas are starting to see small upticks in traffic, tourism officials say that most travel won’t come until later in the season. Domestic air travel is expected to still be sparse and “almost everyone” who travels will be expected to drive.

    Additionally, seasonal hiring is also expected to plunge more than 75% from a year ago. The younger European workers that staff many U.S. resorts for the summer are expected to stay home. Visa processing for U.S. work and travel visas has “basically shut down everywhere” except for farmwork.

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    Since the beginning of the pandemic, almost half of all leisure and hospitality employees have lost their jobs. 

    Areas that are accessible by car are expected to be popular destinations this summer. That includes places like the Florida panhandle, the Carolina coasts, Oregon and Washington. Even parts of Wisconsin and Michigan are expected to be destinations for American road trips. 

    Camping is another alternative that vacationers may try this year. Judson Gee’s, who has a vacation rental home in Wrightsville Beach, North Carolina, said: “People are absolutely dying to get out of their house and more comfortable to be outdoors than in crowded spots.” 

    Just 32% of hotel rooms were occupied as of the week ending May 16. This is despite hotel bookings improving in recent weeks. As of May 14, more than 3,000 hotels remained closed. 

    Federal Reserve Chairman Jerome Powell told Congress earlier this week: “It will take some time for the public to regain confidence and adapt to the new world and start traveling, taking vacations.”

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    Places like Broadway and Disneyworld, popular tourist destinations, remain closed. Fred Dixon, the president and chief executive of NYC & Company, which promotes tourism said: “When restrictions are lifted, there is a lot of pent-up demand. At the same time, people will be more cautious now, just generally about how they make decisions to travel.”

    But places like Myrtle Beach, South Carolina are starting to get busier and restrictions have begun lifting, allowing hotels to take new reservations. 

    Heather Baker and her husband, from Wilkesboro, North Carolina, said: “The beaches were packed. Myrtle Beach is a great mini-vacation. It’s only a four-hour drive for us, which makes for a nice little getaway.”

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    While June bookings are down more than 25% from last year, the shortfall is expected to narrow as summer progresses. Vacation Myrtle Beach, which operates 14 hotels and condo properties in the area, has hired less than 100 seasonal employees this year compared to the 700 they hired last year. 

    Bloomberg economist Carl Riccadonna concluded: “Certain businesses with a relatively short ‘high season’ may not be able to reopen in time to salvage their business for the year. If your year is really 3-4 months in the summer, then a lost few months really means a lost year–and in many cases a failed business.”

  • "The Comments Are Highly Important": China's Xi Reportedly Indicated Desire To Avoid Strong Stimulus
    "The Comments Are Highly Important": China's Xi Reportedly Indicated Desire To Avoid Strong Stimulus

    Tyler Durden

    Sun, 05/24/2020 – 20:15

    One of the more remarkable aspects of the global policy response to the coronavirus crisis has come out not out o the G10, where virtually every nation has unleashed an unprecedented stimulus, both fiscal and monetary, but rather out of China – the country which following the global financial crisis launched an unprecedented debt-fueled reflation and stimulus, yet which this time has done very little if anything at all, as the following chart comparing the fiscal response across countries demonstrates.

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    This should hardly come as a shock: after all, according to the IIF, China’s total debt/GDP as of March 31, 2020 is now a record 317%, the highest in history, and up 17% in just the past quarter and nearly double what it was in 2008, suggesting the country is basically out of room to layer on even more debt leaving far less space for a major new fiscal stimulus push.

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    Overnight, Goldman confirmed as much, writing that President Xi participated at group discussions at the Two Sessions on Friday, with some of his comments reported on Saturday. Notably he said if it were not because of the pandemic, the growth target would be set at around 6%. He added that a global recession is guaranteed, and given this, if a numerical target (implicitly at a relatively high level) was set, it would require a strong stimulus and the focus of the government would be on the growth rate. He said the focus should instead be on the “six stabilities” and “six guarantees” in six areas — the pursuit of these goals will indirectly contribute to GDP growth but the latter should not be the focus of the government, according to the report.

    “The comments are highly important”, according to Goldman because they both explain some past policy decisions and will have significant future policy implications. While this is the first report publicly quoting President Xi on the issue of the GDP growth target, it is probably not the first time he has made this kind of comment, Goldman’s Yu Song goes on to note. If he indeed made similar comments non-publicly, possibly to small groups of senior officials, it would have affected the behavior of government officials and could explain the relative lack of aggressive stimulus measures relative to China’s past stimulus and relative to that of many other economies (as shown in the top chart). One example might be the relatively small MLF and LPR adjustments compared to market expectations. Such decisions had been subject to extensive discussions and debates and had to be signed off by President Xi because they were presented to the National People’s Congress.

    President Xi’s comments will likely have implications for the behavior of officials. The doves at both central and local levels who have been advocating a growth target for fear of disappointing market expectations may well find it harder to argue their cases. While it is true that the “six stabilities” and “six guarantees” goals will contribute to GDP growth, they are much less specific. Some methods of achieving those goals may not contribute much to overall economic growth as measured by GDP. For example, to ensure employment stability, companies may find themselves under more pressures not to lay off workers. This often leads to cuts in pay for a broader group of employees. While having the burden more widely shared is arguably socially more desirable, its contribution to economic growth is likely to be limited and also often not sustainable.

    Non-governmental economic agents such as companies and individuals may become more cautious with their plans as well.

    Lastly there probably will be less pressure on data reporting (read fudging economic numbers for which China is notorious). While on the surface this is a good thing, as it tends to reduce distortions, it also boosts the likelihood of a lower level of reported GDP growth.

    Earlier on Friday NDRC Director He Lifeng stated the performance of high frequency indicators since the beginning of May has been encouraging. If GDP growth in 2020 is 3%, then the level of income will be 1.95 times that in 2010. (The longer-term policy goal of doubling income over the decade is not precisely defined, but implicitly Goldman thinks a 1.95 level should be good enough to be rounded up to 2.)

    Separately, Minister of Finance Liu Kun revealed the government will transfer around 1 trillion RMB from the SOE fund to central government fiscal spending. If so, this means the actual fiscal loosening is meaningfully larger than the apparent fiscal deficit target of 3.6%. In fact, according to Goldman calculations, the effective deficit which is a more relevant indicator to measure the on-budget fiscal stance by taking financing through drawdown of fiscal deposits and transfers from other fiscal accounts into account, will increase even more, by 1.6pp to around 6.5% this year, according to the budget report released on the MOF website over the weekend.

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    That said, as Goldman also notes, the 1tr RMB of central government special bond quota (primarily 10-year tenor) is significantly lower than the bank’s pre-NPC expectation of Rmb 2tr. And here an interesting observation from the bank: “Recently there have been debates on whether PBOC should monetize the issuance (i.e., PBOC buys directly), and as suggested by the budget report, the issuance of these bonds would be market based. This will put pressure on interbank market liquidity, so PBOC needs to provide liquidity support (e.g., through RRR cut; 50bp of RRR cut could release liquidity of around Rmb 800bn).” In short: even with a rather limited fiscal stimulus, is the PBOC setting the stage for its own QE?

    In any case, going back to Goldman, the bank estimates that the augmented fiscal deficit would increase by around 5.5% this year, slightly higher than the bank’s previous forecast of 5.3%, pointing to a slightly stronger fiscal stimulus, but still notably smaller than that in GFC.

    In other words, whereas it was China that managed to pull the world out of the depression triggered by the global financial crisis with an unprecedented surge in debt creation (something we discussed back in 2013), this time around – whether due to political reasons, or purely based on balance sheet limitations – it will be up to every developed and emerging nation to restore its historical growth rate. While that explains the speed, and lack of discussions, with which helicopter money was adopted by the entire world, it begs the question: can the global economy rebound without China’s help this time?

  • Global Anger Builds As Elites Worldwide Break Quarantine Rules
    Global Anger Builds As Elites Worldwide Break Quarantine Rules

    Tyler Durden

    Sun, 05/24/2020 – 20:00

    “One rule for me, and another for thee” appears to be the politically-prone mantra rapidly spreading around the world.

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    Opposition parties take shots at one another with America‘s left decrying President Trump’s maskless-golfing escapades…

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    …and the right exposing Virginia Governor Northam’s recent non-socially-distanced, maskless-beach visit.

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    Japanese authorities are also under pressure with Japanese Prime Minister Shinzo Abe’s cabinet approval rating fell 4 ppts to 29%, lowest since the start of his second administration in Dec. 2012, after a wave of condemnation involving a man that his administration took great pains to defend: Hiromu Kurokawa, head of the Tokyo High Public Prosecutor’s Office. On Thursday, Kurokawa stepped down after a tabloid expose said he had gambled on mahjong with journalists twice this month despite the state of emergency requesting that nonessential outings be avoided.

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    And the icing on the global anger cake is occurring in Britain after UK Prime Minister Boris Johnson came out in support of top aide Dominic Cummings Sunday despite his his chief aide allegedly violating the national lockdown rules that he helped to create by driving the length of England to his parents’ house while he was infected with COVID-19.

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    Defying a growing clamor from public and politicians, AP reports that Johnson said Dominic Cummings had acted “responsibly, legally and with integrity” when he drove 250 miles from London to Durham, in northeast England, with his wife and son at the end of March.

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    Cummings said he traveled to be near extended family because his wife was showing COVID-19 symptoms, he correctly thought he was also infected and he wanted to ensure that his 4-year-old son was looked after.

    However, as AP notes, critics of the government expressed outrage that Cummings had broken strict rules 

    Labour leader Keir Starmer said Johnson’s defense of Cummings was “an insult to sacrifices made by the British people.”

    “The prime minister’s actions have undermined confidence in his own public health message at this crucial time,” he said .

    Former Labour lawmaker Helen Goodman, whose father died in a nursing home during the outbreak, said Cummings’s behavior was “repellent.”

    Whether you’re repelled or not, most ironically, Cummings “is the inventor of these three-word slogans: ‘Stay at Home,’ ‘Protect the NHS’ and ‘Save Lives.'”

    As a reminder, elsewhere in Britain, so-called epidemiologist Neil Ferguson stepped down as government scientific adviser earlier this month after a newspaper disclosed that his girlfriend had crossed London to stay with him during the lockdown. In April, Catherine Calderwood resigned as Scotland’s chief medical officer after twice traveling from Edinburgh to her second home.

    Still, it seems the elites’ ongoing belief in ordering the “better safe than sorry” lockdown of entire nations is facing a breaking point among the stuck-at-home, increasingly welfare-dependent average joe around the world.

  • Iran & Venezuela Hail Victorious 'Defiance' Over US As 1st Tanker Is Escorted By Maduro Forces
    Iran & Venezuela Hail Victorious 'Defiance' Over US As 1st Tanker Is Escorted By Maduro Forces

    Tyler Durden

    Sun, 05/24/2020 – 19:35

    The first among five Iranian fuel-laden tankers has arrived in gasoline-starved Venezuela amid US threats to intervene against the ‘sanctions-busting’ activity by two official Washington enemies. 

    Reuters reports: “The tanker, named Fortune, reached the country’s waters at around 7:40 p.m. local time (1140 GMT) after passing north of the neighboring dual-island Caribbean nation of Trinidad and Tobago, according to vessel tracking data from Refinitiv Eikon.”

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    Multiple tanker tracking monitoring sites have confirmed the arrival of the ‘Fortune’ off Venezuela’s coast last Saturday.

    Maduro’s economy vice president and recently named oil minister celebrated on Twitter:  “The ships from the fraternal Islamic Republic of Iran are now in our exclusive economic zone,” amid broader claims of ‘victory’ on state media. 

    And per Reuters: “Venezuelan state television showed images of a navy ship and aircraft preparing to meet it.” 

    The other trailing tankers are also expected to enter Venezuela’s Exclusive Economic Zone (EEZ), or within 200 miles of the coast, in the coming days. 

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    Iran’s IRGC-aligned Tasnim media hailed the safe arrival of the first tanker as “A turning point for Venezuela’s sovereignty and independence,” according to a state media report.

    Over the past month Tehran and Caracas have become aggressively vocal in touting their “brotherhood” and joint defiance of Trump administration sanctions, for which US officials have recently threatened response, including the possibility of military intervention against the vessels in the Caribbean. Trump months ago reportedly ordered more Navy ships to the area to crackdown against what was dubbed the Maduro regime’s alleged narcotrafficking.

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    Iran-Venezuela cooperation has also included stepped-up flights from Iran via sanctioned Mahan Air, which has lately delivered crucial supplies to bring some of Venezuela’s derelict refining plants back online, amid a national gas shortage. 

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    But as The Jerusalem Post underscores, the saga is far from over, but may have just begun: 

    There are still chances for the US to make trouble for Iran’s tanker fleet. More ships will arrive in the coming days and then they have to go back to Iran. The port they came from was sabotaged by a cyber attack recently. US media pointed the finger at Israel for that incident. It’s unclear what the ships will do next. Furthermore, Venezuela is holding two Americans it accuses of being part of an ill-planned coup.

    Maduro officials days issued an emergency notice to the United Nations of what they called an illegal “threat of imminent use of military force by the United States.”

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    Simultaneously, Iran’s President Hassan Rouhani put Washington on notice that his armed forces can create “trouble” – no doubt a reference to ability to choke key Persian Gulf transit points – should their be any attempt to thwart the tankers’ movement. 

    “If our tankers in the Caribbean or anywhere in the world face trouble caused by the Americans, they [the United States] will also be in trouble,” Rouhani told the Emir of Qatar in a phone call, Tasnim News reported earlier.

  • Tracing The Origins Of COVID-19
    Tracing The Origins Of COVID-19

    Tyler Durden

    Sun, 05/24/2020 – 19:10

    Authored Lawrence Sellin, US Army Colonel (ret.), via WIONews.com,

    On December 9, 2019, long before the world knew anything about it, a video interview took place with one of the key players in the COVID-19 drama, Dr Peter Daszak, President of the EcoHealth Alliance, who inadvertently may have provided indications of its true origin.

    Much of that discussion centred around the severe acute respiratory syndrome coronavirus (SARS) epidemic of 2002-2004, which was believed to have originated in bats, although civets may have acted as an intermediate host.

    While circulating in animals, the SARS virus mutated, acquiring the ability to infect humans, which it was assumed to have done so, infecting workers in a Guangdong, China animal market.

    That explanation became the narrative now being promoted by the Chinese Communist Party, the media and some Western scientists to convince the world that COVID-19 was a naturally-occurring outbreak.

    Beginning at 27:49, Dr Daszak explains the basis of the naturally-occurring narrative and the collection of over one hundred bat coronaviruses capable of infecting humans, but untreatable with drugs or vaccines. Those coronaviruses are presumed to be stored in Chinese laboratories.

    “So, we did a couple of things with it. So, one is around SARS. We focused on SARS coronavirus emerged from a wildlife market. And whilst the first pandemic of this century. So, it’s big event. And, so we started to trace back from the wildlife market, which species carried the virus, that came into those markets. We found that it was bats, not civets, was the original idea. So, we started looking where did they come from. And we went out to southern China. And did surveillance of bats across southern China. And we’ve now found, after six or seven years of doing this, over one hundred new SARS-related coronaviruses, very close to SARS. Some of them get into human cells in the lab. And some of them can cause SARS disease in humanized mouse models. And are untreatable with therapeutic monoclonals [antibodies] and you can’t vaccinate against them with a vaccine.”

    At 29:51, Dr Daszak describes bioengineering of those viruses by inserting components of one coronavirus into another.

    “Well, I think, coronavirus is a pretty good, I mean, you’re a virologist [the interviewer], you know all this stuff, but the, you can manipulate them in the lab pretty easily. Spike protein drives a lot of what happens with the coronavirus, zoonotic risk. So, you can get the sequence, you can build the protein, and we work with Ralph Baric at UNC [University of North Carolina] to do this. Insert it into a backbone of another virus, and do some work in the lab. So, you can get more predictive, when you find the sequence. You have this diversity. Now, the logical progression for vaccines is, if you are going to develop a vaccine for SARS, people are going to use pandemic SARS, but let’s try to insert these other related and get a better vaccine.”

    In 2015, Ralph Baric from the University of North Carolina and Zheng-Li Shi, the “bat woman” from the Wuhan Institute of Virology jointly published a scientific article describing the combination of the receptor-binding spike protein from a newly isolated coronavirus (SHC014) and the “backbone” from SARS-CoV, the coronavirus responsible for the 2002-2003 pandemic.

    That experiment produced a novel virus, chimera SHC014-MA15, which showed “robust viral replication both in vitro [cell cultures] and in vivo [animals],” using models adapted to test human infectivity.

    The scientific consensus claims that COVID-19, like SARS, originated in bats.

    There is conclusive scientific evidence, however, that COVID-19’s receptor binding domain within the spike protein is structurally closest to that of pangolins (scaly anteaters), not bats, and it was the result of a recombination, not convergent evolution.

    Yet, pangolins have been ruled out as the intermediate host for COVID-19.

    Even Dr Ralph Baric in a March 15, 2020 interview, beginning at the 27:40 time point, stated unequivocally, that pangolins were not the source of COVID-19:

    “Pangolins have over 3,000 nucleotide changes – no way they are the reservoir species [for COVID-19], absolutely no chance.”

    It is, therefore, logical to conclude that the recombinant event resulting in a pangolin receptor binding domain within a bat coronavirus backbone must have occurred in a laboratory, in a manner similar to the experiment conducted by Ralph Baric and Zheng-Li Shi in 2015.

    Furthermore, COVID-19’s S1/S2 furin polybasic cleavage site, a distinctive feature widely known for its ability to enhance pathogenicity and transmissibility in coronaviruses, does not appear in any of 45 bat, 5 human SARS, 2 civet, 1 pangolin and 1 racoon dog coronaviruses, that have S1/S2 junction structures otherwise identical or nearly identical to COVID-19.

    There is no credible scientific evidence that the furin polybasic cleavage site evolved naturally, although the methods for artificially inserting such cleavage sites are well-established.

    It is important to note that the EcoHealth Alliance gets 80% of its funding from the U.S. government (9:22), has “been working in China for years” (19:40), and presumably uses U.S. taxpayer money to “hire technicians in labs or Ph.D. students” (12:08) in order to “teach people how to do it and give them the capacity and the tools” and “then you have really made a difference” (13:15).

    Indeed. The EcoHealth Alliance may have really made a difference.

  • White House Imposes Travel Ban On Brazilians As US Nears 100k Deaths: Live Updates
    White House Imposes Travel Ban On Brazilians As US Nears 100k Deaths: Live Updates

    Tyler Durden

    Sun, 05/24/2020 – 19:06

    Summary:

    • White House imposes travel restrictions on Brazil
    • US nears 100k deaths
    • Russia sees new cases below 10k for 9 straight days
    • Brazil sees new cases, deaths rise at alarming rate
    • Mexico reports another daily record jump of ~3,300
    • UK furor over Dominic Cummings grows
    • Oxford vaccine trial sees new obstacles

    * * *

    Update (1845ET): The White House confirmed on Sunday evening that it will bar Brazilians from entering the US unless they’re a citizen.

    “Today, the President has taken decisive action to protect our country by suspending the entry of aliens who have been in Brazil during the 14-day period before seeking admittance to the United States,” White House spokeswoman Kayleigh McEnany said in a statement.

    “As of May 23, 2020, Brazil had 310,087 confirmed cases of COVID-19, which is the third highest number of confirmed cases in the world. Today’s action will help ensure foreign nationals who have been in Brazil do not become a source of additional infections in our country. These new restrictions do not apply to the flow of commerce between the United States and Brazil,” she added.

    Earlier this week, Trump and VP Pence both said they were planning to impose travel restrictions on Brazil.

    “We are considering it. We hope that we’re not going to have a problem,” Trump said during a Cabinet meeting Tuesday, pointing to concerns about Brazilians traveling to Florida.

    “Brazil has gone more or less herd,” he said, adding, “They’re having problems.”

    The WHO’s Dr. Mike Ryan said Friday that South America looks like the new ‘hot spot’ for the pandemic at a press conference on Friday.

    “In a sense, South America has become a new epicenter for the disease. We have seen many South American countries with increasing numbers of cases,” Ryan said.

    “Clearly there is a concern across many of those countries, but clearly the most affected is Brazil at this point,” he added.

    As we mentioned earlier, Brazil passed Russia on Friday, taking the No. 2 spot for most confirmed cases, after the US, which has been in the No. 1 spot for more than 6 weeks.

    Meanwhile, as of 1845ET, the US had 97,679 confirmed deaths and 1,640,972 confirmed cases, creeping ever closer to the 100k mark.

    Brazil has confirmed more than 20,000 deaths, though the number of both deaths and cases is believed to be substantially higher than the confirmed number in South America’s largest economy.

    * * *

    Sunday’s New York Times front page says it all…

    …By midnight ET on Sunday, many expect the number of confirmed coronavirus-linked deaths in the US will have passed the critical 100k milestone, a number that’s represents not only a critical psychological milestone but an upper limit on the death toll promised by President Trump.

    With the growing focus on the death toll and doubts emerging about the effectiveness of remdesivir and the progress made by Moderna,  the Telegraph published a report in Sunday’s paper claiming that an Oxford University-affiliated vaccine trial, which one overly-enthusiastic scientist once claimed might produce substantial quantities of a “safe” vaccine by the fall – potentially enough to start administering the vaccine to the most vulnerable health-care workers, actually hasn’t made much progress at all, and only has a ~50% chance of success, according to scientists affiliated with the project.

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    This is the same vaccine that AstraZeneca struck a $1.2 billion deal with the US government to produce 400 million doses of the unproven vaccine as part of President Trump’s operation “Warp Speeds”, which is looking increasingly like a moonshot, big-swing on a few untested therapies and vaccines in the hope that at least one might pan out.

    Elsewhere, in the UK, the press remains fixated on the scandal over whether Boris Johnson senior advisor Dominic Cummings violated quarantine rules to visit several family members. As calls for Johnson to fire Cummings over the transgression intensify, Cummings and the administration have insisted that he acted “reasonably” and have so far refused to set him adrift, even amid growing backlash to Johnson’s leadership as deaths continue to pile up.

    Johnson has announced that he will host Sunday’s Downing Street press conference, replacing Housing Secretary Robert Jenrick. The briefing has also been delayed to 5pm London Time (12pmET). Watch it live below:

    New York Gov Andrew Cuomo will also deliver his daily briefing starting at noon.

    Even as NY’s testing rate reached a new peak of 50k tests run in a day, the state’s infections have continued to drop, which is an extremely promising sign. Elsewhere in the US, Casinos in Las Vegas have said they plan to reopen June 4, though with precautions including using dice disinfected by UV light.

    Health officials in Moscow just revealed on Sunday that 12.5% of Muscovites may have already been infected with the virus, or nearly 1.5 million people.

    Additionally, Brazil reported 16,508 new cases of the virus and 965 new deaths as the country remained the largest single contributor to the global total for the day. Across the massive nation, 347,398 cases and 22,013 deaths have been confirmed. Mexico reported 3,329 new cases of coronavirus on Saturday, bringing its total to 65,856 cases after what was the US southern neighbor’s largest daily jump yet.

    Russia confirmed 8,599 new coronavirus infections on Sunday, bringing the country’s total to 344,481. Russia has the third-highest number of infections behind the US and Brazil, though in a promising sign, the number of new cases reported has lingered below 10,000 for nine days in a row, a sign that the lockdown is finally starting to work, despite the virus’s deep penetration of Russian society.

  • Retail Investors Are Crushing Hedge Funds Again
    Retail Investors Are Crushing Hedge Funds Again

    Tyler Durden

    Sun, 05/24/2020 – 18:45

    They may have been burned on USO and Hertz, but for retail investors across the US, the joys of trading stocks are just too great to offset these two “BTFD-gone-wrong” blemishes. In fact, bored and flooding into zero-cost online trading platforms like Robinhood, Etrade and Schwab…

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    … retail investors’ recent pursuit of some of the hottest momentum stocks has created a self-fulfilling prophecy whereby the biggest momentum stocks keep rising, drawing in even more retail investors who – in the spirit of Mrs Watanabe – chase not only what goes up resulting in even higher prices for the most visible momentum names and megacap growth stocks such as the FAAMGs…

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    … and Moderna (where management is all too eager to sell as eager amateur traders buy)…

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    …  but also happily buy any dip they see, such as the one in SBUX.

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    To be sure, there was some initial confusion where retail investors found all this capital they are now allocating to risk assets, but that was laid to rest last week when we reported “How Retail Investors Took Over The Stock Market“, in which we showed that according to credit card data analytics company Yodlee, after putting some money into savings and withdrawing cash, the third most popular activity for most income segments was “securities trades” – i.e., buying stocks – especially among the pure middle class, those making between $35K and $75K.

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    But what is even more remarkable is that as retail investors chase many of the same names that make up the Hedge Fund VIP list (profiled here), however without a downside hedging pair-trade which has hurt so many hedge funds which, as the name implies, must hedge and can’t be all in a handful of long positions which has detracted substantially from broad L/S equity hedge fund gains this year…

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    … which are down 9% YTD and performing far worse on a risk-adjusted basis…

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    … retail investors have successfully outperformed the so-called smart money once again.

    As Goldman confirms in its latest hedge fund performance tracker, the continued surge in retail investor trading activity has helped boost the growth stocks most popular with hedge funds, adding that “data collected by our equity analysts from brokers show daily average trades more than doubling in early 2020 relative to the typical pace in recent years.”

    This echoes the data from Robinhood, which showed nearly a tripling in user activity this year, with the number of distinct user-positions in S&P 500  stocks rising from 4 million at the start of 2020 to 5 million at the market peak in February, 7 million at the S&P 500 trough in March, and 12 million today. This sharp increase in retail trading has helped a basket of popular retail stocks (which for those who have access can track it using Goldman’s Marquee platform under the GSXURFAV ticker) outperform the S&P 500 by 13 percentage points YTD.

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    And, as Goldman notes, “because so many retail favorite stocks are also popular with hedge funds, the retail trading surge has also benefited the performance of hedge fund portfolios. Eleven of the 50 stocks in our Hedge Fund VIP basket also rank among the 50 most popular retail trading stocks, including the top three stocks in the VIP list (AMZN, MSFT, and FB).” The full list of the 50 most popular retail stocks is below (while the matching hedge fund VIP list can be seen here).

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    This means that as a result of this cross-investor “symbiosis”, one where the Fed’s intervention means that there are just a handful of stocks that everyone must buy in hopes of outperforming the broader market, the 11 stocks in common have returned a median 18% YTD compared to a median.

    But the punchline is that as a result of the massive concentration in non-FAAMG stocks across hedge funds which as we explained earlier have punished the smart money,  retail investors are once again outperforming hedge funds!

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    Needless to say, this is a bizarre outcome: after all, what is the point of all the in-depth analysis conducted by hedge funds if 20-year-old retail investors armed with just an online trading platform and listening to CNBC can outperform them?

    And as hedge funds struggle with this existential dilemma – which will last as long as central banks step in every single time to prop up the market now that moral hazard has officially been banished – we remind readers that this is not the first time retail managed to outperform hedge funds in recent months. In fact, in late February – just two days after the S&P hit an all time high – the we posted the exact same observation, and concluded by saying that “while it is certainly a novelty to see retail investors outperform hedge funds, we doubt this divergence will last long.“

    It did not, and the market crashed just days later.

    So fast forward three months to today when the same bizarro divergence is back, prompting many to ask if the same selloff we observed in early March is about to strike again? With the Fed going all in to make sure it does not, this time it may – in fact- be different, but according to Wall Street pros (who, let’s face it, now have less clout than daytrading Joe Sixpack if based on performance) this latest torrid scramble by retail investors will again “end badly“:

    “Obviously you’re exposing yourself, depending on how you’re doing it, to catastrophic losses,” said Brian Nick, chief investment strategist at Nuveen. “If you get a lot of investors in either individual securities, companies or investment strategies that they may not have experience with, it could lead to unhappy investors down the road.”

    “There is a long, documented history of retail investors chasing a handful of story stocks and then getting burned,” said James Pillow, managing director at Moors & Cabot Inc. “We humans love a good narrative. I cannot imagine this time around ending any different.”

    Perhaps. But for now it is the hedge funds that are again chasing retail investors, because as Deutsche Bank’s Parag Thatte writes in his latest Investor Positioning and Flows report, “long/short hedge funds, measured beta to the mega cap growth as a whole is below historical average but has been rising over the last three months.”

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    At the end of the day, however, what happens next depends entirely on the Fed. After all, as one after another strategist now admit – most recently Bank of America – this is a “Fake market” where “government and corporate bond prices have been fixed by central banks.” One may, in fact, call it legalized gambling and that’s precisely what one of the retail gamblers “investors” admitted when interviewed by Bloomberg:

    [Meet] Ameer Umarov, a cab driver in Arizona with an interest in math and a passion for video games. Months ago, when he realized the coronavirus was growing into a global health crisis, he reactivated his Amazon.com account to make some purchases. Not for masks or hand sanitizer — for books on stock trading. Two a week, at one point.

    When equities started surging in late March, Umarov stayed away, scared by the volatility. He was ready to act by the first week of April. He bought shares of Boeing Co., a bad decision that set him back more than $4,000. But a stake in Halliburton Co. brought him $9,800, after he sold shares on the day of a 16% rally late last month. A few other purchases — Goldman Sachs and Micron Technology Inc., among them — yielded mixed results. All told, Umarov is down some $400 since he began.

    “It’s a gamble, but a highly intellectual gamble,” he said by phone. “It’s about knowledge and risk, but especially for guys like me, it’s all about sheer luck.”

    Umarov is right: the Fed’s endless interventions have made a mockery the “market”, obviating any fundamental analysis or in-depth research, and ushered in the biggest casino known to man. Which is why in a time when a trade’s success depends only on whether one picked the right side of the coin toss, it is no surprise that a millennial investor armed with nothing more than a trading platform can outperform the “smartest men in the room.”

  • China Touts 1.5 Million Wuhan Residents Tested For COVID-19 In Single Day
    China Touts 1.5 Million Wuhan Residents Tested For COVID-19 In Single Day

    Tyler Durden

    Sun, 05/24/2020 – 18:20

    Earlier this month Beijing announced a surprisingly ambitious plan to mass test some eleven million Wuhan residents for coronavirus after a handful of new cases starting popping up again, sparking fears of a second wave in the original virus epicenter. 

    According to official state media, Chinese health officials are on track to accomplish this, which is no small feat. They are eagerly touting their testing proficiency to the world, only we wish this had been the story when the outbreak first emerged many months ago, as opposed to what many have denounced as an early attempt at cover-up and thus delayed response. Reuters reports:

    The city of Wuhan, the original epicenter of the coronavirus outbreak in China, conducted 1,470,950 nucleic acid tests for the virus on Friday, the local health authority said on Saturday, compared with 1,000,729 tests the previous day.

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    Source: Getty Images

    That’s a whopping million tests per day, and compares to essentially the same number of tests conducted across American over the prior three months. It appears the unprecedented ultra-ambitious plan to test 11 million people for COVID-19 in a mere 10 days is actually coming to fruition.

    “Wuhan kicked off a campaign on May 14 to look for asymptomatic carriers – infected people who show no outward sign of illness – after confirming on May 9-10 its first cluster of COVID-19 infections since its lockdown was lifted on April 8,” Reuters continues.

    It marks the first mass testing of its scale to be carried out anywhere, with scientists and governments across the globe sure to be interested in the data it produces, given it could portend second wave ‘flare-ups’ in other countries, should the results show more than expected are still being infected in Wuhan. 

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    Starting about two weeks ago city districts were ordered to draw up ground level data and local plans to test all residents in their area, in a highly coordinated ground-up effort overseen by national health authorities. 

    The Wuhan data, which could possibly start to produce results in as little as weeks or a month, could spark a firestorm of controversy surrounding the already sensitive debate on a large-scale reopening of economies in the West, as we detailed previously.

  • Oxford University Coronavirus Vaccine Trial Chance Of Success Cut From 80% To Only 50%
    Oxford University Coronavirus Vaccine Trial Chance Of Success Cut From 80% To Only 50%

    Tyler Durden

    Sun, 05/24/2020 – 18:01

    Following the disappointing late Friday publication of a pivotal study by the New England Journal of Medicine, according to which Gilead’s Remdeisivir presented no marked benefit for those Coronavirus patients who were healthier and didn’t need oxygen or those who were sicker, requiring a ventilator or a heart-lung bypass machine, and that the only statistically significant improvement was observed in patients on supplemental oxygen, while also concluding that “given high mortality despite the use of remdesivir, it is clear that treatment with an antiviral drug alone is not likely to be sufficient”, overnight there was more bad news, this time from the world of potential coronavirus vaccines, after the Telegraph reported that the Oxford University team in charge of developing a vaccine said a recent decline in the infection rate will make it increasingly difficult to prove whether it’s been successful.

    “It’s a race against the virus disappearing, and against time,” Professor Adrian Hill, director of the university’s Jenner Institute, told the newspaper. “We said earlier in the year that there was an 80% chance of developing an effective vaccine by September. But at the moment, there’s a 50% chance that we get no result at all.”

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    Professor Adrian Hill is leading the team at Oxford University

    Citing a similar challenge to that which crippled the Remdesivir China trial, Hill said he expects fewer than 50 of the 10,000 people who have volunteered to test the vaccine trial in coming week to catch the virus. If fewer than 20 test positive, the results may be useless, he said. Reuters separately reported that the Oxford University team may join Moderna in a large-scale testing program in July.

    The disappointing update comes after Oxford’s trial partner, pharma giant AstraZeneca announced a $1.2 billion deal with the US government to produce 400 million doses of the unproven coronavirus vaccine first produced in Prof Hill’s Oxford lab.Meanwhile, the British Government has agreed to pay for up to 100 million doses, adding that 30 million may be ready for UK citizens by September

    The graphic below shows what the most recent expectations from the Oxford vaccine were, with management expecting to have the capacity to produce up to 100 million doses by the end of 2020. That timeline now appears optimistic.

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    The British government has agreed to pay for as many as 100 million doses, adding that 30 million may be ready by September. The daily rate of new infections has fallen by almost two thirds since hitting a peak of almost 9,000 on April 10.

    While developers globally are working on as many as 100 experimental vaccines for Covid-19, the process will take time.

    Earlier this month, Dr. Michael Ryan, executive of director of the World Health Organization’s Emergency Program, said that finding a vaccine and distributing it globally will be a “massive moonshot” adding that there’s a chance the disease may be here to stay.

    Meanwhile, with Bloomberg reporting that “Fate of Global Economy Rests More Than Ever on Finding Vaccine“, Morgan Stanley has highlighted six vaccines with the highest probability of success and the ability to manufacture at scale, adding that it believes that “millions of doses could be available by fall 2020, assuming no delays and >1B doses in 2021.” Alas, as the Oxford case just demonstrated, delays are now inevitable, and ironically the one thing that can reinstate the previously lofty schedule is if there is a second wave that provides the trial with the number of sick patients needed to bring the trials to their conclusion.

    That said, here are some more details from Morgan Stanley’s Matthew Harrison:

    Six vaccine candidates to watch: Of the 110 vaccine candidates under development, 8 are in clinical studies. We believe 6 (4 of the current clinical candidates and 2 preclinical) have both a reasonable likelihood of clinical success and can be manufactured at scale to be relevant. We see three waves of potential vaccines available commercially, with those from Moderna, Pfizer/BioNTech, AstraZeneca/University of Oxford and CanSino likely in the first wave before the end of 2020. We expect vaccines from J&J in 1H21 and Sanofi/GSK in 2H21.

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    We expect significant production available by mid-2021 with limited quantities as early as fall 2020: In the near-term we expect to learn if the earliest-to-clinic vaccines produce antibodies against the virus in humans. CanSino has a 508 patient Ph II study which is expected to have data in May (how and when it is released remains unclear), while we expect the US NIAID to provide data from Moderna’s Ph I study in the next 1-2 months. These data will provide initial information about potential efficacy, but will not provide enough information about safety. We would expect to have a clearer picture from Moderna, AstraZeneca and potentially Pfizer on safety by fall 2020. While these companies may be granted emergency use authorizations (EUAs) in the fall of 2020, we would not expect a BLA filing until YE20. Based on current company commentary, we believe millions of doses of the vaccine could be available in the fall, 10-30M/month by YE20 and 100s of millions per month by mid-2021.

    How do the current manufacturing projections compare with project warp speed? The Trump administration has indicated that it plans to have enough doses of vaccine for the entire US population by the end of 2020. Based on current projections from the leading candidates that could be available to the US population, those manufacturers are unlikely to reach a few hundred million doses in aggregate until 1H21. Thus, while it may be possible to accelerate that effort, we believe resources will need to be devoted immediately to potentially achieve such a goal.

    We believe the pandemic market could be $10-30B, while the endemic opportunity could be ~$2-25B: Of the world’s population, we assume ~1.8B people are in markets that would be served by western companies, in particular the US (~330M), Western Europe (~400M), some of Eastern Europe (~115M), South America, Canada and Mexico (~590M),and some Asia-Pacific countries (~210M). We assume India (~1.3B), China (~1.4B) and Russia (~150M) will likely not buy a western vaccine while Africa (~1.2B) and the remaining population (~1.9B) would be largely a donation market. We see US pricing at $10- 20/treatment, Western Europe at ~$5-15 and the remaining countries at ~$5-10. This leads to our $10-30B market range for the 2020-2022 pandemic season.

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