- "Paralyzed By The Pandemic" – World's Largest Diamond Company Considers Restructuring
“Paralyzed By The Pandemic” – World’s Largest Diamond Company Considers Restructuring
Tyler Durden
Mon, 07/27/2020 – 02:45De Beers Group, the world’s largest oldest diamond company, is expected to undergo a restructuring period as diamond sales collapse.
Bloomberg notes the company “is considering ways to restructure mines, expand in jewelry and overhaul diamond sales.” Adding that it must “rethink its entire business in an industry left paralyzed by the pandemic.”
There’s going to be no V-shaped recovery for the diamond industry this year. The industry has been severely damaged by the virus-induced downturn, as consumers across the world can no longer afford pricey diamonds.
Even before the global downturn, diamond sales were waning with De Beers. The younger generation lost interest in the whole marriage thing, as their finances, with insurmountable debts and no savings, made it near impossible to layout enough money for weddings and a diamond ring.
The came big bad COVID-19, led to a further collapse in consumer finances, along with a period where jewelry stores were closed around the world. This pressured De Beers, who reported $56 million in rough diamonds sales in 2Q20, down 96% from a year earlier. RBC expects the diamond company to post a $100 million loss in 1H20.
Read: Diamond Crisis – De Beers Records Lowest Profits Since 2009
De Beers CEO Bruce Cleaver told employees this week, in an email, that it will “narrow the gap between its revenue and costs.” He warned diamond demand would slump in the near term.
“Covid-19 has compounded and exacerbated difficulties that already existed in the diamond world,” Cleaver said. “These difficulties, which have inhibited our growth over the past several years, have become even more urgent to address. They require us to act now to protect the short-term health of the business while refocusing and reorienting it to realize our long-term potential.”
Cleaver didn’t layout all the changes in the company email. Bloomberg notes the restructuring will likely result in job cuts.
Shown below, spot diamond prices via IDEX show prices have been slumping for more than 5-years.
The world’s largest diamond company appears to have gone bust.
- In Message To Turkey, France & Egypt Conduct Joint Naval Exercises In Mediterranean
In Message To Turkey, France & Egypt Conduct Joint Naval Exercises In Mediterranean
Tyler Durden
Mon, 07/27/2020 – 02:00On Saturday, the Egyptian and French naval forces carried out naval drills in the eastern Mediterranean, with the participation of the Egyptian Ghost frigate and French Ghost frigate (ACONIT).
These joint naval drills also come at a time when Egypt, Greece, France, and Cyprus are at odds with Turkey over the latter’s intervention in Libya and their oil exploration plans in the eastern Mediterranean.
Egypt and France joint naval drills this weekend, via Egyptian Army Spokesman. According to the Egyptian army statement, “The training included many training activities of a professional nature focused on methods of organizing cooperation in the implementation of combat missions in the sea against hostile marine formations with the actual use of weapons in engagement with surface and air targets in addition to the implementation of confrontational battles, with the use of aircraft.”
The statement said, “The training showed the professionalism of the crews of ships in carrying out combat missions with accuracy and high efficiency, with a focus on common coordination points between all the common elements.”
It added that “these exercises are in the framework of supporting the pillars of joint cooperation between the Egyptian and French armed forces, and identifying the latest fighting systems and methods in a manner that contributes to honing skills and combat and operational experiences and supporting efforts of maritime security, stability and peace in the Mediterranean.”
Meanwhile on the same day, Saturday evening, the Turkish Ministry of Defense published a video clip of its own military exercises in the eastern Mediterranean region, amid heightened tensions over the Libyan crisis.
Hava Kuvvetleri unsurlarımız tarafından 23 Temmuz 2020 tarihinde Doğu Akdeniz’de eğitim görevi icra edilmiştir.#MSB #TSK pic.twitter.com/Eo7JOlD9ym
— T.C. Millî Savunma Bakanlığı (@tcsavunma) July 25, 2020
https://platform.twitter.com/widgets.js
The Ministry of Defense tweeted that “Turkish fighters carried out training exercise in the eastern Mediterranean last Thursday, July 23,” without providing further details.
The spokesman for the Turkish presidency, Ibrahim Kalin, said earlier, that his country wants to share all natural resources in the eastern Mediterranean fairly, pointing out that Turkey will not accept letters that include a threats.
He said that “sending Egyptian forces to Libya would be a dangerous military adventure, in addition to the support that France provides to Haftar, threatens the security of the North Atlantic Treaty Organization (NATO)… We are only here to protect our rights… We do not accept the language of threats or the threat of sanctions.”
- Let It All Burn (Or Not)
Let It All Burn (Or Not)
Tyler Durden
Sun, 07/26/2020 – 23:30Authored by Erick Erickson via TheResurgent.com,
There is no police power in the federal constitution. The police power is left to the states. To the extent the President can send federal officers into Portland, OR, it must be to protect federal buildings and laws.
The President cannot save Portland from itself and he should not.
I want a mask mandate, but there is no federal police power for the President to impose it. It must come from governors, who have way more expansive police powers than your average libertarian-leaning person would have you believe.
The President does not have that power.
But, beyond that, the people of Portland have a history of outlandish displays of protest and behavior, including nudity. The place is so bizarre there’s been an entire television show parodying Portland.
By sending federal troops to Portland, OR, the President and federal government are allowing Portland not just escape from their own democratic choices, but also allowing them a scapegoat to take the blame.
Portland can blame President Trump instead of the residents of the city. They can blame Washington instead of their mayor.
At some point, we must allow people to live with their choices and make it easy for those who want to escape to actually move. If we allow Portland to fester as it wants, it will either figure out it must change, or live with its consequences.
When people move out, the tax base collapses, and crime goes up, the people will either change their behavior or be democratically marginalized in their voting power. If life goes on as normal or more people move in to embrace what is happening, then they’ve chosen it or the problems have been exaggerated by conservatives, as they claim.
Let the market decision by letting the actions of a free people control their fate.
The President should withdraw from Portland immediately and let the city burn, if it will, or thrive if it will, but it is the choice of the people there.
A President sending in a police force to a city is a dangerous precedent that will be expanded upon even though the United States Constitution lacks a general police power. A city allowed to chose its own fate is a positive precedent from which we can all draw lessons.
Let Portland burn or not, but let it decide without intervention from Washington.
- A Look Inside The $52 Trillion Bubble That Has "Hijacked China's Economy"
A Look Inside The $52 Trillion Bubble That Has “Hijacked China’s Economy”
Tyler Durden
Sun, 07/26/2020 – 23:08More than three years ago, we explained why “the fate of the world economy is in the hands of China’s housing bubble.” As we said at the time, “China has always been a serial bubble inflator courtesy of a closed (capital account) economy, and nearly $30 trillion in bank deposits [$40 trillion as of July 2020] which slosh from one asset class to another, be it the stock market, bitcoin, commodities, farm animals or – most often – housing. “
Why is it so important for China to consistently reflate this bubble? The answer is simple: for China’s middle class there is no more important asset than housing: as Deutsche’s Zhiewi Zhang wrote in 2017 when discussing the macro and market consequences of the Chinese bubble, it is nothing more (or less) than “a massive wealth effect.”
Furthermore, unlike the US, which is hyperfinancialized and the bulk of household net worth is in financial assets (less than 30% is in real estate), in China it is the opposite, and roughly three-quarters of all household worth is in real estate.
And since a global healthy economy starts with a growing, stable and inflating Chinese economy, unless China’s housing bubble is growing at a steady, measured pace created a “wealth effect” illusion among several hundred million middle-class Chinese, we concluded three years ago that the global economy is just as reliant on China’s housing market as it is on the global – and certainly US – stock market.
Fast forward a little over three years, when China’s housing bubble is bigger than ever, and now the WSJ has picked up on what we said three years ago, namely that China’s epic housing market is perhaps the world’s most defining bubble, and more importantly, not even the covid pandemic did anything to threaten the sanctity of this bubble.
First, some context why China’s housing bubble currently eclipses the one in U.S. housing in the 2000s: “At the peak of the U.S. property boom, about $900 billion a year was being invested in residential real estate. In the 12 months ended in June, about $1.4 trillion was invested in Chinese housing. More was invested last month in Chinese real estate than any other month on record.”
Some more statistics: “the total value of Chinese homes and developers’ inventory hit $52 trillion in 2019, according to Goldman Sachs, twice the size of the U.S. residential market and outstripping even the entire U.S. bond market.” China’s housing market is certainly bigger than the US stock market, and at its current growth rate will surpass the total value of all global stocks (which is currently about $85 trillion) in just a few years!
And since just like the US stock market, China’s housing bubble is one of those special “assets’ that continue to grow with the explicit blessing of the government, Chinese houses are not allowed to suffer even a modest drop in values. Which also means home prices constantly have to keep rising, and they do just that:
In March, 288 apartments in a new Shenzhen property development sold out online in less than eight minutes. A few days later, buyers snapped up more than 400 units in a new housing complex in Suzhou. In Shanghai, apartment resales neared a record high in April, by one estimate. One Saturday last month, nearly 9,000 people each put down a deposit of one million yuan ($141,300) to qualify to buy apartments in a Shenzhen development.
“I barely had time for lunch on weekends in March” when the market started bouncing back, said Zhao Wenhao, a Shanghai-based agent at Lianjia, one of China’s largest real-estate brokerage firms.
To be sure, by now China’s middle class must be aware that it is buying into a giant bubble – how has that not put paused some of the relentless euphoria? The answer is simple: Many of Lianjia’s clients worry China’s currency will depreciate in the global economic slowdown, he said, driving even more money into housing as a haven. As a result, instead of holding soon to be devalued 1s and 0s in some bank deposit account, the local population is bracing for devaluation by scrambling into real estate, in the process only assuring that the inevitable housing market crash may well come before said devaluation.
But not just yet: and whereas some speculated that the coronavirus crash would send Chinese home prices tumbling, that never happened and instead the market’s coronavirus pause didn’t last long. Urban home prices in China were 4.9% higher in June than in the year-earlier period. Year-to-date investment is up 1.9% in the first half of the year, despite a huge drop in sales in February and cutting earnings guidance by 50% in late February.
The unexpected resilience has been a blessing to local home developers, which plunged in February and March only to stage a dramatic recovery since. China Evergrande, the country’s biggest home builder, even raised its sales target for the year by 23% from its January estimate, after strong sales in March.
That said, the continued growth of China’s housing bubble simply means that the day of reckoning has merely been delayed. And while the rapid housing-market recovery is good news on one level for Beijing, the WSJ notes that it is also a reminder of behavior that has long worried the central government, which has tried repeatedly to keep property prices from getting out of control. Chinese President Xi Jinping declared in 2017 that “houses are built to be lived in, not for speculation,” which became the guiding mantra for government housing policy.
Of course, having had virtually no declines since then, Xi’s words proved to be just a hollow as Bernanke’s CNBC interview in which he “didn’t buy the premise” that housing prices can crash. The only difference is that so far China has been able to preserve control over home prices, but its day of reckoning is also coming.
Meanwhile, since Beijing has tipped its hand that it will not temper any housing price speculation, the local population has been happy to chase home price to the upside, and after a decade of rapid home-sales growth, fueled by borrowing, China’s household leverage ratio hit a record high of 57.7% in the first quarter. It was, according to the WSJ, the biggest quarterly jump in the ratio since the first quarter of 2010.
Indeed, as noted above, the WSJ confirms that “the central problem in China is that buyers have figured out the government doesn’t appear to be willing to let the market fall. If home prices did drop significantly, it would wipe out most citizens’ primary source of wealth and potentially trigger unrest”, something we have been saying for more than half a decade.
That gives Chinese citizens who have enough money an incentive to keep buying because they believe property in large cities will remain the safest investment in China, regardless of the health of the broader economy.
“Property has hijacked China’s economy, so the government wouldn’t dare to push for a plunge in housing prices, even if that’s the most effective way to deflate the bubble,” said Chen Zhiyu, who works for an American retailer and is looking to purchase a property in Shenzhen. He could as well be talking about the US stock market, which is serving a similar wealth effect function half a world away in the US.
“You gotta follow the money,” said the 37-year-old, adding that he has raised his budget for spending on property since the coronavirus pandemic helped drive up prices. “Whenever governments start printing money, asset prices will go up. In the U.S., you have a bull stock market, but in China, only housing prices will keep surging.”
Bingo, and for the reason why to China the housing market is as stocks are to the US, see the top chart above.
Meanwhile as the bubble grows bigger, an ever greater portion of the economy becomes reliant on its continued expansion and viability. Sales activity, for one, is being driven by cash-strapped developers and the local governments that sell them land. And both need to gin up revenue to pay down debts or offset other problems, and are cooking up more incentives to move properties. The bottom line: everyone is targeting higher home prices which in turn drive much of the rest of the economy.
The problem, as China has found out the hard way on so many occasions, is that every bubble eventually bursts, and when it comes time for the housing bubble – which is now arguably even bigger than the US stock bubble, let along the US housing bubble of 2007 which was amateur hour by comparison – no one has any idea how Chinese officials can manage the problem without destabilizing the broader economy. Even if the market stays strong, it creates headaches for policy makers, who have had to hold off on more aggressive economic stimulus this year—which some analysts say is needed—partly because of fears it will inflate housing further.
Meanwhile, the bubble is only getting worse:
Polling conducted by the China Household Finance Survey, based in the Southwestern University of Finance and Economics in Chengdu, suggests the coronavirus pandemic has encouraged the kind of buying Beijing worries about, with demand for property rising among people who already own multiple properties, even as it has dropped among those who don’t yet own any.
That is a telltale sign of speculative investment, according to Gan Li, a professor of economics at Texas A&M University and an expert in Chinese household finance.
“Speculative demand is on the rise because [people] view housing as a safer asset than the stock market or overseas assets,” he said. “They think it’s guaranteed. Because of the pandemic they’re actually consuming less, and saving more. So they’ll actually have more money available to invest. That will create an even larger housing problem.”
There are other problems too, one is that instead of actually living in them, many Chinese use local apartments as nothing more than an investment asset. Back in late 2018 we observed that for Beijing, a “nightmare scenario” was unfolding as more than 50 million apartments were vacant, about 21% of all homes in urban China.
Since then the number was only increased, and according to the WSJ which cites recent data from China Household Finance Survey, there are now 65 million empty units. Among families who owned two properties, the vacancy rate reached 39.4%, and among those that owned three or more, 48.2% were empty.
The record number in vacant units has meant little upward pressure on rents; in fact, Chinese rental yields are below 2% in major cities like Beijing, Shanghai, Shenzhen and Chengdu, less than can be made buying Chinese government bonds. Even so, Shannon Bi, a 42-year-old English teacher, told the Journal that the pandemic has pushed her to invest in a second home in Shenzhen sooner than she planned, because she worries about inflation. “You have to invest the money somewhere, or it will only depreciate,” she said, and she is not wrong.
* * *
What is so worrisome to some economists is the speed at which China’s property boom – just like the US stock market rebound in the past four months – has grown so large, and its tendency to keep climbing even during times of economic stress. As recently as the 1990s, it was illegal under China’s communist system for most people to own homes.
A State Council decision in 1998 abandoned the country’s system of employer-allocated housing, and homeownership took off. By late last year, about 96% of China’s urban households owned at least one home, according to a Chinese central bank survey released in April, far exceeding the 65% homeownership rate in the U.S. Needless to say, mortgage debt in China has absolutely exploded.
In some ways, the boom accomplished Beijing’s goals. It has boosted economic growth and created wealth for millions of middle-class Chinese families (even if it is all dependent on nothing more than money printing and cheap credit, and like every other bubble, it will eventually crash). It also gave local governments, which must turn over a major part of income-tax revenue to the central government, additional revenue from land sales to developers.
But the boom has taken investment dollars away from other industries competing with real-estate borrowers for bank funding. It also has saddled many families with debt. Globally, China accounted for around 57% of the $11.6 trillion increase in household borrowing over the decade through 2019, according to Bank for International Settlements data, or roughly half of all global debt created since 2005! The U.S. accounted for about 19%.
Home prices in some Chinese cities have reached levels comparable with some of the world’s most expensive urban areas. Average home prices across China reached 9.3 times average income in 2018, according to the Chinese Academy of Social Sciences, compared with 8.4 in San Francisco.
In Tianjin, a city of 15 million southeast of Beijing, apartments in upscale areas sell for around $9,000 a square meter, or about $836 a square foot, according to real-estate services company Savills PLC. That is roughly the price an average buyer would pay in some of the most expensive parts of London, even though disposable incomes are seven times as high in London as in Tianjin.
The bottom line is that, for better or worse, just as Americans have gone all in on stocks, urban Chinese have bet everything on their homes. And picking up on the chart that we first showed years ago, the WSJ notes that the Chinese “now have nearly 78% of their wealth tied up in residential property, versus 35% in the U.S.”
And so, to avoid a spectacular bubble burst in Feb and March when the Chinese economy imploded due to covid, bigger developers and local governments rolled out incentives to bring buyers back. Since February, at least 26 of 32 Chinese provinces and regions have unveiled policies to boost their property markets, according to Huatai Securities, including looser down-payment requirements and subsidies for home purchases.
“While local governments are under pressure to prevent further surges in housing prices, what scares them more is a sharp decline,” said Gao Fei, general manager at real-estate firm Centaline Group in Tianjin. They can ill afford to let the market go down. Income from land sales and related taxes on developers accounted for 52.9% of local governments’ revenue in 2019, a record high, according to Shanghai Yiju Real Estate Research Institute.
China Evergrande, whose enormous debt gives it the largest interest bill in the world among listed nonfinancial stocks, offered discounts of 25% in February and 22% in March. Country Garden Holdings, another major developer, offered more than 17,000 new homes across China via social media with discounts of up to 50%.
These worked: of China’s 34 largest developers, 27 reported a year-over-year increase of sales volume in May, according to data from China Real Estate Information Corporation.
One can, of course, say that same thing for the symbiotic relationship between the US government and the stock market. The bottom line is that every regime has its own pet bubble that it will cultivate as a bubble pop could mean a civil uprising, if not revolution as hundreds of millions realize their paper wealth was just that.
Yet the unprecedented push to preserve the bubble at all costs is now ending.
As the WSJ notes, in a sign the central government disapproves of some of the loosening measures, in at least 12 cities, including Jinan and Guangzhou, documents detailing relaxed lending policies were removed from local governments’ official websites within days. One city in Shandong province backed off plans to provide subsidies to home buyers in mid-May, saying some parts of its plan “violate relevant requirements from senior officials.”
More recently, incentives have been trimmed, though not entirely. At one development in Shanghai in mid-May, CK Asset Holdings offered prospective buyers a Huawei phone and vouchers of 20,000 to 40,000 yuan ($2,800 to $5,600) for future apartment-management fees.
In other developments, no discounts were on offer, and would-be buyers had to enter lotteries to access the smaller and cheaper apartments. China Vanke Co. sold apartments in mid-May worth a total of 148 million yuan ($20.8 million) within four hours online in a live-streaming show hosted by an actress. In other developments, no discounts were on offer, and would-be buyers had to enter lotteries to access the smaller and cheaper apartments.
Still, it doesn’t look like China actually needs all the incentives: China Vanke sold apartments in mid-May worth a total of 148 million yuan ($20.8 million) within four hours online in a live-streaming show hosted by an actress.
Why? Because just as FOMO is pushing 10-year-old retail investors in the US stock bubble due to FOMO, so in China the fear of losing out is driving more buyers to look now, with home prices in some desirable areas up by at least 10% this year according to Yin Haiping, who runs a property consulting firm in Shenzhen.
Xu Xiaohua, a university lecturer in Tianjin who already owns a property there, just bought another apartment this month in Shenzhen. He paid 6.5 million yuan ($913,050) in cash in early May (they sure pay university lecturers well in China) for the 50-square-meter (538-square-foot) property after checking out about a dozen apartments within a week.
He said he thinks most Chinese will park their wealth in real estate during downturns. “The worse China’s economy turns,” he said, “the higher property prices in places like Shenzhen will climb.”
He is right, of course, as long as there is a greater fool willing to buy the next marginal unit at an even higher price. And in a world where central banks are now openly the buyer of last and first resort, one wonders just how much longer this farce of fake wealth built up on artificially inflated assets – housing in China, stocks in the US – can continue…
- Spot Gold Soars To Record High As Dollar Freefall Accelerates
Spot Gold Soars To Record High As Dollar Freefall Accelerates
Tyler Durden
Sun, 07/26/2020 – 23:04Spot Gold is surging in Asian trading as the dollar is dumped.
Source: Bloomberg
Spot Gold traded above $1930, taking out the $1921 highs from 2011…
Source: Bloomberg
The dollar has crashed to 19 month lows…
Source: Bloomberg
Gold appears to be more and more in favor as an alternative place to allocate wealth amid the growing pile of negative-yielding debt (and note that cryptos are starting to get a bid for the same reason)…
Source: Bloomberg
As Jim Grant recently explained:
The Fed wants us to believe that we should believe that there will be no inflation out of all this and to me that is a vast unknown. We have America’s fasted peacetime money-growth coexisting with the all-time 4,000-year record lows in interest rates. It’s a most curious and troubling juxtaposition there.”
Grant said aggressive moves by governments and central banks are unwise.
I think what we have is a monetary moment that is unprecedented and therefore calls for extreme caution and great humility on the parts of all of us.”
So is the “monetary moment” sparking a loss of faith in fiat?
- Rutgers University Declares Grammar 'Racist'
Rutgers University Declares Grammar ‘Racist’
Tyler Durden
Sun, 07/26/2020 – 22:30Authored by Rick Moran via PJmedia.com,
If you’re looking for peak idiocy from academic institutions who are falling all over themselves to kowtow to the mob’s notions of “social justice,” look no further.
The English Department at Rutgers University has declared that proper use of grammar is a hidden form of racism because it disadvantages students of “multilingual, non-standard ‘academic’ English backgrounds.”
Grammar is rather boring so the department is going to sex it up with all sorts of fascinating additions.
The “critical grammar” approach challenges the standard academic form of the English language in favor of a more inclusive writing experience. The curriculum puts an emphasis on the variability of the English language instead of accuracy.
“This approach challenges the familiar dogma that writing instruction should limit emphasis on grammar/sentence-level issues so as to not put students from multilingual, non-standard ‘academic’ English backgrounds at a disadvantage,” Walkowitz said. “Instead, it encourages students to develop a critical awareness of the variety of choices available to them [with] regard to micro-level issues in order to empower them and equip them to push against biases based on ‘written’ accents.”
“Variability instead of accuracy” means incorrect usage of grammatical norms. It’s nice that someone speaks a foreign language but isn’t the whole point of teaching proper grammar is teaching foreigners the proper way to speak English?
Yes, but it’s white and it’s male, and it’s gotta go.
Unfortunately, Rutgers apparently missed the mark with some activists. Aside from being incomprehensibly stupid, the change is, itself, virulently racist.
Leonydus Johnson, a speech pathologist and libertarian activist, said the school’s change makes the racist assumption that minorities cannot comprehend traditional English. Johnson called the change “insulting, patronizing, and in itself, extremely racist.”
“The idea that expecting a student to write in grammatically correct sentences is indicative of racial bias is asinine,” Johnson told the Washington Free Beacon.
“It’s like these people believe that being non-white is an inherent handicap or learning disability…
That’s racism. It has become very clear to me that those who claim to be ‘anti-racist’ are often the most racist people in this country.”
I guess it depends on how you think about the idea of “language.” You and I and the rest of the sane world sees language as a way to communicate. Writing or speaking using a common language with (mostly) agreed-upon definitions for words is the key to communicating and understanding ideas. Even abstract ideas like emotions and feelings can be communicated using commonly accepted forms of grammar.
Grammar “greases the skids” of communication by making things easier to understand. Form and function merge seamlessly and effortlessly so that an intelligent conversation is possible.
But “critical grammar” is so counterintuitive that we’d have to think about every word we used to avoid “bias.” That’s the price we pay for “decolonization.”
The Rutgers English department created a Committee on Bias Awareness and Prevention in 2012. In light of Black Lives Matter protests, the school has moved past bias awareness and prevention and into a focus on “decolonization.” Walkowitz’s email talks of “decolonizing the writing center.” The department offers a specific internship titled “Decolonizing the Writing Center” to “make the writing centers more linguistically diverse.”
When will students revolt against this nonsense? Or will they remain sheep and be led around by the nose by ignoramuses so besotted with ideology they can’t think straight?
- "The Swamp Is In A Feeding Frenzy" – 'Tea Party' Resurgent Amid Trillion-Dollar Bailout Bills
“The Swamp Is In A Feeding Frenzy” – ‘Tea Party’ Resurgent Amid Trillion-Dollar Bailout Bills
Tyler Durden
Sun, 07/26/2020 – 22:00Tea Party conservatives are waking up to the lack of fiscal discipline by the Republican establishment over exploding deficits and another round of economic stimulus, according to The Hill.
What’s happening today is similar to the Republican backlash in 2008 when they bailed out Wall Street during the financial crash, it’s just this time, the bailouts dwarfed the ones a decade ago.
This puts Senate Majority Leader Mitch McConnell, a Kentucky Republican, in a tight spot as he is up for reelection this fall. His state is flooded with Tea Party patriots, who have raised the alarm over the Trump administration’s reckless deficit spending.
“Just came from Progressive Democrat, whoops, I’m mean Republican caucus,” Senator Rand Paul, a Kentucky Republican, tweeted last week.
“The majority of Republicans are now no different than socialist Democrats when it comes to debt. They simply don’t care about debt and are preparing to add at least another trillion dollars in debt this month, combined with the trillions from earlier this summer,” Paul said.
Senator Ted Cruz, a Texas Republican, said “hell no” to critical components of McConnell’s next stimulus package.
“This is the swamp in a feeding frenzy. Everybody’s lobbyist has their hand out, saying, ‘Look, if you’re spending trillions of dollars, I want to get some.’ And it’s not right,” Cruz said.
GOP Senator Ron Johnson of Wisconsin, another politician who was elected during the Tea Party movement a decade ago, told The Hill that Congress shouldn’t authorize “a dime more” until “we’ve thoroughly taken a look at the $2.9 trillion we’ve already authorized” and figure out what funds have actually been spent.
“When we were in the minority, we were able to put a brake on Obama’s desires,” Johnson noted, adding that the Republican establishment has lost fiscal discipline in recent years.
Senator Rick Scott, a Florida Republican, said the pandemic “shouldn’t be used as an excuse to spend” his “state’s taxpayers’ hard-earned dollars” to bailout out other “poorly managed state budgets.”
“As we begin looking at another spending bill, we need to know how the money already allocated has been spent. Last month, I wrote to all governors requesting details on how this taxpayer money is being spent. I’m still waiting on responses from most of them,” Scott said.
Ten years later, the Tea Party has failed to curtail deficit spending. Republicans, disillusioned by the “greatest economy ever,” are beginning to realize in the age of Trump they lost their ways through reckless deficit spending.
Read: Ron Paul: Is The (Tea) Party Over?
President Trump, who appeared to be a deficit hawk as a candidate, and promised to “eliminate the national debt in eight years” has increased the country’s debt load by at least $6 trillion, or about 30% in his first term.
In May, the US added a trillion dollars to combat the virus-induced downturn.
For context, here is total US debt since the start of the century.
Republicans are in a Catch-22 situation, one where they must pass the next trillion-dollar stimulus bill or face a crash in consumption. Passage of the bill will drive internal strife among establishment Republicans and Tea Party members.
- Hertz Has To Sell 182,000 Cars By 2021
Hertz Has To Sell 182,000 Cars By 2021
Tyler Durden
Sun, 07/26/2020 – 21:30Authored by Fred Smith via RoadandTrack.com,
Two months after filing for bankruptcy protection, Hertz finally has a plan in place to attempt to stay afloat until 2021.
To appease lenders and maintain future business, it will unload nearly 200,000 of the manufacturer’s total leased vehicles, numbering under 500,000.
The long-awaited bulk sale of 182,521 cars will take place over the course of the rest of the year, with a deadline set for December 31st, in order to fund an agreed $650 million in other lease-related debts. The number is a step up from the 144,000-car shedding Hertz had proposed last month, but leaves the company with a large enough fleet to maintain a viable business when it emerges from bankruptcy into a world that will, hopefully, involve enough routine travel for rental cars to be a viable business enterprise.
The deal is a direct result of a more positive used car market than the one Hertz had previously faced when it announced its filing in May. The market will allow the rental giant to recoup more of its losses than it had previously expected, which seems to have been the sticking point for lenders approving the deal.
That same market, however, could look very different by the end of the sale period, thanks in no small part to the potential market flooding of 182,000 former rental cars hitting the market with a requirement to be sold in a specific time period.
While no specifics were offered about which portion of the Hertz fleet will be sold, earlier sales this year have included a wide range of low mileage C7 Corvette Z06 options, as well as two of the unique-to-Hertz, 750 horsepower Camaro ZL1s.
- Charting The Retail Devastation: Here Is The Stunning List Of US Store Closures In 2020
Charting The Retail Devastation: Here Is The Stunning List Of US Store Closures In 2020
Tyler Durden
Sun, 07/26/2020 – 21:00While the US “bricks-and-mortar” retail industry was already on its deathbed before the covid pandemic struck with stories discussing the “retail apocalypse” as far back as 2015, the events in the past few months have simply accelerated a long-overdue process that would have taken several years to conclude with mass bankruptcies of corporate zombies coupled with tens of thousands of store closures.
And so, unlike other sectors of the US economy which have – for now – avoided to be swept by the “biblical” default wave that is sweeping across the US corporate sector, amid temporary store closures as part of shelter-in-place measures, Goldman calculates that the announcement (and completion) of permanent store closures YTD (~7,430) has already reached more than half of 2019 figures (~12,370) due to slowing/declining sales growth, leveraged balance sheets, and rising occupancy costs.
It’s only going to get worse: according to Coresight Research, around 20,000-25,000 stores could permanently close in 2020 on COVID-19 headwinds in the US, implying an accelerated store closure schedule in the second half of the year. Further, it expects to see an increase in bankruptcy filings owing to reorganizations or difficulties with financing activities amid the current pandemic.
Meanwhile, as some retailers are experiencing a surge in digital volumes, pure-play eCommerce companies like Amazon continue to benefit from greater access to consumer data and purchase history that enable compelling consumer experiences and also deliver efficiency and competitive benefits through advertising, product recommendations, and dynamic pricing.
This is also why Goldman believes that eCommerce growth will accelerate over the course of the second half amid social distancing measures, record number of retail store closures, investments in fulfillment by Amazon, and increasing tech investments by traditional retailers.
Not surprisingly, with apparel & accessories continuing to record large share of store closures as shown in the charts above and below, Goldman which just upped its price target on Amazon to $3,800, believe the online retail giant will be the primary beneficiary considering this segment already sees >20% online penetration.
- Agricultural Warfare? People Are Receiving Mysterious Unsolicited Packages Of Seeds In The Mail From China
Agricultural Warfare? People Are Receiving Mysterious Unsolicited Packages Of Seeds In The Mail From China
Tyler Durden
Sun, 07/26/2020 – 20:45Just when you thought tensions between the U.S. and China couldn’t get any stranger in the midst of the ongoing global pandemic, Americans across the country are starting to report receiving unsolicited packages of different types of seeds that they didn’t order – and don’t know anything about – at their door. The return address on the packages is always from China.
The Washington State Department of Agriculture wrote about the phenomenon on their Facebook page on July 24, 2020 and said that the seeds are being shipping in packaging that identifies the contents as jewelry.
Similar advisories have been issued in Virginia, Utah, Kansas, Arizona and Louisiana.
“Unsolicited seeds could be invasive, introduce diseases to local plants, or be harmful to livestock,” the post says.
Facebook users have been adding photos in the comments section of the post sharing photographs of seeds they have received from China. “It’s not a joke. I got some the other day!!!” one user commented, stating that the package identified the contents as a “Rose flower stud earring”.
“Look’s like it’s all across the country,” stated an Indiana resident who also received seeds in the mail unsolicited.
At least 40 residents in Utah were said to have been mailed the unsolicited packages, according to the Daily Mail. The Kansas Department of Agriculture and the Arizona Department of Agriculture also addressed the phenomenon, as did the Louisiana Department of Agriculture and Forestry, who said:
“Right now, we are uncertain what types of seeds are in the package. Out of caution, we are urging anyone who receives a package that was not ordered by the recipient, to please call the LDAF immediately. We need to identify the seeds to ensure they do not pose a risk to Louisiana’s agricultural industry or the environment.”
There have been similar reports from Virginia’s Department of Agriculture and Consumer Services. “The seeds have yet to be identified, but officials speculate that the seeds may be of an invasive plant species and are advising residents not to use them,” Fox News reported.
“Taking steps to prevent their introduction is the most effective method of reducing both the risk of invasive species infestations and the cost to control and mitigate those infestations,” VDACS wrote in a press release.
Public Asked To Report Receipt of any Unsolicited Packages of Seeds. Learn more: https://t.co/RY9u4nR1QK pic.twitter.com/ZzNaO2ZaYz
— VDACS (@VaAgriculture) July 24, 2020
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Twitter is also littered with reports of people receiving these seeds:
We have received 2 of those packages here in Indiana. One from China, and one from Kyrgystan. pic.twitter.com/Fm6CBxf1mD
— Don ⭐⭐⭐ (@SmallTownIndy) July 26, 2020
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The Washington State Department of Agriculture has advised people on its Facebook page:
1) DO NOT plant them and if they are in sealed packaging (as in the photo below) don’t open the sealed package.
2) This is known as agricultural smuggling. Report it to USDA and maintain the seeds and packaging until USDA instructs you what to do with the packages and seeds. They may be needed as evidence.
Anyone who has received seeds in the mail can report them to the United States Department of Agriculture by visiting their website here. The site says:
If individuals are aware of the potential smuggling of prohibited exotic fruits, vegetables, or meat products into or through the USA, they can help APHIS by contacting the confidential Antismuggling Hotline number at 800-877-3835 or by sending an Email to SITC.Mail@aphis.usda.gov.
USDA will make every attempt to protect the confidentiality of any information sources during an investigation within the extent of the law.
We can’t help but wonder, given the fact that agriculture is such a large cornerstone of trade talks with China, whether or not this could be more than just “agricultural smuggling”, but perhaps agricultural warfare of sorts.
This story is developing and we will continue to update it if more information becomes available.
- The Worst Year In History?
The Worst Year In History?
Tyler Durden
Sun, 07/26/2020 – 20:30Authored by Saamir Ansari via Medium.com,
2020 has already been immortalised. It is a year that nobody will forget.
However, when speaking of the worst year recorded in human history there are many to choose from:
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The year 1349 saw the Black Death kill half the population of Europe.
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In 1520 smallpox ravaged the Americas and killed between 60 and 90 per cent of the continents’ original inhabitants.
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In 1918 the Spanish Flu led to the deaths of over 50 million people.
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The rise of Hitler in 1933 is often claimed to be the turning point in modern history.
However, historians are unanimous in their choice…
The title of the worst year in history is easily held by the year 536 AD.
Medieval historian, Michael McCormick has stated that:
“it was the beginning of one of the worst periods to be alive, if not the worst year.”
The year began with an inexplicable, dense fog that stretched across the world which plunged Europe, the Middle East and parts of Asia into darkness 24 hours a day, for nearly 2 years.
Consequently, global temperatures plummeted which resulted in the coldest decade in over 2,000 years. Famine was rampant and crops failed all across Europe, Africa and Asia. Unfortunately, 536 AD seemed to only be a prelude to further misery. This period of extreme cold and starvation caused economic disaster in Europe and in 541 A.D. an outbreak of bubonic plague further led to the death of nearly 100 million people and almost half of the Byzantine Empire.
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This part of the sixth century has a widely been referred to as the Dark Ages, but the true source of this darkness had previously been unknown to scholars. Recently, researchers led by McCormick and glaciologist Paul Mayewski, have discovered that a volcanic eruption in Iceland in early 536 led to incredibly large quantities of ash being spread across much of the globe, creating the fog that cast the world into darkness. This eruption was so immense that it altered the global climate and adversely affected weather patterns and crop cultivation for years to come (Antiquity).Labeling each new year as ‘the worst year in history’ has become something of a fad these days.
We should look back to the year 536 A.D. and cherish how fortunate we are not to have lived in a time when the world was truly in darkness.
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- Three Reasons Why Morgan Stanley Thinks The Recovery Is Still On Track
Three Reasons Why Morgan Stanley Thinks The Recovery Is Still On Track
Tyler Durden
Sun, 07/26/2020 – 20:00One day after Goldman poured cold water on the V- or any other shaped recovery narrative, when its high-frequency, real-time indicators showed that the pace of the recovery was slowing across various consumption metrics…
… but more notably, observed a clear contraction within the US job market and warning that “the labor market recovery is stalling due to the worsening virus situation” as “workplace activity measures have declined in the states hit hardest with virus spread and moved sideways in others since late June”…
… on Sunday, Morgan Stanley, which in the past 4 months has emerged as the biggest cheerleader of the economy (perhaps because it feels the need to justify its bullish market take by being optimistic on the broader economy as if the two are still somehow connected), felt its was its duty to launch another full-throttled defense of the economy – something it has been doing virtually every week – and in the bank’s Sunday Start note, Morgan Stanley chief economist Chetan Ahya gives “three reasons why the recovery is still on track”, and lists the following:
- Unlike in March, there has been a change in calculus between the virus and economy, and policy-makers (at least those who are no part of the #resistance) are now balancing the social and economic costs brought about by lockdown measures versus the adverse implications for public health.
- The outlook for vaccines/treatments for COVID looks promising (although there is a risk that elevated levels of COVID-19 cases could coincide with the traditional flu season (which typically leads to hospitalizations beginning to rise from around mid-November onwards and peaking in January), meaning that there will be a greater strain on hospital capacity during that time period.
- Policy support remains unprecedented. As a refresher, the G4 central banks are expanding their balance sheets by 28% of GDP by end-2021 and the G4 and China economies are extending fiscal support of 17% of GDP in 2020. The Fed’s balance sheet will rise to 30% of GDP by end-2021 and the fiscal deficit in the US will rise to 24.6% of GDP in 2020, on our forecasts.
And just in case the bulls are starting to get cold feet, below are the details from the rest of Morgan Stanley’s traditionally upbeat take on the US economy and global markets.
Three Reasons Why the Recovery Is Still on Track, by Chetan Ahya, chief economist and global head of economics at MOrgan Stanley.
Every new economic cycle begins with considerable uncertainty. Concerns about whether we have seen the worst effects of the shock and whether there will be aftershocks or lingering effects tend to be the key causes of uncertainty during the initial recovery. This time is no different.
But we have steadfastly held on to our forecast that the global economy will regain its pre-COVID-19 levels of output by 4Q20 (and DMs by 4Q21). Our views on the global macro outlook are underpinned by three factors – (1) the evolving COVID-19 situation, (2) the race for effective treatments and vaccines, and (3) the extent of the policy support. As we review each of them in turn, we hope to shed some light on why we think the global recovery is still on the right track.
#1: The equation between the virus and the economy is changing
The virus is still spreading in the US and LatAm, while new clusters of infections have emerged in Asia and Europe. For the latter group, policy-makers have been able to manage these new clusters with selective lockdowns, and aggregates for economic activity have not been affected.
This risk of a renewed aggressive lockdown is the most acute in the US. But the equation between the virus and the economy is now changing – with policy-makers now balancing the social and economic costs brought about by lockdown measures versus the adverse implications for public health.
Moreover, the link between new case counts, hospitalizations, and fatalities is also very different today versus the situation in March/April. Today’s cases include more of the milder or asymptomatic variant, a reflection of ramped-up testing capacity as compared to the earlier days of the outbreak where testing capacity constraints meant that only symptomatic cases were being tested. The median age of new cases is also lower, and the medical community is better prepared to deal with COVID-19 patients. Net new hospitalizations have now eased from the recent peak, easing concerns that policy-makers would have to take up strict lockdown measures.
#2: The outlook for vaccines/treatments for COVID-19 is promising
We have been concerned about a renewed wave of infections in the autumn ever since the beginning of the outbreak (we built this into our base case with a forecast that the pace of growth will slow, but not re-enter into sequential decline, around the turn of the year). The issue is that elevated levels of COVID-19 cases could coincide with the traditional flu season (which typically leads to hospitalizations beginning to rise from around mid-November onwards and peaking in January), meaning that there will be a greater strain on hospital capacity during that time period.
However, we are also watching the potential mitigating factors. The additional precautions such as widespread wearing of masks may help to temper the spread of COVID-19 and the traditional flu season. There is also emerging evidence that the current flu season in the Southern Hemisphere is more subdued as compared to previous seasons.
Moreover, treatment options are available today, with the prospect of more to come. In addition to remdesivir, our US biotechnology analysts have highlighted that there are over 20 antibodies in development, and they believe that Regeneron and Eli Lilly are likely to be first to market. They also view antibody treatments as having a high probability of success and expect details of the clinical trials to be released later this summer.
A number of potential vaccine candidates are also entering into phase III trials. Our US biotechnology analysts expect all three companies (Moderna, Pfizer and AstraZeneca) to have a reasonable probability of success in delivering positive phase III results, with potential details released in the September-November timeframe. Manufacturing of these vaccines is already under way and each of these companies are positioned to provide 100M+ doses of vaccines by year-end. This combination of treatments and vaccines will give us another layer of defense against COVID-19.
#3: Don’t forget about the significant support from policy stimulus
Policy support is crucial during the initial stages and, this time around, the scale of stimulus has been unprecedented. As a refresher, the G4 central banks are expanding their balance sheets by 28% of GDP by end-2021 and the G4 and China economies are extending fiscal support of 17% of GDP in 2020. The Fed’s balance sheet will rise to 30% of GDP by end-2021 and the fiscal deficit in the US will rise to 24.6% of GDP in 2020, on our forecasts.
The fact that this is an exogenous shock (i.e., nobody was at fault for causing the recession) has meant that policy-makers have acted quickly. Just this week, we received a welcome upside surprise with the earlier than expected approval of the European recovery fund. In the US, negotiations are ongoing over CARES II and we expect an additional US$1 trillion fiscal package, with the risks skewed towards a bigger package of over US$1.5 trillion (which will take the deficit over 27% of GDP – a post-1943 high). Moreover, considering the outsized impact that the recession has had on lower-income households, central banks and policy-makers have committed to make the recovery as robust as possible, which in turn means that the overall monetary and fiscal policy stance will remain accommodative for some time.
In sum, our big-picture view is that the global economy will continue to make up lost ground, attaining pre-COVID-19 output levels by 4Q20 (DMs by 4Q21). In fact, the recent run of upside surprises in the data in the US and China makes us believe that this might even pan out a bit faster than we originally envisaged. As these economies have already made up a lot of lost ground, they will naturally see a moderate pace of improvement from here and we would also expect to see some month-to-month gyrations in the data. The baton of growth leadership will be passed on to Europe next as it begins to experience catch-up rates of growth.
- GOP Reach Agreement On COVID-19 Relief; $600 Unemployment Boost Becomes 70% 'Wage Replacement'; Pelosi Pops Fuse
GOP Reach Agreement On COVID-19 Relief; $600 Unemployment Boost Becomes 70% ‘Wage Replacement’; Pelosi Pops Fuse
Tyler Durden
Sun, 07/26/2020 – 19:44With the Trump Treasury sitting on $1.8 trillion and three months to spend it, the White House and Senate Republicans are set to introduce a $1 trillion spending bill on Monday which would be released in stages – angering Democrats who are pushing for an immediate, $3 trillion shotgun blast of stimulus.
Speaking with ABC‘s “This Week,” White House Chief of Staff Mark Meadows said “I see us being able to provide unemployment insurance, maybe a retention credit, to keep people from being displaced or brought back into the workplace, helping with our schools,” adding “we can negotiate on the rest of the bill in the weeks to come.“
The Trump administration opposes an extension of a $600-a-week enhanced unemployment payment that expired this month, Mnuchin and Meadows said. Instead, White House officials favor a plan to reimburse an individual’s lost wages or salary by up to 70%, said Mnuchin and Meadows. –Newsday
Asked whether expiring federal unemployment benefits will be extended, WH Chief of Staff Mark Meadows says “The original benefits will not… We are going to be prepared, on Monday, to provide unemployment insurance extension that would be 70% of wages.” https://t.co/qxICVVlxra pic.twitter.com/cDY6VWjXNN
— This Week (@ThisWeekABC) July 26, 2020
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House Speaker Nancy Pelosi (D-CA) popped a fuse at the GOP proposal, blaming Republicans for waiting too long to negotiate for more relief after House Democrats passed a fifth, $3 trillion relief bill which would have included immediate aid to state and local governments, expanded testing and contact tracing for COVID-19.
Appearing on CBS’s “Face the Nation,” Pelosi said that Republicans are “in disarray and that delay is causing suffering for America’s families. So we have been ready for two months and 10 days. I’ve been here all weekend hoping they had something to give us.”
Treasury Secretary Steven Mnuchin, meanwhile, says the White House is “prepared to act quickly.”
We bet they are.
Mnuchin added that unemployment benefits would be extended, while schools and universities would receive protection against “frivolous” lawsuits – part of overall GOP support for protections that would also include corporations.
“Within the trillion-dollar package, there’s certain things that have time frames that are a bigger priority, so we could look at doing an entire deal, we could also look at doing parts,” said Mnuchin, adding that he would push for a “technical fix” to unemployment insurance after many have criticized the $600 weekly benefit as being too high, and a disincentive to searching for a job.
The fix would ensure “that people don’t get paid more to stay home than they do to work, and we can move very quickly with the Democrats on these issues,” Mnuchin said.
He added: “The fair thing is to replace wages, and it just wouldn’t be fair to use taxpayer dollars to pay more people to sit home than they would get working and get a job.”
Pelosi said last week that Democrats would not accept a “piecemeal” approach to a deal.
The Speaker on Sunday said it’s easier for the government to provide a $600 payment to the unemployed than to calculate what 70% of each worker’s salary was. –Newsday
“The reason we had $600 was its simplicity,” said Pelosi, adding “And figuring out 70% of somebody’s wages. People don’t all make a salary … They make wages and they sometimes have it vary. So why don’t we just keep it simple?“
- Moving The COVID Goalposts: Will The Next Step Be Masks To Protect From The Flu & Common Cold?
Moving The COVID Goalposts: Will The Next Step Be Masks To Protect From The Flu & Common Cold?
Tyler Durden
Sun, 07/26/2020 – 19:30Authored by Paula Bolyard via PJMedia.com,
How did we go from “flatten the COVID-19 curve” to “shut up and wear the mask – or else” in just a few short months? Back in March, we were told that lockdowns were necessary to ensure COVID-19 cases would not overwhelm hospitals and, in particular, intensive-care units. In most parts of the country, hospitals were not only not overwhelmed, many were forced to lay off nurses and other employees because elective procedures were put on hold – a move that likely cost lives as people postponed health critical screenings and avoided going to the hospital when they had chest pains for fear of catching COVID-19.
At the beginning of the pandemic, we were assured that once hospitals had things under control we could go back to our regularly scheduled lives, with the understanding that as things reopened and testing increased there would be a spike in the number of cases. Now it seems the goalposts are moving again and we’re being sent into further lockdown —in some cases more stringent lockdowns than before — by governors and other mini-tyrants who are in panic mode because people are catching a contagious (but not very deadly for most people) disease that is, you know, contagious.
Case in point, Ohio Gov. Mike DeWine, who on Wednesday announced a statewide mask order that came with a threat: We’d all better obey him if we want schools to open in the fall.
Wearing masks will make a difference. It will determine what our fall looks like. We want kids to go back to school, we want to see sports — to do that it’s very important that all Ohioans wear a mask. #MasksOnOhio
— Governor Mike DeWine (@GovMikeDeWine) July 22, 2020
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Nice school you’ve got there. It would be a shame if anything happened to it.
But while the number of diagnosed cases of COVID-19 has risen in Ohio over the last month, hospital admissions haven’t kept up and the number of deaths has plummeted:
(Ohio Dept. of Health, July 22, 2020)
You have to dig around the Ohio Dept. of Health website to find these numbers. When you land on the site you’re greeted with a graph showing the cumulative number of deaths and hospitalizations, which make it appear there’s been a huge spike, when in fact it’s showing the growth of the cumulative total over time:
(Ohio Dept. of Health, July 22, 2020)
A Google search turned up no stories about hospitals being overwhelmed or nearing ICU capacity in Ohio, yet DeWine, who is the Democrats’ favorite Republican these days, went ahead with his mask order — the first statewide mask order in Ohio since the pandemic began. To hear DeWine talk (and tweet), you’d think hospitals are overwhelmed with COVID patients (who are probably lying on filthy FEMA cots) and we are all in very grave danger:
#Ohio is sliding down a very dangerous path, with our once flattened curve starting to sharpen and spike. This worrisome, disturbing reversal of our progress is a jarring reminder of just how quickly our fate can change. My fellow Ohioans, it’s time to act. #MasksOnOhio pic.twitter.com/yon1wFtd7d
— Governor Mike DeWine (@GovMikeDeWine) July 16, 2020
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Our state’s life is now in danger – and our own strength lies in our unity of purpose.
— Governor Mike DeWine (@GovMikeDeWine) July 15, 2020
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Meanwhile, in Wayne County, where I’m blessed to live, it doesn’t feel like we’re in grave danger—and the numbers bear that out:
(Ohio Dept. of Health, July 22, 2020)
That’s 55 total hospitalizations since the pandemic began. Last week there were two COVID hospitalizations recorded and no deaths. This despite the fact that nearly everything in the county reopened in mid-May and very few people are wearing masks. To date, we’ve had a grand total of 398 cases of COVID-19 and 59 deaths (most of them in nursing homes) out of a population of 117,710. Yet DeWine’s draconian new OMG-hair-on-fire statewide mask order is being forced on us and we’ll all have to wear them while singing in church on Sunday and smiling at babies in the park.
Look, I’m not denying COVID-19 is a serious and sometimes deadly illness. It is, and many families are grieving the loss of loved ones who’ve died of it. And many families are grieving the loss of loved ones from the flu, from auto accidents, and from cancer. Death catches up to all of us eventually.
I’m also not denying that masks can slow down the spread of disease. They can. But what is the goal at this point? Are we to wear masks until COVID is completely eradicated in the U.S.? Until we have zero cases? And once COVID is eradicated (it won’t be, but stick with me here), shouldn’t we continue to wear them until the flu is eradicated? And the common cold? Rotavirus? RSV? We’re being told that if we love our neighbors (and, by the way, you’re not a real Christian if you don’t’ want to wear a mask) we should be happy to wear a mask to protect them from COVID-19. If that’s the case, we’re going to have to continue to wear them until all contagions have been purged from the face of the earth—in other words, forever.
There’s risk inherent in living life. Each day we calculate the potential risk and make decisions about what we’ll do and where we’ll go. Most of us climb into a car every day and buckle up knowing that there are 1.25 million deaths from car crashes each year and our morning commute could be our last. Some choose not to drive because the risk is too high. Others drive faster than the speed limit, making the calculus that the benefits of getting to where they’re going faster outweigh the risks.
Decisions individuals make about whether to wear a mask or stay home when there are contagions floating around are no different. Unfortunately, high on their own power, politicians like DeWine are gleefully soberly making those decisions for us. And now that they’ve done it with COVID-19, what’s to stop them from issuing other, more onerous, orders or locking us down every year during flu season or using health department orders to confiscating our firearms because gun violence is on the rise and PUBLIC HEALTH CRISIS!!!
That’s what worries me most about these orders, many of which have, thank goodness, already been ruled unconstitutional. There’s a growing sense that this is the new normal – in fact, many of these mayors and governors have said as much. If that’s the case, we can kiss our liberties goodbye.
- "Be Prepared & Godspeed" – Hurricane Douglas Closes In On Hawaii
“Be Prepared & Godspeed” – Hurricane Douglas Closes In On Hawaii
Tyler Durden
Sun, 07/26/2020 – 19:00Hurricane Hanna was downgraded to a tropical storm on Sunday morning after making landfall Saturday evening in south Texas. Now we will shift our attention to Pacific Hurricane Douglas, bearing down on the Hawaiian islands Sunday afternoon.
Douglas is a Category 1 storm about 90 miles East of Kahului, Hawaii. The system is moving west-northwest at around 16mph. It is expected to pass near, or over, the islands from Maui to Kauai on Sunday through Monday. Maximum winds are near 90mph with gusts just over 100mph.
The County of Maui is expected to blare warning sirens for the hurricane on Sunday to alert residents to shelter in place. The main threats of the storm are dangerous surf, high winds, and storm surge.
“A hurricane warning has been issued for Maui County, so we’re strongly urging all residents to shelter in place today due to Hurricane Douglas,” Mayor Victorino said. “Mahalo to our first responders for keeping us all safe during this storm. Make sure you keep listening to your radio and watching the news for updates. We are Maui Strong, and we will get through this together.”
Hurricane conditions are expected for portions of Maui county Sunday, and Kauai and Niihau tonight. Tropical storm conditions will be seen on the Big Island.
One Twitter user said, “Prepare for a direct hit from #HurricaneDouglas on Oahu tonight 8:00 pm. This is from Sunday 5 AM National Weather Service Advisory of Central Pacific Hurricane Center on Hurricane Douglas: Maximum sustained wind 90 mph. Hurricane in warm Hawaii waters now. Be Prepared & Godspeed.”
Prepare for a direct hit from #HurricaneDouglas on Oahu tonight 8:00 pm. This is from Sunday 5 AM National Weather Service Advisory of Central Pacific Hurricane Center on Hurricane Douglas: Maximum sustained wind 90 mph. Hurricane in warm Hawaii waters now. Be Prepared & Godspeed pic.twitter.com/5axuF1SylE
— pd_adams (@smokeyroadpub) July 26, 2020
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Emergency warnings are being sent to residents’ phones.
Weather radar shows Douglas is approaching Hawaii.
2pm ET Update: #Douglas w 90mph winds, 90mi E of Kahului, Hawaii. Moving WNW at 16mph. Buoy 51205 near Pauwela, Maui w 11.5′ wave height. Top gust of 64mph 6,621 ft up on Kula, Maui. Cont track: close to N parts of Islands from Maui 2 Kauai thru tonight. #HurricaneDouglas #HIwx pic.twitter.com/tmPqaYXGjB
— WeatherReMarks (@WeatherReMarks) July 26, 2020
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CNN said if Douglas makes landfall it would the third known hurricane to directly strike the islands.
Here are spaghetti models of where Douglas could be headed.
As for the tropics this weekend, well, it has been very busy.
We’ll be updating readers on tropical developments next week.
- Here's Why JPMorgan Expects The Gold Surge To Continue
Here’s Why JPMorgan Expects The Gold Surge To Continue
Tyler Durden
Sun, 07/26/2020 – 18:35Helped by a sharply weaker dollar in the past month, and a collapse in real 10Y yields to all time negative lows of -0.93%…
… the price of gold made a new all time closing high surpassing $1900 on Friday with the December contract (where the most open futures interest can now be found) hitting an all time high, and gold has already jumped out of the gate with futures reopening on Sunday…
… with silver similarly spiking.
According to JPMorgan’s Nikolas Panigirtzoglou, retail investors appear to have been mostly behind the recent rally (although the Robinhood army has yet to fully engage), and indeed the buying of physical gold ETFs, a major vehicle used by retail investors, rose steeply in recent weeks, making this year already the strongest on record with still five months remaining. This is shown in the chart below which shows the annual flow into physical gold ETF in metric tonnes.
As a result of this year’s inflow, the stock of gold in ETFs has reached a record high of close to 110 million ounce far higher than its previous high seen in 2012.
This also means that retail investors are becoming more overweight gold and are approaching the 2012 highs. This in turn is shown in the next chart which shows the ratio of the outstanding amount of gold ETFs in dollar terms divided by the dollar value of equity and bond funds worldwide.
This ratio, which can be considered as proxy for the gold allocation of retail investors, is only .03% away from its peak of 0.5% seen in 2012. It remains to be seen whether this previous high gold allocation of 2012 will be breached or not in the current conjuncture. At the moment the chart above implies further room for the gold rally to continue.
Retail investors aside, what about tactical institutional investors such as hedge funds? To gauge the exposure of speculative institutional investors such as hedge funds, JPMorgan looks at the spec position on gold futures reported by CFTC every week. This is shown in the final chart which shows that the spec position in gold futures is some way from its Feb peak, also leaving quite a bit of room for further rally.
JPMorgan’s conclusion: “In all, whether we look at retail investors’ gold allocations or the spec positions on gold futures by hedge funds, we see further room for the gold rally to continue.” And judging by the spike in precious metals in Sunday’s premarket, traders agree.
- Texas' COVID-19 Death Toll Tops 5,000 As New Cases Slide To 2-Week Low: Live Updates
Texas’ COVID-19 Death Toll Tops 5,000 As New Cases Slide To 2-Week Low: Live Updates
Tyler Durden
Sun, 07/26/2020 – 18:13Summary:
- Texas passes 5,000 deaths, new cases lowest since July 13
- California reported 8,259 new cases
- Scott Gottlieb says pandemic starting to slow in some parts of the Sun Belt
- Arizona reports latest COVID numbers
- Florida passes New York, now in 2nd place
- Fla reports another 9,300 new cases
- Spain assures world new outbreak ‘under control’
- Countries impose travel restrictions on Spain due to worsening outbreak in Catalonia
- COVID-19 cases pull back after hitting daily records
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Update (1800ET): Texas numbers were the rare silver lining in another day of slightly less dismal numbers across the Sun Belt, and increasingly, in the deep south as well.
Texas reported just 5,810 new cases on Sunday, a sharp drop from the prior day and the state’s lowest daily total since July 13 (about 2 weeks ago),. That brought the Lone Star State’s tally to 381,656.
But the bigger milestone on Sunday came from the “deaths” column, when the state reported another 153 fatalities, pushing Texas’s death toll north of 5,000 to 5,038.
The state’s positivity rate has increased slightly to 13.76%.
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Update (1450ET): California reported 8,259 new cases on Sunday, as the pace appeared to slow across the state, even as worries about a potential return to lockdown simmer.
Sunday’s number (reported with a 24-hour delay) came in below both the 14-day average of 9,421 and the 10,666 from the prior day The statewide total climbed to 453,659 confirmed cases. The number of fatalities increased by 79, which was below the 14-day daily average of 98 and also below the 151 reported the previous day. A total of 8,416 people have died.
As cases continue to slow in certain parts of the Sun Belt, former FDA Commissioner Scott Gottlieb said he is seeing “unmistakable signs” that the pandemic is slowing in Texas and Arizona, though he is less certain about California and Florida. This as one Democratic lawmaker called for Los Angeles County to restore a stay-at-home order.
US cases rose by 65,965 in the latest daily count, a 1.6% increase that’s lower than the 1.8% average over the prior seven days. Deaths increased by 921, breaking a four-day streak of more than 1,000 deaths per day.
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Update (1413ET): Arizona reported another 1,973 cases, bringing its total to 162,014.
ICU capacity has ticked lower to 86%.
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Update (1350ET): One day after Florida blew past New York in the national rankings, the state reported a slight decline in single-day cases, with 9,338 reported over the past 24 hours, according to the Florida Department of Health.
Several data sources reported that Florida’s numbers pushed it past New York in the rankings (though we reported on Friday that the Sunshine State had already overtaken the Empire State). Florida became the second state after California to pass New York in the national rankings.
The top three states, according to Reuters data.
- California – 423,855
- Florida – 423,855
- New York – 415,827
Keep in mind that totals vary from source to source.
Still, New York has recorded by far the most deaths of any US state, with more than 32,000. Florida has fewer than 6,000 cases. On average, Florida has added more than 10,000 cases a day in July while California has been adding 8,300 cases a day and New York has been adding 700 cases.
Meanwhile, New York Gov Andrew Cuomo said total hospitalizations fell by 637.
Today’s update on the numbers:
Of the 53,568 tests reported yesterday, 536 were positive (1.0% of total).
Total hospitalizations fell to 637.
Sadly, there were 3 COVID fatalities yesterday. pic.twitter.com/CQwNjl3PpM
— Andrew Cuomo (@NYGovCuomo) July 26, 2020
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Even though New York has gotten the virus under control, the state still has most businesses locked down.
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As the UK, France, Norway and a handful of other European countries impose mandatory quarantines on travelers visiting from Spain – or warning their citizens to avoid travel to Catalonia, the epicenter of the outbreak – anxieties are rising as the outbreak in Barcelona and the surrounding suburbs, including the village of Lleida, and seven nearby towns, intensifies.
A little over a week ago, Catalan authorities imposed a lockdown affecting 160,000 people in and around Lleida, a swath of suburban Barcelona. Since then, they’ve advised people in the restive region of 7.5 million to stay home and observe social distancing practices with assiduous dedication.
The resurgence is the most glaring evidence yet that the Spanish government’s attempt to salvage at least some of the peak travel season has blown up in the country’s face. It further illustrates just how complicated combating the virus has become: with some authorities warning that finding a vaccine could take two years or more, the quest for a ‘sustainable’ and reasonably safe virus response that doesn’t destroy the lives of millions of Americans has become fraught with political considerations.
Spain’s health ministry reported 920+ new cases on both Thursday and Friday, the highest numbers since early May, when the government was just beginning the process of unwinding its strict lockdown, which was lauded as one of the most intense in Europe. Authorities in Catalonia have closed bars and nightclubs as fears of a second wave intensify.
The 4th highest death toll in Europe was recorded in Spain, with roughly 28k deaths.
Despite all the tough talk from Spain’s neighbors, the tourism industry’s insistence that the border between France and Catalonia remain open, though French PM Jean Castex has said he’s negotiating with Spain to limit the number of such crossings. The UK has added Spain to its “unsafe” list, right alongside the US. But across the Europe, the tourism industry is hurting, and small concessions are still being made.
On Sunday, the Spanish Foreign Ministry advised that the country’s coronavirus epidemic was “under control”, despite the spate of travel advisories adopted by several of Spain’s European neighbors.
Hospitals are coping well with the increase in infections and more than half of new cases are asymptomatic, the ministry said.
With lockdown measures being reimposed, outbreaks in Catalonia and Aragon should soon be brought under control, they said, according to Reuters.
Globally, the world saw a pullback in newly confirmed COVID-19 cases from the record numbers seen just a day prior, as the world reported 257,789 new cases over the last 24 hours…
…bringing the global total to 16,292,002, according to Worldometer.
- Some Colleges Will Require Students To Take COVID-19 Test Twice A Week
Some Colleges Will Require Students To Take COVID-19 Test Twice A Week
Tyler Durden
Sun, 07/26/2020 – 18:10Colleges and universities across the US are planning to roll out strict COVID-19 testing measures at their campuses for those starting back this Fall.
In some instances, like Cornell University in New York or Baylor in Waco, all students, faculty, and staff will be required to test negative before being admitted on campus.
Even more extreme measures are being taken by Colby College in Maine. The Associated Press reports testing will be a “routine part of campus life”. Students will be nasal swabbed twice a week throughout at least the Fall.
University of Washington on campus last March. Getty Images Perhaps more and more students must be thinking: time for a gap year?
All students will be required to provide a nasal swab every other day for two weeks, and then twice a week after that. All told, the college says it will provide 85,000 tests, nearly as many as the entire state of Maine has since the pandemic started. — AP
Currently it appears that most schools with a testing regimen in place, which they say is a necessity to prevent being forced to go to online only classes (Harvard recently announced all undergraduate classes will be conducted online, with only 40% of students invited back to campus), will only screen students once arrived, with further tests reserved only for those students showing symptoms.
Texas A&M University, for example, will use its some 15,000 tests only for those who are known to have been exposed or who are showing symptoms. Still, there’s a raging debate within the health and scientific community over testing approach and strategy, as the AP summarizes:
At Cornell University, a research team recently found that students would need to be tested every seven days to keep infections down. A separate study at Yale University and Harvard Medical School suggested that all students should be tested every two or three days. It found that testing only once a week could lead to thousands of infections over a semester.
Going to college in Boston this fall? Prepare to have cotton swabs stuck up your nose, maybe twice a week. https://t.co/DyWhrKxJJv
— Spencer Buell (@SpencerBuell) July 17, 2020
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In the most common form of the test, it requires a no doubt deeply unpleasant swab deep inside a person’s nasal cavity (sometimes multiple swabs are done).
So it’s uncomfortable at best, and likely terrifying for some at worst. “It’s awful… I wish there was a better way to do it,” one health-care worker previously commented when widespread testing first rolled out in the US months ago.
However, there are high hopes that experimental and less invasive, and perhaps faster, saliva tests could be utilized, also amid a national back log of lab processing nationwide.
All this is no doubt going to give many students and their families serious pause considering they’re about to drop perhaps $30K to $40K or $50K total in tuition, dorm and campus costs for the year while being forced to get a nasal swab possibly up to twice a week.
That gap year consideration might be looking very attractive right about now, also considering the possibility that a potential outbreak on campus could take the whole school straight back to a remote learning format at any time.
- Wilds: Are Predictions Of The Dollar's Demise Premature?
Wilds: Are Predictions Of The Dollar’s Demise Premature?
Tyler Durden
Sun, 07/26/2020 – 17:45Authored by Bruce Wilds via Advancing Time blog,
Predictions of the dollar’s demise are likely premature and overblown. This post is in response to the rising interest in both precious metals and cryptocurrencies. Several factors are driving this trend. One is the idea governments have targeted cash and wish to move us towards a “cashless” society where they control our every move. Another is rooted in the idea inflation is about to raise its ugly head as currencies are debased.
I contend that for several years currencies have been trading in a hyper-manipulated state. It should be noted that fiat money is often sheltered from the storm of volatility by both politics and because it exists in a rather closed system. Wealth is contained within this system of fiat money by laws and rules that discourage freedom of movement. It is the coordinated collusion of the major central banks that have allowed this charade to exist. The fact it has not been recognized or acknowledged does not alter or guarantee the system will continue. The failure or major repricing of any of the world’s four major reserve currencies will destroy the myth that major currencies are immune to the fate that has haunted fiat money throughout history. When the nations granting these currencies prove unable to control their budgets history shows their currency is destroyed and crushed under the weight of debt.
Central Bank Balances Have Exploded
One thing the global economy doesn’t need with all the uncertainty that is currently floating around is unstable currency markets. When you consider just how destabilizing currency swings can be it is easy to see how a strong dollar could obliterate the global economy. It should not be a surprise in our current situation that behind the curtain central bankers could be busy manipulating currencies so they trade in a narrow range that will not rock the boat.
Over the years countries have become very adept at coordinating economic policy, currency swaps are only one of the tools they use, this has now even extended to investing in stocks. When the dollar began to soar back in late 2014, fear began to rise and concerns grew about the stress it was causing in countries that owed a great deal of debt that would have to be paid back in dollars rather than their own currency. This has caused Fed Chairman Powell to attempt navigating a course that doesn’t cause the dollar to strengthen and devastate emerging markets. By doing so the Fed has created a situation that allows the dollar to be used as a global prop.
As far as the idea that China and its cohorts are tanking the dollar because by reducing their holdings of U.S. Treasuries in order to support the yuan, their ability to carry out such a scheme is questionable. We must remember the world currency market is a complicated place full of paths that fall away or come back on themselves and many of the tools used are like a double-edged sword that cut both ways. In the case of China, capital is sneaking and flowing out of the country faster than the government can create new ways to bolster the currency. Sadly for them, it is flowing into America strengthening the dollar even more. Adding to China’s woes is that as their currency falls they will hear more calls from Trump supporters to place duties and tariffs on their exports to America in an effort to level the playing field and reduce the trade deficit.
Currency Swaps Creates Illusion Of Stability
Refrain from calling me Captain Obvious when saying that currencies are trading in a false paradigm and investors should get ready for a rude awakening when currency values shift. A dam has been built to protect market stability but pressure is building and when it breaks it will wreak major damage. Part of this is constructed upon the fallacy we have been given and accepted that a major currency cannot fail or collapse. This will only become more apparent as concern over the future of both the yen and the euro become more of an issue. Both the yen and the euro have major problems going forward and while people point to the fact that behind the dollar America stands with a rapidly growing national debt it is nothing compared to the issues Japan and the Euro-zone face.
The different growth paths are a symptom of a general problem that has haunted currency unions for centuries. Competitiveness and productivity develop at a different pace in different countries. Over time, this leads to large imbalances in growth and a shifting of wealth among the members of a currency union. When the dollar union of the U.S. threatened to fall apart during the Great Depression because of the different economic conditions and unequal potential apparent between states, the federal government found it necessary to enact federal income transfers from prosperous states to aid ailing ones. The federal budget rapidly increased and this practice of income transfers from one state to another to bind the states together as a union became permanently embedded in the American system.
While in the United States a no-bailout policy of crisis-hit states that had been enacted decades ago remains, our “inter-system wealth transfers” has contributed that “special something” that the Euro-zone completely lacks. Inequality has a way of growing and must be addressed early, After a certain point, it becomes too late to implement such a system that transfers wealth from the most prosperous to the most needy because some people feel cheated and others resentful. The bigger a debt problem and inequality is allowed to grow the more people and institutions suffer when they become the victims of a default. Greece has fallen and continues to suffer the consequences of this while much bigger countries like Italy and Spain are teetering on the brink.
During the last several years the question of how to exit the Euro-zone monetary union and the euro has become an important economic issue. Uncertainty and fear relating to its costs tend to discourage political leaders from taking the risk and decisive steps towards an exit but if one or more sizeable countries bolt from the shelter of the euro or the Euro-zone the currency could quickly unravel. A major cause of the Euro-zone problem is growing inequality among its members exacerbated by the lack of system-wide bank protection which causes money and wealth to flee the weaker countries and their failing banks. Japan faces an entirely different problem while national debt is an issue for the central banks that issue both currencies. Japan’s debt is much larger and the country faces a demographic crisis that leaves it forced to support a population comprised of citizens far too old to work.
These problems give credence to the possibility that both the euro and the yen will fail at some point and if they do it is very likely that in our modern era, where wealth leaps across borders at the push of a button, their death will be fast, and swift. Like many Americans, I have railed against our growing debt and questioned whether it would destroy the dollar, however, when looking at the miserable alternative currencies before us the dollar is without a doubt king. We must not underestimate the advantage the dollar has as the world’s reserve currency or the size of debt floating across the globe comprised of dollar based-agreements. If the dollar proves victorious in the currency wars and is indeed the last major currency standing the people of America will reap the benefits of a game well played or just plain luck.
* * *
If you have read the above article in its entirety I urge you to not nitpick or respond with a knee-jerk reaction. To say this is a complex issue is an understatement and I would be interested in your thoughts. I recognize those interested in pursuing a New World Order will gladly throw us under the bus for fun and profit. Still, shifting currency values are a big deal.
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