- A World No Longer Shaped By Atlantic Powers
A World No Longer Shaped By Atlantic Powers
Authored by M.K.Bhadrakumar via Counterpunch.org,
The annual Munich Security Conference that took place February 14-16 this year turned out to be an iconic event, drawing comparison with the one held in the same Bavarian city on February 10, 2007, where in a prophetic speech Russian President Vladimir Putin had criticized the world order characterized by the United States’ global hegemony and its “almost uncontained hyper use of force – military force – in international relations.”
If Putin’s 2007 Munich speech was prescient about an incoming new Cold War and the surge of tensions in Russia’s relations with the West, 13 years later, at the event this year, we witnessed that the transatlantic ties that evolved through the two world wars in the last century and blossomed into a full-fledged alliance system have reached a crossroads.
Deep cracks have appeared in the transatlantic relationship. In an extraordinary opening address, German President Frank-Walter Steinmeier, an éminence grise in European diplomacy, accused Washington of rejecting “the very concept of an international community.”
Steinmeier acknowledged that there is no return to the halcyon days of close transatlantic partnership, as Europe and the U.S. are drifting away from each other. He warned, “If the European project fails, the lessons of German history, but perhaps also European history, will be called into question.”
Having said that, Steinmeier did not advocate that Europe could go it alone, either. Rather, “only a Europe that can and wants to protect itself credibly will be able to keep the U.S. in the alliance.”
But he regretted that “Europe is no longer as vital to the U.S. as it used to be. We must guard against the illusion that the United States’ dwindling interest in Europe is solely down to the current administration… For we know that this shift began a while ago, and it will continue even after this administration.”
The theme of European independence—Europe becoming a sovereign, strategic and political power—was also the leitmotif of a speech by French President Emmanuel Macron who brought a rare dynamism into the European debate, fighting spiritedly for a common European foreign and security policy. The German policymakers have signaled broad agreement with Macron’s idea that Europe must take charge of its own destiny.
In contrast, the U.S. Secretary of State Mike Pompeo had earlier insisted that the talk about the demise of the West is “grossly exaggerated,” and, in fact, “the West is winning. We are collectively winning. We are doing it together.”
Meanwhile, two subplots that kept appearing in the discussions were, one, the continued relevance of multilateralism in the international system and, two, deep anxiety over the current global security environment.
Steinmeier framed the concerns sharply, saying, “the idea of international community is not outmoded,” adding that “withdrawing into our national shells leads us into a dead end, into a truly dark age.”
All in all, these sharp exchanges between the Europeans and some of the American delegation confirmed, more than ever, the weakness and disunity of the West. A Politico report on the Munich Security Conference noted, “The two sides aren’t just far apart on the big questions facing the West (threats from Russia, Iran, China), they’re in parallel universes.”
One major issue that divided Munich was China. Neither Pompeo nor Defense Secretary Mark Esper left any doubt that Washington considers China to be a nefarious force in the world, representing a significant long-term threat. But that view is not shared by many countries in the EU. The underlying question is what posture the Western alliance should take toward China, which is a fundamental one with far-reaching consequences. Europe is deeply worried about the consequences that spurning Beijing would have on trade and investment.
It became apparent at the conference that there was no acceptance of Pompeo’s plea that China is the new enemy. His cautioning against the involvement of the Chinese tech company Huawei in the upcoming 5G rollout met with stony silence by European allies. The policy toward China could emerge as the biggest transatlantic divide.
Can the West regain its influence? The crux of the matter is that with the decline in material wealth and the decay of moral values, the capacity to influence has shrunk. And the West’s form of economic organization is no longer as appealing as it once was. Also, with the rise of China, rapid development of India, and the resurgence of Russia, a new dynamic of global power is taking shape.
As these and other emerging powers grow in strength, a dispersion of power and influence is bound to accelerate, and the West is unlikely to regain the preponderant influence it wielded in the post-World War II era.
This drain of influence might slow down if only a “new West” led by Europe that combined power and values reached out to powers such as India or Japan to build global alliances. But a major lacuna lies in the United States’ contempt of multilateralism and a rules-based order.
Equally, Washington’s push for trade-offs to advance its unilateral confrontations—be it with Russia and China or Iran and Venezuela—fails to strike a chord with its top Western partners, the majority of whom are averse to any form of confrontation, least of all with Beijing.
“We cannot be the United States’ junior partner,” said Macron, citing recent failures in the West’s policy of defiance. Clearly, internal divisions afflict the West, and it is hard to see how they can be overcome.
At best, coalitions of the willing may appear within and among the Western states on specific issues. But even then, the West can at best slow down its relative decline but nowhere near reverse it.
The heart of the matter is that the economic center of gravity in the world order and the ensuing global power equation is inexorably shifting away from the West, while on the other hand, there is no longer a “West” that is united behind principles, values, and policies.
Tyler Durden
Fri, 03/06/2020 – 00:05 - Minimum-Wage Blowback – Fast Food Burger-Flipping Robot Works For $3 An Hour
Minimum-Wage Blowback – Fast Food Burger-Flipping Robot Works For $3 An Hour
Over the years, we’ve documented the proliferation of artificial intelligence and robots in the workplace would lead to a tidal wave of job losses through 2030.
What peaked our attention several years ago was Miso Robotics, a Pasadena tech company with the focus of developing robots for fast-food restaurants, has seen the price of its burger-flipping robot drop from $100,000 to $10,000 in four years.
“Off-the-shelf robot arms had plunged in price in recent years, from more than $100,000 in 2016, when Miso Robotics first launched, to less than $10,000 today, with cheaper models coming in the near future,” according to the Los Angeles Times.
The burger-flipping robot is now more cost-effective than the average low-skilled employee, which means Miso’s unveiling of a subscription plan for restaurants, of just $2,000 a month, with the choice of a robot that works either the grille or fryer, could be very appealing to restaurant owners or managers across the country who need to drive down labor costs.
“As a result, Miso can offer Flippys to fast-food restaurant owners for an estimated $2,000 per month on a subscription basis, breaking down to about $3 per hour. (The actual cost will depend on customers’ specific needs). A human doing the same job costs $4,000 to $10,000 or more a month, depending on a restaurant’s hours and the local minimum wage. And robots never call in sick,” LA Times adds.
Americans could soon see Flippy or a variant of the robot at a mom and pop restaurant or a major fast-food chain in the early 2020s, the affordability of these robots will entice restaurant operators to drive down labor costs.
On a much broader perspective, Karen Harris, Managing Director of Bain & Company’s Macro Trends Group, presented a fascinating report several years ago titled “Labor 2030: The Collision of Demographics, Automation, and Inequality,” which outlines how automation could eliminate upwards of 40 million jobs by the end of this decade.
Millions of Americans are employed in the fast-food industry; the proliferation of automation could lead to a rapid increase in job losses through the mid to late 2020s. The labor market could see major disruptions from robots in the years ahead, it’s expected this trend could force the government to have the Federal Reserve finance People’s Quantitative Easing, in the form of universal income, etc.
Tyler Durden
Thu, 03/05/2020 – 23:45 - Will The Coronavirus Topple China's One-Party Regime?
Will The Coronavirus Topple China’s One-Party Regime?
Authored by Minxin Pei via Project Syndicate,
It may seem preposterous to suggest that the outbreak of the new coronavirus, COVID-19, has imperiled the rule of the Communist Party of China (CPC), especially at a time when the government’s aggressive containment efforts seem to be working. But it would be a mistake to underestimate the political implications of China’s biggest public-health crisis in recent history.
According to a New York Times analysis, at least 760 million Chinese, or more than half the country’s population, are under varying degrees of residential lockdown. This has had serious individual and aggregate consequences, from a young boy remaining home alone for days after witnessing his grandfather’s death to a significant economic slowdown. But it seems to have contributed to a dramatic fall in new infections outside Wuhan, where the outbreak began, to low single digits.
Even as China’s leaders tout their progress in containing the virus, they are showing signs of stress. Like elites in other autocracies, they feel the most politically vulnerable during crises. They know that, when popular fear and frustration is elevated, even minor missteps could cost them dearly and lead to severe challenges to their power.
And “frustration” is putting it mildly. The Chinese public is well and truly outraged over the authorities’ early efforts to suppress information about the new virus, including the fact that it can be transmitted among humans. Nowhere was this more apparent than in the uproar over the February 7 announcement that the Wuhan-based doctor Li Wenliang, whom the local authorities accused of “rumor-mongering” when he attempted to warn his colleagues about the coronavirus back in December, had died of it.
With China’s censorship apparatus temporarily weakened – probably because censors had not received clear instructions on how to handle such stories – even official newspapers printed the news of Li’s death on their front pages. And business leaders, a typically apolitical group, have denounced the conduct of the Wuhan authorities and demanded accountability.
There is no doubt that the authorities’ initial mishandling of the outbreak is what enabled it to spread so widely, with health-care professionals – more than 3,000 of whom have been infected so far – being hit particularly hard. And despite the central government’s attempts to scapegoat local authorities – many health officials in Hubei province have been fired – there are likely to be more questions about what Chinese President Xi Jinping knew.
Not surprisingly, Xi has been working hard to repair his image as a strong and competent leader. After the central government ordered the lockdown of Wuhan in late January, Xi appointed Premier Li Keqiang to lead the coronavirus task force. But the fact that it was Li, not Xi, who went to Wuhan seemed to send the wrong message, as Xi realized in the subsequent days.
On February 3, at a Politburo Standing Committee meeting, Xi took an unusually defensive tone in a speech that smacked of damage control. While Xi admitted that he had learned of the outbreak before he sounded the alarm, he emphasized his personal role in leading the fight against the virus.
Moreover, on February 10, Xi made a series of public appearances in Beijing, aimed at reinforcing the impression that he is firmly in command. Three days later, he sacked the party chiefs of Hubei province and Wuhan municipality for their inadequate handling of the crisis. And two days after that, in an unprecedented move, the CPC released the full text of Xi’s internal Politburo Standing Committee speech.
Though Xi has apparently regained his aura as a dominant leader – not least thanks to CPC propagandists, who are working overtime to restore his image – the political fallout is likely to be serious. The profound uproar that marked those fleeting moments of relative cyber-freedom – the two weeks, from late January through early February, when censors lost their grip on the popular narrative – should be deeply worrying to the CPC.
Indeed, the CPC may be highly adept at repressing dissent, but repression is not eradication. Even a momentary lapse can unleash bottled-up anti-regime sentiment. One shudders to think what might happen to the CPC’s hold on power if Chinese were able to speak freely for a few months, not just a couple of weeks.
The most consequential political upshot of the COVID-19 outbreak may well be the erosion of support for the CPC among China’s urban middle class. Not only have their lives been severely disrupted by the epidemic and response; they have been made acutely aware of just how helpless they are under a regime that prizes secrecy and its own power over public health and welfare.
In the post-Mao era, the Chinese people and the CPC have adhered to an implicit social contract: the people tolerate the party’s political monopoly, as long as the party delivers sufficient economic progress and adequate governance.
The CPC’s poor handling of the COVID-19 outbreak threatens this tacit pact. In this sense, China’s one-party regime may well be in a more precarious position than it realizes.
Tyler Durden
Thu, 03/05/2020 – 23:25 - Army Doubles Purchase Of New Sniper Rifle
Army Doubles Purchase Of New Sniper Rifle
Flushed with cash, the Pentagon is doubling its purchase of a new anti-personnel precision rifle.
Task & Purpose reviewed the Department of Defense Fiscal Year (FY) 2021 Budget Estimates document and found the Army is purchasing 536 Precision Sniper Rifles (PSR), nearly doubling its original order of about 357.
Alton Stewart, a spokesman for the Army’s Program Executive Offices (PEO), said the PSR would replace M107 and M2010 Enhanced Sniper Rifle.
The Tennessee-made PSR, which is produced by Barrett Firearms Manufacturing, is a bolt-action Multi-Role Adaptive Design (MRAD) system and called the Mk 22, which will be chambered in 7.62×51 mm NATO round. The PSR is the next generation of sniper rifles, and it’s lightweight, more accurate, and more reliable than legacy systems.
Task & Purpose said, “the PSR provides the increased probability of hit over the current M2010 [Enhanced Sniper Rifle] configuration at distances up to twelve-hundred (1200) meters and increases range out to fifteen-hundred (1500), which enhances the sniper role in supporting combat operations and improves sniper survivability.”
Army budget documents also said the PSR would include a silencer, thermals, and other advanced optics that will “allow snipers, when supplemented with a clip-on image intensifier or thermal sensor system, to effectively engage enemy snipers, as well as crew-served and indirect fire weapons virtually undetected in any light condition.”
Between fiscal years 2022 and 2025, the Army expects to have 1,516 PSR systems in the field. By 2025, it expects to have an estimated 2,545 at an estimated total cost of $45.5 million.
It’s not just sniper rifles the Army is considering for upgrade. We noted last Sept that the service selected AAI Corporation Textron Systems, General Dynamics Ordnance, and Sig Sauer as the three finalists to test their next-generation assault rifles for the next 27 months.
The Army requested all three manufacturers to each supply 53 rifles, 43 automatic rifles, and 850,000 rounds of ammunition for the 27-month test that will conclude in 1H22 with a winning design.
Here’s what AAI Corporation Textron Systems’ next-generation assault rifle looks like:
President Trump is rebuilding the military ahead of the next major conflict.
Tyler Durden
Thu, 03/05/2020 – 23:05 - "We Have Never Seen This Before": The Last Time The Market Did This, FDR Confiscated All The Gold
“We Have Never Seen This Before”: The Last Time The Market Did This, FDR Confiscated All The Gold
To say that moves in the US stock market have been erratic in the past two weeks would be a prodigious understatement: with the Dow Jones swinging by over 1,000 points on nearly 5 occasions in the past two weeks (today’s 970 point move would have been the fifth)…
… traders – holding on for dear life in a market rollercoaster the likes of which have not been seen in years – have given up trying to make sense, and are just praying they don’t lose all their money. “When you have a 4.5% up day in the market and a 2% down day – what does that mean?” Kathryn Kaminski of AlphaSimplex Group told Bloomberg. “It just means we don’t know what’s going on.”
And while futures continue to slide amid a surge in US coronavirus cases late on Thursday with over 2,000 New Yorkers now having self-quarantined, and emboldening what little is left of the bears – recall that heading into this week, single stock/ETF short interest was at all time lows…
… the bulls, who are rapidly losing faith that even the Fed can prop up this market, are pointing to the recent dramatic rebounds in the stocks most recently on Wednesday when the S&P500 surged back above 3,124 (it is now trading well below 2,990), yet which nobody can fully explain because even though there are several catalysts for the rebound that one could point to, historically speaking none of them are entirely satisfying as explanations, and as Nomura’s Masanari Takada writes in his daily Nomura quant note, “we suspect that more than a few investors (whether bearish or bullish) are feeling paralyzed in the face of such unusual swings in the market.”
However, it is what he says next that struck us as a stark admission that we have crossed the rubicon into a market that nobody, not even grizzled quant veterans, can explain: “We have also been at a loss to predict the market’s movements, and feel painfully reminded of the difficulties involved in drawing a story from nothing more than day-today changes in the market.”
And the punchline: “Even so, what is happening now is like nothing we have seen before.”
To be sure, here one can counter that maybe “we” simply haven’t been around long enough, and one just needs to extend the time horizon to observe a similar market to the one we have today. And so, indeed, without wandering too far off into the weeds, Nomura picks up on something we highlighted last week, namely that the market’s drawdown to a 10% correction from an all-time high was the fastest since just weeks before the great depression started…
… and observes that there have been only 65 occasions since 1900 in which the DJIA has recorded a daily loss in excess of three standard deviations over the average daily return only to log a gain in excess of three standard deviations on the following trading day, and 70% of those occasions were concentrated in the 1900-1950 span, as happened this week on Tuesday and Wednesday (3 and 4 March), and 70% of those occasions were concentrated in the 1900-1950 span. In percentage terms, this is a frequency of just 0.21%.
The last time this happened (14 January 2019), the market enjoyed a sustained rally, but the time prior to that (11 August 2011), no such rally ensued. Figure 2 is a plot of the average pattern followed by the market after each of these occasions, using the full sample of 65 instances between 1900 and 2019.
Yet while recent events are an extreme rarity across the entire historical spectrum, there is one distinct point in time when we observe cluster of activity similar to the furious market action noted in recent days (something tells us readers can already figure out which period we are talking about).
But before we get there, Takada writes that “it may be instructive to split this long span of time into two blocks (1900- 1950 and 1951-2019), as the impact of the Great Depression and the two world wars can be cordoned off in the 1900-1950 block. Even when back-testing the data in this fashion, however, we find no evidence that a gain in excess of three standard deviations on the day after a loss in excess of three standard deviations necessarily indicates that a bottom has been marked.
However, where the current market gyrations get even more interesting, is that this time the market logged a gain in excess of three standard deviations (over the average daily return), then a loss in excess of three standard deviations, and then a gain in excess of three standard deviations over the course of three consecutive trading days. This is only the sixth time this phenomenon has occurred since 1900.
And here is the stunning punchline: out of the five historical instances of this pattern (leaving out the present case for obvious reasons), Nomura finds that the only instance that was followed by a sustained market rally was that of April 1933, when the US abandoned the gold standard in the midst of the Great Depression.
Which makes sense: with stocks in freefall for years after the Great Depression started, what some argue stopped the collapse, was the signing of Executive Order 6102 by FDR, which not only ended the gold standard, but also confiscated all gold held by the public, and finally devalued the dollar against gold (Roosevelt changed the statutory price of gold from $20.67 to $35 per ounce, thereby devaluing the U.S. dollar by 40%). Such a historic fiat devaluation against gold was, to many historians, the necessary condition that finally let stocks find a bottom during the great depression, and started the long and painful recovery… the culminated with World War II.
Of course, conditions now are vastly different than they were at the time of each of the five prior instances, with the dollar long ago losing its convertibility into gold (thank Nixon for that) – yet while it would be next to impossible to confiscate gold, a massive dollar devaluation against the yellow metal may be just what the Fed is planning next (as Harley Bassman suggested in 2016) – so Nomura’s dissection of these market patterns is intended only as something that may be of interest from a technical standpoint. That said, this look back at 120 years of market history may be helpful to market observers attempting to assess the sustainability of the rally in US equities…
… and also to spark some thoughts about what events may be necessary to halt the ongoing collapse in risk assets. Our advice: for those who own gold, now is a good time to have an unfortunate boating accident.
Tyler Durden
Thu, 03/05/2020 – 22:47 - Ilhan Omar Tweets "Abortion Is A Constitutional Right", Accuses Two Supremes Of Being "Sexual Predators"
Ilhan Omar Tweets “Abortion Is A Constitutional Right”, Accuses Two Supremes Of Being “Sexual Predators”
A day after Senate Minority Leader threatened the Supreme Court (and later apologized for his language), none other than Rep. Ilhan Omar, D-MN, took to Twitter with some very accusatory Tweets.
She suggested two SCOTUS Judges of being “accused sexual predators” and then stated that abortion was a Constitutional right.
Two accused sexual predators should not be deciding whether or not women have access to healthcare in this country. https://t.co/okJE85pwoN
— Rep. Ilhan Omar (@Ilhan) March 4, 2020
https://platform.twitter.com/widgets.js
“Two accused sexual predators should not be deciding whether or not women have access to healthcare in this country,” she said.
https://platform.twitter.com/widgets.js
She is allegedly referring to unproven and false claims against Justices Brett Kavanaugh and Clarence Thomas. Her statements were met with backlash from people around the country.
There’s more evidence that you married your brother to commit immigration fraud than there is for your false claims about Supreme Court Justices.
— Tim Young (@TimRunsHisMouth) March 4, 2020
https://platform.twitter.com/widgets.js
Moreover, as Sara Carter notes, Omar’s tweet that “Abortion is a Constitutional right” was also met with a slew of negative commentary.
Just look at some of the responses from people around the country to Omar’s Tweets below.
Ilhan, again, I’m asking you to direct me to Chapter and Verse in the U.S. Constitution, where the Founding Fathers wrote this so called “right” please show me so I can read it myself…..I’m waiting
— Shadowbanned (@clamsroll) March 5, 2020
https://platform.twitter.com/widgets.js
“Right to life…” is in the Constitution, so, abortion is pretty much the OPPOSITE of constitutional.
Maybe a Civics class or two would help with your glaring lack of knowledge about our nation’s rights.— Susan [Needs a literary agent] Bagwell (@SweetieWalker) March 4, 2020
https://platform.twitter.com/widgets.js
I’ll mail you a copy of the Constitution since apparently you have never read it.
— SusieQ4USA🇺🇸 (@127bama) March 4, 2020
https://platform.twitter.com/widgets.js
And our particular favorite:
NO it is NOT!!! pic.twitter.com/GpFFrJf2tJ
— Peni Basse ⭐️⭐️⭐️ Text TRUMP to 88022 (@pmbasse) March 5, 2020
https://platform.twitter.com/widgets.js
I’m not sure where she read that it was a right but I know for certain that abortion is something our Founding Fathers didn’t include in the Constitution.
Tyler Durden
Thu, 03/05/2020 – 22:25 - Oil Markets Predicting Risk Of A Global Recession
Oil Markets Predicting Risk Of A Global Recession
Authored by Alasdair Macleod via GoldMoney.com,
Oil prices have sold off sharply over the past month. Despite a series of bullish events – the killing of Qasem Soleimani by the US, Iran’s retaliation attack on US troops in Iraq, the shutdown of almost the entire Libyan production and the US’ tightening the screws on Venezuela by sanctioning Rosneft and potentially refusing to renew waivers to US companies stating in April – oil prices are now substantially lower than before these events. Brent front month prices peaked at $72/bbl in early January and are now at below $50/bbl (See Exhibit 1).
Moreover, by mid-January, the geopolitical tensions and supply losses had pushed the Brent curve into severe backwardation. June-December 2020 time-spreads for example traded as high as $4.50/bbl just one month ago, reflecting prolonged physical tightness. Those time-spreads are now in contango (see Exhibit 2).
This massive change in sentiment happened as the Coronavirus situation in China unfolded. Importantly, while we do expect a significant impact on Chinese oil demand from the massive travel restrictions in China, that alone would not warrant such a move in the curve in our view. Instead, we think the recent moves in oil prices is reflecting expectations for a significant slowdown in global economic growth. In fact, we think the oil price move is now pricing in a significant probability for a global recession in 2020.
Commodity markets are the only markets which currently reflecting this view. Equity markets, despite the recent sell-off, do not. Importantly, we believe commodity markets are still underpricing the risks to aggregate demand. The question is not longer whether the economic impact from the Coronavirus outbreak will be short-lived or whether it will be more pronounced. The question is whether the economic impact will be pronounced or catastrophic. In our view, energy markets are currently pricing in a pronounced impact with substantial fiscal and monetary stimulus down the road. There is substantial downside risk if that view turns out to be too optimistic.
That said, in either case we expect central banks to return to the 2008 playbook soon. Nominal interest rates will only decline from here and we are likely going to see a reacceleration in quantitative easing. However, in the catastrophic scenario, we believe central banks will quickly realize that the tools they have been using since 2008 will not get them very far this time. Hence, we would expect central banks to become more creative, by deploying something like “helicopter money”. This is not far-fetched. Hong Kong announced a few days ago that it would give every adult citizen HK$10’000, around $1300, in order to combat the economic fallout Coronavirus-crisis. We believe this would push gold prices sharply higher medium term.
How the Coronavirus outbreak changed the oil market outlook
As we have highlighted before, there is a strong correlation between inventories and time-spreads (see Exhibit 3). When inventories are low, the oil curve tends to trade in backwardation (near-dated prices are above deferred prices). When inventories are high, the curve is in contango (near-dated prices are below deferred prices). The reason for this is that when inventories are low, consumers of a commodity are willing to pay a premium for immediate delivery rather than delivery at some point in the future. If oil (or any other commodity) is an input good in the production process, running out of the input good is much more costly than paying the premium as the alternative would be to shut down production. For example, jet fuel is an input good for an airline. Running out of jet fuel is very costly, hence, when inventories are generally low, airlines are willing to pay more for immediate jet fuel deliveries. The curve becomes backwardated. Conversely, when inventories are high, there is no risk of running out of oil, and storing oil is expensive (storage costs, insurance costs, time value of money), hence, consumers would rather have delivery in the future, and the curve is in contango.
The outlook at the end of 2019
We ended 2019 with relatively low global petroleum inventories, and hence, the Brent curve was backwardated. The low inventory situation came amidst strong US shale production growth and weak global demand. The reason for this is that OPEC production was lower by close to 2mb/d year-over-year on both voluntary (core OPEC+) and involuntary (Iran, Venezuela) production cuts (see Exhibit 4).
However, we expected global balances to change going forward. By the end of 2019, we predicted the global oil balance to be oversupplied by roughly 0.7mb/d in 2020 and by about 1mb/d in 1H2020. Consequently, we expected the curve to become less backwardated and eventually to end up in contango, accompanied by lower front month prices.
Our bearish 2020 balance was driven mostly by strong production forecasts:
-
Conventional non-OPEC production was (and still is) expected to grow strongly in 2020 by about 1 mb/d with several major new fields coming online and ramping up.
-
US shale production, while not growing as quickly as in 2019, was still expected to grow at around 1mb/d (including natural gas liquids NGLs).
-
On net, we expected non-OPEC production to grow by 2mb/d year-over-year
-
This strong growth was expected to offset declines of 0.5mb/d year-over-year in OPEC production on the back of the new production cuts decided in December 2019 plus reduced output from Libya (we assume not all Libyan production will remain offline in 2020). The voluntary and involuntary production cuts from early 2019, however, would no longer show up as year-over-year declines.
On net, at the end of 2019 we expected global oil production to grow by around 1.6mb/d in 2020.
These supply growth expectations exceeded demand growth expectations in 2020. Most forecasters, including the International Energy Agency (IEA), predicted demand growth at slightly over 1mb/d. This reflected an expected recovery in global economic growth from 3% in 2019 to 3.4% in 2020. We had a more pessimistic outlook on demand growth of around 800-900kb/d because our calculation showed that demand growth was slowing down sharply in 2H2019, and thus, a minor recovery in economic growth would unlikely lead to the demand growth figures we had been accustomed to over the past years. But even with the more optimistic outlook by the IEA, the global oil balance was poised to be oversupplied.
On net, we expected global petroleum inventories to build by close to 700kb/d in 2020 or about 230 million barrels. The bearish balances where mostly in 1H20 with an oversupply of >1mb/d, while it looked more neutral for the remainder of the year. Our inventory forecast, thus, implied weaker time-spreads and consequently, lower prices in 1H2020.
Shutting off Libyan exports
However, this bearish outlook was suddenly challenged in early January. Firstly, it was reported that Qasem Soleimani, an Iranian General of the revolutionary guards and commander of its Quds Force, was killed in an US airstrike in Iraq. Soleimani was considered the second most powerful man in Iran, in charge of all military operations outside Iran. The news sent oil prices sharply higher as the market began to worry about an escalation of this conflict in the region. Iran had repeatedly threatened to disrupt oil shipments in the Strait of Hormuz, through which about 1/3 of all seaborne oil flows. A few days later, Iran attacked a US base in Iraq with missiles in retribution. The US quickly announced that there weren’t any casualties among the US troops. The market interpreted that the Iranian retribution was an act of saving face rather than the first strike in a prolonged conflict, and prices moved sharply lower on the same day (see Exhibit 8). As suddenly as this conflict emerged, as quickly it was over, without any real impact on oil supplies.
This changed quickly when on January 17, 2020, forces close to Libyan General Haftar closed almost all of Libya’s export ports. Prior to that, Libya had produced around 1.2mb/d of high-quality light sweet crude oil (see Exhibit 9). With the exports gone, the expected global oversupply in 1H2020 almost entirely vanished and 2H2020 now looked quite bullish. At the time, it was quite unclear how long the exports would remain shut-in.
Historically, exports resumed when demands from local groups that blocked exports were met. But this time, the situation is much more complex than just meeting financial demands of a few local interest groups. General Haftar seems to be using the exports as a bargaining chip in the ongoing international peace negotiations. He also seems to have the backing of local tribe leaders (who blocked the ports), which have been complaining about the unfair – or lack of – distribution of the oil revenues for years. Thus, the likelihood for a quick resumption of exports looked low in January (This view has since turned out to be correct. Six weeks into the disruption and a peaceful and quick resolution of the conflict seem very unlikely).
As oil exports could potentially remain offline for months, the Libyan situation turned an oversupply to a shortage overnight. Consequentially, oil prices rallied on these news and time-spreads became more steeply backwardated.
The Coronavirus outbreak starts impacting demand
This bullishness didn’t last long. Since oil prices peaked on the back of the Libyan news six weeks ago, oil prices sold off more than $20/bbl. Moreover, the Brent forward curve went from steep backwardation to contango. This sell-off is entirely driven by the outbreak of the Coronavirus in China. While there is a significant immediate impact on oil demand from the draconian measures taken by the Chinese government to contain the virus, we think the market is now pricing in wider demand destruction on the back of a global economic slowdown or possibly a global recession.
How much is oil demand affected in China? Chinese petroleum demand is roughly 13 mb/d, making it the second largest consumer in the world after the United States (see Exhibit 10). The below table show the breakdown of consumption by product:
We don’t have a lot of information out of China that would allow to directly calculate by how much oil demand is affected. The information we have suggests that air and rail travel and even car travel has decreased sharply, with some cities showing hardly any congestion in the streets. Thus, the hit from the transportation demand alone is most likely 2mb/d or even more as many international flights to and from China are suspended.
On top of that, manufacturing has come to an almost standstill in about 70% of the country. Over the past week, we saw some companies resuming operation, but only at a minority of plants in some regions. A lot of workers who came home from Lunar New Year are still required to stay at home. We estimate the total demand impact currently to be around 3mb/d. While this seems a lot, in our view, this alone cannot explain the dramatic move from backwardation to contango and the $20/bbl price decline in less than 4 weeks. We think the oil market is pricing in a sustained hit to global economic growth, to the point where it’s pricing in a significant probability of a global recession.
How big does the loss in oil demand have to be to warrant such a shift in the curve?
Our inventory-to-time-spread model allows us to back out how much the market is pricing in in terms of inventory builds. Prior to the outbreak of the Coronavirus, prompt prices traded 20% above longer-dated prices (5-year forward). Currently, prompt prices are trading 7% below the forward. In our time-spread to inventory model, such a move is equivalent to a 280-million-barrel build in global inventories. With 3mb/d of demand shut in, it would still take >3 full months of total Chinese lockdown in order to get to such a number, and that requires assuming that once the virus is contained, Chinese companies are not making up any of the lost production (and in turn oil demand). Hence, in our view, the shift in the Brent term structure is not simply reflecting lost Chinese demand, it is reflecting a sharp deterioration in global economic growth.
Assuming that lost Chinese demand is closer to 100 million barrels, 160 million barrels of inventory build (450kb/d) would have to come from lower economic growth outside of China. Our global demand model shows that a 1% change in global GDP accounts for 1 million b/d of oil demand. Thus, the market is now pricing in a 0.5% slowdown in global GDP on top of the slowdown in China. In other words, the oil market is pricing in global economic growth well under 3%. According to the IMF, the last time this has happened was during the finical crisis in 2009. Before that, one has to go back to the bursting of the dot.com bubble in 2002 to get to similar numbers.
Interestingly, commodity markets – oil and copper but also LNG and freight – are the only markets that seem to reflect this worldview. Equity markets on the other hand were making new highs even as the viral outbreak unfolded in China. While equities corrected sharply last week, equity markets have declined a lot less than commodities.
We may have already been in a recession before the Coronavirus outbreak
It may come as a surprise, but nobody really has a good handle on global oil demand. One would think that – given the importance of oil for the global economy – there would real-time in-depth data for oil demand across the globe. In reality, all demand data is of very poor quality, reported with a 2-3-month lag and very limited in scope (We only have data for OECD countries, which account for less than half of global demand). Furthermore, the data reported does not actually reflect what real demand is, it’s so called implied demand.
Meaning, the OECD member countries are obliged to report production of oil and petroleum products, changes in stocks as well as imports and exports. From those data points, implied demand is calculated. How much is actually consumed by cars, trucks, jets and heating boilers is unknown. In fact, for most regions, we don’t even know how much gasoline is sold at petrol stations. While some OECD countries report weekly implied demand data, it often comes with heavy revisions a few months later, to the extent that the weekly demand data reports are ignored by the oil market (the market focuses almost entirely on the inventory reports, as those are believed to be the least distorted). Hence, the best estimate we have for OECD demand is typically a few months old, and even that data often tends to be revised years later.
For non-OECD countries, demand data is even harder to obtain. Most non-OECD countries don’t report any data at all. Some do report some data, like China, but part of the data infers such strange results, that calculating implied demand becomes futile. Hence, non-OECD demand is typically just estimated based on economic growth projections. Hence, the global oil demand data that is typically reported and cited is simply a medley of notoriously bad OECD implied demand data and even less reliable estimates based on GDP predictions.
In addition, oil agencies such as the IEA typically publish balances that don’t balance. Meaning, supply minus demand does not equal changes in inventories on a global level. In other words, The IEA does calculate demand as implied demand bottom up for each country but applying the same data for a top down implied demand calculation for the world, leaves a huge error term. The reason typically provided for this error term, is that changes in non-OECD inventories are not part of the balance. However, we do have some inventory data from larger non-OECD economies, and taking those into account does not typically improve those balances, it often makes them worse.
Thus, when trying to get a glimpse of the state of global demand, we calculate top-down implied demand. Meaning, we aggregate changes in global inventories, including oil at sea and add supply, which should add up to global demand. Importantly, our implied demand number for 2019 shows very weak demand of just 0.7mb/d year-over-year. This is below of what most forecast agencies show. Moreover, while implied demand was still healthy in 1H2019, it slowed down dramatically in 2H2019.
The latest numbers suggest that global demand growth in 2H19 was barely positive year-over-year. This would be consistent with global GDP growth at just 2%. While data for the most recent month will likely see some revisions, the latest revision have shown larger inventory builds than previously reported. We see indications for economic weakness in other corners of the petroleum markets as well. Demand from the chemical sector, for example, often an early warning sign for economic slowdown, was very weak in recent months.
Is the oil market bearish enough?
The oil market is one of the few markets that predicts a larger global economic impact from the virus outbreak. However, in our view, what is priced into the current forward curve is still too optimistic. The current 0.5% impact is the bare minimum we expect as a potential fallout on the global economy. This would require:
-
the draconian measured in China to be lifted over the coming weeks and business going back to normal (with heavy fiscal stimulus in 2H20),
-
Other governments abstaining from any comparable measures (no wide spread travel bans and lock-downs)
-
Companies outside China abstaining to close plants and offices and manage to remain productive
-
The general population largely accepting that they may get the virus eventually and going their business as usual
This scenario seems increasingly unlikely. France reported last week that tourism activity was down 30-40%. By the time this number was reported, the country had only 12 reported cases, so France can’t have been particularly affected by travel cancellations. We can, thus, assume that traveling activity across the world is now heavily impacted. Italy has over 2000 cases now as the virus is spreading in the northern part of the country. South Korea is closing plants and Japan has announced to close all schools until spring break. Global supply chains will no longer be impacted just because Chinese companies can’t deliver, but increasingly because manufacturers from other nations are affected as well. While supply is affected first, we expect demand to suffer going forward. Layoffs mean people will have less disposable income. The hospitality sector will be hit hard, retail as well. Car sales in China have collapsed and there are early indicators that car sales are already slowing down in Europe. We believe that – despite the sell-off – barely any of this to be currently priced into oil markets, still less in other assets such as equities.
Conclusion
Markets became really excited about some better PMI data prior to the Coronavirus outbreak. The IMF predicted a reacceleration in growth from 3% in 2019 to 3.4%. In all likelihood, the impact of the Coronavirus will bring 2020 growth well below 3% even in the “contained” scenario with minimal knock-on effects on other economies, either through supply chain effects or reduced demand for goods (commodities) from China.
However, if economic activity was in fact already much weaker in 2H19 than what is generally assumed, the Coronavirus may be just what it takes to finally push the global economy into a deeper recession.
In such a scenario, we would expect equities to adjust to reality over the coming weeks.
At the same time, this should be very positive for gold. Despite the near-term deflationary effects from lower commodity prices, we expect central banks to quickly return to the financial crisis playbook by slashing rates and deploying some form of Quantitative Easing (QE) or more direct form of stimulation (helicopter money). This would propel gold prices sharply higher over the medium term.
Tyler Durden
Thu, 03/05/2020 – 22:05 -
- "Gold Is Going A Lot Higher" – DoubleLine's Gundlach Warns Of "Seizure In The Corporate Bond Market"
“Gold Is Going A Lot Higher” – DoubleLine’s Gundlach Warns Of “Seizure In The Corporate Bond Market”
“The bond market is rallying because The Fed has reacted the seizure in the corporate bond market – which is not getting enough attention.”
That was the sentence that sparked a chin hitting the table moment for anyone watching DoubleLine CEO’s Jeff Gundlach being interviewed on CNBC today. Until now, amid all this equity market carnage, various talking heads – who clearly are not ‘in’ the bond market – have confidently claimed ‘yeah, but it’s different this time, there’s loads of liquidity and credit markets are not showing any signs of pain’… Well that all changed today as the world was told the truth.
Credit spreads have exploded wider in recent days… “the junk bond market is widening out massively…”
Gundlach noted that Powell’s background in the private equity world – rather than academic economist land – has meant that his reaction function is driven by problems in the corporate bond market as “this will be problematic for the buyback aspect of the stock market.”
The Fed cut rates, he added, “in reaction to even the investment being shutdown for 7 business days.“
So the DoubleLine CEO said that Powell “cutting rates was justified” but didn’t like the way it was done as it signaled “panic.”
The reason for his disdain is clear:
“The Fed in their most recent press conference, took a victory lap, talking about how they had finally reached a stable place in policy and that they could be on hold for the foreseeable future, maybe even the entire world. That we are in a good place. That policy rates were appropriate. And I don’t know, I thought it was a little bit of hubris at this time.”
And reminds watchers that historically, “when The Fed has cut 50bps in an emergency intra-meeting such as this, they typically cut pretty quickly after once again.”
And sure enough the market is already pricing in another 50bps cut at the March meeting…
However, unlike Guggeheim’s Scott Minerd – who sees 10Y yields at 25bps – Gundlach believes “we are pretty near the low right now…maybe we get to 80 basis points on the ten year.”
Well we are at 85bps now…
However, while his view is that long-rates are starting to floor, he notes that “short rates are definitely going lower. There is absolutely no upward pressure on short rates.”
Gundlach agrees with Jim Bianco that short-rates are going back to zero, but stopped short of expectations for negative rates:
“I think Jay Powell understands that negative rates are fatal to global financial system. If we go to negative rates, there will be capital destruction en masse.”
But more easing is coming, as Gundlach reflects on those calling for v-shaped recoveries:
“I think it is foolhardy to think anything other than this [pandemic] is going to take a major hit to short-term economic growth.”
His perspective on the financial and societal impact of the Covid-19 pandemic is refreshingly honest on CNBC:
“…obviously, the airlines are in free fall for good reason. And small business activity is going to contract. Maybe grocery store sales will go up on a short-term spike. But all other kind of social activity is grinding to a standstill.”
Warning that “the two sectors that are just falling knives are financials and transports. And I don’t see anything that’s going the reverse that until we get through the other side this valley of this sort of travel shutdown.”
Finally, Gundlach ends on an even more ominous note:
“…the President and the physicians, on top of this coronavirus situation, and they are saying that they might have a vaccine in like a year, year and a half.
So, nobody knows what is happening here. And so, caution is appropriate.“
So no more buy the dip?
As former Dallas Fed President Richard Fisher noted, that means a generation of money-managers are about to losae their security blankets!
And that’s why Gundlach is long gold:
“I turned bullish on gold in the summer of 2018 on my Total Return webcast when it was at 1190. And it just seems to me, as I talked about my Just Markets webcast, which is up on DoubleLine.com on a replay, that the dollar is going to get weaker.
And the dollar getting weaker seems to be a policy. And the Fed cutting rates, slashing rates is clearly going to be dollar negative. And that means that gold is going to go higher.“
Watch the full interview below:
Tyler Durden
Thu, 03/05/2020 – 21:45 - Is Prince Andrew Being Protected By The FBI Over His Pedo Affair With Virginia Roberts?
Is Prince Andrew Being Protected By The FBI Over His Pedo Affair With Virginia Roberts?
Authored by Martin Jay via The Strategic Culture Foundation,
The royal family in the UK is having its very foundations shaken by both the controversial departure of Prince Harry and Meghan and now startling new revelations which compromise Prince Andrew even further, since his “car crash” interview with BBC, over his alleged relationship with a sex-trafficked child prostitute working for Jeffrey Epstein.
Andrew had always denied any link whatsoever with the then named Virginia Roberts who was in just 17 when the main allegation – that Epstein flew her to London in March 2001 for her to have sex with the British royal – was brought against him. Central to that allegation was a photo taken by Ghislaine Maxwell in her London home on the same night in question which Andrew claims is fake.
Roberts claims that she was forced into the act by Epstein and Maxwell and has gone on the record to talk about the intimate details of the incident, but her case have been light on witnesses or those who can corroborate her allegations. Until now.
Her shocking claims are that Maxwell and Epstein were running a high class sex trafficking organisation which targeted powerful, influential individuals, which some might speculate was part of a Mossad run ‘honey trap’ – a blackmail ring which made Epstein hugely powerful and in a position to ask from the same targets favours, or for highly valuable information which could support its agenda.
In just a few days in mid February, Prince Andrew already feeble case which he was clinging on to – that he had no link whatsoever with Roberts – was shattered though, which in itself raises a number of questions over who is protecting the British royal. And at what price?
First off came the accusation by a palace security guard in London who has challenged Andrew’s claim to be in another part of the country (far from the capital) on the night of the alleged sexual incident. According to the security officer, Andrew returned to Buckingham Palace in the early hours and shouted at the top of his voice at the palace gates for them to be opened.
But far more damning is the testimony of a telecoms man who was employed by Epstein on his private Caribbean island who a British tabloid interviewed days later, who identifies both Prince Andrew and Roberts being intimate with one another and how she appeared to be like a child “hiding behind an adult” sometime around 2001 or thereafter.
There is nothing quite so powerful in a legal case which Roberts (now Giuffre) is preparing than eye witnesses who can stand in the witness box. And the emergence of Steve Scully will be seen as a massive blow to Andrew’s claims now. The FBI too will find it hard to ignore Scully’s allegations.
Or will it?
The notion supported by conspiracy theorists that Andrew is somehow being protected just got ratcheted up ten fold. The FBI interviewed Scully earlier but Prince Andrew’s name, curiously, was never mentioned.
Given that Epstein and Maxwell were almost certainly being bankrolled by Mossad and that Trump’s relations with Israel are unfathomable one has to ask if there is a deliberate plot in the US to not take Virginia Giuffre’s allegations seriously. Add to that Britain and the US forging stronger links post Brexit with a new trade deal in the air and Trump’s double state visit to the Queen and a reasonable question would be is there a ruse on both sides of the Atlantic to keep Andrew out of an FBI investigation? Or perhaps more worryingly, is Andrew part of a bargaining chip from Trump’s side to nail a more advantageous trade deal which benefits America more, given Trump’s style of blackmailing those he wished to secure deals with, which we have seen with other countries he tackles?
It is hard to imagine how many days left Andrew has as a British royal and a possible heir to the throne, given how tough the Queen was with Meghan and Harry, both stripped of their ‘royal’ titles as they bolt to the US to shamelessly cash in their fame. Andrew may well have to flee the UK and find a Caribbean island himself to escape the reach of both the FBI and Giuffre’s lawyers. But for the moment, he seems secure in the UK, protected by that oh-so special relationship between Trump and Buckingham palace.
But for how long?
Tyler Durden
Thu, 03/05/2020 – 21:25 - "The Worst Is Yet To Come": Nomura Now Sees As Many As 1.5 Million Covid Cases By June
“The Worst Is Yet To Come”: Nomura Now Sees As Many As 1.5 Million Covid Cases By June
“The worst is yet to come.”
That’s the self-explanatory title of Nomura’s latest analysis assessing the consequences from the coronavirus pandemic, and which comes just two weeks after the Japanese bank issued its first preliminary assessment on the fallout from the global pandemic, which as readers will recall we found unduly optimistic. Well, a lot has happened since then, and as the report’s title suggests, the outlook has deteriorated sharply.
In the bank’s new base case, it revises down further its Q1 2020 GDP growth forecast for China to 0% y-o-y, and for the world to 0.9%. While Nomura still envisages a V-shaped global recovery in Q2 in its new base case, it now has a “U” in its new “bad scenario” and a downright depressionary “L” (non) recovery in the new severe scenario.
Below are the details on how in just two short weeks, the situation went from bad to downright catastrophic, in the bank’s own words:
- The positive news is the marked decline in the number of new daily confirmed COVID-19 cases in China, but it has also demonstrated the challenging trade-off other governments now face between public health security controls – ranging from adequate resources of health services to containment and mitigation measures – and economic growth.
- China imposed draconian controls, sealing off Hubei’s nearly 60m inhabitants, blocking transport and locking down dozens of cities. China’s authoritarian state may have won the battle against the virus but at a huge short-run cost to economic growth. Our new base case assumes that China’s lockdowns end late this month, which will be too late to avoid our forecast of GDP growth slowing to 0% y-o-y this quarter, which translates to -4.4% q-o-q.
- This contraction in China’s economy will have major negative spillover effects on the rest of the world, particularly in the rest of Asia – and this is only just starting to show up in the economic data. However, what has really spooked financial markets is the rapid contagion of COVID-19 outside China to 76 countries (and counting), with a handful of hotspots – South Korea, Italy and Iran. These hotspots are now experiencing the same severe simultaneous demand (public fear factor) and supply (business disruption) shocks as China in addition to the negative spillover effects from China’s contracting economy.
- While COVID-19 has not been as deadly as SARS (the case fatality outside China and Iran is 1.5% vs 10% for SARs), what is now clear is that it spreads much more easily. As COVID-19 spreads, governments will need to weigh the trade-off between health security and economic growth and it remains to be seen whether they have the resources and wherewithal to increase their health security controls – and the public’s willingness to follow them – to the same force and effectiveness as China has done. If not, the rest of the world could, in the not too distant future, lose control in trying to contain COVID-19.
Separately, for those urging for a central bank response, Nomura’s economists caution that in this abnormal economic slump, “macroeconomic policies are less well equipped to help (or “can only help so much”). If health security controls fail to contain the spread of COVID-19, financial markets may soon have to accept that a global recession is a forgone conclusion.”
In short, the situation is bad, and could get much worse if the pandemic spreads unchecked even faster around the globe.
How much worse? To consider the magnitudes, Nomura crudely assumes COVID-19’s attack rate (the percent of the population infected) in the rest of the world ends up being, on average, similar to that in China – then number of world confirmed cases could peak at 445,000. But if the rest of the world’s security controls are half as rigorous (the attack rate is twice as high as China’s) the number of world confirmed cases could peak at 890,000, and if world’s controls are one-quarter as rigorous, the peak could be 1.78m.
Consider the 2009 H1N1 Influenza. It started in the US in late April 2009 and spread with great intensity. By 11 June, it had reached 74 countries with a total of 30,000 cases and it was on this date that the WHO declared a global pandemic (it has not declared one since); by early November it has reached over 200 countries with 0.5m cases. We estimate that over the same period since the initial outbreak, the number of COVID-19 cases is about 3x more than 2009 H1N1, and if it tracks the 2009 H1N1 case trajectory there could be 1.5m COVID-19 cases by June 2020.
* * *
Extending on the above analysis, to get a relative sense of which countries outside China are most vulnerable to becoming high infection hotspots from COVID-19, Nomura has expanded the scorecard in our earlier Anchor report to 40 countries (Figure 2). Of the nine indicators, higher values indicate a higher risk of contagion, except in the case of geographical proximity and the global health security index, where lower values indicate higher vulnerability. The bank then normalizes the values of each of the nine indicators across countries, by calculating Z-scores, and sums up the nine Z-scores for each country and add 100. The results line up reasonably well with the COVID-19 contagion so far with South Korea, Iran and Italy ranking as highly exposed.
Glancing at country temperatures, there is support for the notion that COVID-19 is weaker in warmer climates, but the analysis shows several countries with mild temperatures that are at risk of becoming hotspots. The two most exposed – Hong Kong and Singapore – have been relatively successful in containing COVID-19 so far.
And while there is much more in the full 64-page analysis, we can summarize the analysis with the following three somber warnings:
- The COVID-19 shock is quickly morphing into a global crisis. In addition to major economic spillover effects from China’s large GDP contraction in Q1, an increasing number of countries are having to contend with their own local demand and supply-side shocks from the spread of COVID-19, plus a tightening in global financial conditions.
- In terms of rapid policy response, the Fed is really the only game in town (we expect the Fed to cut rates by a further 50bp in our base case and 125bp in our bad scenario). The ECB and BOJ have limited room, and fiscal stimulus will take time to deploy.
- This is an abnormal global economic slump. The most effective immediate policy response is not monetary or fiscal policies; it’s health security controls. If health security controls fail to contain the spread of COVID-19, financial
Tyler Durden
Thu, 03/05/2020 – 21:25 - Ja-Panic? – Stocks & Bond Yields Are Collapsing As Asia Opens
Ja-Panic? – Stocks & Bond Yields Are Collapsing As Asia Opens
10Y Treasury yields are collapsing to new record lows as Asian markets open – down to a stunning 82bps…
Source: Bloomberg
2Y TSY yields are back below 50bps…
Source: Bloomberg
For the first time since 2016…
Source: Bloomberg
China’s 10Y Yields just fell to a record low…
Source: Bloomberg
And Dow futures are down over 200 points, accelerating lower as no apparent imminent intervention from The BoJ is seen…
AsiaPac stocks are a sea of red…
And the dollar continues to get dumped…
But don’t worry, a good jobs print tomorrow will bring the machines back on line in dip-buying, must confirm all is well mode… or not!
The market is now pricing in 3 more rate-cuts to the April Fed meeting…
That will save us for sure! Right?
Tyler Durden
Thu, 03/05/2020 – 21:21 - After Purell Sells Out, Titos Says Stop Using Vodka As Hand Sanitizer
After Purell Sells Out, Titos Says Stop Using Vodka As Hand Sanitizer
Americans have been panic buying masks, Purell, and food in the last several weeks as pandemic fears soar. We showed over the weekend how thousands of people rushed to Costco stores across the country to load up on supplies.
3M N-95 masks have been in short supply since late January, as much of the US mask stockpile was depleted last month.
The latest run on products started with Purell last week. Brick and mortar and e-commerce stores ran out of the hand sanitizer made of an ethyl alcohol solution. As a result of surging demand and now shortages, it forced many people to experiment at-home in concocting their own hand sanitizer blend with vodka.
Austin-based Tito’s Vodka noticed Twitter users in the last 24 hours were using their spirits to make at-home sanitizers. Tito’s social media team was quick to inform anyone who was experimenting with Tito’s products that the concentration of alcohol in the products wasn’t high enough to be rated as an effective sanitizer. “Per the CDC, hand sanitizer needs to contain at least 60% alcohol. Tito’s Handmade Vodka is 40% alcohol, and therefore does not meet the current recommendation of the CDC,” Tito’s Vodka tweeted.
Per the CDC, hand sanitizer needs to contain at least 60% alcohol. Tito’s Handmade Vodka is 40% alcohol, and therefore does not meet the current recommendation of the CDC. Please see attached for more information. pic.twitter.com/DtpfsAHZKJ
— TitosVodka (@TitosVodka) March 5, 2020
https://platform.twitter.com/widgets.js
“As soon as we saw the incorrect articles and social posts, we wanted to set the record straight,” a spokesperson for Tito’s said in a statement provided to The Dallas Morning News. “While it would be good for business for our fans to use massive quantities of Tito’s for hand sanitizer, it would be a shame to waste the good stuff, especially if it doesn’t sanitize (which it doesn’t, per the CDC).”
Per the CDC, hand sanitizer needs to contain at least 60% alcohol. Tito’s Handmade Vodka is 40% alcohol, and therefore does not meet the current recommendation of the CDC. Please see attached for more information. pic.twitter.com/QNEFOXxYPQ
— TitosVodka (@TitosVodka) March 5, 2020
https://platform.twitter.com/widgets.js
Per the CDC, hand sanitizer needs to contain at least 60% alcohol. Tito’s Handmade Vodka is 40% alcohol, and therefore does not meet the current recommendation of the CDC. Please see attached for more information. pic.twitter.com/J5ifkV3Jah
— TitosVodka (@TitosVodka) March 5, 2020
https://platform.twitter.com/widgets.js
Per the CDC, hand sanitizer needs to contain at least 60% alcohol. Tito’s Handmade Vodka is 40% alcohol, and therefore does not meet the current recommendation of the CDC. Please see attached for more information. pic.twitter.com/96uldE8uMe
— TitosVodka (@TitosVodka) March 4, 2020
https://platform.twitter.com/widgets.js
As the fast-spreading virus infects America, what products will people hoard this coming weekend? We’re sure more videos will surface on social media of runs on stores.
Tyler Durden
Thu, 03/05/2020 – 21:05 - "Political Anarchy" Is How The West Got Rich
“Political Anarchy” Is How The West Got Rich
Authored by Ryan McMaken via The Mises Institute,
It is not uncommon to encounter political theorists and pundits who insist that political centralization is a boon to economic growth. In both cases, it is claimed the presence of a unifying central regime – whether in Brussels or in Washington, DC, for example – is essential in ensuring the efficient and free flow of goods throughout a large jurisdiction. This, we are told, will greatly accelerate economic growth.
In many ways, the model is the United States, inside of which there are virtually no barriers to trade or migration at all between member states. In the EU, barriers have been falling rapidly in recent decades.
The historical evidence, however, suggests that political unity is not actually a catalyst to economic growth or innovation over the long term. In fact, the European experience suggests that the opposite is true.
Why Did Europe Surpass China in Wealth and Growth?
A thousand years ago, a visitor from another planet might have easily overlooked European civilization as a poor backwater. Instead, China and the Islamic world may have looked far more likely to be the world leaders in wealth and innovation indefinitely.
Why is it, then, that Europe became the wealthiest and most technologically advanced civilization in the world?
Indeed, the fact that Europe had grown to surpass other civilizations that were once more scientifically and technologically advanced had become apparent by the nineteenth century. Historians have debated the question of the origins of this “European miracle” ever since.
This “miracle,” historian Ralph Raico tells us,
consists in a simple but momentous fact: It was in Europe—and the extensions of Europe, above all, America—that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the “Malthusian trap,” enabling new tens of millions to survive and the population as a whole to escape the hopeless misery that had been the lot of the great mass of the human race in earlier times. The question is: why Europe?
Across the spectrum of historians, theories about Europe’s economic development have been varied, to say the least. But one of the most important characteristics of European civilization—ever since the collapse of the Western Roman Empire—has been Europe’s political decentralization.
Raico continues:
Although geographical factors played a role, the key to western development is to be found in the fact that, while Europe constituted a single civilization—Latin Christendom—it was at the same time radically decentralized. In contrast to other cultures—especially China, India, and the Islamic world—Europe comprised a system of divided and, hence, competing powers and jurisdictions.
Although modern EU centralizers are attempting it, at no point has European civilization ever fallen under the dominion of a single state as has been the case in China. Even during the early modern period, as some polities managed to form absolutist states, much of Europe — such as the highly dynamic areas in the Low Countries, Northern Italy, and the German cities — remained in flux and highly decentralized. The rise of the merchant classes, banking, and an urban middle class — which began as early as the Middle Ages and were so essential in building the a future industrial Europe — thrived without large states.
After all, while a large polity with few internal borders can indeed lead to large markets with fewer transaction costs, concentrating power in one place brings big risks; a state that can facilitate trade across a large empire is also a state that can stifle trade through regulation, taxation, and even expropriation.
The former vast kingdoms and empires of Asia may have once been well positioned to foster the creation of a wealthy merchant class and middle class. But the fact is this didn’t happen. Those states instead focused on stifling threats to state power, centralizing political control of markets, and extorting the public through the imposition of fines and penalties on those who were disfavored by the ruling classes.
The Benefits of “Anarchy”
In contrast, Europe was relatively anarchic compared to other world civilizations and became the home of the great economic leap forward that we now take for granted. This isn’t “anarchy” in the sense of “chaos,” of course. This is anarchy as understood by political scientists: the lack of any single controlling state or authority. In key periods of the continent’s development—as now—there was no ruler of “Europe” and no European empire. Thus, in his book The Origins of Capitalism, historian Jean Bachler concludes:
The first condition for the maximization of economic efficiency is the liberation of civil society with respect to the state….The expansion of capitalism owes its origins and raison d’être to political anarchy. (emphasis in original)
For many years, economic historians have attempted to find correlations between this political anarchy and Europe’s economic success. Many have found the connection to be undeniable. Economist Douglass North, for instance, concludes:
The failures of the most likely candidates, China and Islam, point the direction of our inquiry. Centralized political control limits the options—limits the alternatives that will be pursued in a context of uncertainty about the long-run consequences of political and economic decisions. It was precisely the lack of large scale political and economic order that created the environment essential to economic growth and ultimately human freedoms. In the competitive decentralized environment lots of alternatives were pursued; some worked, as in the Netherlands and England; some failed as in the case of Spain and Portugal; and some, such as France, fell in between these two extremes.
Competition among Governments Means More Freedom
But why exactly does this sort of radical decentralization “limit the options” for ruling princes and kings? Freedom increases, because under a decentralized system, there are more “alternatives”—to use North’s term—available to those seeking to avoid what E.L. Jones calls “predatory government tax behavior.” Thus, historian David Landes emphasized the importance of “multiple, competing polities” in Europe in setting the stage for
private enterprise in the West possess[ing] a social and political vitality without precedent or counterpart. This varied, needless to say, from one part of Europe to another…And sometimes adventitious events like war or a change of sovereign produced a major alteration in the circumstances of the business classes. On balance, however, the place of private enterprise was secure and improving with time; and this is apparent in the institutional arrangements that governed the getting and spending of wealth.
It was this “latent competition between states,” Jones contends that drove individual polities to pursue policies designed to attract capital. More competent princes and kings adopted policies that led to economic prosperity in neighboring polities, and thus “freedom of movement among the nation-states offered opportunities for ‘best practices’ to diffuse in many spheres, not least the economic.” Since European states were relatively small and weak—yet culturally similar to many neighboring jurisdictions—abuses of power by the ruling classes led to declines in both revenue and in the most valuable residents. Rulers sought to counter this by guaranteeing protections for private property.
This doesn’t mean there were never abuses of power, of course, but as Landes observed:
To be sure, kings could, and did, make or break men of business; but the power of the sovereign was constrained by the requirements of states…and international competition. Capitalists could take their wealth and enterprise elsewhere and even if they could not leave, the capitalists of other realms would not be slow to profit from their discomfiture.
Nor was decentralization limited to the international system of separate sovereign states.
Thanks to the longtime tug-of-war between the state and the church, and between kings and nobles, decentralization was common even within polities. Raico continues:
Decentralization of power also came to mark the domestic arrangements of the various European polities. Here feudalism—which produced a nobility rooted in feudal right rather than in state-service—is thought by a number of scholars to have played an essential role….Through the struggle for power within the realms, representative bodies came into being, and princes often found their hands tied by the charters of rights (Magna Carta, for instance) which they were forced to grant their subjects. In the end, even within the relatively small states of Europe, power was dispersed among estates, orders, chartered towns, religious communities, corps, universities, etc., each with its own guaranteed liberties.
Over the long term, however, it was the system of international anarchy that appears to have ensured that states were constrained in their ability to tax and extort the merchant classes and middle classes, who were such a key component of Europe’s rising economic fortunes.
We Need a Return to Smaller Polities
Even today, we continue to see these factors at work. Small states—especially in Europe and the Americas—tend to have higher incomes and have greater openness. We can see this in the microstates of Europe and in the Caribbean. Small states, seeking to attract capital, often undercut larger neighbors in terms of taxes.
It is true that one of the most economically successful polities in the world today is a large one: the United States. The US’s success, however, can be attributed to the enduring presence of political decentralization internally—especially during the nineteenth century—and to the latent, albeit receding, economic liberalism esteemed by much of its population. Europe, of course, was already rich—and relatively politically free compared to the despotic regimes of the East—long before it began to centralize political power under the banner of the European Union.
Today, however, we are seeing the impoverishing downside of decades of political centralization in both the US and Europe. Government regulations decreed from Brussels and Washington continue to stifle innovation and entrepreneurship. The EU has sought to crack down on low taxes in smaller member states. Both the EU and the US are erecting trade barriers to producers outside their trading blocs.
The antidote to all of this is to decentralize. Decentralization, after all, has never been a true barrier to economic growth. If anything, the rise of mobile capital and global trade has made economic success more attainable for small states than ever before. Moreover, the implosion of the Soviet Union provides yet another example of how the disintegration of a large state can lead to far more economic progress than had been thought possible.
Unfortunately, those in power, who benefit from the status quo and from holding the reins of large states, are unlikely to relinquish their power without a fight.
Tyler Durden
Thu, 03/05/2020 – 20:45 - Bloomberg Launching New Group To Support Democratic Nominee, Attack Trump
Bloomberg Launching New Group To Support Democratic Nominee, Attack Trump
‘Mini’ Mike Bloomberg is forming a new organization which will support the Democratic nominee and attack President Trump, according to the Washington Post.
So this little guy:
Mini Mike, you’re easy! pic.twitter.com/rxFiqSB9RQ https://t.co/G2M1QHj0HV
— Donald J. Trump (@realDonaldTrump) March 5, 2020
https://platform.twitter.com/widgets.js
Is going to support this guy:
This type of stuttering, mental impairment and overall cognitive decline is frequently seen in patients who suffer from a neurological disease like dementia. pic.twitter.com/WpjErGaS96
— Michael Coudrey (@MichaelCoudrey) March 5, 2020
https://platform.twitter.com/widgets.js
To take on President Trump in November – in the midst of a potentially (some would say unavoidably) serious coronavirus outbreak blanketing the country.
Bloomber’s new group – which has yet to disclose its name while it’s in teh trademark application process – will absorb hundreds of the billionaire’s presidential campaign staffers in six swing states.
One major hurdle is the fact that Bloomberg’s ‘meme team’ is the best money can buy, and they’re still not funny.
We’re not done with you yet, Donald. https://t.co/RYLzqPP9e8 pic.twitter.com/2AI0iCWPKr
— Mike Bloomberg (@MikeBloomberg) March 5, 2020
This probably killed with the 22-year-old Daily Show stoner demographic.
Trump was in rare form during his post-acquittal speech. pic.twitter.com/jq8NTTn5yd
— Team Bloomberg (@Mike2020) February 6, 2020
Bloomberg’s meme team is sure to do wonders for Joe Biden.
“I’ve always believed that defeating Donald Trump starts with uniting behind the candidate with the best shot to do it,” Bloomberg said Wednesday after suffering a staggering defeat during Super Tuesday. “After yesterday’s vote, it is clear that candidate is my friend and a great American, Joe Biden.”
Bernie Sanders’s advisers, meanwhile, say they want no help from Bloomberg’s crack team of electioneers.
Bloomberg’s advisers have identified Wisconsin, Michigan, Pennsylvania, Arizona, Florida and North Carolina as the six states that will decide the electoral college winner this year. Staffers in each of those states have signed contracts through November to work on the effort.
The new group also could serve as a vehicle for Bloomberg to support Democratic candidates for the House and Senate. In 2018, Bloomberg gave $20 million to Senate Majority PAC to support Democratic senatorial candidates. A separate group he founded, Independence USA, spent $38 million to help Democrats retake the U.S. House. –Washington Post
https://platform.twitter.com/widgets.jshttps://platform.twitter.com/widgets.js
In addition to Bloomberg’s new organization, he will continue to fund Hawkfish – a political data company which is supporting Democratic campaigns, according to a person familiar with the discussions. The company has signed a long-term lease in the same building in Times Square which has been home to Bloomberg’s presidential campaign.
Tyler Durden
Thu, 03/05/2020 – 20:25 - Studies Show Fracking Ban Would Wreak Havoc On US Economy
Studies Show Fracking Ban Would Wreak Havoc On US Economy
Authored by Tim Benson via WattsUpWithThat.com,
A new study from the American Petroleum Institute (API), with modeling data provided by the consulting firm OnLocation, details how a nationwide ban on hydraulic fracturing (colloquially known as “fracking”) could trigger a recession, would seriously damage U.S. economic and industrial output, considerably increase household energy costs, and make life much harder and costlier for American farmers.
In America’s Progress at Risk: An Economic Analysis of a Ban on Fracking and Federal Leasing for Natural Gas and Oil Development, API argues that a fracking ban would lead to a cumulative loss in gross domestic product (GDP) of $7.1 trillion by 2030, including $1.2 trillion in 2022 alone. Per capita GDP would also decline by $3,500 in 2022, with an annual average decline of $1,950 through 2030. Annual household income would also decline by $5,040.
In 2022 alone, 7.5 million jobs would be lost (almost 5 percent of the U.S. total workforce), while annual job losses would average roughly 3.8 million through 2030. More than 3.6 million jobs would be lost in five states alone in 2022: 1.103 million in Texas, 765,000 in California, 711,000 in Florida, 551,000 in Pennsylvania, and 500,000 in Ohio. States with the highest job losses as a share of overall employment would be North Dakota (76,000), Oklahoma (319,000), New Mexico (149,000), Wyoming (48,000), Louisiana (321,000), West Virginia (109,000), Kansas (208,000), and Colorado (353,000).
Household energy costs would also increase significantly, 14 percent by 2030, even though household energy use is projected to decline by 12 percent. American families would see, on average, a $618 annual increase in their energy costs, as electricity prices would rise by, on average, 20 percent annually. Gasoline prices would also increase by 15 percent.
Farm incomes would decline by 43 percent, with a cumulative loss in farm income of $275 billion, or more than $25 billion on average annually. The costs of wheat farming would increase by 64 percent, while corn farming costs would increase by 54 percent and the costs of soybean farming would increase by 48 percent.
This is not the only recent study to highlight the immense economic costs of a ban on hydraulic fracturing. A report released in November 2019 by the U.S. Chamber of Commerce’s Global Energy Institute concludes a ban would eliminate 19 million jobs through 2025 and reduce GDP by $7.1 trillion. The report also estimates household incomes would be reduced by $3.7 trillion by 2025. Consumers would be paying $5,661 more per capita for energy and goods and services thanks to a doubling of gasoline prices and a 324 percent increase in the price of natural gas over that same time period.
The fracking revolution of the past dozen years has considerably spurred economic development throughout the United States. According to the Federal Reserve Bank of Dallas, the shale industry alone drove 10 percent of U.S. GDP from 2010 to 2015. In 2018, according to the National Bureau of Economic Research, oil and gas extraction accounted for $218 billion of U.S. economic output.
A September 2019 report conducted by Kleinhenz & Associates for the Ohio Oil and Gas Energy Education Program shows increased oil and natural gas production from fracking has saved American consumers $1.1 trillion in the decade from 2008 to 2018. This breaks down to more than $900 in annual savings to each American family, or $9,000 in cumulative savings.
Meanwhile, the White House Council of Economic Advisors estimated in October 2019 that fracking saves American families $203 billion annually on gasoline and electricity bills, roughly $2,500 per family. For low-income families, who spend the largest share of their income on energy costs, these savings are very significant. For those families in the lowest income quintile, it represents a savings of 6.8 percent of their total income.
Hydraulic fracturing activity delivers $1,300 to $1,900 in annual benefits to local households, including “a 7 percent increase in average income, driven by rises in wages and royalty payments, a 10 percent increase in employment, and a 6 percent increase in housing prices,” according to a December 2016 study conducted by researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology.
Another study published in the American Economic Review in April 2017 found “each million dollars of new [oil and gas] production produces $80,000 in wage income and $132,000 in royalty and business income within a county. Within 100 miles, one million dollars of new production generates $257,000 in wages and $286,000 in royalty and business income.”
Hydraulic fracturing enables the cost-effective extraction of once-inaccessible oil and natural gas deposits. These energy sources are abundant, inexpensive, environmentally safe, and can ensure the United States remains a leading energy producer for years to come. Therefore, policymakers across the country should refrain from considering any sort of fracking ban or moratorium, while also making sure not to place unnecessary burdens on the natural gas and oil industries, which are safe and positively impact their states’ economies.
Tyler Durden
Thu, 03/05/2020 – 20:05 - "Super Puke" – US Stocks Crash As Credit Markets & Yields Collapse
“Super Puke” – US Stocks Crash As Credit Markets & Yields Collapse
So much for the ‘Biden Bounce’. Watching the markets today – as The Dow plunged 1000 points, Treasury yields collapsed to record lows, credit markets imploded, and demands for more Fed intervention exploded – has one veteran trader remarking, “this is becoming a super-puke.”
It seems the stock market is ‘stuffed’ with Fed intervention and ‘just one waffer-thin mint’ more may spark the total destruction of markets.
The market is in panic mode – demanding over 50bps more rate-cuts in March as stocks collapse…
Source: Bloomberg
Credit spreads are exploding wider (decompressing 9 of the last 11 days – the biggest blowout since June 2013) – now at their widest since 2016…
Source: Bloomberg
Sending an ugly message to stocks…
Source: Bloomberg
10Y Treasury yields plunged to new record lows…
Source: Bloomberg
And gold (safe-haven) was aggressively bid…
In fact, since The Fed enacted an emergency 50bps rate-cut, Gold is soaring as the dollar and stocks faded…
And before we dive into some of the details, this made us laugh – China – the epicenter of the collapse in global supply chains – has seen its stock market MIRACULOUSLY soar back to pre-Covid-19 levels… as Europe and US crash…
Source: Bloomberg
Amid all this chaos, Dow, Nasdaq, and S&P are still up 2-3% on the week, Small Caps and Trannies are red though…
Dow tumbled back below 26k and then the battle began for the algos…
Yesterday’s top was at an almost perfect 50% retrace of the initial crash…
Another 1000-point day for the Dow – just how crazy is this vol? It’s the most extreme since the very peak of Europe’s debt crisis…
Source: Bloomberg
On the week, Defensives have dominated with Cyclicals unchanged (although today saw both hit just as hard)…
Source: Bloomberg
Bank stocks entered a bear market today, tumbling to their weakest since Jan 2019…
Source: Bloomberg
Global Systemically Important Banks are collapsing…
Source: Bloomberg
The Big US Banks were clubbed like baby seals…
Source: Bloomberg
VIX smashed higher, back above 42 intraday…
The VIX term structure is its most inverted since Lehman…
Source: Bloomberg
While stocks feel like they have plunged, they have a long way to go to catch up to bonds’ reality…
Source: Bloomberg
Treasury yields crashed today down 10-15bps across the curve with the long-end outperforming…
Source: Bloomberg
Yields are hitting record or cycle lows across the entire curve…
Source: Bloomberg
The Dollar slipped back to post-Powell-cut lows – this is the lowest for the dollar since January…
Source: Bloomberg
Cryptos were bid today, lifting all the major coins into the green for the week…
Source: Bloomberg
Commodities were clearly divided today with gold and silver soaring and copper and crude crushed…
Source: Bloomberg
WTI plunged back to a $45 handle after OPEC+ talks did not seem to go well (damn you Putin!)…
Gold soared higher all day – to its highest close since Jan 2013
And also surged again Yuan…
Source: Bloomberg
Finally, with a h/t to John Lohman, the Coronavirus Fear Index is exploding… “Long panic-buying food, short travel and entertainment”
“Probably nothing!”
Tyler Durden
Thu, 03/05/2020 – 20:01 - Lebanon Prosecutor Freezes Assets Of 20 Banks After $2.3BN In 'Illegal' Transfers
Lebanon Prosecutor Freezes Assets Of 20 Banks After $2.3BN In ‘Illegal’ Transfers
Lebanon’s state news agency NNA said on Thursday the country’s top financial prosecutor has moved to freeze the assets of 20 Lebanese banks, including the property of the bank chiefs and boards.
Heightened security outside the entrance of the Association of Banks in downtown Beirut. File image via Reuters. “Judge Ali Ibrahim decided to freeze the assets of twenty Lebanese banks. He also imposed a freeze on the assets of the heads and members of boards of directors of these banks,” state-run NNA said.
It comes amid a broader ongoing probe into the alleged illegal transfer of some $2.4 billion overseas and the recent sale of Eurobonds to foreign funds. Fourteen bankers are reportedly under scrutiny as the Lebanese economy teeters on the brink of collapse, and crucially with a March 9 deadline looming for repayment of $1.2 billion in Eurobonds.
Bloomberg lists some among Lebanon’s biggest lenders including “Bank Audi, Fransabank, Blom Bank and the Lebanese unit of Societe General” under investigation.
And further “The prosecutor also questioned the head of the Association of Banks in Lebanon, Salim Sfeir, who is also chairman of Bank of Beirut,” according to the report.
Chart: In Billions$. Source: Lebanon’s Ministry of Finance (MoF)/Blominvest, Blom Bank Group Research The government charges that bankers are actively thwarting attempts to restructure the country’s debt, while the banks say they needed cash to meet demand of patrons for basic staples including wheat, fuel and medicines amid the ongoing liquidity crisis.
The Institute of International Finance (IIF) now lists Lebanon as having among the highest debt-to-gross domestic product ratios in the world at 166%.
Chart via Bloomberg: “Relative to the economy, Lebanon’s banking system is the Middle East’s biggest — and one of the biggest in the world.”
This after its public debt increased by an annual 7.6% to $91.64 billion at the close of 2019.
Over the past number of months the country has seen repeat intermittent bank closures, also as banks have blocked most transfers abroad for their clients, and maintained tight controls over hard-currency withdrawals, policies which have in many instances led to riots and reports of threats against bank staff.
Tyler Durden
Thu, 03/05/2020 – 19:45 - President Trump Refuses To Answer Questions About Testing Kit Shortage As US Case Total Passes 200: Live Updates
President Trump Refuses To Answer Questions About Testing Kit Shortage As US Case Total Passes 200: Live Updates
Summary:
- 207 cases reported across the US
- Santa Clara County total hits 20 as 6 new cases confirmed
- San Francisco mayor reports first 2 cases in the city
- SF closes a school after a student tests positive
- First French lawmaker contracts the virus
- New Jersey Lt. Gov confirms 2nd “presumptive” case
- 2 more cases confirmed in Texas’s Harris County
- NYC asks travelers from 5 countries to ‘self-quarantine’
- Trump refuses to answer questions about testing kit shortage
- NY state cases double to 22
- Washington state reports another 20 cases
- Palestinian territories confirm 7 cases
- Seattle closes 26 schools
- Pentagon tracking 12 possible COVID-19 cases
- 35 passengers aboard ‘Grand Princess’ showing flu-like symptoms
- Another senior Iranian figure dies
- Illinois reports 5 more cases
- NYC reports 2 more cases, raising total to 4
- Italy postpones referendum vote; death toll hits 148
- WHO’s Tedros: “Now’s the time to pull out the stops”
- Tennessee confirms case
- Nevada confirms first case
- New Delhi closes primary schools
- EU officials weigh pushing retired health-care workers back into service to combat virus
- Italy to ask EU for permission to raise budget deficit as lawmakers approve €7.5 billion euros
- Beijing tells residents not to share food
- 30-year-old Chinese man dies in Wuhan 5 days after hospital discharge
- Cali authorities tell ‘Grand Princess’ cruise ship not to return to port until everyone is tested
- Global case total passes 95k
- Lebanon sees cases double to 31
- France deaths climb to 7, cases up 138 to 423
- EY sends 1,500 Madrid employees home after staffer catches virus
- Trump says he has a “hunch” true virus mortality rate is closer to 1%
- Switzerland reports 1st death
- South Africa confirms 1st case
- UK chief medical officer confirms ‘human-to-human’ infections are happening in UK
- UK case total hits 115
- Google, Apple, Netflix cancel events
- HSBC sends research department and part of London trading floor home
- Facebook contract infected in Seattle
- Microsoft, Google, Amazon, Netflix cancel events and/or ask employees to work from home
- Netherlands cases double to 82
- Spain cases climb 40, 1 new death
- Belgium reports 27 new cases bringing total to 50
- Germany adds 87 cases bringing total to 349
* * *
Update (1930ET): We neglected to mention this earlier, but in light of all the companies in the US sending employees home or asking them to WFH (an acronym that’s starting cropping up with startling regularity), it’s worth mentioning that Starbucks said earlier that it expects a revenue hit of up to $430 million due to the coronavirus’s impact on its China business. At the same time, the company revealed Thursday during its after-hours earnings report that 90% of its 4,300 stores have reopened and have returned to business as usual, more or less.
Meanwhile, in what seems like a deliberate decision to slow the increase of the case count, the CDC reported earlier that the “confirmed” cases in the US had topped 149 – 100 cases across 19 states, plus another 49 who had been repatriated from either the Diamond Princess or Wuhan.
That’s up from 129 on Wednesday.
Of course, given all the “presumptive” positives reported on Thursday, we suspect that number has already likely increased by at least 50. BNO News, which has been tracking cases across the world, put the US case total at 207 as of 7:30 pm ET.
In the latest sign of the media’s frustration with President Trump’s handling of the outbreak, ABC News and others have “fact checked” Trump’s claim, made during a Wednesday evening press conference, that the slow rollout of new test cases is “Obama’s fault.”
In reality, the CDC’s initial batch of test kits didn’t work as designed, as the agency admitted, which left the administration flat-footed when the case numbers started climbing.
The truth is that neither the Obama administration nor the Trump administration really prioritized pandemic response. That, combined with the CDC’s epic screwup, is the root of the current problem.
Still, the fact remains that more than 99% of people calling about getting tested are probably hypocondriacs or are unnecessarily paranoid given the news coverage and general hysteria that sent the Dow on another nearly four-figure drop on Thursday.
* * *
Update (1830ET): Following the disclosure of its first two cases, San Francisco has closed Lowell High School – a school that’s located on the border of Parkside on the east side of town – after a student there reportedly tested positive for Covid-19. Earlier, Mayor Breed said there were two cases in the city, and that both were “contained”. Some 3,000 students attend the school/
However, it looks like this student – if these reports are accurate – might be SF’s third case (or they may have been counted in the roll of another nearby county depending on where they live). Public Health Director Dr. Grant Colfax said the first patient was a man in his 90s with underlying health conditions. The patient’s condition was described as serious. The second patient is a woman in her 40s and is in the hospital in fair condition. The patients aren’t related, and neither traveled recently, meaning they likely picked up the virus in the city, or nearby. They’re being kept at separate hospitals.
“We do not know how they were exposed,” Colfax said during the press conference (video below). “This suggests that this is spreading in the community.”
Breed asked that city residents now treat anybody poorly because of the outbreak, citing harmful examples of “xenophobia” (somehow, we suspect this might not be an issue in SF, unless things get really bad).
Here’s a list of closures across the area, courtesy of KTVU.
Elsewhere in the US, Florida’s Santa Rosa County has reported its first case of the virus, according to the Florida Department of Health.
As the number of cases soars in France (more than 400 cases reported), the French press reported that a lawmaker named Jean-Luc Reitzer has tested positive and is seriously ill, making him the first French lawmaker to be infected with the virus. Earlier, we reported that 23 Iranian parliamentarians had contracted the virus.
Meanwhile, a NorCal nurse who contracted the virus at work has some pretty harsh words for the CDC and the Trump Administration and the shortage of tests, as President Trump’s flippant treatment of the issue seems to have inflamed public sentiment.
This week has been characterized by the explosion in cases and deaths outside China. As a reminder, here’s what the trajectory of new cases is looking like ex-China.
* * *
Update (1720ET): Santa Clara County has confirmed another six cases, bringing the countywide total to 20. Seven of those cases are of “unknown origin,” and it appears county health officials have no more insights on how those patients were infected.
6 new cases in Santa Clara County, CA
20 total
7 of the cases are of unknown origin
(from press conference)
— Steve Lookner (@lookner) March 5, 2020
https://platform.twitter.com/widgets.js
Santa Clara County: “The risk of exposure to the virus is increasing” in the county
(from press conference)
— Steve Lookner (@lookner) March 5, 2020
https://platform.twitter.com/widgets.js
The county is recommending that organizers postpone any large gatherings…
* * *
Update (1645ET): Two more cases have been confirmed by the CDC in Texas’s Harris County, as a man and woman from the unincorporated area immediately northwest of the county have been confirmed to carry the virus, according to WFAA.
Two people in northwest Harris County have tested positive for the coronavirus, according to Harris County Public Health.
The tests have been verified by the Centers for Disease Control and Prevention.
These cases are travel-related and, at this time, there is no evidence of community spread. The man and woman live in the unincorporated area of northwest Harris County, outside the City of Houston.
Fort Bend County also reported a presumptive positive case on Wednesday.
“Since January, we have been at an elevated level of readiness to prepare for and respond to a positive case here in Harris County,” said Harris County Public Health Executive Director, Dr. Umair A Shah, MD, MPH. “We will continue to take action by identifying potential contacts and monitoring them closely.”
HCPH officials said they understand residents will be concerned about local cases, but said 80-percent of people who have coronavirus experience mild to moderate symptoms and fully recover.
Meanwhile, in NYC, Mayor de Blasio said city officials would ask visitors from five countries to “self-quarantine” if they happen to be in NYC. Sounds like a great way to spend a vacation abroad.
Finally, President Trump caught some flak from reporters over VP Pence’s admission that the administration doesn’t have enough tests on hand to meet demand.
JUST IN: @realDonaldTrump does not answer questions on why coronavirus test kits were not sent out sooner as @VP says there are not enough tests today to meet “anticipated demand.” @CBSNews pic.twitter.com/vFvGM3P81H
— Paula Reid (@PaulaReidCBS) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1530ET): The government of the Palestinian territories confirmed Thursday that 7 cases of the coronavirus had been identified. In response, the government has banned all tourists for two weeks. The cases were all discovered in the Bethlehem area, a town south of Jerusalem that was, according to the New Testament, the town where Jesus was born.
As the death toll in Italy, the epicenter of the outbreak in Europe and the broader Mediterranean area, climbs to 148 and the outbreaks in both Germany and France worsen, Paris officials have cancelled the Paris Marathon, postponing it until October.
Oh, and here are some tweets from Dr. Tedros reiterating what he said earlier during Thursday’s WHO presser.
We’re concerned that in some countries the level of political commitment & the actions that demonstrate that commitment don’t match the level of the threat we all face. This is
NOT a drill
NOT the time to give up
NOT a time for excuses
This is a time for pulling out all the stops— Tedros Adhanom Ghebreyesus (@DrTedros) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1510ET): During a live update of the coronavirus situation in New Jersey, Lieutenant Gov. Sheila Oliver reportedly said that the state had identified a second “prospective” case.
We now have our first presumptive case of coronavirus in New Jersey.
Watch live as @NJDeptofHealth Commissioner Persichilli and I provide an update on #COVID19 and our preparedness efforts:https://t.co/3qjgiuYFpU
— Lt. Governor Sheila Oliver (@LtGovOliver) March 5, 2020
https://platform.twitter.com/widgets.js
This brings the total cases in the county to 51, with one additional death.
* * *
Update (1450ET): VP Mike Pence said Thursday that the Coast Guard had delivered coronavirus tests to the ‘Grand Princess’ cruise ship off the coast of San Francisco. Pence also admitted during an update from the White House task force that the CDC doesn’t have enough tests to meet anticipated demand going forward, while HHS Secretary Azar said earlier that 75,000 test kits would be shipped by the end of the week.
This is really not helping the administration deflect criticisms that it failed to adequately prepare for the virus.
Meanwhile, Washington’s King County, part of suburban Seattle, has just reported another 20 cases of Covid-19, increasing the state of Washington’s total by roughly 20%.
Iranian diplomat Hossein Sheikholeslam, a former member of parliament and Iran’s former ambassador to Syria and current advisor to the foreign minister has died of coronavirus, becoming the latest senior government figure to die from the virus.
Though dozens of cases have already been reported across California, San Francisco hotels had already reported 150k cancellations tied to the outbreak – and that was before discovering evidence of a potential community outbreak.
150,000 hotel nights lost in SF alone due to coronavirus.
One city. https://t.co/JG8wpAVSBK
— Christopher Mims 🎆 (@mims) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1450ET): This is extremely savage, even for Iran.
The Saudi government denounced Iran on Thursday for allowing several Saudi citizens to enter the country without stamping their passports, a move that was likely deliberately intended to spread the virus to Saudi Arabia, Iran’s chief political and military rival in the region.
- SAUDI ARABIA DENOUNCES IRAN FOR GRANTING SAUDI CITIZENS ENTRY WITHOUT STAMPING THEIR PASSPORTS AMID CORONAVIRUS OUTBREAK -STATEMENT
* * *
Update (1430ET): The $8.3 billion emergency coronavirus funding package has passed the Senate, following a tweet from President Trump last night urging lawmakers to pass it, claiming he would sign it once it hit his desk. Presumably, that’s still the plan.
According to CNN, the agreement provides $7.8 billion in appropriations to address the outbreak of coronavirus as well as an authorization for $500 million in mandatory spending to finance a telehealth program intended to expand access to diagnostic services.
In other news: Mayor Breed has confirmed that the two cases in San Francisco are examples of community transmission, and are unrelated, suggesting that a larger outbreak is already underway in the city. The first patient is a man in his 90s who is in serious condition with underlying health conditions. The second person is a woman in her 40s who is in fair condition.
Gav. Newsom and the CDC, meanwhile, said they’re still working to find “the best location” for the “Grand Princess” to dock as 35 passengers are reportedly exhibiting flu-like symptoms, though at least two said earlier that they were tested and cleared.
Oddly, in other news, Energy Secretary Dan Brouillette said Thursday that SARS drugs could be used to treat the coronavirus, before adding that the outbreak will have only a ‘marginal’ impact on oil demand.
Mr. Secretary, this is not the time to be talking your book.
* * *
Update (1415ET): San Francisco is already described by many as a dystopian nightmare city, a living testament to a future where wealth inequality has reached such exaggerated extremes that a clear caste system has emerged, dominated by an elite group of tech billionaires and multimillionaires.
And now, it also has the coronavirus.
- SAN FRANCISCO HAS 2 CASES OF CORONAVIRUS, MAYOR SAYS
Mayor London Breed is holding a press conference on the situation. Watch live below:
Update from San Francisco leaders on local response and preparedness efforts regarding novel coronavirus (COVID-19) https://t.co/043mhKDxaQ
— London Breed (@LondonBreed) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1355ET): Now that Cuomo’s latest update is over, we have some more information about the 9 new cases confirmed in New York State.
Eight of the new cases are in Westchester, connected to Lawrence Garbuz, the New Rochelle-based lawyer, while the ninth is on Long Island, Cuomo said. Garbuz’s wife, son and daughter have all tested positive, as has a friend of Garbuz’s, his wife and three of their four kids.
A neighbor who drove Garbuz to the hospital has also been infected. Because he’s suffering from an underlying respiratory issue, Garbuz is being treated at a hospital in Upper Manhattan, while the rest of the patients are self-isolating. The patient on Long Island has also been hospitalized, though few details were given about that case.
Two students at Yeshiva University’s Washington Heights campus are being “evaluated” after possibly being exposed via Garbuz’s son, along with seven of Garbuz’s co-workers and an intern.
The governor told residents to stay calm, though according to reports the hysteria has already erupted in Westchester.
“Here the facts do not merit the level of anxiety that we are seeing…I believe it’s being generated because…people don’t know the truth, they don’t know the facts. I’m a little bit perturbed about the daily angst,” Cuomo said.
Earlier, NYC Mayor Bill de Blasio confirmed two new cases in the five boroughs: A man in his 40s, and a woman in her 80s, who are both in intensive care.
* * *
Update (1330ET): The Southeastern Nevada Health District has confirmed that Nevada has indeed recorded its first case of the coronavirus, according to the Las Vegas Sun.
Judging by the description, the patient, who is a Clark County resident (most of the county, but not all, is in the city of Las Vegas), is a high-risk patient: He’s in his mid-50s and has an underlying health condition. He also recently traveled to Washington State and Texas. Texas recently reported its first travel-associated case in Houston, and community spread is already believed to be happening in Washington State.
Here’s more from the Sun:
The Health District was working with its health care partners and leading the effort to quickly identify close contacts of the patient, officials said. Those exposed to the patient were being asked to self-quarantine, officials said.
Test results are considered “presumptive positive” until confirmed by the federal Centers for Disease Control and Prevention, officials said. It should take 24 to 48 hours for the CDC to confirm the results, officials said.
The patient was identified through the VA Southern Nevada Healthcare System, said Shelbie Bostedt, a spokeswoman for U.S. Rep. Steven Horsford.
Horsford said in a statement that he was working the Gov. Steve Sisolak’s office, the VA and the Health District to stay apprised of the situation. “I take the safety of all Nevadans seriously,” he said.
The Health District said the immediate risk from the virus to the general public in Clark County is low at this time. No community spread has ben identified at this time, officials said.
In other news, France has confirmed its 423rd case, up 138 from late Wednesday, according to local health officials. In total, seven have died.
* * *
Update (1300ET): Bernie Sanders has cancelled an upcoming Mississippi rally. Interestingly enough, the coronavirus is only one reason. The Sanders campaign has apparently realized that any more effort campaigning in Mississppi would be wasted – Democrats in the state are mostly black and will back Biden by a massive margin.
Instead, he’s going “all in” on the Midwest as his best shot at the nomination.
* * *
Update (1250ET): During yet another press conference (the fourth in roughly 36 hours), NY Governor Andrew Cuomo just announced that the number of confirmed coronavirus cases in his state has nearly doubled to 22.
BREAKING: Gov. Andrew Cuomo announces that there are 11 new cases of novel coronavirus reported in Westchester County, New York City and Long Island. https://t.co/oXKxkKrm1m pic.twitter.com/wlZhBMUf96
— ABC News (@ABC) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1230ET): Illinois has confirmed 5 more cases of Covid-19, bringing the US case total to 159.
Over in the UK, the Telegraph reports that a patient has died from the virus, marking the first death in the UK as the number of confirmed cases nears 100.
In other news, the Ultra Music Festival in Miami has been postponed until next year.
As we noted earlier, Cali Gov. Gavin Newsom has ordered the ‘Grand Princess’ cruise ship to remain offshore until all its passengers can be tested for the virus. We were one of the first media organizations to link the death of a 71-year-old man in California to the investigation into a previous voyage of the cruise ship and its connection to one of the patients.
Now, Fox 2 KTVU is reporting that several passengers aboard the ship are displaying flu-like symptoms.
In fact, two women have posted a YouTube video from their cabin, saying they are experiencing typical cold symptoms, but that they do not have a fever. They said in the video that they were tested for the virus, but told they didn’t have it.
In other news, Hawaii has become the fourth state to declare a state of emergency over the virus, even though no cases have been confirmed in Hawaii yet, despite several scares. But Hawaii Gov. David Ige said the declaration would allow the state to better prepare.
Regarding the latest case confirmed in California, that of an LAX airport screener, officials reportedly can’t tell if he contracted the virus at work, or “in the community” – which is extremely discouraging, if you ask us.
Cali has reported 53 cases so far.
The Grand Princess currently has 2,500 passengers. The number of crew is unclear.
In a statement, Princess Cruises said there are no confirmed cases and that only 100 individuals have been “identified for testing.”
“There are fewer than 100 guests and crew identified for testing, including all in-transit guests… those guests and crew who have experienced influenza-like illness symptoms on this voyage, and guests currently under care for respiratory illness,” the statement said.
So Newsom is going to let thousands de-board after testing a smattering of 100 people out of more than 3,000. Sounds like a great ‘containment’ plan.
We’re also starting to wonder how Carnival Cruise, which owns Princess cruises, is going to deal with this latest crisis.
* * *
Update (1220ET): As more workers are being told to work from home and more schools, events and businesses close around the world, Seattle has just closed 26 schools – the entire school district – for two weeks.
* * *
Update (1215ET): Italy’s national death toll has just taken another leap higher: Officials are now reported a new total of 148 deaths, following the disclosure of 25 deaths in Lombardy about an hour ago. Another couple of dozen deaths have apparently been recorded since.
Italy might want to consider taking a page out of Iran’s playbook and lying about the numbers.
Speaking of Iran, neighboring Iraq has just reported another three cases, bringing its total confirmed to 38.
Before we go, we wanted to mention one final comment from Dr. Tedros from Thursday’s Trump-shading, China-praising, WHO press conference.
After Dr. Tedros chided world leaders for not doing enough, while simultaneously claiming that the world is well-prepared for the virus, the good doctor claimed that while we’re not quite at ‘pandemic’ level yet (a fact that’s disputed by many experts, who believe we are indisputably in the midst of a pandemic) there are “very concerning signs”.
* * *
Update (1120ET): Italian health officials have reported 25 more deaths on the Lombardy region of northern Italy – the worst-hit region. Deaths in this region alone have climbed to 98, bringing Italy’s national total to 132.
* * *
Update (1100ET): The UK has reported that total coronavirus cases have risen to 115 from 85 earlier on Thursday, making the UK the latest European nation to see its total confirmed cases break above 100.
In the corporate sphere, accounting and consulting firm Ernst & Young sent around 1,500 employees from its Madrid offices home on Thursday after a staffer was confirmed to have contracted the virus. Wal-Mart is restricting all cross-border travel to only “business-critical” trips.
As of March 5, the CDC has confirmed 100 cases in its lab, the agency said, meaning some cases reported by the states have yet to be ‘officially’ confirmed. It has also confirmed another death, bringing the total to 10 (meaning one reported death has yet to be officially confirmed). DHS said US has no plans at this time to lift China travel restrictions.
WHO’s Dr. Tedros said Thursday during the NGOs daily presser that now is the time to “pull out all the stops” to combat the virus – which is ironic, considering the agency won’t officially label the outbreak a ‘pandemic’, even though experts in the US have told the Washington Post and other media orgs that it is undoubtedly a pandemic. They also added that there’s “no evidence” the virus has been spread from a human to a dog, despite earlier reports.
WHO added that heads of state must “take responsibility” for their virus response (obviously a snipe at President Trump, whom critics have accused of ‘denying’ the existence of the virus’.
Tedros also threatened to “name names” of governments that aren’t doing enough to prepare for the outbreak during his next press conference.
The organization also has found no evidence the virus will behave differently in different climates, even as its spread across Africa has been notably slow.
EU officials are reportedly considering pressing retired health-care workers back into service as a ‘response’ to the virus. Hopefully, the elderly nurses and doctors aren’t left to catch the virus and die.
* * *
Update (1035ET): Another Italy update…
- ITALY TO ASK EU FOR GO AHEAD TO RAISE BUDGET DEFICIT BY 0.35 PERCENTAGE POINTS OF GDP TO TACKLE CORONAVIRUS GOVT SOURCE
Unsurprising given that lawmakers approved more than the recommended €5 billion.
* * *
Update (1025ET): Xinhua reports 16 new cases have been confirmed in Lebanon, more than doubling the case total to 31.
- Xinhua: Lebanon’s COVID-19 cases rise to 16
In other news, Italy has dedicated more money to its coronavirus response than it initially expected. .
- ITALY TO ALLOCATE EU7.5B FOR VIRUS RESPONSE STIMULUS: ANSA
* * *
Update (1015ET): As we move closer to half of states having confirmed cases of their own, the Nevada Independent reported that Nevada officials had identified the first case of the virus in the state just minutes after Tennessee Gov. Bill Lee confirmed the first case in his state.
- NEVADA SEES FIRST CASE OF CORONAVIRUS IN PATIENT: NEV. IND.
17 states now have confirmed cases of Covid-19.
* * *
Update (1010ET): Tennessee has confirmed is first case, according to media reports.
- FIRST CONFIRMED CASE OF CORONAVIRUS IN TENNESSEE: WKRN-ABC
The reports were almost immediately confirmed by the governor.
#Breaking Gov. Bill Lee announces first confirmed case of #Coronavirus in Tennessee
— Arianna Poindexter (@AriannaWMC5) March 5, 2020
https://platform.twitter.com/widgets.js
* * *
Update (1000ET): The Pentagon is reportedly tracking 12 individuals who may be infected with the coronavirus.
- PENTAGON IS TRACKING 12 POSSIBLE COVID-19 CASES, OFFICIAL SAYS
* * *
Update (0930ET): France health officials have reported another 2 deaths, bringing the death toll in Europe’s second-largest economy to at least six.
We also have some more details on the first case in South Africa, which we noted earlier on Thursday shortly after the news broke: SA’s News 24 has some more information on the case: It’s a 38-year-old man who had recently traveled to Italy.
Italy and Iran remain two of the most commonly-cited spreaders, as travelers around the world are bringing the virus home after trips to northern Italy.
The man and his wife were among a group of 10 who returned from Italy on March 1.
Yet the government insists it doesn’t expect more cases as South Africa’s summer season is typically inhospital to viral outbreaks. Given the surprising lack of spread in Africa so far – which some fear might be a result of low testing rates – they might have a point.
* * *
Update (0920ET): Two Italian Red Crossvolunteers have tested positive while another 140 have been deemed “at risk” for infection. Trump “Iran whisperer” Brian Hook said Thursday that Iran had rejected the State Department’s offer of assistance.
Meanwhile, NYC Mayor Bill de Blasio has shared some more details about the two new cases confirmed in New York, including confirming that investigators haven’t been able to trace the source of the infection, suggesting that an uncontained outbreak is already underway in NYC.
There are two new confirmed cases of COVID-19 in New York City. One new patient is a man in his 40s, and one new patient is a woman in her 80s.
Neither patient has a connection to travel nor any of the other local individuals diagnosed with COVID-19.
— Mayor Bill de Blasio (@NYCMayor) March 5, 2020
https://platform.twitter.com/widgets.js
Since they haven’t traveled, the patients were almost certainly infected in the US, and possibly in NYC.
* * *
Update (0850ET): Yesterday, we pointed out that the first fatality reported in California appeared to be the same patient – a 71-year-old man – whom state officials had said recently traveled aboard a cruise ship called the “Grand Princess”. The ship, which was ironically on its way to dock in San Francisco at the time, was ordered to remain offshore. According to USA Today, officials confirmed on Wednesday that the ship will not return to port until testing of everyone on board can be carried out.
And just like that, the US has its own cruise ship emergency, though it appears authorities are learning from the mistakes made by Japanese health officials during the ‘Diamond Princess’ fiasco (to be sure, the US clearly violated quarantine by transporting sick passengers back to the US).
Gov. Newsom said the state would scramble to test the passengers as quickly as possible.
“We will be able to test very quickly… to determine if these individuals that are symptomatic just have traditional colds or the flu or may have contracted the COVID-19 virus,” Newsom said.
We’ll keep an eye on that – we suspect we might have more cases to report soon.
Over the last hour or so, some more virus-linked headlines have hit the tape.
- South Africa has reported its first case of the virus.
- New Delhi has shut down primary schools as virus spreads in India.
- Confirmed cases of the virus have doubled in the Netherlands to 82
- US official ‘concerned’ about health of Iranian detainees.
We’ll be back with more updates shortly.
* * *
Update (0840ET): Italy has postponed a referendum to reduce the number of lawmakers, a hot-button local issue that is at the crux of a government reform agenda pushed by the Five Star Movement.
- ITALY GOVT TO POSTPONE MARCH 29 REFERENDUM ON CUT IN NUMBER OF PARLIAMENTARIANS DUE TO CORONAVIRUS – SOURCES
* * *
Update (0822ET): As China continues to roll out new restrictions on foreign travelers, all while gloating about the world’s inability to contain the outbreak that China unleashed, Global Times editor Hu Xijin tweeted Thursday morning that he was “calling on” the Chinese government to impose 14-day quarantines for everybody traveling from the US.
US CDC’s passive attitude in tallying/disclosing infection number, and Trump administration’s attempt to downplay the epidemic is disturbing. I have called on Chinese local governments to implement 14-day quarantine for all people coming from the US.
— Hu Xijin 胡锡进 (@HuXijin_GT) March 5, 2020
https://platform.twitter.com/widgets.js
China managed to stop the virus only by restricting the movements of roughly half its population. Democracies like the US unfortunately don’t have that power.
* * *
Update (0720ET): NYC Mayor Bill de Blasio has apparently just announced during an appearance on “Morning Joe” that NYC has confirmed 2 more cases, raising the citywide total to 4 and the state-wide total to 13, per the NYT.
BREAKING: @NYCMayor announces two new #coronavirus cases in NYC on Morning Joe just now. Source says it’s a man in his 40s and a woman in her 80s. That brings the city’s total positive tests up to four.
— Julia Marsh (@juliakmarsh) March 5, 2020
https://platform.twitter.com/widgets.js
The new cases include a man in his 40s and a woman in her 80s.
* * *
With stock futures once again pointing to a massive drop at the open, the brief respite provided by Joe Biden’s political comeback has faded as Americans brace for the outbreak by, among other things, hoarding Purell, while California and others threaten to prosecute sellers caught gouging prices on essentials as people across the country stock up.
More US companies have cancelled events: Last night, Google said it would cancel its developer conference and Netflix has cancelled SXSW screenings. In London, HSBC has evacuated its entire research department and parts of its Canary Wharf trading floor, Financial News reports. A Facebook contractor has been infected in the company’s Seattle office. Microsoft, Amazon and Facebook have all asked their Seattle employees to work from home.
Since midday on Wednesday, the virus death toll in the US has held steady at 11. But there’s no denying the reality that coronavirus hysteria has arrived in America. Last night, California declared a state of emergency, joining Florida and Washington State.
And with cases confirmed in New York, Rhode Island and New Jersey, the virus has officially gone bi-coastal.
Globally, the number of confirmed cases has surpassed 95,000, and the global death toll is north of 3,000. China remains by far the worst hit, with 80,410 cases, while South Korea is No. 2 with 5,766. They’re followed by Italy and Iran.
Courtesy of the FT
In addition to declaring the state of emergency, Cali Gov. Gavin Newsom ordered that a cruise ship – the ‘Grand Princess’ – preparing to dock in San Francisco be held off the coast of California after the one fatality in California was linked to a previous voyage on the ship.
Late yesterday, New Jersey Gov. Phil Murphy announced that local health officials had discovered the first “presumptive” case of the virus in Bergen County, a suburb of New York City. The individual, a male in his 30s, has been hospitalized in the county since March 3. The “presumptive” case was initially tested at a local New Jersey lab
Tonight, Acting Governor @LtGovOliver and I are announcing the first presumptive positive case of novel coronavirus, or #COVID19, in New Jersey. The individual, a male in his 30s, is hospitalized in Bergen County and has been hospitalized since March 3rd. pic.twitter.com/E2QtB1Wzut
— Governor Phil Murphy (@GovMurphy) March 5, 2020
https://platform.twitter.com/widgets.js
We take this situation very seriously and have been preparing for this for weeks. I urge residents to remain calm.
The investigation is underway & more information will be released when it becomes available.
For more info:
💻visit https://t.co/UyohzX5yGk
☎️call 1-800-222-1222— Governor Phil Murphy (@GovMurphy) March 5, 2020
https://platform.twitter.com/widgets.js
According to the CDC, 14 US states have reported either confirmed or “presumptive” cases of the virus.
Already, the number of confirmed cases in the US is north of 150 (including the 48 evacuees).
Yesterday, VP Pence and HHS Secretary Azar promised that new screening measures would be applied to travelers from South Korea and Italy. Australia on Thursday joined the list of countries restricting travel by barring visitors from South Korea. Meanwhile, in a glimpse of what’s to come for the airline industry, which could be in for a $100 billion hit tied to the coronavirus, the UK regional airline Flybe collapsed.
As the outbreak appears to wane in China, President Xi has cancelled a state visit to Japan because of the rapidly circulating outbreak.
Though it wasn’t all good news out of Beijing: Last night, the western press reported that a 36-year old man thought to have recovered from coronavirus had died from respiratory failure in Wuhan five days after being discharged. It’s alarming because the man was young and otherwise healthy – characteristics that should have made him particularly resilient to the virus.
Also, Beijing has imposed a new rule on residents: Eat alone, keep away from co-workers, and under no circumstances should you share plates with others (popular in so called ‘hot pot’ dishes and other communal-type meals).
Much to the chagrin of his political allies, President Trump continued his campaign to minimize the severity of the outbreak during an appearance on Hannity Wednesday night when he said he had a “hunch” the real mortality rate for the virus is closer to 1% than the 3.4% estimate shared by Dr. Tedros during Wednesday’s WHO Press conference.
Trump to Hannity on WHO saying coronavirus death rate is 3.4%: “I think the 3.4% number is really a false number. Now this is just my hunch, but based on a lot of conversations … personally, I’d say the number is way under 1%.”
Astoundingly irresponsible. pic.twitter.com/uC9c03zX31
— Aaron Rupar (@atrupar) March 5, 2020
https://platform.twitter.com/widgets.js
In South Korea, mass testing has confirmed more than 6,000 cases as of the health officials’ second update on Thursday, as well as more than 40 deaths. Italy has confirmed more than 3,000 cases, along with more than 100 deaths. Elsewhere in Asia, Malaysia has confirmed another 5 cases, bringing its national total to 55. Travelers who have recently visited any hot spots – northern Italy, Hokkaido (in Japan), Tehran and Daegu – will be temporarily banned from entering Malaysia, unless they are Malaysian citizens.
Officially, Iran has confirmed 92 deaths and 2,922 cases. But the Washington Post reported last night that data obtained from a string of hospitals in Tehran suggests that the epidemic has spread far more widely than the government has acknowledged.
CNN reports that the case total in India, the world’s second most populous country, has climbed to 29 (three have already recovered). In response, India has started screening all passengers who arrive at its airports for the virus. The Indian government is also preparing to evacuate its citizens from Iran, becoming the first country to plan an evacuation from the epicenter of the virus in the Middle East.
Based on the data, which was given to WaPo by a UK-based activist, the true case count in Iran is probably closer to 30,000 than the 3,000 cases counted by the government. And the death toll is likely closer to 1,000 than 100 – after all, the BBC reported last week that the true death toll was already north of 200 days ago.
Whatever the real number, as more senior government officials catch the virus, the Islamic Republic has kicked off its “national mobilization” scheme in which 300,000 medical teams joined by voluntary members of the IRGC – the Revolutionary Guard – will monitor families across the country and take unexplained action to help limit the spread. The teams will be stationed in “medical facilities, schools and military bases” across Iran. The Iranian government has also started to limit travel within the country after suspending issuing visas for travelers from other hot spots.
With 15 cases confirmed in Israel, the West Bank city of Bethlehem has closed all mosques and churches, setting of a controversy in the town where Jesus was reportedly born, Middle East Eye reports.
Over in Europe, Switzerland reported its first death overnight; health officials have confirmed 80 cases across the small alpine state. In Italy, where the number of cases climbed above 3,000 (total: 3,089) and deaths surpassed 100 (total: 107), Deputy Economy Minister Laura Castelli said the government could increase the size of the package to €5 billion, according to the FT. In the UK, PM Boris Johnson said Thursday morning during an interview with ITV that the best thing Britons can do to prevent the spread of the virus is to “just wash our hands,” Johnson said. He also stressed that for most people who catch the virus, this will be a “mild to moderate” illness. The number of confirmed cases in the UK climbed to 88 on Thursday. ITV also reported. Six of those were reported in Scotland, 2 in Wales and three in Northern Ireland.
In London, en employee in HSBC’s research department has reportedly tested positive for the virus, Reuters reported.
The latest increase in cases comes as the NHS warns that it doesn’t have enough nurses, ITV reports. Despite efforts to fill positions, more than 43,000 vacancies remain across the UK.
Meanwhile, UK Chief Medical Officer Chris Whitty confirmed that human-to-human transmission is ongoing in the UK, before adding that the UK is now “mainly in the second stage” of its plan to tackle coronavirus, which involves delaying the spread for as long as possible to stop the virus from overwhelming the country’s hospital system.
Elsewhere in Europe, Spain confirmed 40 new cases and 1 new death bringing its total to 248 and death toll to 3. Belgium reports 27 new cases raising total to 50.
After all, since western democracies simply can’t undertake the same heavy handed response imposed by China (though the west has the advantage of jumping on the problem instead of choosing to ignore it for weeks), the west is going to need to accept the fact that the virus will likely become significantly more widespread.
Before we go, we’d like to leave readers with a little levity. Are you a recent college grad searching for a business plan?
Here’s a freebie, courtesy of the CCP:
Xuzhou City in E #China’s Jiangsu, has put into use the country’s first self-vending machine that dispenses #masks. With a daily limit of 800 masks, this tool has been in use since Mar 2. Residents can buy two N95 masks using their ID cards every 24 hours for 12 yuan ($1.72). pic.twitter.com/V3Q60DvuDi
— Global Times (@globaltimesnews) March 5, 2020
Tyler Durden
Thu, 03/05/2020 – 19:41 - "It's All Just The Same Broken System" – Exposing Greenspan's Moon Cult
“It’s All Just The Same Broken System” – Exposing Greenspan’s Moon Cult
Authored by Jeffrey Snider via Alhambra Investments,
Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events.
The short version: monetary authorities as well as the “experts” describe almost perfectly risk averse behavior among the central money dealing system in outbreaks like September’s repo – but then bend over backward trying to come up with any other kind of explanation for it. The problem must be some complicated stew of otherwise benign technical issues because there’s no possible way, they tell themselves, it can be anything else. Not with bank reserves abundantly over a trillion (now rising again) and Jay Powell pleasantly whispering in their ears about the unemployment rate every other day.
It takes on religious, cult-like properties to try so hard to prove (to themselves) what has already been so thoroughly disproven.
Start with the bond market and interest rates. Over the last half decade or so, ever since Janet Yellen’s ill-advised first rate hike in December 2015 amidst a near recession, a move she immediately regretted, central bankers and Bond Kings have been on a mission to convince the world monetary policy was a tremendous success. It had to have been because it was the biggest thing ever devised and those devising it had promised it was so big the flood of “easing” couldn’t possibly fail.
Something about a printing press.
Anyway, that’s not logic so much as self-delusion and rationalizing; the fallacy of sunk costs. Rather than recognize all the warning signs that it all had indeed failed, policymakers and Economists instead convinced themselves it just needed more time.
Except, by 2015 and 2016 time was running out (see: Trump, Donald, and Britain, exit). People were growing anxious as even politicians like President Obama had exhausted what had been a deep reservoir of patience (thus, his June 2016 comment about a manufacturing “magic wand”).
Along came 2017 and Reflation #3 – just in time to be hyped into that very mode of success all officialdom had been waiting on. President Trump was only too happy to take credit. It was given a catchy name, globally synchronized growth, and described in the most emphatic of terms. The game changer had arrived, the final end to what had by then been far too many years of lethargy and uncertainty.
What that would’ve meant for the bond market was clear: an explosion in yields. The combination of risky opportunities (recovery), the end of macro slack (inflation), and a resolute central bank aggressively trying to keep it all within bounds (hawkishness) would lead to the BOND ROUT!!!!
It never happened. Nope. Not even when yields were rising, as I wrote in March 2018 amidst what had been true hysteria:
No, when they call for an end to the 30-year bond bull market (though there is no such thing as a bond bull market) they are claiming the reverse to March 2008; a paradigm shift of near or equal potency. An end to the crisis at long last.
The problem with such an idea is that it just doesn’t appear anywhere. Markets have been trading on mild “reflation” sentiment, that’s it. And there really isn’t much conviction behind it, either.
The curves uniformly said that the game changer scenario just wasn’t playing out. By flattening where they did, around 3% nominal, it was a very clear signal that something was still wrong. The same thing that had been wrong the entire time since August 2007.
But, since central bankers had so much riding on a positive outcome, they reversed engineered persistently low bond yields into something they could spin as consistent with globally synchronized growth and the tremendously optimistic factors behind the BOND ROUT!!!!
Yes, term premiums.
According to the conventional theory, since yields weren’t actually rising in the manner they “should” have been the only way to decompose them without disproving the whole game was to claim, without outside corroboration, by subjective statistical modeling only, inflation expectations really were rising, that the bond market really was figuring on much higher short-term money rates due to rate hikes, but that it was also experiencing some revelation of past forward guidance (mostly Delphic, but maybe some Odyessean, too) which only in an Economist’s mind can be priced out as a negative term premium.
Common sense dictated that low and, since November 2018, falling yields would have been the product of persistently low and falling inflation expectations plus persistently low and falling future short-term rates. Term premiums simply wouldn’t factor – unless you are desperately trying to accomplish some other goal than honest analysis.
The thing is, as I pointed out last August as the shockingly “unexpected” drop in yields was happening, we have markets for both of those yield components. They tell us within all reasonable standards what yields are made of. And it wasn’t falling term premiums.
The reason it has to be term premiums is because Bernanke, Janet Yellen, or Jay Powell all say inflation is going to rise and so will short-term interest rates. Guaranteed. Take it to the bank. The Fed will therefore be hiking short-term rates and since they don’t believe the bond market would ever, ever disagree with them, process of elimination, it therefore must be term premiums that are causing yields to fall (when these same people say they should be rising).
Even last August, when the yield curve was at its most public (other than now), these people continued to talk about negative term premiums (related, of course, to R*) seriously. No matter how much and many events go against them, they never, ever change their view. Again going back to what I wrote in March 2018:
March 2008 was a very long time ago, and the technocrats have been repeatedly predicting its mirror positive image almost every year since. Having surpassed a decade now, there is religious fervor about it. It doesn’t matter how much the yield curve collapses on the narrative (the long end, even as it rises somewhat in nominal terms, continues its stubborn and obvious resistance against the idea), the BOND ROUT!!! like actual inflation is certain for tomorrow.
Interest rates have nowhere to go but up no matter how low they keep going. The bond market, like repo problems, are all dissected from this other, deeply unscientific perspective. Central bankers start, not end, with the premise that the world is fixed and awesome – and then seek to validate this predetermined conclusion.
But, because it is a faulty and ultimately incorrect conclusion, it takes some real mental gymnastics and tortured logic to get back to it. Repo is nothing more than technical factors. Falling bond yields are really a good sign, even more negative term premiums. The BOND ROUT!!!! is still penciled in for tomorrow.
No, seriously:
A growing chorus of strategists and money managers is voicing concern as investors charge into government debt at seemingly any price.
The fear is they’re exposing themselves to interest rate risk like never before, risking a precipitous slump on even a modest bump in yields. One breakthrough in the fight against the illness, or a sign the global economy is recovering faster-than-expected, might be all it takes.
That wasn’t written in March 2018 nor March 2019. It was published yesterday, of all days. And here’s the kicker, “The moves highlight belief in some corners that policy action will stoke growth, creating upward pressure for stocks and bond yields.”
Even now, after the clunker that was Powell’s unscheduled fifty, after last year’s three rate cuts that no one bothers to remember, the myth of monetary potency remains imagined as the godhead of the maestro’s legacy. No matter how many times all its central tenets disproven, the cult remains stocked with true believers.
These people – central bankers, Bond Kings, Economists, repo experts – they all claim that because the moon is an ages-old symbol of the nighttime that when it suddenly appears in the sky during the day, as happens, that when it does daytime is actually night. The fact that no one has any lights on is explained by technical factors like some imagined, regression-deduced shortage of light bulbs rather than the obviousness of the real time of day. The Fed moves to renew its abundant light bulb policy rather than recognize and adjust its clock.
Moon = night. QE = success.
So steadfastly convinced that the moon must only be a nighttime phenomenon, repo has to be technical factors rather than the more obvious risk aversion behavior. Low interest rates have to be negative term premiums (how negative will term premiums have to be if, really when, nominal yields are themselves?) instead of the deepest, most sophisticated combination of markets in human history describing, point blank, rapidly rising liquidity risks and the long run consequences of them.
Thus, nothing changes. Nothing did in 2017, that’s for sure. It’s all just the same broken system. That alone is why there was never a BOND ROUT!!! as well as why there won’t be. All these things go hand in hand; broken repo and low yields, risk aversion and the lack of inflationary acceleration.
If it wasn’t for this Greenspan Moon Cult these problems might’ve been solved, at least properly recognized, a long time ago.
Tyler Durden
Thu, 03/05/2020 – 19:25
Digest powered by RSS Digest
Saving...![<!–[if IE 9]><![endif]–>](https://i0.wp.com/www.zerohedge.com/s3/files/inline-images/lebbankassn.png?ssl=1){kind=link}
![<!–[if IE 9]><![endif]–>](https://i0.wp.com/www.zerohedge.com/s3/files/inline-images/MOF.png?ssl=1){kind=link}