Today’s News 3rd May 2020

• China's Exploiting The COVID-19 Pandemic To Expand In Asia
  China’s Exploiting The COVID-19 Pandemic To Expand In Asia

  Authored by Con Coughlin via The Gatestone Institute,

  While the rest of the world is preoccupied with tackling the coronavirus pandemic, China is intensifying its efforts to extend its influence in the South China Sea by intimidating its Asian neighbours.

  The arrival of China’s Liaoning aircraft carrier, together with five accompanying warships, in the South China Sea earlier this month has resulted in a significant increase in tensions in the Asia-Pacific region as Beijing seeks to take advantage of the coronavirus pandemic to flex its muscles.

  So far in April, there were claims that a Chinese coast guard vessel deliberately rammed and sank a Vietnamese fishing boat operating close to the disputed Paracel Islands. All the fishermen survived and were transferred to two other Vietnamese fishing vessels operating nearby.

  The incident prompted a furious response from the Vietnamese government, which accused Beijing of violating its sovereignty and threatening the lives of its fishermen. The US State Department said it was “seriously concerned” about the incident and called on Beijing “to remain focused on supporting international efforts to combat the global pandemic, and to stop exploiting the distraction or vulnerability of other states to expand its unlawful claims in the South China Sea.”

  In other incidents, Chinese vessels have been accused of harassing Indonesian fishing boats, as well as tailing Malaysian oil-exploration boats.

  At the same time, China has provoked a diplomatic dispute with the Philippines following Beijing’s declaration that a region over which Manila claims sovereignty in the South China Sea is Chinese territory.

  The dispute concerns China’s recent announcement that it intends to administer two disputed groups of islands and reefs in the waterway. One district covers the Paracel Islands, and the other has jurisdiction over the Spratlys, where China has built a network of fortified man-made islands. The Philippines has a presence of its own on at least nine islands and islets in the area, and bitterly opposes Chinese attempts to extend its influence.

  Beijing has long claimed control over the South China Sea and the surrounding area because of its strategic significance as one of the world’s busiest waterways. Around one third of the world’s shipping passes through it and carries trade worth around $3 trillion. In addition, the waters contain lucrative fisheries, and huge oil and gas reserves are believed to lie beneath its seabed.

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  China’s gradual encroachment on the area has been resisted by other countries in the region such as Vietnam, the Philippines, Taiwan, Malaysia and Brunei, which all have competing claims of their own.

  As the region’s dominant power, China has shown little interest in seeking to resolve these conflicting claims peacefully. Instead, it has resorted to brute force, using its increasingly powerful navy to assert its dominance by harassing the shipping of rival states, even, at times, in their own territorial waters.

  China’s increasingly aggressive action, known in Beijing as “Wolf Warrior diplomacy”, has prompted US Secretary of State Mike Pompeo to warn that China is taking advantage of the world’s preoccupation with the coronavirus pandemic to push its territorial ambitions in the South China Sea. At a recent briefing to foreign ministers of the 10-member Association of Southeast Asian Nations (ASEAN), Mr Pompeo stated:

  “Beijing has moved to take advantage of the distraction [over Covid-19], from China’s new unilateral announcement of administrative districts over disputed islands and maritime areas in the South China Sea, its sinking of a Vietnamese fishing vessel earlier this month, and its ‘research stations’ on Fiery Cross Reef and Subi Reef.”

  Despite the Trump administration’s preoccupation with tackling the coronavirus pandemic, Washington is not prepared to tolerate China’s aggressive actions. Three ships from the US Seventh Fleet, together with an Australian frigate, have responded by sailing through the disputed waters in a show of force.

  China’s communist leadership may believe that they can take advantage of the coronavirus pandemic to bully their Asian neighbours. But this show of force by the US Navy should send a timely reminder to Beijing as to which country is the real military power in the region.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 23:50

• These Are The 10 Most Expensive (And Cheapest) Cities In The World
  These Are The 10 Most Expensive (And Cheapest) Cities In The World

  Where personal wealth is concerned, there are two sides to every story.

  The first of which is the amount of money a person earns, and the other is what they choose to spend their money on. As Visual Capitalist’s Katie Jones notes, the latter is influenced by the cost of living in the city where they reside – an ever-changing metric that is driven by a wide variety of factors, such as currency, population growth, or external market movements.

  Today’s graphic visualizes the findings from the 2020 Worldwide Cost of Living report and uses data from 133 cities to rank the most expensive cities in the world.

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  Note: Report research was conducted towards the end of 2019, before the COVID-19 outbreak.

  Asia Dominates the Ranking

  Globally, the cost of living has fallen by an average of 4% over the last year, with much of the movement up and down the ranking being driven by currency fluctuations.

  The locations with the highest cost of living are largely split between Europe and Asia. For the second time in the report’s 30-year history, three cities are tied as the top spot—Singapore, Hong Kong, and Osaka.

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  Source: EIU. New York City is index baseline (score = 100). Ties in index score values are denoted by (t).

  Osaka is a newcomer to the top spot, climbing four places over the last year to join cost of living heavyweight champions, Singapore and Hong Kong. As Japan’s third-largest city, Osaka is a major financial hub and a breeding ground for emerging startups, with relatively low real estate costs compared to Singapore and Hong Kong.

  Three European cities (Paris, Zurich, and Geneva) sit atop the most expensive city rankings, compared to seven cities only 10 years ago. Similarly, 31 of the 37 European cities have seen a decrease in cost of living overall—largely as a result of the Euro or local currencies losing value relative to the U.S. dollar.

  Finally, the top 10 is rounded out with two cities from the United States (New York, Los Angeles) and one from Israel (Tel Aviv).

  The Cheapest Cities

  While East Asia is home to many of the world’s most expensive cities, South Asia hosts the largest grouping of cities with the lowest cost of living.

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  Source: EIU. New York City is index baseline (score = 100). Ties in index score values are denoted by (t).

  Three Indian cities dominate the cheapest cities ranking due to a combination of low wages and high levels of income inequality, preventing any price increases.

  Meanwhile, political and economic turmoil is a common denominator among the cheapest cities outside of South Asia. For example, the Syrian Civil War resulted in an economic collapse, leading to high inflation and a downward spiral in value for the Syrian pound.

  A Spanner in the Works

  The COVID-19 pandemic is estimated to cost the global economy up to $2 trillion in 2020, so while governments attempt to boost the economy, many are concerned about higher inflation rates spreading across the world.

  With a recession becoming more likely, uncertainty around real estate prices will heighten for every city, regardless of their cost of living ranking.

  As we navigate chaotic and uncertain times, the next cost of living survey could look very different to today—the most important question will be how permanent the damaging effects of the pandemic will be.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 23:25

• Johnstone: Biden Is Everything The Democrats Are
  Johnstone: Biden Is Everything The Democrats Are

  Authored by Caitlin Johnstone via Medium.com,

  Joe Biden is not an “imperfect candidate” for the Democrats.

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  He is the perfect candidate, because he’s everything the party is: Demented. Decrepit. Bloodthirsty. Corrupt. Cronyistic. Authoritarian. Reactionary. Rapey.

  He is exactly what they deserve. He is exactly what they are.

  Joe Biden is the Democrat’s Democrat. He is the perfect representative of the party. They should even take it a step further and replace that donkey with Joe Biden.

  Biden is to the Democrats as Trump is to the Republicans. Everyone’s just wearing their true face now.

  ~

  If you’re willing to sacrifice all principles, all sanity and all morality to get rid of Trump, what exactly is the point of getting rid of Trump?

  ~

  We know Biden is a liar. He’s been pinged for lying his whole career. Everyone is trying to undermine the victim’s character in order to discredit her while ignoring Joe’s character. We know he lies. He also has a history of unwanted sexual advances. His story is not credible.

  ~

  Nobody actually believes that Biden didn’t sexually assault Tara Reade. Nobody’s actually confident that Creepy Uncle Hair Sniffer isn’t a rapist, they’re just pretending they are. I can understand saying “It’s possible but unproven”, but saying it’s false is so gross and dishonest.

  They’re accusing Reade of lying for partisan reasons, when in reality that’s exactly what they are doing: they’re pretending they believe Handsy Joe Biden is incapable of shoving his fingers into a woman without her consent, and they are lying. Out of pure partisan loyalty.

  ~

  It’s funny how refusing to support a literal dementia patient who has been credibly accused of rape for the world’s most powerful elected office is a very, very normal thing to do, yet people are acting like it’s bizarre and freakish.

  ~

  Which looks more likely to you? (A) That Reade seeded a bunch of vicious lies about Senator Joe Biden in the 1990s with the intention of someday sabotaging his presidential bid in the distant future for some reason, or (B) that a powerful man sexually assaulted a woman?

  ~

  It’s so weird how Joe Biden is a spent piece of leftover 1970s beltway flotsam made of plastic donor class dinner parties and AIPAC lobbying but everyone’s all pretending they like him as a person and stuff.

  ~

  There are no fact-based and intellectually robust arguments for working within the establishment to manifest revolutionary agendas, but there are a lot of highly effective intellectually dishonest arguments for why it’s okay for you to pretend otherwise and go back to sleep.

  ~

  “They destroyed the economy over a virus, but the narrative about the virus is completely fake!”

  Perhaps. But so is the narrative about “the economy”.

  ~

  Terence McKenna once said “We are led by the least among us. The least intelligent, the least noble, the least visionary.” Can’t think of a better illustration of this than having Donald Trump versus Joe Biden competing for the most powerful elected office on the planet.

  ~

  Hey remember when Trump provoked a missile retaliation that led to scores of injured US soldiers by assassinating Iran’s top military commander for no legitimate reason, lied about the whole thing, and then suffered no consequences or political repercussions of any kind? Good times.

  ~

  Democrats are so fucking stupid and ridiculous that the Krassenstein brothers are still a thing.

  ~

  All of humanity’s worst atrocities have been legal. Genocide. Slavery. Torture. The fact that you can squint at the imprisonment and extradition of a journalist for exposing US war crimes in such a way that makes it look “legal” does not mean it isn’t unforgivably evil.

  ~

  It’s always about power. Power comes before everything, including profit, which is why you see escalations against nations who’d be very profitable to continue trading with and why critics of US foreign policy are attacked far more aggressively than critics of its domestic policy.

  Manipulators understand that wealth control is a means to power and not an end in itself; that’s why you see things like Zuckerberg hurting his own profit margins by making changes to Facebook which make the platform less fun to use but shore up establishment narrative control.

  Power trumps profit every time. Manipulators are driven ultimately by the desire to control as many humans as possible to the greatest extent possible. Money is a useful tool for accomplishing that, but in a pinch they’ll swap it out for military/police force or censorship etc.

  Wealth is a narrative construct and can be gained or lost or made obsolete in a new narrative paradigm. Elite manipulators understand that it’s hard, nonconceptual control over hard, nonconceptual objects that gives them their actual alpha status over the rest of the humans.

  ~

  “A newly democratized media environment has made it difficult for people to distinguish fact from fiction.”

  ‘Oh no! What do we do?’

  “Censor everyone except authoritative news sources.”

  ‘Authoritative news sources? Like who?’

  “The ones who lied about Russiagate and all the wars.”

  ~

  As a general rule, indie media should not attack other indie media. If you’re not punching up, you’re punching down.

  ~

  People ask me “Well, what should we do? How do we fix this thing?” And of course my only possible answer is, “Do what I’m doing! Or your version of it.” Of course I’m doing the thing I think we should do to solve the problems of our species. Why would I be doing anything else?

  ~

  Revolution is an inside job. This is not an egoically pleasing fact, but it is a fact. It’s much more fun for egoic mind to believe both the problem and the solution exists in other people, but in reality the changes you can make in yourself will have far greater effects on the world.

  There are vast, vast depths within all of us, and we are capable of making vast, vast changes to those depths. We are in fact far more capable of doing this than we are of changing the outside world through force of will. And interestingly when we do this, we do change the world. And we do it far more efficaciously than we can by trying to will it to conform with the noises in our babbling thinky brain.

  *  *  *

  Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for my website, which will get you an email notification for everything I publish. My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics onTwitter, checking out my podcast on either Youtube, soundcloud, Apple podcasts or Spotify, following me on Steemit, throwing some money into my hat on Patreon or Paypal, purchasing some of my sweet merchandise, buying my books Rogue Nation: Psychonautical Adventures With Caitlin Johnstone and Woke: A Field Guide for Utopia Preppers. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge.

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  Tyler Durden
  
  Sat, 05/02/2020 – 23:00

• Get Ready For Slaughterhouse Robots To Ease America's Meat Processing Crisis 
  Get Ready For Slaughterhouse Robots To Ease America’s Meat Processing Crisis 

  America’s meat processing crisis, mainly triggered by labor shortages and plant closings due to coronavirus spread, is set to unleash a new wave of automation across plants to ease labor and health woes.  

  Bloomberg Law reports JBS SA, the world’s largest meat producer, is preparing to install robots in slaughterhouses to mitigate the spread of COVID-19 among human employees working on the production line. 

  JBS SA CFO Guilherme Cavalcanti recently said the Brazilian processing company expects to expand automation at its facilities across the world.  

  Cavalcanti said the adoption of automation started before the pandemic as labor tightened at US plants due to a decline in immigration sparked by the Trump administration. He said labor shortages have developed in the US as the virus infects workers and shutters plants. 

  Watch this video of meatpacking robots already in a JBS SA plant:

  The fast-spreading virus has so far infected 4,900 workers (across the entire industry) and left 20 dead at 115 meatpacking plants across 19 states, according to CDC data from April 9-27.

  In a JBS SA webinar on how it has handled its pandemic response, Cavalcanti said automation is more important than ever considering labor and health issues. 

  JBS SA has closed two US meatpacking plants due to the virus outbreak. There have been at least 22 plant closings in the US. We’ve noted, the closures have resulted in a 25% reduction in pork-processing capacity and beef by 10%. This has crushed farmers with overcapacity as they have limited options in selling livestock, resulting in mass cullings and plunging livestock spot prices. As for the consumer, soaring food inflation and shortages have been the result of plants reducing output or closing. 

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  And at Zero Hedge, we have not been shy at telling you how things might pan out when it comes to a nation that is becoming automated, which means millions of jobs will be eliminated entirely by 2030. And, for some more uncomfortable truths, corporate America will speed up their adoption of automation and artificial intelligence, because robots can’t be infected by coronavirus.  

  
  Tyler Durden
  
  Sat, 05/02/2020 – 22:35

• "Go Buy Guns First" – John McAfee Warns Governments "Are Deceiving You" About Virus
  “Go Buy Guns First” – John McAfee Warns Governments “Are Deceiving You” About Virus

  Authored by Amy Castor via DeCrypt.co,

  The government is deceiving you. The pandemic is a ploy spread by the fake-news media, and if you care about your lives, go out and buy guns now. 

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  That was the message of John McAfee. Between evil laughs and dark chucklings, the tech guru, tax fugitive, and general wild man shared his suspect views on the “state of the world” during COVID-19 last night at Virtual Blockchain Week.

  “We are living in a paradigm the world has never seen before,” the 74-year-old crypto advocate and antivirus-software pioneer said, speaking from God knows where.

  (He’s kept his whereabouts a secret since fleeing Belize in 2012 after suspicions grew that he killed his neighbor.)

  “One-third of the planet is in lockdown,” he said, adding that most of those people are sitting at home, watching TV, and not doing much of anything, while the US government “pulls money out of thin air.” The situation is not sustainable, he argued.

  He was especially disturbed by a recent $2 trillion stimulus package in the US, which appears to be backed by nothing other than the good graces of the US government.

  “You can’t pull money out of the air and expect everything to be okay. Money is based on something called industry, production, service. We haven’t increased any of that,” he said, with a deep, unsettling chuckle. He predicted the money-printing will lead to a collapse of the US dollar. 

  It’s too late for crypto

  Bitcoin and blockchain were meant to “save us from financial slavery, and from the overburdened government that creates the fiat currency that we are forced to use,” McAfee said.

  But he doesn’t think crypto will save us this time. 

  “We are not going to jump into crypto,” he said, because it’s not easy enough to use.

  “It is not like opening a bank account. You have to spend days understanding what it is and how it works.” 

  But as far as the markets go, he predicts that the price of Bitcoin will spike ahead of the halving event on May 12. He recalled that in 2016, the last halving event, there was a huge rise in the price of Bitcoin, and then a huge drop. And he believes history will repeat because the same people populate the cryptosphere, and they’re just as greedy as they were four years ago. 

  More people die of diarrhea

  As far as the threat of COVID19, McAfee thinks the number of deaths are skewed because they are presented out of context. It is certainly not worth shutting down entire economies, he believes.  

  Repeatedly, he said more people die of diarrhea and of the flu. But both comparisons, common attempts to downplay the severity of the virus, have been widely dismissed as reckless by leading epidemiologists. 

  But the way McAfee, who is known for his drug use and paranoia, sees it—just before opening his talk, he jokingly commented he was getting ready to shoot up with heroin—we are being lied to by the government and stirred up by the media.

  “If you use your head and common sense, you can see you are being deceived,” he said.

  Due to the global shut down and the money printing, he believes dark times ahead for our species.

  The solution? 

  “Go buy guns, and guns first,” he said.

  “Because if you just have the food and you don’t have the guns, your neighbors are going to take it because your neighbors have the guns.”

  And then McAfee, who appears to enjoy it when people think he is on edge, pulled out an AK-47 assault rifle and began praising its sturdiness.

  “This sucker will always fire,” he said. 

  
  Tyler Durden
  
  Sat, 05/02/2020 – 22:10

• "The US Doesn't Own The UN" – Furious Beijing Blasts UN Mission's Taiwan Tweets As "Political Manipulation"
  “The US Doesn’t Own The UN” – Furious Beijing Blasts UN Mission’s Taiwan Tweets As “Political Manipulation”

  President Trump is going all-in on antagonizing China as a crux of his 2020 campaign strategy (since clearly a large segment of his base, and many undecided voters, blame China for unleashing the virus on the world whether it came from a lab or not). And in keeping with the stepped-up antagonisms – since President Trump’s agreement to “cooperate” with President Xi to fight the virus is 100% meaningless – the US late Friday tweeted its support for Taiwan’s participation in the UN.

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  Kelly Craft

  The tweet, sent by the US Mission to the UN, said the 193-member organization should allow space for “all voices” and welcome “a diversity of views and perspectives” to promote human rights. “Barring #Taiwan from setting foot on UN grounds is an affront not just to the proud Taïwanese people, but to UN principles,” it continued. It was retweeted by US Ambassador Kelly Craft, who succeeded Nikki Haley as US ambassador to the UN.

  .@UN was founded to serve as a venue for all voices, a forum that welcomes a diversity of views & perspectives, & promotes human freedom. Barring #Taiwan from setting foot on UN grounds is an affront not just to the proud Taiwanese people, but to UN principles. #TweetForTaiwan

  — U.S. Mission to the UN (@USUN) May 1, 2020

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  The U.S. believes firmly that #Taiwan belongs at the table when the world discusses #COVID19 and other threats to global health. Before 2017, Beijing didn’t object to Taiwan joining the World Health Assembly as an Observer. What’s changed? #TweetforTaiwan

  — IO Bureau @ State (@State_IO) May 1, 2020

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  Is the health of Taiwan’s 23 million people less important now than it was before 2017? Or, is the #PRC punishing Taiwan voters for freely choosing their own leader? #TweetforTaiwan

  — IO Bureau @ State (@State_IO) May 1, 2020

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  We all know Taiwan has long been committed to global health and boasts one of the finest health and research networks in the world, and that Taiwan promotes scientific cooperation and transparency on threats to #health. #TweetforTaiwan #TaiwanModel

  — IO Bureau @ State (@State_IO) May 1, 2020

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  .@iingwen, the contrast with the #PRC is striking. China’s response to the outbreak of #COVID19 has been to hide the facts, muzzle its scientists, and censor discussion. #Taiwan‘s response has been and continues to be a model for the world. #TweetforTaiwan #TaiwanModel https://t.co/KADqwnLsrr

  — IO Bureau @ State (@State_IO) May 1, 2020

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  Sympathy for Taiwan has been running high since the country masterfully handled the coronavirus outbreak. Another boost came when eporters exposed the WHO’s bias toward Taiwan and refusal to even acknowledge the de facto independent state (legally viewed in China as an errant province).

  Never one to mince words, President Xi has threatened retaliatory violence against any nation state that dares assist Taiwan on the road to sovereignty, a role that the US under President Trump has consistently flirted with. Trump’s overall hawkishness toward China – a huge component of his political appeal – is why there’s little doubt that China is actively trying to hurt Trump’s election chances (we suspect their intelligence indicates Joe Biden’s level of cognitive decline is more serious than most Americans realize).

  Unsurprisingly, China’s Mission to the UN – a body where China enjoys tremendous clout as a permanent voting member of the UN Security Council – responded that the US Mission was way out of line and should probably calm the fuck down before these twitter fingers turn to trigger fingers.

  The spokesperson for China’s U.N. Mission called the U.S. Mission tweet “a serious violation” of the General Assembly resolution that gave China the U.N. seat, three U.S.-China joint communiques and China’s sovereignty and territorial integrity.

  “It gravely interferes with China’s internal affairs and deeply hurts the feelings of the 1.4 billion Chinese people,” said the spokesperon, who was not named. “There is only one China in the world. The government of the People’s Republic China is the sole legal government representing the whole of China, and Taiwan is an inalienable part of China.”

  China’s mission accused the United States of ”hypocrisy” for citing the U.N.’s welcome of diverse views while repeatedly using its power to issue visas to block or delay U.N. member states and civil society organizations from attending activities at the United Nations.

  China strongly urged the United States to abide by the one-China principle, the three joint communiques between the two countries and the General Assembly resolution “and immediately stop backing the Taiwan region, politicizing, and undermining international response to the pandemic.”

  “While the coronavirus is raging across the world, people of all countries are calling for international solidarity in fighting the pandemic,” the Chinese spokesperson said. “Political manipulation by the United States on an issue concerning China’s core interests will poison the atmosphere for cooperation of member states at a time when unity and solidarity is needed the most.”

  And the icing on the cake: Global Times editor Hu Xijin whining that the US “doesn’t own” the UN.

  The US, for its own agenda, often puts together Five Eyes Alliance and some other Western countries, pretending to be international community. It is just a small gang, with combined population much smaller than China’s or India’s. The UN is not a holding company of the US. pic.twitter.com/keHORO6v1p

  — Hu Xijin 胡锡进 (@HuXijin_GT) May 2, 2020

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  Now get ready to do this all again tomorrow when the Pentagon sends a US carrier strike force through the Strait of Taiwan (we’re joking of course…but on a more serious note…it wouldn’t be so far-fetched).

  
  Tyler Durden
  
  Sat, 05/02/2020 – 21:45

• Brace For A Monday Massacre: Buffett Liquidates All Airline Holdings As Berkshire Sees Another Leg Lower
  Brace For A Monday Massacre: Buffett Liquidates All Airline Holdings As Berkshire Sees Another Leg Lower

  Well, it’s official: there won’t be any “Buy American” op-eds by the Oracle of Omaha this time around. In fact, if anything, they will be titled simply “Sell.“

  Warren Buffett, who turns 90 in 4 months, had an unpleasant surprise for the permabullish Berkshire faithful during their annual pilgrimage to Omaha live-stream of Berkshire’s annual meeting: one month after Berkshire surprised investors by selling parts of its Delta and Southwest Airlines stakes – both of which had previously been above a 10% ownership level and speculation was rife that Berkshire could purchase an airline outright in the near future – the Oracle of Omaha said that, 4 years after Berkshire took major stakes in the four largest US airlines, he had liquidated the sold the entirety of its equity position in the U.S. airline industry which included $6.5 billion worth of stock in United, American, Southwest and Delta Airlines.

  Assuring that Monday will be a bloodbath for Trannies (that would be the transportation stocks you perverts), Buffett justified his decision as follows: “The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way,” he said. “I don’t know if Americans have now changed their habits or will change their habits because of the extended period.”

  But “I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control.”

  “When we bought [airlines], we were getting an attractive amount for our money when investing across the airlines,” he said. “It turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs. Believe me. No joy of being a CEO of an airline.”

  ““I don’t know that 3-4 years from now people will fly as many passenger miles as they did last year …. you’ve got too many planes.”

  Realizing that he won’t be alive by the time a turnaround eventually happens, he clarified that he made the decision and that he lost money on his investments. “That was my mistake.”

  Highlight: “The value of certain things have decreased,” Warren Buffett says. “Our airlines position was a mistake. Berkshire is worth less today because I took that position… There are other decisions like that.” #YFBuffett pic.twitter.com/W1ZqRzsfmv

  — Yahoo Finance (@YahooFinance) May 3, 2020

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  Asked by CNBC’s Becky Quick to clarify if Berkshire had sold all of its airline holdings, Buffett answered “yes” and explained: “When we sell something, very often it’s going to be our entire stake: We don’t trim positions. That’s just not the way we approach it any more than if we buy 100% of a business. We’re going to sell it down to 90% or 80%.”

  “The airline business — and I may be wrong and I hope I’m wrong — but I think it’s changed in a very major way,” Buffett said. “The future is much less clear to me.”

  As Bloomberg reminds us, Buffett has had a complicated relationship with the airline industry over the years. After a troublesome investment in USAir, Buffett joked that he would call an 800 number to declare he was an “air-o-holic” if he ever got the urge to invest in airlines again. Then in 2016, Berkshire dove into the industry again, amassing stakes in the four largest airlines. His renewed faith in the industry prompted speculation that he might one day own one of the carriers.

  There is a more simplistic explanation of Buffett’s style of investing at least in recent years: he will buy the stock of companies that engage in massive buybacks, such as Apple, even though his annual letter bashes companies that buybacks stocks, and he will dump all companies that halt buybacks, of which IBM is the most famous example. And since the quasi-bailed out airlines won’t be repurchasing stock for years and years to come, it was only a matter of time before Buffett dumped them.

  It also means that Buffett may soon liquidate many more sector holdings, starting with the banks which have also suspended buybacks for the near future and may be forced to extend said suspension indefinitely unless there is a V-shaped recovery in the global economy. The banks will then be followed by consumer discretionary, railroads, and many more. In fact, it would explain why unlike 2008, Buffett has not only not been buying any stocks despite major “bargains” but has actually been aggressive in liquidating his holdings, hardly an endorsement of the broader market.

  Amusingly, after wasting much digital ink bashing buybacks in his annual letters, Buffett went off on a rant defending buybacks during the annual videocast: “It’s very politically correct to be against buybacks now,” he said. “There’s a lot of crazy things being said about buybacks. Buybacks are so simple. It’s a way of distributing cash to shareholders,” especially when that shareholders is Warren Buffett. The “oracle” then noted that share repurchase programs should be executed in a price and need-sensitive manner, but “when the conditions are right, it should also be obvious to repurchase shares and there shouldn’t be the slightest taint to it anymore than there is to dividends.” Yes, well, good luck with all that Warren because for the next 2 years, you can kiss buybacks goodbye from all companies except perhaps the FAAMGs.

  For those curious what Buffett will sell next, here is a full summary of Berkshire’s most recent equity holdings:

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  “If we like a business, we’re going to buy as much of it as we can and keep it as long as we can,” he added. “And when we change our mind we don’t take half measures.”

  His comments Saturday afternoon came after Berkshire reported a $50 billion Q1 loss and only nibbled at equities during the violent stock market rout in March, mostly on his investment portfolio, even as the conglomerate’s cash stockpile rose to a record $137BN (more net cash than AAPL has) and up $10 billion from the $127 billion it reported at the end of 2019.

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  As we reported earlier, the company spent just $1.8 billion buying stocks and just $1.7 billion repurchasing Berkshire Hathaway shares during the first quarter of 2020, suggesting not only that Buffett could not find any of his hallmark bargain, value opportunities in the market sell-off, which took the S&P 500 down more than 30%, but that Buffett sees the current market rebound as nothing more than a dead cat bounce as he prepares to snap up the real bargains after the next crash.

  #WarrenBuffett sold $6.5 in equities in april20, mostly Airlines and admits: “I was wrong” on the sector. He bought very little & didnt buy back any shares in #BRKH. Meaning: #Buffett (a long term bull) is NOT very bullish on stocks right now! #berkshire2020 #BerkshireHathaway pic.twitter.com/DV1DhHN2N7

  — peterpauldevries (@peterpaul_vries) May 2, 2020

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  Explaining why he didn’t repurchase more Berkshire Hathaway shares during the sell-off in the first quarter, Buffett said “the price has not been at a level where it really feels way better to us than other things, including the option value of money, to step up in a big way.” Which is a long way of saying it remains too expensive.

  Worse, explaining why he still hasn’t made a major acquisition despite the recent 35% drop in the market, the billionaire investor said “we have not done anything because we haven’t seen anything that attractive,” adding that “we are not doing anything big obviously. We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it.”

  The fact that he hasn’t done it yet means one thing: Buffett, or rather the banks that advise the soon-to-be-90 year old investor are convinced that a next leg lower in stocks is coming, and he should conserve his ‘dry powder’ for when it comes.

  And what may be scariest for the bulls, is that in justifying his lack of buying, Buffett practically blamed the Fed, saying that “the Fed acted too quickly and too strongly for Berkshire to may any big deals right now.” Not only that, but even Buffett – whose entire fortune is the result of enjoying sequential bailouts from either governments or central banks time and again – appears to be becoming a measured Fed skeptic: “you can look at the Fed’s balance sheet and you will see some extraordinary changes there in the last 6 or 7 weeks. And we don’t know the consequences of that.” And while he adds that Powell took Draghi’s “whatever it takes squared… we are prepared at Berkshire that maybe the Fed will not have a chairman that acts like that” which explains Berkshire’s $137 billion in cash, which in other words is a hedge for when the Fed finally fails to prop up stocks.

  Highlight: “We do know the consequences of doing nothing,” Warren Buffett says. “That would’ve been the tendency of the Fed many years past… We do never wanna be dependent on the not only the kindness of strangers but the kindness of friends.” #YFBuffett pic.twitter.com/gfrqLaShsU

  — Yahoo Finance (@YahooFinance) May 2, 2020

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  Translation: according to none other than the most admired investor in the world, the Fed’s unprecedented bailout of capital markets has not only disconnected prices from fundamentals but has led to a market so overvalued that there are still no bargains despite the recent crash (and subsequent dead cat bounce).

  We were all waiting for Buffett to buy preferred stock in the airlines or Boeing as he did in some banks in ‘08. He didn’t. Does it mean he thinks this crisis is far worse than the Great Recession and not easily reversible? My bet is absolutely yes.

  — Scott Wapner (@ScottWapnerCNBC) May 3, 2020

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  And now we prepare for the Monday bloodbath in the trannies, and perhaps across the entire market, as investors – notorious for being unable to think for themselves and always blindly following the actions of a 90-year-old man – furiously imitate what Berkshire has already done. And, if the bulls are unlucky, the selling could be the catalyst for the next major market drop… which would of course be delightfully ironic if Buffett’s own actions catalyze the crash that he hopes to benefit from and finally put his record cash hoard to use.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 21:25

• "Remdesivir Is Probably Worthless" – A Trauma Surgeon Exposes "Drug Company's Shenanigans"
  “Remdesivir Is Probably Worthless” – A Trauma Surgeon Exposes “Drug Company’s Shenanigans”

  Markets got very excited (briefly) this week about a study finding a Gilead Sciences drug helped coronavirus patients heal a little more quickly.

  But that was all the trial found: remdesivir isn’t the miracle cure that will get us all out of lockdowns tomorrow, unfortunately.

  Worse, as Bloomberg’s Faye Flam writes, the trial was rushed to get quick FDA approval, without getting helpful information on what kinds of patients it helps or hurts the most; and now that the study is over, we’ve forever lost a chance to help doctors treat virus patients better.

  All of which raises a significant number of questions and Acute Care Surgeon (and Asst Professor of Surgery at Wash U.) Mark Hoofnagle warns “I am truly sorry to say, Remdesivir is probably worthless…”

  In an excellent Twitter thread, Hoofnagle details what he calls “some fascinating drug company shenanigans.”

  First, the pre-test probability that an infused, small-molecule inhibitor of a virus would improve mortality in symptomatic patients was already pretty low. Unfortunately, antivirals work poorly in acute disease. This has to do with their mechanism of action, and host response. 

  Antivirals usually target some aspect of viral replication/assembly/transmission. Remdesivir is a clever pharmacologic prodrug that inhibits a key piece of RNA viruses that mammals don’t have – the RNA-dependent RNA polymerase, and inhibits viral replication. 

  Unfortunately, by the time you are symptomatic with a virus, you are usually already high/peak viral load. So, when you give an antiviral to someone who is already ill, the damage from the virus is largely done.

  It’s there in big numbers and in the cells. 

  Consistent with this, the Lancet paper on the remdesivir trial in China shows no impact on viral load clinically.

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  Pick your metaphor. The cat is out of the bag. The damage is done. At this point the host response to virus is activated, and your body is suppressing replication through a variety of mechanisms (which also make you feel terrible). 

  So how could inhibiting RDRP after the fact help? The answer is, it probably doesnt. It certainly didn’t in this trial – no difference, not even a trend in mortality, but in subgroup analysis maybe shortened disease duration in early/mild disease.

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  Now, critics of stupid drugs that should never have been stockpiled by govts say, “sounds like Tamiflu!”

  Yes. This is the same as Tamiflu, which also maybe shortens flu by a day, but otherwise is a largely useless antiviral (and actually harmful with bad side effect profile). 

  Fortunately, side effects of remdesivir did not seem severe in this trial with only about 3x as many patients stopping than placebo, some rashes, nothing life threatening.

  Where do the Shenanigans come in?

  Well, remember how maybe this Chinese trial showed a shortened course in a subset of patients? Like tamiflu? But didn’t change mortality?

  Well a month ago the NIAID trial changed their endpoints to remove death and instead look at dz duration.

  No really.

  They changed the destination half way through the race to match the only positive outcome of another trial, that they (or Gilead at least) certainly had a copy of the paper once it was submitted to Lancet.

  Shenanigans! Get a broom!

  Since NIH remdesivir trial is in the news…

  was there an explanation about why the primary outcome (now positive) was changed last month to ‘time until clinical recovery?’ @matthewherper https://t.co/fCTc1EGI1d pic.twitter.com/W1hAACnO1r

  — Walid Gellad, MD MPH (@walidgellad) April 29, 2020

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  This is like declaring a race and then when you realize you’re not going to win, declaring the destination was actually wherever you are standing at the moment. 

  Then, even more fishy, *the same day* as this Lancet trial is release, Gilead and NIAID claim a “positive trial” and they’ve “shortened the course of the disease significantly”. Notably, the mortality benefit did not reach significance.

  By the end of the day, reports that FDA is going to emergently approve remdesivir for treatment of COVID.

  Gilead gets what they want. No one will want to be in a control arm in further trials and they will argue all future trials must be non-inferiority. 

  Before we have the answer whether this drug actually changes anyone’s destiny, it’s going to become the gold standard therapy. We will likely now never know if (the unlikely possibility) it changes mortality. 

  Absolute genius. You have to salute them. On the day a negative trial of their drug is reported, based on a press release they took over the news cycle, and with some midstream edits to their endpoints their now “positive” trial wins them FDA approval and a halted trial. 

  It’s an infusion, once symptomatic, you need an admission, a test, etc., really even symptoms are probably too late a goal for such a therapy to work. Prophylaxis (like Gilead’s Truvada/PreP) would be better – but unworkable in its current form. 

  Either way, a big win for Gilead, but I’m unimpressed with any if the evidence presented so far that this is a game changer.

  *  *  *

  How long before Hoofnagle is banned from Twitter?

  Hoofnagle is not alone in his skepticism.

  Naked Capitalism’s Yves Smith exclaims, it is disturbing to watch the push to con the public into seeing remdesivir as the only promising treatment for coronavirus, and points to a new study that found and tested 47 old drugs that might treat the coronavirus: Results show promising leads and a whole new way to fight COVID-19

   

  
  Tyler Durden
  
  Sat, 05/02/2020 – 20:55

• 6 Reasons Why This Is (Or Isn't) The Worst Economy Since The Great Depression
  6 Reasons Why This Is (Or Isn’t) The Worst Economy Since The Great Depression

  Authored by Daniel Nevins via Nevins Research,

  When the NBER’s Business Cycle Dating Committee draws the boundaries on the current recession, it’s unlikely to stand out as an especially long one. In fact, by the time the committee publishes the official start date, it could be past its end date.

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  Why?

  Because it’s front-loaded. Spending has dropped so sharply in such a large portion of the economy that many types of activity have nowhere to go but up. And once activity starts increasing, even from nothing, that’s expansion, not recession.

  But the eventual business-cycle dates tell us little about our current situation. We could hit bottom in 2020 but then expand so weakly that we don’t restore vitality for several years. So let’s consider how the economy might unfold over a fixed horizon—say, three years from 2020 to 2022—rather than fixating on business-cycle dates.

  First, I’ll look at the reasons why our situation is really, really bad, and then I’ll consider why it might not be that bad, after all. I’ll benchmark my calculations against the post–World War II period, but especially against the economic destruction from 2008 to 2010.

  Why this is the worst economy since the Great Depression

  I have six reasons.

  Reason #1: This is a “double-recession.”

  Consider that our last ten recessions were shaped mostly by four categories of spending: business equipment, commercial real estate, home building and consumer durables. If you isolate only the ups and downs of those four categories (but throw in changes in inventories to account for milder, inventory recessions), your partial business-cycle history would be almost indistinguishable from the actual history.

  Moreover, those four categories typically amount to less than a quarter of the economy. In 2019, they composed 19.5% of GDP, as shown below:

  • Business equipment:  5.8%

  • Commercial real estate:  2.9%

  • Home building:  3.7%

  • Consumer durables:  7.1%

  So a 19.5% chunk of the economy explains the first part of the double-recession, and we know it’s currently recessionary because the usual precursors are back—collapsing business profits, tightening loan standards, widespread job losses and rising delinquencies. With the usual precursors in place, we can expect a sharp contraction in all four categories noted above.

  But the second part of the double-recession is separate. Consider the 2019 GDP weights for the additional spending categories below, totaling 11.3%:

  • Transportation services:  2.2%

  • Recreation services:  2.7%

  • Food services and accommodations:  4.8%

  • Gasoline and other energy goods:  1.6%

  Now we’ve reached the piece that’s completely new—it has no precedent in past business cycles. Each of the four categories shown above has contracted far more than ever before. In each case, activity is only a fraction of what it was just three months ago—probably less than half, and maybe even less than a quarter. Considering the severity of the contraction, together with the GDP weights, the destruction in these items alone is enough to establish a recession, even without the usual fixed investment and consumer durables categories discussed earlier.

  So that’s what I mean by a double-recession. The first part includes the fixed investment and consumer durables categories (totaling 19.5% of GDP). The second part includes the additional categories (totaling 11.3% of GDP) that imploded during the last two months, even as they’re normally only bit players in the business cycle.

  Reason #2: Pandemic-related business costs could last for years.

  Businesses will have to manage through some combination of the following:

  • Migration to more secure but higher cost suppliers (in response to supply chain fragilities exposed by the pandemic)

  • Measures to facilitate social distancing, including larger business premises in some cases

  • More frequent and thorough cleaning of business premises

  • Personal protection equipment for employees and, in some cases, customers

  • COVID-19 testing costs

  • Potentially greater contributions to employee health insurance (when insurance companies build COVID-19 into their cost structures, premiums can only go up)

  • Potentially greater absenteeism (employees being told to stay home with even mild illnesses, employees relying on public transportation facing greater challenges getting to work safely)

  • Potential work stoppages when employees test positive

  • Potential hazard pay

  We can only guess how widespread and persistent these costs will be. But across the whole economy, they’ll surely add to a significant, positive number. They’re bad news for business profits, inflation and probably both (more on inflation in a moment).

  Reason #3: The Fed only had two bullets in the interest-rate chamber (the two March rate cuts).

  After cutting the fed funds rate in March from 1.6% to just above zero, the Fed can’t reduce it further without entering the Twilight Zone of negative rates. (Sure, other countries have tried negative rates, but it’s still the Twilight Zone.) By comparison, here are the fed funds rate changes during the last five recessions, from business-cycle peak to business-cycle trough: –4.8%, –9.8%, –2.0%, –3.2% and –4.1%. So this year’s change of –1.5% is only a fraction of the interest rate stimulus we normally see in recessions.

  Reason #4: Bankruptcies could be more severe than in any other post-WW2 recession.

  I wrote “could be” because we don’t know for sure, but record bankruptcies seem consistent with three things we do know.

  • First, business shutdowns within the 11.3% of GDP noted above (the second part of the double-recession) will surely result in record destruction in that particular portion of the economy.

  • Second, activity has already contracted more sharply than at any time since the 1933 national bank holiday, and in that instance, widespread business stoppages only lasted a week.

  • Third, nonfinancial businesses are loaded up with record amounts of debt. As of Q4 2019 and relative to GDP, nonfinancial businesses were more indebted than ever before on a gross basis (74% of GDP), and they also carried more debt than in any prior expansion after netting out interest-earning assets and cash (55% of GDP). In short, nonfinancial businesses could hardly have entered this crisis with a riskier aggregate balance sheet.

  Reason #5: Meet the zombies—next generation.

  Stimulus programs are helping forestall economic destruction, but they’re also propping up companies that wouldn’t be viable without cheap financing backed by the Federal Reserve and Treasury Department. Some of those companies will still go bust, despite public support. Others will become zombies, dependent on loans that can only be paid back by obtaining more loans. To those who pointed to the zombie companies of the last decade as one reason for a less-than-vibrant global expansion, you haven’t seen anything yet.

  Reason #6: Inflation risks are unusually high for a recession.

  As noted above, the pandemic has lifted business costs by adding procedures and complexities that didn’t exist before. Rising business costs damage profitability, at first, but should eventually have some effect on inflation. And that’s not all. Inflation is normally a policy choice (either intentional or inadvertent), and policy makers are more inclined to risk it than at any time in the last four decades. Notably, current policies include direct injections of Fed-financed spending power into the Main Street economy. Moreover, those injections appear to be augmenting rather than just supplanting spending power supplied by commercial banks. (I’ve shown several times that past QE programs merely substituted Fed financing for commercial bank financing, without having a significant effect on the total.)

  Note that I’m not using the flawed logic of monetarist economists who predicted rising inflation during the Fed’s earlier QE programs, nor did I join those predictions (just the opposite, as shown here, for example). Also, the inflation outlook is hardly one-directional, since certain items, such as housing costs, are now less likely to inflate than they are to deflate or remain stable.

  But the factors discussed above should threaten the benign inflation of recent decades. After remaining below 3% for the last 24 years, an increase in core inflation to just 4% would be a major event. And if we get there, fiscal and monetary policies would become more challenging, to say the least. After many years of disinflation, policy makers would again be forced to choose between snuffing out inflation and sustaining growth.

  Why this isn’t the worst economy since the Great Depression

  I have six reasons, once again, the first three of which compare 2020 to 2008.

  Reason #1: The big-4 “home” risks—home prices, home mortgage debt, home building and home equity extraction—are relatively nonthreatening.

  The mid-2000s housing bubble brought unsustainable prices alongside unsustainable growth in mortgage debt, home building and home equity extraction. Just before the pandemic, by comparison, house prices and housing activity appeared sustainable. Here’s a rundown of 2019 data versus “peak” housing boom data:

  • Home prices:  Grew 3% in 2019 versus –19% in 2008 (after peaking in mid-2006)

  • Home mortgage debt:  49% of GDP in 2019 versus 72% in 2007

  • Home building:  3.7% of GDP in 2019 versus 6.6% in 2005

  • Home equity extraction:  1% of DPI in 2019 versus 8% in early 2006 (according to Bill McBride’s calculations)

  We can link each of the items above to a significant drop in household spending power or housing activity in the 2008-9 recession and the years that followed, whereas the data show much lower risks today. Clearly, the big-4 home risks are unlikely to wreak as much destruction in the current recession as the destruction caused by the housing bubble.

  Reason #2: Sterilization? What’s that?

  In 2008, the FOMC fretted for months before dropping long-established central banking orthodoxies. But such lengthy deliberations have long since gone out of style. The committee now crams money without hesitation into every financial-sector crevice that appears to be leaking. The new policy “normal” invites both moral hazard and zombification of wide swathes of the economy, as noted above. But the immediate upside is significant—the Fed’s interventions short-circuited the financial crisis that appeared to be unfolding in March.

  Reason #3: Banks have more capital than they did in 2008.

  We’ve all heard the story about the better capitalized banking system, and it’s true. But higher capital ratios won’t stop banks from slowing or even shuttering their lending operations. (They’ve already done that.) So the capital cushion is larger, and that’s nice to have, but it won’t save the economy. The main benefit is that measures to bail out the banks won’t need to be as large as they would otherwise be.

  Reason #4: Some areas of the economy are seeing stellar demand.

  I noted above that spending has evaporated like never before in portions of the economy that total 11.3% of GDP. Now consider three other types of spending:

  • Food and beverages purchased for off-premises consumption (4.8% of GDP)

  • Other consumer nondurables (5.6% of GDP)

  • Health care (11.5% of GDP)

  Solid spending in these areas, which total 22% of GDP, doesn’t negate the destruction in the transportation, recreation, restaurant, hotel and energy sectors. But it’s important to recognize that some of the spending lost through health fears and business shutdowns is being redirected, not extinguished. It’s flowing strongly into other parts of the economy. And the jobs market demonstrates that point—many recently jobless workers are finding new positions at Amazon, Instacart, CVS or one of a smattering of other companies whose outlook has brightened. So the double-recession I noted above might net out to more like a recession-and-a-half.

  Reason #5: Furloughs, not layoffs.

  Of the newly jobless workers who don’t find jobs elsewhere, many remain on their employers’ payrolls, retaining certain benefits but not working or receiving wages. One survey shows that 78% of employees who lost their wages due to the coronavirus expect to return to their former jobs. That might prove more hopeful than realistic, but it’s a less bearish recession story than the more typical story of companies slashing labor unconditionally.

  Reason #6: Helicopter money!

  Now for the elephant in the room. Fiscal policy makers are intent on providing “what it takes” to overcome the crisis. For that, they’re tapping into the Fed’s unlimited capacity to finance government spending with newly created money. They’re tapping it like never before. To highlight just two data points:

  • Roughly half of unemployment claimants will have more income than they had while working (through July, at least), thanks to an extra $600 weekly of CARES Act benefits on top of their normal state benefits.

  • Millions of working Americans will also make more than they would have without COVID-19, thanks to CARES Act stimulus payments.

  It shouldn’t be surprising that the survey linked above shows people feeling better about their finances than they did a month ago, despite weekly unemployment claims averaging over five million between the two survey dates.

  So helicopter money gives us yet another surreal and unprecedented development to ponder. In the short-term, it’s certain to blunt the pandemic’s economic impact. In the long-term, we’ll face consequences, but I won’t delve into that in this article. I’ll only suggest tuning out pundits who claim that “advanced” nations with their own currencies can drop helicopter money without repercussions. In fact, the advanced nations of today reached their advanced status long ago after enduring tumultuous periods of fiscal profligacy, learning from those experiences, and then maintaining relatively sound finances thereafter. And if they didn’t learn from experience? Well, that’s one of the biggest reasons that many countries fail to advance.

  (My book supports that argument with an examination of every recorded instance of governments accumulating a higher debt-to-GDP ratio than America’s debt-to-GDP as of 2018. For anyone interested in the general idea without the historical detail, I published an excerpt here.)

  Conclusions

  The eventual COVID-19 wreckage pivots on many unknowns, and future policies are among them. But the biggest unanswered question—at least when it comes to the economy—is this:

  For how much longer will the pandemic prevent vulnerable businesses from operating profitably (or operating at all)?

  Optimistically, new COVID-19 cases will descend downward until they hit bottom in a few months, allowing businesses to restore profitability. That’s the scenario the President’s task force includes in its slideshows—it shows virtually no new cases by July. And the more political voices on the task force have reinforced that message, playing up the idea that we’ll be back to normal by this summer. If their prediction proves accurate, the economy should perform better in 2020–22 than it did in 2008–10, for these reasons:

  • With a COVID-19 resolution in the summer, the housing market would be in far better shape than it was in 2008.

  • The financial sector would recover relatively quickly—banks would still be cautious but not as cautious as they were during and after the Global Financial Crisis.

  • Many depressed businesses would bounce back at least partially and rehire furloughed employees.

  • Some businesses boosted by the pandemic would continue to thrive.

  • Exiting the recession, household spending power would be unusually strong, thanks to the recession’s short duration as well as generous government handouts.

  So that’s the outcome we’re hoping to see, but it has an obvious weakness. That is, it presumes the coronavirus remains dormant after the economy restarts. A different theory says the virus revives whenever it finds an opening. Evidently, that’s a common feature. Epidemics tend to attack in waves. Until vaccines become available, the challenge in snuffing out this epidemic is that it only takes a handful of infected people going about their normal lives to reseed it.

  In other words, a future resurgence of COVID-19 seems the most likely outcome. It’s the scenario many experts warn us to expect, and not just any experts but the ones who’ve been most accurate to date.

  Where does that leave the economy?

  The worst case combines a historically deep recession with a disappointing recovery that feels more like continued recession. If future COVID-19 waves prove as dangerous as the first wave, the recession could be an early 1980s–style double-dip. But other possibilities are less severe. For example, medical discoveries could make the virus less risky, restoring confidence in normal business activities. (Note that Dr. Fauci was citing “quite good news” on remdesivir trials as I write this.)

  So the possibilities run from one extreme to the other. We need to be ready for anything, unfortunately, from a mid-2020 rebound to a prolonged crisis more severe than any since the Great Depression.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 20:30

• 50 Dead, 60 Wounded After Venezuela Prison Uprising: Live Updates
  50 Dead, 60 Wounded After Venezuela Prison Uprising: Live Updates

  Summary:

  • Italy sees 76% surge in new COVID-19 deaths as single-day total hits 11-day high

  • New York sees first rebound in deaths since April 25th.

  • 12.3% of New York state tested positive for COVID-19 antibodies

  • Spain allows outdoor exercise

  • Russia reports another record jump in cases

  • Video shows Mexican hospitals hiding bodies of COVID-19 patients as hallways packed with the sick

  • More EU countries back plan to waive law requiring airlines give cash refunds

  • IMF lends another $642 million to Ecuador as coronavirus ravages country

  • France extends state of emergency order until July 24

  • Singapore eases some lockdown measures as domestic cases decline

  • US case total tops 1.1 million

  • Japan joins US in fast-tracking remdesivir

  *  *  *

  Update (1725ET): In what has been a relatively quiet day for virus news, South American newspapers are reporting on a prison riot in Venezuela that has left almost 50 prisoners dead. The riot reportedly started on Friday, according to local newspaper Ultimas Noticias and Reuters.

  Prison riots have occurred in Italy, China and elsewhere as prisoners, forced to live in crowded conditions, rebel over prohibitions against visitors while outbreaks are virtually left unchecked.

  Opposition lawmakers reportedly blamed the riots on new rules banning visitors from bringing food for the inmates. The riot took place at Los Llanos Penitentiary Center in Guanare in the western state of Portuguesa.

  To date, Venezuela has confirmed 335 coronavirus cases and 10 deaths from the virus, but the outbreak is believed to be much more widespread. And the further plunge in oil prices caused by the outbreak has only exacerbated one of the world’s worst humanitarian crises.

  At least  46 prisoners are believed to have died, along with another 60 who were injured, many seriously.

  In a local media interview, Prisons Minister Iris Varela said the riot resulted from an escape attempt. On twitter, local accounts claimed guns and grenades were used by the prisoners, and that the Warden of the prison had been shot and badly wounded.

  The Venezuela Prisons Observatory posted photos of what appeared to be bodies lying on a blood-stained concrete patio.

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  It said there were 2,500 prisoners in the jail, which is designed to hold 750.

   

  *  *  *

  Update (1325ET): As Italy and Spain continue to tiptoe toward reopening, France has decided to take a U-turn and extend its “State of Emergency” – an order that undergirds the strict legally-enforced lockdown in France – until July 24, an unprecedented two-month extension that will almost certainly infuriate thousands of French citizens.

  Though, to be sure, fear of the virus runs deep in France, just like it does in Italy and Spain where many residents – especially the vulnerable – express trepidation about reopening. But French Health Minister Olivier Véran said Saturday that the a bill to extend the deadline will be put to France’s parliament on Monday.

  “We are going to have to live with the virus for a while,” Interior Minister Christophe Castaner said after a cabinet meeting.

  Travellers to France, including French citizens returning home, will face a compulsory two-week quarantine and possible isolation when they arrive in the country to help slow the spread of coronavirus, the health minister said.

  Véran said the duration and conditions of the quarantine would be defined in a decree to be published. Decisions to isolate people would be scrutinised by judges to ensure they are justified and fair, he added.

  To be sure, France is still planning on easing some conditions on May 11, and then some more on May 17. But some measures – like ensuring restaurants and retailers don’t allow the number of customers to reach full capacity – will likely persist for a couple more months, according to France 24.

  President Macron said Friday during a ‘May Day’ address that the French people shouldn’t expect life to go back to normal immediately after the first restrictions are lifted on May 11.

  Norway recently announced plans to extend a ban on large gatherings through the summer until summer, and many officials, including NYC Mayor de Blasio and NY Gov. Cuomo have warned that concerts, shows and music festivals might not return for some time.

  In other news, Reuters reports that Germany, Italy and Spain have joined a call by 12 EU governments to suspend rules requiring airlines to offer full cash refunds as more airlines – including Ryanair –  implement mass layoffs or file for bankruptcy.

  “I’m glad a very large majority of member states are supporting my request to authorise airlines and maritime groups to temporarily use vouchers when trips are cancelled, so as to relieve their cash reserves while protecting passengers’ rights to a refund,” French transport minister Jean-Baptiste Djebbari told Reuters in a statement.

  Finally, the IMF said Saturday it would lend another $643 billion to Ecuador as it grapples with one of the deadliest outbreaks in the region while also struggling with the financial whiplash caused by the global drop in oil prices.

  *  *  *

  Update (1130ET): New York suffered its first rebound (to 299) in COVID-19 deaths since April 25th. Governor Cuomo says this is “bad news”  though added optimistically that hospitalizations declined further.

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  Additionally, 12.3% of New York state has tested positive for novel coronavirus antibodies, Gov. Andrew Cuomo said at a briefing on Saturday.

  As a whole, 19.9% of New York City has tested positive for antibodies, the preliminary study found. At 27.6%, the Bronx is reporting the highest rate of infection, which Cuomo said the state would further investigate.

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  Italy also suffered a surprise resurgence in COVID-19 deaths…adding 474, the most since April 21st.

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  For the first time in seven weeks, adult Spaniards are enjoying a jog or a bike ride outdoors as PM Pedro Sanchez lifted restrictions on outdoor exercise.

  Spain’s death toll and case count have been trending lower (interspersed with a handful of one-day spikes) for more than two weeks. A week ago, the government lifted restrictions requiring children to remain indoors, allowing young children to leave their homes (accompanied by an adult) for the first time in a month and a half.

  Spain’s lockdown has been among the most strict in the world (in some ways, it approximated the lockdown faced by the tens of millions of Chinese residents of Hubei).

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  Of course, that remains to be seen: One of the biggest stories of the past week has been the uptick in Germany’s ‘infection rate’ – known as “R” – which approximates the average number of people infected by an infected patient. So long as the ratio stays below 1, then the outbreak is slowing. But mid-week, Germany revealed that its ‘R’ rate had jumped from 0.70 to 0.96 in the week since some more shops were allowed to reopen.

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  However, now that people are back out and about, Spain is imposing a new restriction: the government is requiring masks to be work on all public transport as of Monday, the prime minister said earlier this week as he outlined plans to relax the lockdown.

  To ensure that nobody is unable to comply, the government will hand out millions of masks to reduce the risk of contagion, Pedro Sánchez said in an address to the nation on Saturday afternoon. He pleaded with Spaniards to exercise responsibility when the next phase towards ending the lockdown begins on Monday.

  Sánchez said Saturday that 6 million masks would be handed out at transport hubs, while 7 million would be handed out by local councils, and 1.5 million would be distributed by the Red Cross and other NGOs. He added that the success of Spain’s phased emergence from lockdown would depend on “social and personal responsibility,” adding, “the key to the de-escalation isn’t just about personal decisions. The key will be tens of thousands of decisions taken at home, on public transport, at work, and in free time.”

  Spain’s Health Ministry said Saturday there have been 216,582 confirmed cases of the virus in the country, and 25,100 deaths.

  In Italy, concerns about the reopening are intensifying have led to deep political divisions about how the process should be conducted, as millions worry about another devastating spike in deaths.

  As Spain and Italy prepare to lift all remaining restrictions, Russia is finding that its national lockdown, which was extended to mid-March last month by President Putin, might not be long, or strict, enough.

  It’s becoming increasingly clear that the virus has already deeply penetrated Moscow society, and spread far and wide enough to create a serious problem in the massive country of 144 million. New daily nfections in Russia have risen by 20% as officials worry that hospitals across the country – but particularly in Moscow – might be overrun.

  More than 9,000 new infections were reported on Saturday, another daily record. Once again, they were mostly in Moscow, where the mayor said earlier this week that the government might establish temporary hospitals in sporting arenas or shopping centers to help manage the flow of seriously ill patients, following several other European countries, including Spain and the UK.

  Russia has 124,054 confirmed cases, including Prime Minister Mikhail Mishustin, who had been charged with leading the country’s response. Russia’s death toll stood at 1,222.

  Its death toll stood at 1,222 as of Saturday morning, although many suspect that the true number of cases is likely much larger, as is the number of deaths.

  Over in North America, the government of AMLO, the far-left anti-establishment leader who has been skeptical of the virus from the beginning, has just been exposed for actively trying to cover up the extent of the crisis.

  In the US, the number of confirmed cases climbed to 1,104,345 as of Saturday morning, while the number of deaths hit 239,236.

  And here’s a rundown of where every country stands re: ‘the virus curve’.

  Relatives of patients burst into a Mexican hospital on Friday night and discovered bodies in bags on stretchers crammed into a room. Several of the families discovered the bodies of their loved ones, deaths that hadn’t officially been reported in Mexico’s numbers.

  Watch the video below:

  En Hospital General de Ecatepec Las Américas , familiares de paciente, entran a buscarlo, y descubren que falleció y encuentran los restos de otros fallecidos
  Esto es un cuadro dantesco digno de un Apocalipsis, que tienen que decir @HLGatell y @lopezobrador_ ?
  ⚠️ Fuertes imágenes pic.twitter.com/ctA6X3n5R4

  — Aprendiz de Brujo 💎(No Soy Periodista) (@JoseAntonioLo06) May 2, 2020

  Finally, Singapore said it will start easing some of its distancing measures after reporting a drop in locally transmitted coronavirus cases. The average daily number, excluding migrant workers living in dormitories, of locally transmitted cases has dropped to 12 in the past week from 25 the week before, as the country’s outbreak has been almost entirely confined to impoverished migrant workers who represent a kind of second-class caste in Singaporean society.

  As more scientists question the wisdom of the US going all in on remdesivir, Japan said Saturday that it woud fasttrack a review of the antiviral drug remdesivir so that it can hopefully be approved for domestic COVID-19 patients. We suspect US investors will be watching for results of that study.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 20:22

• US Embassy: Israeli West Bank Annexation Can Move Forward Without A Palestinian State
  US Embassy: Israeli West Bank Annexation Can Move Forward Without A Palestinian State

  The recently established US Embassy in Jerusalem (moved from Tel Aviv last year as part of Trump’s plan) has confirmed that the world will soon see the most controversial element of Trump’s peace plan put into effect: Israeli annexation over broad swathes of the West Bank, particularly the Jordan Valley.

  “As we have made consistently clear, we are prepared to recognize Israeli actions to extend Israeli sovereignty and the application of Israeli law to areas of the West Bank that the [Trump peace plan] foresees as being part of the State of Israel,” a top US Embassy official told the Times of Israel on Friday.

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  The statement made clear that “Israeli actions” will be validated with or without recognition of a Palestinian state, something which on paper at least Trump’s ‘deal of the century’ offered. 

  Though the deal offers statehood, the Palestinians have rejected the US-Israeli brokered Trump peace plan from the start, given they simply had no involvement or were not fundamentally consulted. 

  Ultimately such a brazen annexation, which as we noted before PM Netanyahu said will take place as early as within two months, or likely early summer, will essentially end the path to statehood.

  But maybe this was the whole point to begin with: design and orchestrate a ‘peace plan’ which ultimately preempts any real path to statehood all while charging the Palestinian side with not being on board, or as has been heard many times before: the Israelis can claim “we don’t have a partner for peace”. 

  Should Israeli annexation indeed move forward by this summer, as Netanyahu envisions, it could potentially unleash protests and violence on the level of a third Intifiada. Palestinian Authority leaders as well as Hamas have vowed that such an extensive new Israeli land grab will be resisted by call costs. 

  
  Tyler Durden
  
  Sat, 05/02/2020 – 20:05

• SpaceX: Camel's Nose Under The Tent Of Rapid Space Militarization
  SpaceX: Camel’s Nose Under The Tent Of Rapid Space Militarization

  Via Southfront.org,

  In the last several decades, and certainly in the post-9/11 environment in which the previous restrictions on the militarization of the American society largely disappeared, the US national security establishment has expand not only by creating new programs and agencies, but also by co-opting non-state actors. Many a US think-tank is now little more than an extension of some US government agency, conducting research to validate previously arrived-at conclusions in furtherance of a specific institutional agenda. Likewise many corporations have gone beyond being mere defense or intelligence contractors. Rather, their business activities are from the outset designed to be readily weaponizable, meshing seamlessly with the armed services and intelligence agencies.

  It is not entirely clear how the process works, for there does not appear to be a system of contract awards for specific deliverables. Rather, it seems these capabilities are developed on the initiative of specific businesses which speculate their efforts will be utilized by the US national security establishment ever on the lookout for technological “game-changers”. Moreover, given the unchecked growth of the US national security budget, these entrepreneurs can operate in high confidence their efforts will also be financially rewarded by the intelligence and defense establishments, even if they are not commercially viable.

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  There have been numerous examples of initially civilian applications being put to use for the benefit of US national security institutions. Facebook has made its databases available to various agencies to test facial recognition technologies, for example. Google and Amazon make their cloud capabilities available to the Pentagon and the intelligence communities. The opposition to China’s Huawei 5G networks and cell phones appears to be motivated by the concern these systems do not have backdoors installed for the benefit of US national security state.

  Elon Musk’s business empire has benefited from its proximity to the US national security state. Musk, an immigrant from the Republic of South Africa, has made his initial fortune by creating PayPal. While Musk has sold his remaining interest in PayPal in 2002, that entity has since then engaged in furthering US national security agendas by blocking payments to organizations which were critical of US policies. This, however, is probably more of a reflection of the subservience of US tech firms to the US government than of Musk’s original intent.

  Nevertheless, the timing of Musk’s departure from PayPal and the entry into the space business is noteworthy. Already in the late 1990s, there were rumblings in the United States about the desirability of militarizing space and building up anti-ballistic missile defenses, ostensibly against the so-called “rogue states” of North Korea and Iran. These initiatives gained considerable impetus in 2001, following the election of the Bush-Cheney administration which promptly moved to end the ABM Treaty as the first step toward the future of weaponization of space.

  SpaceX: We’ll Consider Launching Space Weapons If Asked | @DefTechPat https://t.co/nAINha6Qye pic.twitter.com/uzJ1Uyviqw

  — Defense One (@DefenseOne) September 17, 2018

  Space-X’s establishment in 2002, the same year the ABM Treaty collapsed due to the Bush Administration abrogation, seems entirely too convenient to be a mere coincidence, even though the stated aims of the company are mainly commercial. Still, it is easy to imagine why a firm focused on the development of low-cost, possibly reusable, space launch vehicles would be useful to the Pentagon. Creating a government program with the same objective would have attracted unnecessary attention. There would be budget appropriations battles, congressional testimony, various forms of oversight, and the inevitable domestic and international opposition to such destabilizing and provocative initiatives.

  Providing Space-X with technological assistance, allowing it to hire government specialists, then giving it access to lucrative government space launch orders, is a far more attractive proposition. Moreover, the bypassing of the normal defense contracting system actually meant considerable cost savings, thanks to Musk’s red tape-cutting techniques. It’s design bureau functioned in a fashion akin to Lockheed’s famous “skunk works” which developed extremely ambitious projects such as the U-2 and SR-71 in large part thanks to being able to fly “under the radar” (no pun intended). However, since that time Lockheed ballooned into a massive “too big to fail” defense contractor which delivers costly and poorly performing aircraft.

  Musk’s fantasies about colonizing Mars and selling seats on orbital space flights proved a very effective cover for the corporation’s core military applications. Moreover, Space-X’s status as a private corporation allows it to defray some of the research and development costs through genuine commercial activities. Yet one has to wonder whether SpaceX success would have been as spectacular if it weren’t for privileged access to government facilities. SpaceX has been able to piggy-back on the massive US government investment in space launch facilities. It is able to operate out of not only Cape Canaveral and the Kennedy Space Center, but even from the Vandenberg Air Force Base. The speed with which SpaceX was able to develop, test, and deploy several different new rocket engine design of the Kestrel, Merlin, Raptor, and Draco families also may be due to privileged access to technologies developed for NASA and military space programs.

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  Even though SpaceX was founded in 2002, it won a $100 million USAF space launch contract in 2005 and the NASA Commercial Orbital Transportation Services (COTS) contract in 2006, even though the first orbital mission of the Falcon I rocket would not take place until 2008. USAF awarded another $1 billion contract to SpaceX in early 2008, even before the first Falcon I flight. SpaceX has become the de-facto research and development branch of NASA when it comes to manned spaceflight. The 2014 NASA contract for the Crew Dragon has so far resulted in one successful docking with the International Space Station, though without a crew on board, and was followed by a successful splashdown. The larger Starship reusable heavy manned spacecraft is expected to start flying in the 2020s.

  Competition from United Launch Services and even Boeing notwithstanding, there is little doubt SpaceX is to US manned spaceflight what Boeing is to heavy commercial aircraft and Lockheed-Martin to “fifth-generation” fighters. It has become the primary go-to contractor of such systems for both commercial and military US government applications, with the competitors being maintained in existence with occasional contracts largely as insurance against spectacular failure of SpaceX.

  SpaceX portfolio of reusable space launch vehicles, manned spacecraft, and most recently also satellites means that the company is well positioned to serve as a one-stop shopping center for the newly created branch of the US armed forces. Given the United States’ desire to weaponize space as part of its effort to undermine strategic nuclear deterrence of rival powers, namely the Russian Federation and the People’s Republic of China, there is every reason to expect SpaceX will be a recipient of considerable financial largesse from the USSF.

  Arguably the most intriguing project SpaceX is pursuing is Starlink, a proposed network of over four thousand miniature satellites whose ostensible aim is to provide broadband internet service to the entire planet. However, the interest in Starlink demonstrated by the US military suggests that, once again, this is at the very least a dual-use project. Articles discussing the military’s interest in Starlink cite the possibility of it becoming the replacement for the aging J-STARS airborne ground target acquisition radars, suggesting these satellites’ emissions can be used to track moving land objects.. If that is indeed the case, they could also serve the role of anti-ballistic missile warning satellites, and even be used to track stealth aircraft, since the constellation of satellites would function as a massive distributed multi-static radar array.

  The mad pace of SpaceX has not been without mishaps. The Crew Dragon, in particular, suffered a number of embarrassing failures, and it may yet be that the corner-cutting hell-for-leather approach the corporation may yet lead to disaster when applied to the considerably more demanding problem of manned spaceflight. Other private entrepreneurs, such as Burt Rutan’s Scaled Composites and Richard Branson’s Virgin Galactic, either suffered fatal accidents that greatly delayed their respective programs or prompted their shut-down. G_7 SpaceX, however, differs from them in that its main customer is the US government that is greatly interested in having the USSF dominate the Earth’s orbit in the same way as the USN dominates the global ocean by establishing large-scale permanent presence of US military personnel in space. The US government has gambled SpaceX will deliver products necessary for such domination. Whether it can do that still remains to be seen.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 19:40

• Ex-Green Beret Was Behind Failed Attempt At 'Armed Invasion' Of Venezuela Funded By US Billionaires
  Ex-Green Beret Was Behind Failed Attempt At ‘Armed Invasion’ Of Venezuela Funded By US Billionaires

  As we’ve recently observed, Washington’s push to oust Maduro is by no means over, even if seemingly less intensified as well and central to media coverage. Currently for example, there’s some level of build-up of US naval ships in the Caribbean ordered by the administration off Venezuela’s coast for what the White House had described early last month as “counter-narcotics operations”.

  And now the Associated Press has unearthed the stunning details of a prior failed coup attempt that seem straight out of a Hollywood script, given it involved a plot centered on about 300 “heavily armed volunteers” who unsuccessfully tried to topple Nicolas Maduro in a “private coup” allegedly funded by US billionaires.

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  The American overseer of the whole operation was a former Green Beret who ran secret training camps in neighboring Colombia, with the aim to infiltrate the group into Venezuela in order to fuel momentum for a broader ‘armed popular uprising’ à la covert CIA-style Syria regime change ops. 

  The details are as follows according to the AP:

  The plan was simple, but perilous. Some 300 heavily armed volunteers would sneak into Venezuela from the northern tip of South America. Along the way, they would raid military bases in the socialist country and ignite a popular rebellion that would end in President Nicolás Maduro’s arrest.

  What could go wrong? As it turns out, pretty much everything.

  The ringleader of the plot is now jailed in the U.S. on narcotics charges. Authorities in the U.S. and Colombia are asking questions about the role of his muscular American adviser, a former Green Beret. And dozens of desperate combatants who flocked to secret training camps in Colombia said they have been left to fend for themselves amid the coronavirus pandemic.

  And like other more recent disastrous failed plots to oust the socialist strongman in Caracas, such as last year’s short-lived rebellion a small group of Juan Guaido loyal officers, AP reports the “The failed attempt to start an uprising collapsed under the collective weight of skimpy planning, feuding among opposition politicians and a poorly trained force that stood little chance of beating the Venezuelan military.”

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  It’s unclear the extent to which it had the official backing or coordination with US intelligence, or the degree to which it was an entirely private, ‘rogue’ undertaking, though Venezuelan state media has slammed the newly emerged plot as another failed CIA coup attempt.

  Though at times while pitching and discussing his plan, ex-Green Beret Goudrea — who in 2018 established his private security firm Silvercorp USA — had contact with individuals linked to President Trump (such as a veteran personal bodyguard of Trump’s) as well as a who’s who of shady defected Venezuelan military officers, the AP report claims that any Washington officials or people of influence who caught a whiff of his bizarre plan rejected it and distanced themselves from it.

  lt all began, according to the AP, after April 2019 with what’s colorfully described as a “Star Wars summit of anti-Maduro goofballs”. The report details:

  Planning for the incursion began after an April 30, 2019, barracks revolt by a cadre of soldiers who swore loyalty to Maduro’s would-be replacement, Juan Guaidó, the opposition leader recognized by the U.S. and some 60 other nations as Venezuela’s rightful leader. Contrary to U.S. expectations at the time, key Maduro aides never joined with the opposition and the government quickly quashed the uprising.

  A few weeks later, some soldiers and politicians involved in the failed rebellion retreated to the JW Marriott in Bogota, Colombia. The hotel was a center of intrigue among Venezuelan exiles. For this occasion, conference rooms were reserved for what one participant described as the “Star Wars summit of anti-Maduro goofballs” — military deserters accused of drug trafficking, shady financiers and former Maduro officials seeking redemption.

  Among those angling in the open lobby was Jordan Goudreau, an American citizen and three-time Bronze Star recipient for bravery in Iraq and Afghanistan, where he served as a medic in U.S. Army special forces, according to five people who met with the former soldier.

  Those he interacted with in the U.S. and Colombia described him in interviews alternately as a freedom-loving patriot, a mercenary and a gifted warrior scarred by battle and in way over his head.

  The 43-year old Goudreau soon landed a spot helping to organize security for the February 2019 controversial ‘Live Aid freedom-type’ opposition supporting concert put on by British billionaire Richard Branson, held on the Venezuelan-Colombian border.

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  Goudreau had later written of the event: “Controlling chaos on the Venezuela border where a dictator looks on with apprehension,” according to an Instagram post showing him working the concert, which attempted to gem up popular support for ousting Maduro.

  The invasion plans involving 300 trained and armed rebel soldiers hinged on Goudreau working closely with a ringleader of the Venezuelan military deserters, Cliver Alcalá, previously a retired major general in Venezuela’s army, as AP continues:

  Goudreau told Alcalá his company could prepare the men for battle, according to the three sources. The two sides discussed weapons and equipment for the volunteer army, with Goudreau estimating a budget of around $1.5 million for a rapid strike operation.

  Goudreau told participants at the meeting that he had high-level contacts in the Trump administration who could assist the effort, although he offered few details, the three people said. Over time, many of the people involved in the plan to overthrow Maduro would come to doubt his word.

  From the outset, the audacious plan split an opposition coalition already sharply divided by egos and strategy. There were concerns that Alcalá, with a murky past and ties to the regime through a brother who was Maduro’s ambassador to Iran, couldn’t be trusted. Others worried about going behind the backs of their Colombian allies and the U.S. government.

  However, training camps along the border appeared spartan and ill-prepared, with recruits sleeping in barren conditions with lack of enough food and weaponry.

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  But documented evidence shows plans for major weapons shipments, some of which reportedly did arrive and were later recovered inside Venezuela’s borders by Maduro’s military: 

  The volunteers also shared with Mattos a three-page document listing supplies needed for a three-week operation, which he provided to AP. Items included 320 M4 assault rifles, an anti-tank rocket launcher, Zodiac boats, $1 million in cash and state-of-the-art night vision goggles. The document’s metadata indicates it was created by Goudreau on June 16.

  “Unfortunately, there’s a lot of cowboys in this business who try to peddle their military credentials into a big pay day,” said Mattos.

  The CIA among other US agencies would deny ever having anything to do with Goudreau and the ultimately failed plan. 

  However, the report emphasizes it had the support of particular American billionaire businessmen. AP describes: 

  When the Colombians checked with their CIA counterparts in Bogota, they were told that the former Green Beret was never an agent. Alcalá was then told by his hosts to stop talking about an invasion or face expulsion, the former Colombian official said.

  It’s unclear where Alcalá and Goudreau got their backing, and whatever money was collected for the initiative appears to have been meager. One person who allegedly promised support was Roen Kraft, an eccentric descendant of the cheese-making family who — along with former Trump bodyguard Schiller — was among those meeting with opposition envoys in Miami and Washington.

  At some point, Kraft started raising money among his own circle of fellow trust-fund friends for what he described as a “private coup” to be carried out by Silvercorp, according to two businessmen whom he asked for money.

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  The ragtag poorly planned ‘invasion’ was thwarted by the Venezuelan military essentially at the border from the start:

  The plot quickly crumbled in early March when one of the volunteer combatants was arrested after sneaking across the border into Venezuela from Colombia.

  Shortly after, Colombian police stopped a truck transporting a cache of brand new weapons and tactical equipment worth around $150,000, including spotting scopes, night vision goggles, two-way radios and 26 American-made assault rifles with the serial numbers rubbed off. Fifteen brown-colored helmets were manufactured by High-End Defense Solutions, a Miami-based military equipment vendor owned by a Venezuelan immigrant family.

  Currently, the main organizers, including Alcalá and Goudreau himself, are in prison. The ex-Green Beret is now in US federal custody reportedly on narcotic charges, but the details remain unclear. 

  
  Tyler Durden
  
  Sat, 05/02/2020 – 19:15

• We Need to Shut Them Down…
  We Need to Shut Them Down…

  Authored by Robert Wright via The American Institute for Economic Research,

  We need to shut them down… Governments that is.

  At least the ones that cannot pay their bills because of unnecessary economic lockdown orders.

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  I have tried just about everything in these pages to induce politicians to see that they are pushing the worst policies since at least the New Deal and are not going to get reelected if they continue their lockdown policies, which could end in bloody revolt if the power or another essential system goes out. 

  I’ve also tried to induce Americans to sue for their freedom on both civil and Constitutional grounds. I’ve tried to stir their patriotism, and to shame them into rising above the status of mindless test subjects or medieval peasants. I’ve tried to get “Progressives” to see that they can’t have both Social Security and government health insurance simultaneously without increasing the probability of future fiascos. 

  I have also proffered two separate ways out of this mess, one recently implicitly endorsed by Elon Musk, and another that no self-respecting social scientist could dispute. And I suggested that COVID-19 life insurance would help Americans to face death more like their brave ancestors, or younger selves, did at Woodstock.

  But oh the powers that be, be a mighty whale some doth call Leviathan, with the magical power of creating something out of nothing, or rather, like the Wizard of Oz, appearing to create something out of nothing! So the money doth spew forth from the whale’s blow hole in mighty bursts to assuage and calm those who might wish it ill. And worked so far it has.

  That the beast might spew forth again, some state and local governments complain of pecuniary distress. But to satiate their greed for power and lucre will be our undoing. The best that our ship’s captain, Ishmael Trump, can do right now is to make clear that state and local governments that remain locked down shall never hear “Thar she blows!”

  The penultimate power, before resorting to the harpoon, be the power of the purse, an old expression not so much about money per se as the real resources that money can command. Typically tyrants try to seize resources to strengthen their tyranny. Today, we are faced with tyrants who are deliberately destroying resources despite ample evidence from Sweden and the five free states that they need not do so to successfully slow the spread of the novel coronavirus.

  In fact, as I predicted, the New York Times-Columbia “we are all going to get COVID and die” model has been way off, even in the five free states. South Dakota’s cases and deaths, for example, are about 7 percent of those predicted and some counties expected to be overrun by now haven’t had any reported cases, most of which have occurred in Minnehaha and Lincoln counties, which share parts of Sioux Falls, the state’s eastern metropolis of 190,000. A big hunk of those cases stemmed from the infamous but super essential Smithfield pork processing plant.

  I do not have a ready explanation for why places that imposed less extreme mandatory restrictions have fared about as well on “flattening the curve” as those that have locked down. It could be self-selection but Stockholm and Omaha are real cities, not one stop sign hamlets, and even there infections and deaths have not run rampant. 

  Something like the Peltzman Effect could be at play, meaning that people in free areas take fewer unnecessary risks because they know that they may be interacting with infected people while the poor souls in locked down areas assume, often wrongly, that they can crowd into a Walmart because everybody is on lock down and the government is “doing something,” even if that something is utterly irrational, like keeping beaches open while closing beach parking lots. That bit of brilliance had Floridians parking in the lots of shuttered businesses across A1A and then congregating at the few crosswalks!

  In fact, in retrospect, a 99 percent 3-week shelter-in-place for everyone (except COVID-19 HCPs and first responders) for any reason except dire emergency (and I don’t mean the dog needing to defecate) would have been preferable to what has evolved. A simple stay law deferring all debts for three weeks would have been far preferable to seemingly endless bailouts. 

  That approach would have been unconstitutional too, and people would have died, but America would have been rid of COVID-19 by early April and thereafter could have concentrated on border controls and testing/tracing a la South Korea for any new outbreaks. The economy would have experienced a shock but one that it would already be rebounding from because of the certainty of the policy. That “nuclear” option is now off the table as we are too weak to suffer such a shock now.

  For whatever reason, many governments persist in destroying resources and fundamental liberties on the basis of a debunked epidemiological model.

  The national government should actively intercede, as it did to protect Americans’ rights during the Civil War and Civil Rights Movement, neither of which were very civil. But even if it doesn’t want to interfere with states’ rights today, under no circumstances should it FUND their oppression.

  Verily, I believe any attempt to do so will lead to a tax revolt, probably of the quiet variety at first.

  There is just no way Americans in the free states are going to fund the continued subjugation of their fellow Americans in California, Michigan, and elsewhere, which have essentially been invaded and occupied by their own governments. 

  But what then shall the poor state and municipal governments do? Obviously, they need to lift most economic restrictions so that taxes again begin to flow in. And they also need to cut their “nonessential” workers, which is essentially most of them. In the short term anyway, we need courts and police officers and other first responders. (Ultimately, we do not need any of them but this is no time for novelty, even if we have rich comparative and historical examples from which to draw.) But teachers, recorders, prothonotaries, and all sorts of other bureaucrats need to be furloughed immediately. (If you think that many will then join the ranks of protesters, you’re starting to understand the power of the purse! They can arrest some protestors, but not all of them, especially with their budgets so tight.)

  There is no reason to exclude national government employees from furloughs either. The bailouts and other forms of hush money already paid out has to be repaid somehow, through higher taxes or lower expenditures. Why do we need parts of the SEC if no corporations are issuing securities? What good is the EPA if factories are shuttered? The USDA if meat processors are closed? What does the Department of Education do even in normal times? Surely most of the Department of the Interior can be let go. 

  Is furloughing 75 percent of government workers a draconian suggestion? Absolutely, but why shouldn’t government employees suffer along with the rest of us? You can’t expect civvies to bear all the burden of flattening an already pretty flat curve indefinitely. Plus, unlike the private sector, which is all “essential” or it wouldn’t exist, we know from budget battle government shutdowns that much of the national government is nonessential. Life goes on, and some think improves, without it. 

  The nonpartisan Congressional Budget Office (CBO) estimated the deadweight loss of the 35-day partial federal government shutdown in early 2019 at only $3 billion. We will be lucky to get out of the current mess for $3 trillion in deadweight losses.

  Governments messed up by botching testing, then not stopping the spread of the virus when it was still manageable, then did so again by shutting down too much of the economy for too long to cover their incompetence, and now they want to be rewarded with continued nonessential employment, and the forced redistribution of wealth from all Americans to Constitution-smashing state governments? Where is the last straw?

  
  Tyler Durden
  
  Sat, 05/02/2020 – 18:50

• Andy Hall Says "Unlikely" We See Negative WTI Again, But Doubtful On "V-Shaped" Recovery In Oil
  Andy Hall Says “Unlikely” We See Negative WTI Again, But Doubtful On “V-Shaped” Recovery In Oil

  Longtime oil investor Andy Hall says he thinks it is “unlikely” that we ever wind up seeing negative WTI pricing again, calling the move in the commodity “pretty shocking” in a Bloomberg TV interview on Friday. 

  The main question, he contends, is whether or not the industry is going to see a “V” shape recovery from here. And he doesn’t seem to be confident that it’s going to be anytime soon.

  “How quickly are people going to go back to their prime behavior, I mean, maybe in some respects the answer is never,” Hall said, talking about a potential recovery. Instead, Hall says he sees a major recalibration of demand for oil globally.

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  “There’s a thought now with production being shut in, rig counts falling, investment in future supply being reduced, that we’re potentially setting ourselves up for a potential future supply shock, but all this production is not going away, it’s all potentially there, and can be brought back fairly rapidly,” he continued.

  He then urged investors away from oil: “Personally, I think there are better ways to invest one’s money than trying to predict these chaotic movements.”

  Recall, on April 20, the May WTI contract made history after it settled at negative $37.63. On the same day, the June contract finished the day down 18%.

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  We took the time on April 20 to explain why we thought the negative oil prices had happened in the first place.

  “This happens when a physical futures contract find no buyers close to or at expiry,” we wrote. 

  A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May.  So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market.  This is very rare.

  It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.

  What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

  This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.

  You can watch Hall’s interview with Bloomberg here:

  
  Tyler Durden
  
  Sat, 05/02/2020 – 18:25

• What Caused The New York Vs. London Gold Price Spread And Why It Persists
  What Caused The New York Vs. London Gold Price Spread And Why It Persists

  Written by Jan Nieuwenhuijs for Voima Insight,

  The spread between the New York futures and London spot gold price was initially caused by logistics and manufacturing constraints, and likely persists because of credit restrictions.

  If you read into the economics of commodities, much of it is about geography. The Corona crisis and its effects on global aviation has disrupted large shipments of gold, and created price discrepancies geographically. Normally, bullion is transported in passenger planes, but as those have stopped flying, there is more friction in bullion logistics. Partially, this created the spread between the futures gold price in New York and the London spot price. In my view, the spread persists because arbitragers don’t have enough access to funding, and demand in New York remains elevated.

  How it Started

  On March 14, 2020, President Trump started curbing passenger flights between Europe and the US. Including those from Switzerland, where the four largest gold refineries of the world are located. This didn’t happen in isolation. Passenger flights all over the world were being curbed. One of the most important airports in London—home of the largest gold spot market by trading volume—is Heathrow. Since March 10, 2020, arrivals at Heathrow started declining from 600 flights per day, to 250 two weeks later.

  On March 23, 2020, three refineries in Switzerland where temporarily shut down due to the coronavirus. Reuters reported:

  Three of the world’s largest gold refineries said on Monday they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry to curtail the spread of the coronavirus.

  The refineries – Valcambi, Argor-Heraeus and PAMP – are in the Swiss canton of Ticino bordering Italy, where the virus has killed more than 5,000 people in Europe’s worst outbreak.

  Normally, airlines transporting gold and refineries manufacturing small bars from big bars, or vice versa, keep the price of gold products across the globe in sync. If supply and demand for gold in one region is out of whack relative to another, arbitragers step in (buy low, sell high). But with planes not flying and refinery capacity crippled, everything changed.

  Making delivery at the New York futures market, the COMEX, wasn’t that simple anymore. As we all know, shorts and longs on the COMEX are mostly naked. They either don’t have the metal to make delivery (shorts), or don’t have the money to take delivery (longs). In normal circumstances this isn’t a problem because neither shorts or longs are interested in physical delivery. They trade futures to hedge themselves or speculate. However, when sourcing small bars from Switzerland—only 100-ounce and kilobars are eligible for delivery of the most commonly traded COMEX futures contract—became “more difficult,” the shorts became nervous.

  Likely, after the refineries closed, shorts wanted to close their positions as soon as possible to avoid making delivery. Closing a short position is done by buying long futures to offset one’s position. These trades were driving up the price in New York, and the spread was born.

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  Usually, such a spread is closed by arbitragers (often banks). They buy spot (London) and sell futures (New York) until the gap is closed. If necessary, these arbitragers hold their position until maturity of the futures contracts, and make delivery to lock in their profit. But because flights were cancelled and refineries were shut down, the “arb” was risky and the spread didn’t close.

  So you mean the gold futures market “freaks out” exactly at the moment when refineries are shut down and airplanes stop flying? What coincidence. Maybe this market had something to with physical supply and demand after all 😉

  — Jan Nieuwenhuijs (@JanGold_) March 26, 2020

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  Bullion Banks Losing Money Through EFPs

  Bullion banks often have a long spot position in London and are short futures on the COMEX. When a refinery in Switzerland, for example, casts big bars (400-ounce) and sells them to a bullion bank in London, the bank hedges itself on the COMEX. This makes the bank long spot and short futures.

  “Exchange For Physical” (EFP) is an OTC swap. On the COMEX website it reads:

  Exchange For Physical (EFP) allows traders to switch Gold futures positions to and from physical [spot], unallocated accounts. Quoted as dollar basis, relative the current futures prices, EFP is a key component in pricing OTC spot gold.

  (The London Bullion Market is an OTC market.)

  An EFP is usually a swap between a futures and a spot position. In banking jargon the word “EFP” also refers to, (i) having a position in both markets, and (ii) the spread in general (because the price of the EFP is equal to the difference in price between New York futures and London spot). A bullion bank that is “short EFP” is long spot and short futures.

  As mentioned, banks are most of the time short EFP. When the spread widened their short EFP starting bleeding. To avoid further losses, some banks “were forced to cover,” which added fuel to the fire. (It can also be the banks themselves started the spread to widen.) Many banks suffered severe losses.

  Currently, most refineries in Switzerland have reopened. So, why does the spread persist? After all, arbitragers can hire planes to transport gold to wherever. On April 30, 2020, the spread was still $15 dollars per troy ounce.

  Because I couldn’t figure this out myself, I asked John Reade, Chief Market Strategist of the World Gold Council, and Ole Hansen, Head of Commodity Strategy at Saxo Bank, for their views.

  Reade wrote me:

  I guess for two reasons: firstly, banks and traders probably still have large EFP positions that they haven’t been able to cover. And secondly, I doubt that risk officers and banks are prepared to allow large EFP positions to be run, so the usual arbitragers of this market cannot add to their positions, flattening the spread.

  Which is in line with what Hansen wrote me:

  While COMEX has now allowed the delivery of 400oz bars (the most popular bar size in London) and raised spot positions limits the problem has not gone away. This means that the mechanism that should balance the gold market still isn’t functioning correctly despite improving underlying physical conditions.

  Market makers [banks] have suffered major losses last month and as they tend to natural short the EFP (long OTC, short futures) the risk appetite and ability to drive it back to neutral has for now been disrupted.

  Banks lost so much money, they are cautious not to lose more. They don’t access funds to close the spread.

  Conclusion

  Generally, just the threat of delivery keeps markets in line as well. Any trader that sees an arbitrage opportunity can take position without the intention of making/taking delivery, in the knowledge that New York futures and London spot will converge. Now this certainty doesn’t prevail, traders are cautious. If they take positions but the spread widens, they lose.

  Another reason why the spread can persist, is because of strong demand in New York. Speculators that reckon the price of gold will go up will buy long futures, increasing the spread. Normally, this type of demand is smoothly translated into the spot market by arbitragers without increasing the spread. But not now.

  In a nutshell, I think that logistics and credit restrictions prevent the spread to close. However, if anyone has a better analysis please comment below.

  Addendum

  It can be, as John Reade wrote me, “banks and traders probably still have large EFP positions that they haven’t been able to cover.” I noticed on Nick Laird’s website Goldchartrus.com that EFP volume cleared through CME’s ClearPort is decreasing since early March, to levels not seen in a long time.

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  Perhaps this is a reflection of a market that is slowly trying to heal itself. Perhaps when all losses have been crystalized, banks, or other financial entities with sufficient firepower to hire planes etc., will close the spread.

  Another possibility is that when the new COMEX futures contract—that can be delivered in 400-ounce bars—becomes active, the spread closes. At the time of writing, the open interest of this contract is virtually zero. Time will tell.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 18:00

• "The Whole Thing's A Farce" – 'Conspiracy Theories' Thrive As Texans Flock Back To Shopping Malls
  “The Whole Thing’s A Farce” – ‘Conspiracy Theories’ Thrive As Texans Flock Back To Shopping Malls

  Texas is the largest US state to allow a substantial number of retailers and other businesses to reopen for the first time on Friday, even as many of the state’s Democratic big-city mayors urged residents and business owners to ignore the governor’s advice.

  To try and get a sense of how the beating heart of Texas retail – the Barton Creek Square in Austin – was faring during its first day back in business, the dogged reporters at the Texas Tribune ventured out to the capital city’s biggest mall to commiserate with shoppers bold enough to risk infection over a pair of sneakers, as the TT piece put it.

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  What the reporters found was hardly surprising: stores barely managing to meet the 25% max-capacity threshold set by the governor, a threshold at which most businesses simply cannot operate profitably. As a result, only a handful of Barton Creek’s smaller stores were open; all of the mall’s anchor tenants – department stores that have been particularly hard hit by the downturn – remained closed.

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  By the time the mall opened at 11am local time yesterday, lines of shoppers had formed, with everyone standing six feet apart, and lines forming outside stores allowing only a handful of shoppers to enter at a time.

  Most of the patrons were there to shop, it seemed – little things mostly; shoes, swimsuits etc. At least one told the TT that she was just out to get some exercise. They ranged from young couples to older singletons.

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  No temperature-checkers were present when the doors opened; no masks, nor sanitizing wipes, were handed out. Shoppers were basically left to look after themselves

  John Whitton and Marina Oneill stood by their car outside wearing face masks – Oneill’s a DIY mask made by her roommate from a bra cup – waiting to buy a swimsuit (for Oneill) and shoes (for Whitton).

  “I think I’m going to buy a pair of skate shoes and take it back to 2002,” Whitton said.

  One thing that caught our attention: the surprising number of individuals interviewed by the TT to expressed doubt about the virus (one called the outbreak “a farce”) or endorsed some other conspiratorially-oriented view.

  By 10:58, a line had formed outside an entrance adjacent to the Cheesecake Factory. Patrons, many wearing masks, kept a 6-foot distance from one another, aided by blue tape pressed onto the concrete to direct them where to stand.

  The line included an avid mall-walker hoping to exercise away from the Texas heat, a mother whose young kids — each no older than 10 — all wore face masks and an Austin-area teacher convinced the coronavirus was cooked up by President Donald Trump, Russia’s President Vladimir Putin and North Korean leader Kim Jong-un.

  Though most customers wore masks, as mandated by law, only a handful of patrons wore gloves.

  Shoppers were antsy. Resigned, too.

  “I think it’s all a big farce. I believe there’s a virus, but we have bird flu and pneumonia and I’ve had several shots,” said Charlene Franz, 65, who came to the mall to fix the cracked screen on her Cricket cellphone and return a broken pair of sunglasses purchased from Loft.

  Friday was the first day that shopping malls, restaurants, retail outlets and movie theaters were allowed to reopen in Texas after being closed since the beginning of April. According to Gov Abbot’s order, stores can open, but must limit occupancy to 25% of capacity.

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  As several mall employees eagerly told the TT (speaking anonymously for fear of losing their jobs), the governor’s order was actually making it harder on most small businesses, as they’re essentially being forced to operate at a loss, and employees are being called back in to work, despite the fact that both the business and the employees were probably better served with the ‘PPP’ loan-to-grant scheme and of course the beefed-up unemployment checks that, combined with the stimulus, have left many hourly workers with more in their pocket than they would otherwise have.

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  It’s just something to think about: Why would anybody want to push for a reopening if it would only seal the fate of thousands of small businesses?

  Some employees returned to work reluctantly. A 42-year-old who helps operate two phone kiosks at Barton Creek said there’s “no use” reopening the mall at only a 25% occupancy.

  “None of the businesses can survive on 25% business,” said the employee, who spoke under the condition of anonymity because he wasn’t licensed by the mall to talk to the press.

  “All the major stores are closed. We get business when people come to the major stores, and then it all flows and comes to the kiosk,” he said. “We do want to get back to work, but the governor should’ve waited until we were at 50-75% so we have a chance to survive or not open at all.”

  Remember, if small businesses don’t make enough money after reopening, they’re going to need to shut down again – but this time, it might be forever.

  Yanick Almeida, 23, who works as a jeweler at one of the mall’s kiosks, said the business usually takes in several thousand dollars on a typical Friday.

  “That was before corona,” he said. Around noon, he hadn’t made a single sale.

  “If we don’t make any money, we’re going to have to shut down,” he said. “But I don’t think we’re going to go anywhere because we’ve been shut down for about two months, and so far we’re still good.”

  It’s worth wondering: Who benefits from the wholesale destruction of small business (or, in this case, the death of American malls, and the implosion of any securities backed by their debt)?

  Who benefits?

  
  Tyler Durden
  
  Sat, 05/02/2020 – 17:35

• Fauci Links & Virus-Lab Leaks: Newsweek Report Raises Urgent, Important Questions
  Fauci Links & Virus-Lab Leaks: Newsweek Report Raises Urgent, Important Questions

  Via PeakProsperity.com,

  One of the more acutely-asked questions since the covid-19 pandemic broke out has been: Is the virus man-made?

  Debate on the matter has been wild and furious. After much investigation, Chris is now weighing in on the heels of an explosive Newsweek report.

  Newsweek reveals that as recently as last year, the US funded scientists at the Wuhan Institute of Virology focused on conducting ‘gain of function’ research on bat coronaviruses.

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  The source of that funding?

  The National Institute for Allergy and Infectious Disease, headed by… (drumroll please)… Dr Anthony Fauci, lead medical expert for America’s Covid-19 presidential task force.

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  Now, this doesn’t mean the virus was lab-engineered as a bio-weapon. But it does suggest a naturally-occuring bat virus could have been artificially accelerated along certain vectors.

  Of course, this raises an awfully lot of urgent and important questions:

  So far, Fauci has not commented on the Newsweek report. You can be certain we will be keeping close tabs on developments from here…

  *  *  *

  Don’t forget to get your free download of Peak Prosperity’s book Prosper!. Given its relevance to preparing for any kind of crisis, pandemic or otherwise, Chris and Adam are now making it available to the world for free. To get your own copy, click here.

  
  Tyler Durden
  
  Sat, 05/02/2020 – 17:10

• Here Is Hugh Hendry's 3-Step Plan To Save The World From Financial Collapse
  Here Is Hugh Hendry’s 3-Step Plan To Save The World From Financial Collapse

  It’s official: despite still technically retired in St Barts where he is a “luxury real-estate, mentor, advisor, paddle-surfer” according to his twitter profile, last week’s markets tweetstorm appears to have awoken if not the investing, then at least the analytical “primal urge” in the Scottish investor, who ran the Eclectica macro hedge fund for 15 years until he shuttered it in September 2017 (his farewell letter can be found is here) disgusted with how broken and impossible to navigate capital markets had become as a result of central bank intervention.

  And in case it wasn’t clear that after a three year hiatus Hendry suddenly finds himself having much more to say, late on Friday the macro investor followed up last week’s “inaugural” commentary with another massive tweetstorm (Hugh: it may be easier to just write a blog post or alternatively, send it here and we will post it), spanning hundreds of tweets, discussing – in far more whimsical, if typically Hendrian terms – what is arguably the most important concept: when does money printing become inflationary (i.e., the catalyst that will make David Einhorn’s long-term forecast correct).

  But first, as a reminder last Friday, Hugh Hendry reverted to his investor roots, discussing the fate of gold and the dollar in the helicopter money regime, what it would take for the S&P to hit 10,000, whether the entire VIX regime is now inverted due to central bank backstops, and asks the “two key questions”: are we transcending from a bull market in fear to a bull market in WTF!? And will QE infinity differ from its previous vintages by driving risk asset volatility levels higher??

  Over on hughhendryofficial pic.twitter.com/WW4ByuNQRg

  — Hugh Hendry Eclectica (@hendry_hugh) April 29, 2020

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  Hendry also touches on an old favorite topic, namely hyperinflation, a thesis which he thinks “needs stock prices to fall further and vol to rise in the conventional manner.”  But his most topical observation is what are the core criteria that will allow MMT – i.e., that fusion of the Fed and Treasury known as “helicopter money”…

  you can print as many dollars as you damn well please, as long as the yield curve doesn’t steepen and the dollar doesn’t rally precipitously…you’re good to go and MMT is dope.

  … as the alternative is game over. As usual, his stream of consciousness answers, right or wrong, were fascinating and could be read in their entirety here.

  Fast forward one week later when we got “part two” from the Scottish investor – perhaps best known for his 2010 full-frontal assault on Jeffrey Sachs and the immortal words “I recommend you panic“, when Hendry explained accurately why the current central planning takeover would lead to much more pain in the future…

  “Let’s purge this system of its rottenness. Let’s take on a recession. It’s going to be tough, people are gonna lose their jobs. They are going to lose their jobs anyway. We can spread this over 20 years, or we can get rid of it over 3 years.

  … something which was clearly correct now that we are 10 years through Hendry’s 20 year forecast, and as we can observe in real time, to keep the system from imploding due to the accumulated “rottenness”, the Fed was forced to inject and backstop a record $12 trillion in just a few short weeks.

  Below is the full stream of twitter consciousness which as expected is just as disjointed, as it is insightful, and every bit the Hugh Hendry we had grown to admire (and periodically criticize, especially after his odd “conversion” phase) over the past decade.

  In it, Hendry – and this is our best attempt at actually grasping what he is trying to say – proposes a 3 Step mechanism for fixing the broken world, one which revolves around the following i) undoing capital limitations that would enable banks to lend much more aggressively while phasing away concerns about “moral hazard” and the great bank bailout of 2008; ii) end negative rates and force positive rates across the globe; and iii) “reintroduce central bank Window Guidance” giving banks a quota for their loan book and a targeted growth rate.

  Now, we don’t necessarily agree with Hendry’s proposal – after all there is now so much debt in the world that artificially hiking rates far above r-star (which according to Deutsche Bank is now -1% in the US so one can imagine what it is in Europe and Japan) would lead to an immediate and catastrophic collapse in bond prices. On the other hand with central banks now monetizing virtually all securities, and bond markets no longer signaling anything, one would not have an incentive to sell bonds even if yields were to spike – since central banks would backstop everything. And so, in a perverted way Hendry’s proposal may actually work.

  On the other hand, and we will discuss this later, there also needs to be loan demand instead of just supply. And the fact that the government’s PPP program is not based on loans at all but forgiveable grants, is precisely what there has been over $600BN in demand for the Paycheck Protection Program. If these funding facilities were structured as plain vanillla loans at slightly punitive rates (to invoke Bagehot), there would be virtually no demand and none of the money the government and Fed had created would flow through to the economy.

  Long story, short, for there to be loan demand in the future, loans may all have to be structured as grants, which is possible for a government that can just print money but is impossible for banks which obviously can only take so many loan losses.

  In any case, the reality is that the current status quo is also completely unsustainable – as the recent bailout of everything has shown – and so it may be that trying anything would be better than merely enforcing the same broken policies that have led the entire world to the edge of hyper(deflationary/inflationary) collapse.

  And with that, without further ado, here is Hugh Hendry’s 3-step plan to save the world, as tweeted late on a Friday night..

  We’ve never seen the phenomenon of simultaneously higher equity prices and a shift higher in the VIX curve without a state of hyperinflation; except at the start of Abenomics for 1-2 months in 2012 and maybe now…

  But it’s a HUGE ask to imagine that April’s moves in VIX and SPX, allied to promises of further gigantic central bank printing, will prove a precursor to runaway inflation. But heck, let’s give it a go…

  Crudely put, it seems more likely that this 2020 helicopter money is simply filling the great landfill dump left behind by the furloughing of the global labour market this year; that the CBs have replaced the normal monetisation that would emanate from an active labour force.

  What might deliver a tipping point – where bank printing outweighs every other factor and we experience runaway prices? Clue: the answer is always in what I don’t write.

  I’m going to attempt this thought exercise tonight

  But first, let’s look at the abysmal chart of French bank lending

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  If you have the 50y data series, please share. But it kind of looks like a GOLD/SPX chart from the 1990s. Right? Hey to a man with a hammer, everything looks like a nail

  Loans were expanding @ < 2pc p.a. before the pandemic. Looking forward, I think they are going to take off; or rather, this is an absolute requisite if we are to stave of the march to serfdom and prevent political extremists attaining the highest offices of government

  But having lost so much precious time dithering, we may have to experience runaway prices as the quid pro quo. Hey! Shit happens. I really can’t imagine a scenario where a Hank Reardon saves the day. Can You?

  Ok hold that thought! Cause first we got to remember that before this calamity, Macron, decided to shake up France’s overly generous state pension system. Quelle bêtise.

  Imagine, we’ve had a 50y cycle that allocated more and more of the economic spoils to creditors and a FRENCH President just announced an attack on the proletariat. Hold on! Wait a minute? It’s like handing the DJ a cassette player…

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  But then this is the country that elected the ultra-leftie Mitterrand as President of the First Republique and he invited the Communist Party to join his government at the beginning of this cycle in 1981. I mean 1931 and the guy is a forward-thinking master of the universe but 1981 with the proletariat in it’s ascendancy and downtrodden creditors having retreated to the ghettos? It’s like a bully who can only find his courage in a crowd.

  As contrarian signals go the French are a perfect indicator of where we are in the 50y cycle of wealth redistribution. The last adopter surely must always be the President of the Republique. Right?  After 50y of this we all know that you only fight when the economy is set to boom.

  The global dream of an endless arc of rising economic prosperity is in jeopardy and this is no longer happening. Since the GFC, our Wesley Mouch type policymakers have consistently “mouched” their way through the manual of how to remedy an economy made vulnerable from a shock

  It didn’t have to be like this.

  The valedictory sound of “mission complete” first sounded along this bureaucratic blunder-path to radicalism when, and for good reason, they bought private debts at way above face value through regimes such as TARP I & II

  Normally a sure-fire thing way to restore vitality to a devastated post-shock economy. Helpful. Relevant. On point. Courageous. I loved this!

  But no bank-boom; no huge lift in GDP.

  Again, and for good, sound reasons, they declared, “mission complete”, when they really went for it and  loaded up on radicalism and opted to return huge flows of money to the private sector. Subterfuge for sure but QE enabled the banks to make significant profits – the classic market cornering -where your independent, some might say lawless, central bank buys with the objective of creating a Hunt Brothers’ Bubble in Treasuries where private banks invest heavily.

  Controversial to many for sure but no complaints from me. I give them an A+ for this exemplary move. But bank boom? Explosive GDP growth? Nada…So 2 textbook steps forward but little payback. What gives?

  They have been undone by a collective failure to grasp the principle that GDP growth rates are determined by the momentum, the mojo, the VELOCITY, if you will, that only comes from an expansion of private sector bank balance sheets.

  And hence my deliberate omission from earlier. Changes in money supply equal changes in central bank plus commercial bank assets. But moral hazard busted this equation…

  In the frenzy of fear and recriminations that was 2008-9, centrist parties whimsically determined that as taxpayers were not responsible for the GFC (really?) then they – the State – did not have a mandate to foot the recovery bill. Caution: Ideology Alert!

  As a consequence, it became preordained that all of the rise in the money supply had to come from the expansion in public or central bank balance sheets. A great depression averted but at the cost of economic dynamism. Bash them banks all you want but no loan growth begets no loan growth begets a fossilising economy were GDP can’t grow nowhere near damn fast enough to right ‘em wrongs.

  Japan anyone?

  All the central bank money printing in the world isn’t going to generate runaway prices if private sector banks are not expanding credit!!

  So what has to happen?

  It is not difficult to nudge the economy back into action. Ideology brought us here. Drop the dogma and we recover. Heck there’s even a manual residing somewhere in every government treasury department that explains exactly how to do it. Otherwise, appoint HughHendryOfficial to advise your sovereign Treasury and I promise that my team and I will generate “dynamic” GDP growth. Just tell me the number you desire cause I’m your supplier.

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  Step I: First things first, on the first day of my appointment, I’m going to ditch this moral hazard nonsense and rescind the longest suicide note in economic history a.k.a., Basel III: International Regulatory Framework for Bank Supervision.

  Let me read directly from the macro manual. Rule no.1 clearly stipulates that accounting changes should be introduced to improve bank profitability which will beget more capital strength and more risk appetite; vigorous loan growth will ensue. I scream, you scream, we all need ice-cream! These bozos implemented the reverse!!!

  However, it’s just possible that the legacy of the pandemic a.k.a the phantom menace, may allow scope to reverse this idiotic regulation; let’s hope so.

  Step II, I’m going to reverse negative official interest rates in Europe and Japan. I’m not smart enough to understand everything. But I watch, listen and I try to improve. And those voices in my head keep telling me that those neg rates are counter-productive. How else do you explain the disparate performance of US banks vs. their Japanese and European cousins? Can someone chart and share this please? So I’m gonna raise rates folks; Volker, anybody?

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  Shorn of ideology deflation can be averted.

  But  to return to the future we most likely have to visit the past. To conceive of this, I want you to try the following mental exercise. Think of a glossy Steve Jobs, promo video showcasing not the latest iphone but instead the economic milestones of the last 50 years.

  Volker raising rates to tame inflation, quantitative restriction of the money supply, independent CBs, less powerful unions, liberalisation of the capital account, no unemployment, rising profits, risk taking, entrepreneurship, dynamic economies, the liberation of billions from the tyranny of state planning…

  Done that? OK, now I want you to replay that same movie but only in reverse, and in slow motion, with interest rates being cut to negative, with market rates determined by the public sector, with the loss of CB independence, with quantitative expansions of the money supply. With less and less risk taking and lower rates of prosperity, less technology breakthroughs, less free markets and more government-set prices. An economy where everyone is on the payroll of the State.

  It’s a dirty business but who ya gonna call? If it’s HughHendryOfficial then…

  Step III will see us quietly, and without pomp or ceremony, reintroduce central bank Window Guidance whereby commercial banks will be given a quota for their loan book and a targeted growth rate.

  The Princes of the Yen describes this technique well. The political imperative in Japan in the late 1980s was to stoke a domestic boom to deflect international pressure from the US regarding the Japanese trade surplus. Japan’s commercial banks grew their risk assets by 15pc pa between 1986 and 1989 and everything boomed.

  Normally the circuit breaker is you and me. It’s we who work out the unsustainable nature of a fiat directed bank loan expansion. It is we who see the tower of riskier and riskier loans and its power to generate reflexively even riskier loans and huge unproductive investment.

  Because, You & Me, we see things differently. It is us who head to the exit first and that’s why it’s You & Me who are going to live forever!

  Sorry, I digress, where were we? The ensuing currency crisis. It usually puts a brake on the expansion. However, Japan, with a capital account of more than $200bn, rivalling the firepower of the IMF at the time, had no currency crisis; you want to pick a fight with a monster?

  The hammer when it fell was simply an ideological change by the policymakers. Revolted by “les noveaux riches” and with a titanic battle of egos raging between MoF and the BoJ, policymakers chose to reverse their loan program. And, lacking a bid, risk assets crashed. It wasn’t about super sky high equity valuations. It was simply a change in bureaucratic ideology…damn dogmas.

  Anyway, put me in charge of the ECB and I’ll deliver 3pc GDP growth across the continent by 2023ish; it will be easy. I’ll raise official policy rates, abolish Basel III and by re-introducing window guidance, I can command that European banks expand their balance sheets by 10pc.

  Failure will be punishable by loss of quota. You wanna misbehave?

  Not convinced? I hear you: the macro community are going to see a bozzo like me coming from miles away. Rapid private sector bank lending, riskier and riskier lending, debt fuelled asset purchases, bubbles – the €uro will plummet, and my German paymasters will kick me out.

  Or will they? Is it inevitable that the €uro crashes under this scenario? I don’t think so because the U.S. Treasury has my back. Bitch!

  Remember they promised to stop at nothing to prevent a sharp deflationary rise in the external value of the $. And so, like my brethren at the BoJ, so many years ago, I think I‘ve got job security. Just don’t re-introduce moral-hazard cause I’m the guy who’s gonna take you higher

  I know you think this is fanciful, and for sure I won’t argue, but hear me out just a little longer. I promise I’m nearing the end. Let’s talk about me. Like the film, The Truman Show, I’m an investor living inside my investment. Weird, huh?

  To the un-initiated, my Vol @ the End of the World Trade is to own client financed, one-of-a-kind, real estate on the tiny island of St Barts, funded by €uro matched, fixed, 20-year money at 2 or less percent. Recently my phone has never stopped ringing. It’s my French bank; they called to ask whether I wanted to defer my payments for 6 months? Those friendly officials from the French government are keen to help-out. God bless them…of course, I accepted their generosity.

  Last week, same thing. It transpired that officials from the Treasury had put their heads together and come up with another great idea. They could propose an interest-only 5y loan equivalent to 20pc of my outstanding debt. Is that something I might be interested in? You sure bet!

  The political centre ground is collapsing under a systematic ideological failure to forgive the banks. The malaise of the banking sector is preventing the cyclical propensity of GDP to rebound and deliver prosperity to the many.

  Centrists must resolve their own moral hazard or face extinction. Make Banks Great (again)! Give me a call at hughhendryofficial

  Or we’re destined to remain trapped in the serfdom of perpetual deflation

  Well, since we’ve tried everything else and it has failed, why not give Hendry a try too before making the last leap to full fiat collapse?

   

  
  Tyler Durden
  
  Sat, 05/02/2020 – 16:45

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