Among the banks who made margin loans to Luckin Coffee's founder, one stands out in particular: Morgan Stanley.
Morgan Stanley was part of a consortium of banks that extended loans to Lu Zhengyao across three different funding rounds. Morgan Stanley is said to have put up about $100 million of a total of over $340 million in loans. Credit Suisse Group AG and Haitong International Securities Group were also named as lenders.
The recent fraud allegations at the company caused the loans to default, according to Bloomberg.
Additionally Goldman Sachs said that an entity controlled by Lu's trust reneged on $518 million of margin debt and that lenders had seized up to 76.4 million LK shares as a result. It's unclear whether or not the shares have been sold yet.
Goldman and Barclays' were said to have about $70 million in exposure, each, to the loans. Credit Suisse and other banks that helped the company IPO and subsequently helped it raise convertible debt, have been sued as a result of the stock plunge.
Meanwhile, Morgan Stanley is also one of the largest lenders to Elon Musk, with the Tesla CEO taking $50 million from the bank and mortgaging five homes with their help back in early 2019. The bank was also part of a consortium of lenders to Alibaba's Chairmen back in 2015.
Recall, on April 2, we reported that Luckin Coffee had brought to the attention of the board information indicating that COO Jian Liu and several employees engaged in certain misconduct, including fabricating certain transactions, starting in Q2 of last year. It was estimated that total 'fake' revenue was around $310 million.
Shares immediately crashed:
When will we get back to normal?
If you yearn for the days before COVID-19 swept across the planet, I regret to inform you that those days are gone.
This isn’t a warm and fuzzy blog post telling you that everything is going to be all right. If you’re looking for reassurance that “we’ve got this,” I’m afraid I can’t provide it. This article wasn’t written to console or coddle you, so if that’s what you’re seeking, you’re going to want to stop reading right now.
If, however, you want a reality check on what I believe we’re really facing, I’m not going to hold back. You’ve been warned.
You may have seen some optimistic reports recently that the “worst” is behind us. It would certainly be lovely if that’s the case, but in my opinion, this ordeal is just getting started. I wrote an article previously about how long we could expect our current state of lockdown to last using the timelines of China and Italy as points of comparison, and based on that, we are 17 days in as of the writing of this article on April 8.
The lockdown of Wuhan is expected to last 77 days. If our own timeline continues to echo that of China, then we’re not even halfway there. We have at least 2 months left and this doesn’t include any new clusters when the lockdowns are totally lifted or any second waves. We’ve barely begun living in our current state of purgatory and this will continue (and most likely worsen) for quite some time.
So if you’re seeing this as a little break after which you’ll pick up with your life exactly where you left off, you’re going to be extremely disappointed. You need to adapt now because if you don’t, the future is going to be very hard on you mentally.
Use this time to think about the changes you can make to meet the needs of your family. Learn new skills, practice old ones, and get your head in the game.
Nearly every store in America (the ones that are still open, anyway) has glaring bare spots on their inventory. Who would have expected paper products to be the “gold” of our apocalypse? There was an original run on supplies back in early March when the general public realized, “Hey, this is for real!” and razed store shelves bare. Even though preppers already had most of their supplies put back by the time this happened, we were no less vilified by the media as panicked shoppers got into physical altercations over toilet paper and macaroni.
Government officials told everyone to “calm down” and “just shop for the week.” They promised that if we did, everything would be back in stock in no time. Many of us knew even then that this wasn’t true. The ports in California were empty of shipping containers from China where many of our essential goods are produced. There’s no inventory with which to replenish the inventory.
It’s been more than a month since that first shopping frenzy and unfortunately, supplies are still limited in most parts of the country. A reasonably-sized package of toilet paper can’t be had for love or money, nor can one easily locate cleaning wipes, paper towels, 20-pound bags of rice, and bottles of bleach. Other supplies are available, but sparsely and often in limited quantities: meat, eggs, butter, dried goods like pasta and rice, and canned goods. Prices have approximately doubled on many items.
Don’t expect this to clear up any time soon. Abundant inventory may well be a thing of the past. Many of the products sold in American stores are made in China. Even much of our meat that is a “product of the USA” is processed in China. Obviously, China is going to replenish its own inventory before exporting goods to us. Here’s a list of goods that we import from China that we may not be receiving in the same quantities in the future.
As well, the days of just “running to the store” to replace things or pick up a single ingredient are gone. Now, in many parts of the country, you have to walk through a cordoned off maze to enter a Walmart or Costco store. Only a certain number of people can be there at a time. Shopping means you’re risking your own health if someone else is ill, or you are ill and don’t realize it, you’re risking the health of others. It’s no longer quick, easy, inexpensive, or pleasant in any way.
And the generous offerings of days gone by are disappearing. In some areas, the store may have things you want but because the government there doesn’t consider them “essential,” you won’t be allowed to buy them. Ordering online may soon be your only option for things like craft supplies, clothing, decorative items, and shoes. And even when you order online, it may take quite some time before the goods arrive. Amazon has said it is prioritizing necessities, leaving people with uncertain shipping times.
And it could get even worse. What happens if the US Postal Service stops running? A House committee has warned the USPS could actually be forced to cease operations by June. So, if you think it’s hard to get supplies now, just wait.
Every state with some form of movement restriction (lockdown for lack of a better word) has its own set of rules which are handed down by the respective governors in the form of an executive order. Some states are more restrictive than others and a small handful of states have no restrictions whatsoever.
The other difference between states is the methods of enforcement. Some states have the rules on the books but do little to enforce them. Others are levying fines. One municipality in Louisiana found it amusing to announce the beginning of the curfew with the Purge siren, terrifying people who were already on edge.
Don’t expect this gentle approach to continue. While I don’t think we’ll go full-Wuhan and weld people into their apartments, our Constitutional rights are already being trampled in numerous ways.
Texas and Florida have checkpoints where they’re testing travelers for health problems, escorting them to quarantine, or turning them away. Rhode Island police went so far as to go door-to-door with the National Guard, searching for “New Yorkers” who had fled the virus in their home state.
Most states have closed non-essential businesses and schools for the foreseeable future. Local authorities are beginning to crack down on groups of people and innocent Americans risk being questioned when they leave their homes to walk the dog or go to the store. Last week, thousands of Americans considered essential workers were given “travel papers” to show the authorities if they’re stopped when they are going to work. Travel papers. In the United States of America.
Expect as the rules and enforcement efforts become more stringent for people to balk. As the money being dished out by the government dwindles to a trickle and as promises made by the government get broken, people will become more and more desperate.
Imagine. Your ability to make a living was suddenly taken away through no fault of your own. You’re all but under house arrest. Your government is threatening you with fines, incarceration, and even possible violence. Your family is hungry and you have nothing to feed them. What would you do in that situation?
There’s virtually no way this continues without violence ensuing, either out of rebellion or hunger or possibly both. Fewer and fewer police officers are available to respond as more of them get diagnosed with COVID-19. In New York City, nearly ten thousand first responders are ill. When you put all this together, it’s a recipe for violent crime.
We’re already watching our economy get destroyed right in front of our eyes. Never in history – including the Great Depression – have so many Americans been unemployed. And the fact that they all became unemployed at once is even worse. By the end of March, 7.1 million people had filed for unemployment due to COVID-19.
Many of the people who lost their jobs are the ones who are least able to afford it – hourly workers. Those who work at or around minimum wage are less likely to have a savings account to see them through the rough spot.
Then there’s the fact that the government appears to have lied. Others who became unemployed were initially told they qualified, but now the application process is proving impossible. Gig workers, such as drivers for Uber, Lyft, and Doordash, are being asked to supply pay stubs, something they just don’t have. It just isn’t how it works.
Those who have applied are waiting weeks to hear back from state unemployment programs. Their applications will likely be rejected, leaving them without any income for an indefinite amount of time. The advice for these workers?
A spokesperson for the New York State Department of Labor says the guidance requires workers who are not usually eligible for unemployment benefits to apply to state programs, get rejected, and then apply again for the federally funded pandemic assistance. (source)
So for all the big talk about making unemployment easy to get and simple to apply for, it isn’t working out that way at all for many people.
And of course, the economic issues are bigger than that. Small businesses are in big trouble. Those who are not able to find a way to operate during these difficult times still have overhead and bills. They have rent and utilities for their place of business. Many have inventory payments that were due net-30. Restaurants that can’t make the conversion to takeout and delivery, fitness studios, gyms, clothing stores, and many more independent businesses may never reopen after the government-imposed hiatus.
One by one, families across America are looking at disappearing income, higher prices, and with shelter-in-place orders nearly everywhere, no real way to seek new employment. Unemployment, if and when it comes, is only a short term solution. If ever there as a chance to usher in Universal Basic Income and see people welcome it with open arms, this crisis would be it. Of course, UBI brings with it many problems, not the least of which is a lord-and-serf relationship and a slippery slope toward the social credit system, also brought to us by China just like the COVID-19 outbreak.
Right now we’re looking at short-term effects, but we will feel the effects of this situation for a very long time. In fact, it’s likely to change the economy forever.
As the economy continues to plummet because people are only purchasing the bare necessities, we’ll see other issues arise. How will you pay your rent or mortgage if your job qualifications are in a field that is now considered a luxury? How will you keep your utilities on when you’re not making any money? How will you feed your family, keep a roof over your head, pay for medical care, and maintain a vehicle?
If you’ve never been through personal financial hardship before, you could be in for a terrible reality check when the cost of your most basic essentials is out of reach. But many of us have been there. We can tell you that it often makes you feel powerless – it’s difficult and humiliating, but you can get through it.
If you’re a business owner, how will you keep operating if you have no working capital? How can you hire people if you don’t know whether you’ll be able to keep them on board for more than a couple of pay periods? How can you buy more inventory and can you even acquire that inventory anymore? Will you be able to get the parts you need to repair items if you run a repair service business?
As you can see, there are more questions than answers. (source)
We’re just at the beginning of this bumpy ride, and there’s really no place that it leads except to an economic depression even worse than the one that took place in the 1920s.
For all the people wondering when we’re going to get back to normal, I’m very sorry to say, the answer to that is “never.”
There are jobs lost that are never coming back. Businesses that were successful may never reopen, and if they do, unless they can pivot to cater to necessities, they won’t last long in an economy with widespread unemployment.
And medically speaking, we are a long way from “normal” too.
Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, told a coronavirus press briefing on Monday that the world may never return to the “normal” that was known before the outbreak.
…”When we get back to normal, we will go back to the point where we can function as a society,” he said. He continued, “If you want to get back to pre-coronavirus, that might not ever happen in the sense that the threat is there.” (source)
What’s more, the virus will be back for another wave.
Fauci said Sunday that people must be prepared for a resurgence next year, which is why officials fighting the pandemic are pushing for a vaccine and clinical trials for therapeutic interventions so “we will have interventions that we did not have” when this started. (source)
We could be looking at on and off periods of social distancing for eighteen months to two years before this is over. Here’s what the models suggest:
Under this model, the researchers conclude, social distancing and school closures would need to be in force some two-thirds of the time—roughly two months on and one month off—until a vaccine is available, which will take at least 18 months (if it works at all). They note that the results are “qualitatively similar for the US.”
Eighteen months!? Surely there must be other solutions. Why not just build more ICUs and treat more people at once, for example?
Well, in the researchers’ model, that didn’t solve the problem. Without social distancing of the whole population, they found, even the best mitigation strategy—which means isolation or quarantine of the sick, the old, and those who have been exposed, plus school closures—would still lead to a surge of critically ill people eight times bigger than the US or UK system can cope with…
…How about imposing restrictions for just one batch of five months or so? No good—once measures are lifted, the pandemic breaks out all over again, only this time it’s in winter, the worst time for overstretched health-care systems.
And what if we decided to be brutal: set the threshold number of ICU admissions for triggering social distancing much higher, accepting that many more patients would die? Turns out it makes little difference. Even in the least restrictive of the Imperial College scenarios, we’re shut in more than half the time.
This isn’t a temporary disruption. It’s the start of a completely different way of life. (source)
For the foreseeable future, it appears that this is our life.
At this point, it’s pretty difficult to imagine what a future filled with waves of a pandemic virus, a devastated economy, and great loss will look like.
But some of the things we can expect are intermittent periods of social distancing, periods of interaction. Businesses like restaurants, movie theaters, bars, malls, travel experiences, and sports venues will never be the same and if they survive, will only be able to operate intermittently.
Homeschooling will be a long-term thing – children will not be able to be in a regular school setting during outbreaks.
We’re going to be looking at an entirely different world, one full of six-foot distances, immunity passports, and dystopian tracking methods using our phones.
One particularly unsettling possibility is a picture is painted by Technology Review.
We don’t know exactly what this new future looks like, of course. But one can imagine a world in which, to get on a flight, perhaps you’ll have to be signed up to a service that tracks your movements via your phone. The airline wouldn’t be able to see where you’d gone, but it would get an alert if you’d been close to known infected people or disease hot spots. There’d be similar requirements at the entrance to large venues, government buildings, or public transport hubs. There would be temperature scanners everywhere, and your workplace might demand you wear a monitor that tracks your temperature or other vital signs. Where nightclubs ask for proof of age, in future they might ask for proof of immunity—an identity card or some kind of digital verification via your phone, showing you’ve already recovered from or been vaccinated against the latest virus strains.
We’ll adapt to and accept such measures, much as we’ve adapted to increasingly stringent airport security screenings in the wake of terrorist attacks. The intrusive surveillance will be considered a small price to pay for the basic freedom to be with other people.
As usual, however, the true cost will be borne by the poorest and weakest. People with less access to health care, or who live in more disease-prone areas, will now also be more frequently shut out of places and opportunities open to everyone else. Gig workers—from drivers to plumbers to freelance yoga instructors—will see their jobs become even more precarious. (source)
Never let a good crisis go to waste, right?
This is necessarily how it’s going to happen – it’s only one possible scenario of the many unpalatable futures that are currently emerging. None of them are scenarios that embrace freedom or the joy of anonymity.
The life we knew is not coming back. But it’s better to know this and begin to think about how to mitigate these changes. Think about how you can earn a living, how you can teach your children about freedom in an unfree world, and how you can resist being a figure on a screen, constantly monitored for a spike in temperature.
And who knows? Maybe Americans will return to their independent ways and say, “No more.” But the changes that took place after 9/11 suggest otherwise. Unless a fearful populace can be convinced that freedom is more important than safety, this will lead to more restrictions and some kind of Pandemic Patriot Act 2.0.
Facing uncertainty is always difficult. But by focusing on the things you can do, it can be managed.
I can’t tell you exactly what the future holds. But I can tell you that the lives we lived prior to COVID-19 are not going to re-emerge like nothing ever happened. And every day the lockdowns continue lessens the possibility of that even more.
You need to accept that now so you can best figure out how to navigate the post-COVID world that awaits. This doesn’t mean you’ll never be able to be happy again. It doesn’t mean you’ll lose everything. It means that things are going to be different and if you don’t accept that, your acclimation period will be dangerously long. As Selco always says, the sooner you understand the new rules, the better off you’ll be.
Things will be different.
We will adjust. We will adapt. We will survive.
Hier, Mark Sommers, le second avocat extrêmement érudit de Julian Assange, lors de son audience d'extradition, a tremblé de colère au tribunal. La magistrate Vanessa Baraitser venait de décider que les noms du partenaire et des jeunes enfants de Julian Assange pouvaient être publiés, ce qui, selon elle, est dans l'intérêt d'une "justice ouverte". Sa partenaire avait soumis une lettre à l'appui de sa demande de mise en liberté sous caution liée à Covid 19 (que Baraitser avait sommairement rejetée) pour (...)Nos lecteurs proposent / Julian Assange
With America's small and medium businesses suffering from cardiac arrest now that the economy is in a indefinite coma, it is hardly a surprise that the largest US bank, JPMorgan Chase has been inundated with more than 375,000 requests for $40bn of loans under the $350bn small business rescue scheme, a higher number of applications than any other bank, its consumer head Gordon Smith told President Donald Trump on Tuesday.
It is in this context that the FT reports that Chase has temporarily stopped accepting applications for small business loans outside the government’s Paycheck Protection Program. A Chase spokeswoman told the FT that the bank was now devoting all of its small business underwriting resources to processing these applications and had “temporarily suspended” taking other applications from small businesses. The bank was continuing to process non-PPP applications already in train, she said, and would revisit the issue of new applications next week.
This means that any small business that have borrowing needs beyond the PPP’s limits, or if they want to borrow for purposes beyond wage bills, they would need to seek other facilities or other lenders.
Ok fine, JPM is so busy trying to bail out mom and pop shops, it doesn't have time to deal with anyone else. Why is that a story? Here's why.
First of all, even before the Treasury announced it would hand out PPP loans to eligible business, the issuance of commercial and industrial loans exploded, and in the past month soared by nearly $400 billion, the fastest increase on record.
There is a good reason for this surge, and it has to do not only with a surge in demand but also supply - after all such loans are some of the highest margin products US commercial banks offer, in fact one can argue that it is not prop trading or frontrunning the Fed, but issuing loans that is the primary business of - you know - commercial banks!
Furthermore, loans are not only extremely profitable over their lifetime, they are also secured by assets, effectively eliminating downside risk for the bank lender. Said otherwise, of all bank products, these are the ones US commercial banks want to flow no matter what. One final point: bank lending is the most scalable, as it involves a minimum amount of upfront work which creates an extremely lucrative revenue stream since traditionally only a tiny percentage of loans default, at which point the bank's loan workout teams kick in.
Unless... that's no longer the case.
Which brings us to what is the much more likely reason why the largest US commercial bank has decided to suddenly no longer participate in the one product that is the bread and butter of large US commercial banks.
As a reminder, there is one way that PPP loans are unique - they are guaranteed by the Treasury, which means that JPMorgan carries absolutely no risk when it issues the loan. Worst case, the loan defaults and the bank issues a refund request to Uncle Sam, which then quickly makes JPM whole. Simple enough.
But all those other loans that flooded the system and are still flooding the system... see they don't have a government guarantee, they only have a loan-to-value, and if the value of the underlying assets is virtually nil - as would be the case in a depression and a wave of defaults, well... there goes your supply.
And even though loans normally pay generous interest over their lifetimes, that is not the case if JPMorgan's default assumptions have soared alongside the surge in new issuance.
Said otherwise, the only reason why JPMorgan would "temporarily suspend" all non-government backstopped loans such as PPP, is if the bank expects a default tsunami to hit coupled with a full-blown depression that wipes out the value of any and all assets pledged to collateralize the loans. Futhermore, why issue loans that will default in months if not weeks, just as bankruptcy courts fill up with millions of cases (assuming the coronavirus clears out by then, as the alternative is simply unthinkable - a default tsunami without any functioning Chapter 11 or Chapter 7 process) when JPM can simply stick to the 100% risk-free issuance of government-guaranteed small-business loans which pay a handsome 1% interest, especially if it makes JPM look patriotic by doing its duty to bail out America.
If indeed it is the case that JPMorgan is quietly stepping away from the non-government backstopped lender market, expect all other banks to soon do the same, and other big and not so big US banks such as BofA, Citi, and Wells Fargo to follow just as quietly in JPM's footsteps and halt loans to all small business across America due to fears of a default tsunami.
If that indeed happens, and if America is about to not only find itself locked out of normal-course funding, but flooded with thousands if not millions of corporate bankruptcies, what happens then? Will the Fed expand its functions to become a "bankruptcy court of last resort" for all of America and offer unconditional DIP loans to millions of small and medium businesses, while equitizing existing lenders (and making equityholders whole)?
Since this is unlikely, inquiring minds want to know just how bad will the US depression get over the next few months if JPMorgan has just put up a "closed indefinitely" sign on its window.
I have to wonder if our state government’s lockdown of the population, curtailment of civil liberties, destruction of job opportunities, and denial of basic medical, education, and cultural needs would have been necessary and legally justified had each of us been equipped with our own supply of masks.
At the beginning of the self-declared State of Emergency, Washington Governor Jay Inslee declared, among many other restrictions, that access to basic medical services, such as routine doctor visits, dental procedures, diagnostic services were to be prohibited, ostensibly on the fact that masks should be diverted from these services and conserved to supply hospitals and critical care centers that were lacking in preparedness and woefully out of stock. He further reiterated that because the public will spread corona virus, we were ordered to self-quarantine, resulting in tens of thousands of job losses, an upset in daily life and the general loss of liberty.
Before the next virus crises hits, I propose we adopt a new symbol of American Freedom and Liberty–The N95 Mask–and shield ourselves from the next outbreak of panic legislation and overreach by executive and administrative power
Washingtonians, can debate whether or not the actions of our state government was reasonable or necessary, but the fact is that what is happening here provides a strong lesson in what life is like when freedom is taken away, and of the great importance of preventing a similar environment. It was not the corona virus that led to this, the upheaval was the result of mandates forced upon us by politicians and agency bureaucrats. Surely COVID-19 was the impetus, but government proclamations were the instrument. And that instrument can be wielded in the future regardless if there is an actual threat or enemy if we do not learn how to restrain government overreach.
We are told that we cannot hunt for food, attend funerals for those who are not of our immediate family, attend church, peacefully assemble, purchase clothing, work in some of our chosen occupations, visit public parks and forests, visit our dentist or doctor for needed but not emergency health care, travel outside our areas of residence, and in other states be outside our homes past 9:00 p.m. If we do so we are subject to arbitrary restrictions under threat of arrest. Presumably this was partially due to shortages of masks and the transmission potential of viruses. Health care workers are permitted to attend to COVID-19 patients, is there any reason we cannot live a lifestyle of our own choosing if we all instead simply adorned ourselves with N95 masks when in the public arena or at work?
I find it difficult to believe that the Courts here would not frown upon the governor and state agencies claiming a legitimate state interest in curtailing liberty as we have seen recently had each of us had the universal ability to wear masks and go about our lives as we did previously. Had hospitals not failed to adequately stock their warehouses with PPE supplies such as masks and other sundries and not relied on the economics of “Just in Time” supply chain strategies the state could not fully justify the mandate for dental offices and basic health care providers to cut services on the rubric of masks being in short supply. How could the state also justify restricting the public’s right to assemble in public, keep their shops open, or engage in their chosen profession when we each have masks that would make transmission of disease negligible? The Courts do not view the power of government to restrain freedom during an emergency as absolute.
Rather than punishing society and coercing us under penalty of arrest through proclamations of emergency, we should instead demand that we be accomodated to protect our liberty by allowing us or giving each household a supply of protective masks and gloves.
We might actually save more lives than we are by treating the symptoms of disease at the expense of jobs and freedom.
Perhaps we should go from politicians promising a chicken in every pot, to a box of N95 masks in every medicine cabinet. It would actually be much cheaper in the end than wrecking our economy and our livelihoods.
Over the past month, the American economy has collapsed into a depression, with the most significant unemployment spike in history. Millions of people have just lost their jobs, and as we've been documenting, food bank networks across the country are becoming overwhelmed.
We recently said that some food banks had seen an eightfold increase in the number of people asking for food. The National Guard has been deployed to food banks in Cleveland, Pittsburgh, and Phoenix, to make sure supply chains do not breakdown, which if food shortages did materialize, it could lead to a "social bomb," triggering civil unrest.
"I've been in this business over 30 years, and nothing compares to what we're seeing now. Not even when the steel mills closed down did we see increased demand like this," said Sheila Christopher, director of Hunger-Free Pennsylvania, which represents 18 food banks across 67 counties.
Today's food bank lines resemble 'breadlines' from the 1930s. However, this time around, Americans are not standing around city blocks waiting for soup, they're sitting in mile-long traffic jams outside donation centers waiting for a care package.
The run on food banks was first documented on March 30. Drone footage captured a traffic jam of hungry Americans waiting to pick up food aid at a facility in Duquesne, Pennsylvania.
As a reminder, to visualize how America went from "the greatest economy ever" to "Greater Depression," in just one month, take a look at the chart below:
The run on food banks will only increase as the depression worsens in April.
On Monday, a drone captured dramatic footage outside a South Florida food bank that measured "miles-long" row of cars, reported Daily Mail.
The footage is from outside the Feeding South Florida food bank, located in Broward County.
The food bank reports a 600% jump in the number of people in recent weeks as South Florida's services economy collapsed, resulting in hundreds of thousands of job losses.
Stephen Shelley, president and CEO of Farm Share, which distributes food to food banks, churches, schools, and other nonprofits, said the amount of people asking for food at food banks is unprecedented.
"The volume is at a level we've never seen before," Shelley said, adding that his company is running at full capacity at the moment to handle the demand surge. He said the amount of food that he is moving to keep pace with demand is "overwhelming the system."
A perfect storm is brewing deep in America, one where overwhelmed food bank networks could see supply chain disruptions that could trigger food shortages in various low-income regions, that would undoubtedly leave many people hangry – and possibly incite social unrest.
Just in case Nomura's quant Masanari Takada wasn't clear enough yesterday when he said that the current rally, which pushed the S&P back into a bull market from its March 24 lows was nothing more than a giant "bear squeeze" rally, driven by panicked exits from shorts that investors accumulated during the downturn, he doubled down today when in a note published overnight, he said that "the present rally should best be viewed as an unenthusiastic, inorganic bear market rally" and that "the stock market rebound across major world markets is being led by exits from bearish trades, including a squeeze on short positions held by systematic traders."
Echoing Morgan Stanley which found that virtually nobody is participating in the current bear market rally, the Nomura quant writes that global equity market remain jittery as "most investors (apart from some with short investment horizons) are still in standby mode", and in fact, "some may be inclined to sell whatever rallies come along."
Meanwhile, as Takada shows in the charts below, the pick-up in investor sentiment looks like no more than the sort of spontaneous rebound in sentiment that one would normally expect under the circumstances.
As a reminder, looking at investor flows, Morgan Stanley was surprised that in the recent surge higher, there had been virtually no participation on the buy side, and even more perplexing, almost no short covering either, especially in the latest leg higher:
Yet while there is nothing explicitly new in the above which we had presented previously, where Takada did provide a new perspective was his estimate of how long this bear market rally will last. To do that, he analyzed the transition in the bullish flows "baton" between CTA and fundamental investors, warning that "should the baton get dropped, we would expect
CTAs’ net buying of NASDAQ 100 futures to wind down by 22 April."
We think that periodically checking CTAs’ net position in NASDAQ 100 futures may give investors a sense of how long the bear market rally might last... It appears that CTAs were quick to swing long on NASDAQ 100 futures. To anyone looking to gauge the strength of technical investors’ inclination to buy, CTAs’ net position in NASDAQ 100 futures can be read as a leading indicator of what may happen in other equity futures markets.
Nomura expects CTAs to continue "tentatively chasing the market up for the moment, with a push from the decline in stock market volatility." Futures prices have increased more quickly than the pace of growth in CTAs’ net long position would suggest, but even when adjusting for this, CTAs should remain inclined to buy unless the NASDAQ 100 drops down into the 7,000-7,500 range.
However, as Takada shows next, the record of periods in which CTAs have accumulated long positions in NASDAQ 100 futures since 2009 shows that on average, net buying by trend-following investors has tended to mark an initial peak about 14 trading days after the net buying started. This time around, we estimate that CTAs started going long on 2 April (or around then), so if precedent is any guide, Nomura expects the systematic buying to fizzle out by April 22 at the latest.
But while CTAs may have already gone long, fundamentals-oriented growth funds and macro funds are far more cautious, and as we showed earlier today, still have a negative net exposure. This is important, because the upward momentum behind a technical rally tends not to stabilize until heavyweight fundamentals-oriented investors like these start chasing the market up.
For the coming week or two, then, the critical thing to look out for is whether the CTAs that are currently driving the rally manage to smoothly pass the baton to fundamentals-oriented investors without anyone dropping it. And, as Nomura concludes, "should the baton get dropped, we would expect CTAs’ net buying of NASDAQ 100 futures to wind down by 22 April."
WHO Director-General Tedros Adhanom Ghebreyesus fired back at President Trump on Wednesday - warning world leaders not to politicize the response to COVID-19 lest it result in "many more body bags.
.@WHO Director General Tedros Ghebreyesuson attacks Trump for noting the org bends over backwards to protect China: “Stop pointing fingers” unless you “want more body bags … it’s like playing with fire” pic.twitter.com/mTwFPqpBdE— Tom Elliott (@tomselliott) April 8, 2020
"No time to waste. Let’s focus on saving lives. Collaboration across party lines important to ensure national unity to fight the virus more effectively," Tedros tweeted in a Wednesday follow-up.
No time to waste. Let’s focus on saving lives. Collaboration across party lines important to ensure national unity to fight the virus more effectively. National unity is a foundation for global solidarity. When we do this, we quarantine political covid. Stop politicizing #COVID19— Tedros Adhanom Ghebreyesus (@DrTedros) April 8, 2020
The comments came in response to a question during a Wednesday WHO press briefing about President Trump's recent comments about putting a "very powerful hold" on US funds supplied to the WHO - a move backed by Sen. Lindsey Graham (R-SC).
Notably, the US pays approximately 22% of the WHO's budget - or just under $116 million in 2020, not including voluntary additional contributions (which in 2017, added $401 million to the budget according to an analysis by the Kaiser Family Foundation).
"Last year the US paid $452 million to the World Health Organization and China paid $42 million," said President Trump during tonight's press conference, adding that
"The year before it was $500 million and China paid less than $40 million... and they have to get their priorities right, that everyone has to be treated properly... as it doesn't seem that way, does it...in the meantime we are holding back as it doesn't seem fair."
Recall that the WHO chastised Trump's late-January travel ban, while also promoting Chinese propaganda that there is no human-to-human transmission of COVID-19.
* * *
Sen. Lindsey Graham (R-SC) is backing President Trump's decision to reassess US funding to the World Health Organization (WHO) in the next coronavirus appropriations bill unless the organization makes top-down changes to leadership.
"I’m not going to support funding the WHO under its current leadership," Graham told Fox News, adding "They’ve been deceptive, they’ve been slow, and they’ve been Chinese apologists. I don’t think they’re a good investment under the current leadership for the United States, and until they change their behavior and get new leadership, I think it’s in America’s best interest to withhold funding because they have failed miserably when it comes to the coronavirus."
Lindsey Graham says he’s going to take the burden off the President and use his position on the appropriations subcommittee to eliminate any money for the WHO in the next appropriations bill pic.twitter.com/PnxLmcWaYG— Acyn Torabi (@Acyn) April 7, 2020
Graham's comments follow President Trump's condemnation of the WHO on Tuesday - when he repeatedly threatened to cut funding to the UN-linked body for being "very biased towards China" as well as 0its terrible response to COVID-19.
"We’re going to put a very powerful hold on it, and we’re going to see. It’s a great thing if it works, but when they call every shot wrong, that’s not good," said Trump - only to later soften his tone and say he's still considering the move.
The U.S. is the biggest contributor to the WHO's budget in the world. Trump's fiscal 2021 budget request proposed cutting funding $122 million to about $58 million.
The WHO has continually voiced warnings about the dangers of the novel coronavirus since it first appeared in Wuhan, China, last December. The organization declared that the virus's outbreak was a public emergency of international concern in January and then declared it was a pandemic in mid-March.
But the organization said in early February that widespread travel bans were not necessary to prevent the outbreak. Trump on Tuesday accused the WHO of disagreeing with his decision to enforce travel restrictions on incoming flights from China. -The Hill
Last week Sen. Martha McSally (R-AZ) demanded the resignation of WHO Director-General Tedros Adhanom Ghebreyesus for "helping Communist China cover up" the coronavirus outbreak which has blanketed the world.
Two weeks ago, President Donald Trump signed the largest stimulus bill in U.S. history: more than $2 trillion.
For once, both Republicans and Democrats agreed. The Senate voted 96-0. The House didn't even bother with a formal vote.
At the White House, a reporter asked the president, pointing out that the bill includes $25 million for the Kennedy Center, "Shouldn't that money be going to masks?"
"The Kennedy Center has suffered greatly because nobody can go there," Trump responded.
"They do need some funding. And look -- that was a Democrat request. That was not my request. But you got to give them something."
"Something" they got. The bill includes $25 million for Congressional salaries, $50 million for an Institute of Museum and Library Services and lots of other wasteful things.
Only a few politicians were wary.
Rep. Thomas Massie complained that he wasn't even allowed to speak against the bill.
Rep. Alex Mooney asked:
"How do you pay for it? Borrow it from China, borrow it from Russia? Are we going to print the money?"
Those are good questions.
Our national debt is already $24 trillion. Now it will jump, percentage-wise, to where Greece's debt was shortly before unemployment there hit 27%.
Greece was bailed out by the European Union.
But the United States can't be bailed out by others.
How will we pay off our debt? That's the topic of my new video.
There are really three options:
1. Raise taxes.
2. Print money.
Let's consider each:
But raising taxes on the rich often kills the wealth and jobs some rich people create. And it won't solve our debt problem. Even if we took all the billionaires' wealth -- reducing their net worth to zero -- it would cover only an eighth of our debt.
This belief, called Modern Monetary Theory, destroys lives.
Zimbabwe's dictator tried it. Eager to spend more money on wars, higher salaries for government officials and luxury for himself, he had his government print more money. But that meant more money pursued the same goods. That caused explosive inflation. Soon, a $2 bag of onions cost $30 million Zimbabwean dollars.
The more money the government printed, the more inflation there was. They eventually even issued 100 trillion dollar bills. Today those 100 trillion bills are worth about 40 cents.
Inflation wrecked lives in 1920s Germany, Argentina and Russia, and in modern-day Venezuela, too.
Defaulting on your debt wrecks economies, too. When Argentina defaulted, unemployment rose to 21%.
Once you're deep in debt, no option is good.
How did we get to this point?
Presidents have talked about the dangers of debt for decades. But they didn't deal with it; they just talked about it.
"We have piled deficit upon deficit, mortgaging our future and our children's future," warned Ronald Reagan. "We must act today to preserve tomorrow."
Bill Clinton said, "We've got to deal with this big long term debt problem."
Barack Obama called driving up the national debt "irresponsible" and then proceeded to do exactly that.
Donald Trump complained that Obama "doubled" the nation's debt. But now, under Trump's presidency and the new CARES Act, our debt will grow even faster.
This will not end well.
So far, the deficit spending hasn't done enormous harm. But it will. You can stretch a rubber band only so far, until it breaks.
Our debt will wreck our children's lives.
Yet, today politicians mostly talk about spending more.
* * *
John Stossel is author of "Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media." For other Creators Syndicate writers and cartoonists, visit www.creators.com.
Amid asset sales, boardroom battles, and seemingly endless litigation, WeWork has decided to jump on the "well, why should we have to pay according to a signed contract when no one else is" bandwagon and is reportedly skipping rent payments on numerous properties.
Amid an effort to aggressively cut costs as the economic downturn crushes any revenues, The Wall Street Journal reports, according to people briefed on the matter, that WeWork has yet to mail in its April rent check at numerous properties while it tries to renegotiate leases. (Quick aside - WeWork mails in its rent-checks?)
“WeWork believes in the long-term prospects of our locations and our relationships with landlords across the world,” a WeWork spokesperson said in a statement.
“Rather than implementing a companywide policy on rent payments, we are individually reaching out to our more than 600 global landlord partners to work in good faith towards finding asset-specific solutions that benefit all parties involved.”
WeWork isn’t treating all landlords the same. While some reportedly say they have been paid, others say they are still waiting for their checks.
One glance at the company's bond price tells you all you need to know about the cash situation at this once almost $50 billion market cap mockery of an office space company.
Bloomberg's Gillian Tan reports that WeWork executives have been pitching solutions including revenue-sharing agreements. Such deals would give landlords the chance to collect a portion of future revenue generated by each property. Early indications are that landlords are reluctant, people with knowledge of the matter said last week.
Mark it zero, Masa-san!
Historically speaking, it is hard for Americans to see how their liberties have been taken away. With the COVID-19 pandemic spreading across the country, hopefully that will no longer be the case.
In Crowley, Louisiana police are using “Purge” sirens to warn people to stay indoors during the COVID-19 pandemic.
In an effort to alert residents to the parish-wide curfew in Acadia Parish, Crowley Police rode around town broadcasting an alarm signal at 9:00 last night, but it’s not what anyone expected. In a video provided to KATC, the audible alarm from Crowley Police is actually the alarm sound from the successful film franchise The Purge.
Crowley Police will ticket people for going outside without documentation.
“After several days of this, the police department says they will begin giving out citations to violators. If you are headed to work or leaving work, you must have documentation from your employer.”
In Louisville, Kentucky a judge has ordered that people who ignore stay-at-home orders to wear GPS ankle bracelets.
“A judge has ordered one resident to stay at home after refusing to self-quarantine. CNN affiliate WDRB reports that the person, identified as D.L. in the court order, is living with someone who has tested positive for the illness and another person who is a presumptive case, according to an affidavit from Dr. Sarah Moyer, director of the health department.”
In Vermont, the Attorney General’s Office ordered police to stop setting up checkpoints and roadblocks to detain motorists who do not comply with stay-at-home orders. In Maine, a Franklin County Sheriff said they will not arrest motorists who do not comply with stay-at-home orders, “this is not Nazi Germany or Soviet Russia where you are asked for your papers.”
In Massachusetts and Alabama the government is giving law enforcement the names of anyone suspected of having COVID-19.
In Rhode Island, the state police are stopping people with New York state license plates and the National Guard is going door-to-door looking for New York state residents. In New York City the mayor has authorized the NYPD to fine people $500.00 for not observing social distancing.
In New Jersey, the Bergen County DA’s Office ordered police to stop requiring suspected COVID-19 patients to post signs on their homes. Police in Pennsylvania fined a woman $200.00 for taking a drive, and in Baltimore, Maryland the National Guard is being used to enforce COVID-19 curfews.
In Florida, Delaware, and Texas police are authorized to stop and question out-of state motorists. In Chicago, the mayor has threatened to arrest people for violating stay-at-home orders. Police in Rio Grande Valley are setting up roadblocks and 24/7 patrols to fine people for ignoring stay-at-home orders, while police in Detroit use video surveillance planes to fine people $1,000 and up to six months in jail for not observing social distancing. (To find out about Baltimore police surveillance airplanes, click here.)
In Brighton, Colorado a father was arrested for playing T-ball in a park with his 6-year-old daughter and wife because he did not observe social-distancing.
She’s like, ‘Daddy, I don’t want you to get arrested.’ At this point I’m thinking, ‘There’s no way they’re going to arrest me, this is insane.’ I’m telling her, ‘Don’t worry, Daddy’s not going to get arrested. I’ve done nothing wrong. Don’t worry about it,’ and then they arrest me.
As AP News warned, governors are using COVID-19 to further their political ambitions and help them win re-election.
“Now governors have been finding a way to introduce themselves, both politically and personally. Society won’t be the same for a long time after this, and that includes our politics,” Republican strategist John Weaver said. “I think you’ll see a rise of governors at the top of everyone’s mind when we get to that point in four years, there’s no doubt about it.”
If ever there was a reason to question political motives during COVID-19, I give you Sleepy Hollow. The same village made famous for people being afraid of a headless horseman are now petrified of leaf blowers.
The Village of Sleepy Hollow is temporarily banning the use of leaf blowers to make sure residents are safe during the coronavirus pandemic. Village officials say since the virus is a respiratory condition, having things blown into the air could create a hazmat situation.
Talking about absurd COVID-19 responses, the U.S. Department of Justice wants to give U.S. law enforcement the power to detain people indefinitely during an emergency.
The Justice Department has quietly asked Congress for the ability to ask chief judges to detain people indefinitely without trial during emergencies — part of a push for new powers that comes as the novel coronavirus spreads throughout the United States.
The Executive Director of the National Association of Criminal Defense Lawyers (NACDL) is “terrified” that police could hold people indefinitely for ignoring stay-at-home orders.
“So that means you could be arrested and never brought before a judge until they decide that the emergency or the civil disobedience is over. I find it absolutely terrifying. Especially in a time of emergency, we should be very careful about granting new powers to the government,” Norman L. Reimer, executive director of the NACDL said.
As Megan Fox from PJ Media said,
Someone has to stand up to the unconstitutional directives that are being handed down daily by government officials and it will fall on the sheriffs to uphold what they know to be their legal and lawful duties, none of which involve trampling the rights of citizens.
We must remain vigilant and demand that the measures taken to stop COVID-19 are only temporary or we risk living in a country that suspends our Constitutional rights whenever they deem it necessary.
Unlike the Phase 3 of the fiscal stimulus, which represented $2.2 trillion in bailout aid for America's small and medium business, and which passed through Congress without a glitch if with some delays, the next - Phase 4 - stimulus sought by Republicans may face far greater hurdles.
According to Reuters, House Speaker Nancy Pelosi said on Wednesday that $250 billion in coronavirus relief for small businesses desired by Republicans would not pass the House of Representatives on its own under current procedures, which require a unanimous vote of those present while most of Congress is out of town.
The reason why the aid would not get unanimous Democratic support is because Pelosi and Senate Democratic Leader Chuck Schumer are demanding that more aid for hospitals, local governments and food assistance be added to the small business aid proposal that the Trump administration and Republicans want passed this week.
Pelosi was speaking in an interview with National Public Radio. Asked if there are limits on spending for coronavirus relief, she said "No, we have to spend what we need."
Which leaves republicans with two options: delay the passage of the next stimulus indefinitely, even though according to many the current $350 billion allocated to the PPP small business rescue program will be insufficient, or concede to Democrats and add far more pork to the bill.
Considering that according to Goldman, the US deficit will soar to 18% of GDP in 2020...
... and public US debt will hit 99% by the end of FY2020 and to 108% of GDP by 2023 from the current level of 79%...
... one can ask "what difference does it make?" After all, going forward the Fed will likely have to monetize all debt in perpetuity or risk losing control of long-term rates. In fact, one can probably also ask: why should anyone pay taxes ever again?
The Wall Street Journal published a new monthly survey that outlines the severe economic impact of shutting down cities across America to mitigate the spread of the COVID-19 pandemic.
The survey of 57 economists from April 3-7 includes 14.4 million job losses and a surge in unemployment through spring, with the possibility of a recovery in the second half of the year.
Economists told The WSJ that the U.S. labor market is in free fall, could see an unemployment rate as high as 13% in June, and roughly 10% by December. As of March, the jobless rate was elevated at 4.4%.
The outcome of the virus pandemic spreading across the country with 399,929 confirmed cases and 12,911 deaths, has turned into an economic and social crisis.
A depression will unfold in the second quarter, and the survey expects GDP to contract by at least 25% on an annual rate.
"This is the worst external shock in anyone's living memory; it is as if a meteor hit the Earth and now we have to put it back on its axis," said Grant Thornton economist Diane Swonk.
Most of the economists, or at least 85% that were surveyed, believe an economic recovery will be seen in the second half of the year. Their estimates are between annualized growth rates of 6.2% and 6.6% in the third and fourth quarters, respectively.
Here's what they believe growth will be on the full year:
"For the full year, measured from the fourth quarter of 2019 to the fourth quarter of 2020, economists expect gross domestic product to shrink 4.9%. That compares with expectations of 1.2% growth just last month. Full-year growth was 2.3% in 2019. Economists now forecast full-year growth of 5.1% in 2021," said The WSJ.
Many of the economists that were surveyed were split among the shape of the recovery in the second half.
"Can't retire 20% of the economy and expect rapid rebound," said economists Matthew Fienup and Dan Hamilton of California Lutheran University, who was part of the 45.1% of respondents expecting a U-shaped recovery.
The economists also said the Federal Reserve would hold interest rates on the zero lower bound through 2021. The average forecast in rate policy was a 25bps increase by the end of 2021.
The monthly survey showed 100% of economists thought the virus would be a "significant drag" on full-year economic growth in 2020," up from 75% a month earlier.
"The economy will remain shellshocked at least this year," said Loyola Marymount University economist Sung Won Sohn. "No time to raise rates."
When it comes to corporate profits, economists expected earnings across companies in the S&P 500 to plunge 36% in the second quarter versus the same period last year. On an annualized basis, economists believed earnings would decline by at least 19%.
The WSJ notes, "One thing economists don't see coming are further sharp selloffs in financial markets."
Economists are making a bold statement in calling a possible bottom in markets as the economy plunges into depression.
Odd that almost every economist surveyed expects a recovery in the second half. What if that is not the case?
Maybe these economists need to read the latest WTO and OECD reports listed below. It would undoubtedly change their minds about recovery this year...
And a kindly reminder from Sven Henrich via NorthmanTrader.com, "January WSJ survey: 100% expect no recession in 2020."
January WSJ survey: 100% expect no recession in 2020. https://t.co/SJLGLGvcCN— Sven Henrich (@NorthmanTrader) April 8, 2020
It appears these so-called experts are blinder than bats...
Authored by Justin McCarthy of Gallup,
Three in four Americans say they have completely (28%) or mostly (47%) isolated themselves from people outside their household.
The percentage who are self-isolating rapidly increased between March 16 and 26, but has shown only modest change since then.
These results are from a probability-based Gallup Panel survey, conducted online April 3-5. Currently, 16% say they are partially isolated, while 6% have isolated a little. Few Americans (3%) say they have not made any attempt to isolate themselves at all.
In the initial Gallup Panel survey, conducted March 16-19, Americans were about equally likely to report being isolated versus not isolated. The percentage who reported self-isolating increased to 64% in the week that followed, reaching 69% one week later.
Gallup found some differences by subgroup:
The more dense the area where a person lives, the more likely they are to self-isolate. Residents of urban areas (84%) are more likely than those living in suburbs (79%) and rural areas (67%) to say they are completely or mostly isolated from people outside their home.
Among political party identification groups, Democrats (84%) are most likely to report being completely or mostly isolated. Most independents (73%) and Republicans (66%) have isolated themselves to the same degree.
Americans who are not currently working (84%) are more likely to report isolation than those who are currently working (69%).
It's that time again.
As the global coronavirus case total passes 1.5 million, President Trump and the VP Mike Pence-led coronavirus task force will deliver their big Wednesday night update some time after 5 p.m.
Et pendant que vous vous crêpez le chignon autour du Pr Raoult avec vos diplômes de médecine en chocolat...
Il manque toujours des moyens dans un des pays les plus riches au monde, classé sixième en termes de pourcentage de millionnaires.
Ils sont capables de construire des portes-avions "au cas où" il y aurait une guerre, mais pas des hôpitaux "au cas où" il y aurait une épidémie ? Mais qui sont ces abrutis ?
Je n'ai pas entendu clairement que le pouvoir avait l'intention d'inverser ses priorités (...)
During the financial crisis, when most hedge funds suffered catastrophic returns forcing many to gate their investors, Mark Spitznagel, who is perhaps best known for the phrase "I spend all my time thinking about looming disaster", made what the WSJ reported was "huge gains" with his "black swan"-targeting hedge fund Universa Investments, which not incidentally is advised by Nassim Taleb. Then, in August 2015 during the infamous ETFlash crash, his fund reportedly made a gain of about $1 billion, or 20%, during a single, turbulent day when the VIX briefly broke and ETF trading went haywire for several hours.
Fast forward to March when the biggest "looming disaster" in decades finally struck, and when Universa hit the proverbial payday it was waiting for ever since the inception of its tail-hedge fund - which is basically deep out of the money puts which roll every month - in March 2008.
"It is a good time to reflect again on how we have performed for you as a risk mitigation strategy, if for no other reason than to give you some reassurance and even solace following one of the scariest months for markets on record" Spitznagel writes in his investor letter sent out to clients earlier today, and then delivers the good news: the fund generated a 3,612% return on invested capital in March, and a phenomenal 4,144% year to date.
"These returns likely surpass any other investment that you can think of over the period you have been invested with us. Kudos to you for such a sound “tactical” allocation to Universa", Spitznagel said, taking a well-deserved victory lap, adding that the fund was able to monetize the bulk of the spikes in P&L that it experienced in March, "while keeping downside protection in place throughout, should the market continue lower—one of our tricks of the trade."
Spitznagel went on: "the standalone Universa tail hedge strategy’s life-to-date mean annual net return on invested capital (expressed as returns on a standardized capital investment since inception in March 2008, and using yours from your start date) has been +76% per year. (During this period, as a reminder, the SPX has gained 151%. Are we really such an “über-bearish” strategy?).
In explaining how the Universa fund adds fat-tail protection to a diversified portfolio, Spitznagel writes that:
We have managed to consistently achieve our aim of raising our risk mitigated portfolio CAGRs by lowering risk, pandemic or no pandemic. And, as I have said many times before, it has worked so well simply because of the mathematics of compounding: the big losses are essentially ALL that matter to your rate of compounding, not the small losses—and not even the big or small gains. The big losses literally destroy your geometric returns and, equivalently, your wealth, through what I have called the “volatility tax.” For risk mitigation to be effective, it therefore must focus primarily on mitigating those big, rare losses (the tails). More specifically, risk mitigation must have a very high “bang-for-the buck” in a portfolio when the chips are down in a crash, relative to the portfolio cost of that “buck” the rest of the time—a very “convex” (tail) hedge. None of these other competing strategies have shown that.
Spitznagel also included a performance scorecard, which showed that a portfolio invested 96.7% in the S&P500 and just 3.3% in Universa's Tail Hedge fund, would have had a positive return in March, a month when the S&P dropped 12.4%. The same portfolio - which eliminates the adverse effect on compounding from downside shocks - would have produced a 11.5% CAGR since inception in March 2008 versus 7.9% for the S&P500.
"To put this in perspective, that value-added to the SPX portfolio CAGR life-to-date from a 3.33% allocation to the Universa tail hedge is mathematically equivalent to a 3.33% allocation to an annuity over that same period yielding 102% per year. Let that one simmer for a minute. We are not just another little incremental source of alpha within your portfolio; nor are we just some exotic alternative to a fixed income allocation", the Universa CIO wrote explaining his risk management philosophy.
"Remember, anyone can make money in a crash; it’s what they do the rest of the time that matters. The totality of the payoff is what creates the portfolio effect."
There is more on how Universa's "risk-mitigation" strategy worked to offset the sharp March losses in the pdf attached below, but what we found more interesting was the brief outlook on markets and the global economy from the Universa CIO, which while pithy, is sufficient concise to recap everything one needs to know about the "market" in the years to come:
Looking ahead, the world remains very much trapped in the mother of all global financial bubbles. This is obvious, a given. Markets were priced for “perfection,” and now, following even more of the greatest monetary stimulus in human history (much of it in the span of just the last few weeks), they’re still priced for “really good”—still very expensive.
So this is far from over; the current pandemic is merely threatening to pop the bubble. (And, as we all can plainly see, the powers that be are likely running out of ways to keep the bubble inflated.) Make no mistake, it’s the systemic vulnerabilities created by this unprecedented central-bank-fueled bubble, and the crazy, naïve risk-taking and leverage that accompanies it, that makes this pandemic so potentially destructive to the financial markets and the economy.
Is the bubble now popping? When I look deep into my magic crystal ball, it clearly says to me, “There are no magic crystal balls!” And, moreover, those who grandiosely tout their crystal balls need to be avoided in the interest of preservation of capital. Whose crystal ball saw this past quarter coming? Sure, the global pandemic risks were there for all to see (as our colleague Nassim Nicholas Taleb pointed out in his book The Black Swan, some 13 years ago), but no one can ever really see what’s next, what lies around the corner. Despite our performance, that has included us. One’s risk mitigation strategy must reflect that reality.
But if history and economic logic are any guide, if the pandemic doesn’t pop this bubble then, of course, it will be something else that eventually accomplishes this. That’s my Cassandra speech (again).
Full Universa letter below:
Last week, I read an online article in my local paper telling of a 68-year-old gentleman who died from COVID-19. In the article, it described how the man had retired in the last year because of cancer. Then, two days later, my wife asked me if I had read the article. When I said that I had, she responded:
“Scary, huh? He was healthy.”
“What do you mean? He had underlying issues“.
And when we logged-on to read the article again, it was tagged as “updated 7 hours ago” and many of the words I’d read two nights before were…. gone.
In the paragraph where it said he retired, it mentioned nothing of his cancer and instead described how the man was “active and enjoyed riding his bike”.
Of course, even a tin-foil-hat-wearing blogger like me would have a hard time believing that any conspiratorial pressure could be applied to my local paper. Perhaps the family requested the change or the original article was in error. It’s hard to say.
But I do know what I read. And, the internet archive “Way Back Machine” showed the URL as being updated on March 31, 2020 and again on April 2, 2020, but the initial article was not archived. Now I wish I’d have taken a screenshot of, or printed, the original post.
Because of, as delineated in my last six Coronavirus articles, the dubious origins and timing of the outbreak, the coinciding events, how COVID-19 has been reported, and the questionable responses of governments and organizations around the world.
Everything is suspect and it’s not difficult to differentiate between reporting and propaganda; because there’s an agenda behind propaganda. Always an agenda. That said, it is difficult to discern truth in a bubble – which is basically what America has become – an electronic bubble full of colorful programming and strategic deception.
You can call me a conspiracy theorist and that’s fine; although I prefer critical thinker. For example, is it a “conspiracy” when a pandemic “exercise” undertaken by specific “players” is publically known? As stated in my last article:
….. there have been many oddities during the Coronavirus outbreak. One peculiarity is how the same players consistently appear to advance the narrative; to wit, Bill Gates, John Hopkins University, the Centers for Disease Control (CDC), and the World Health Organization (WHO). These show up almost everywhere Coronavirus tales are told and, perhaps unsurprisingly, participated in the October 2019 Event 201 Pandemic Exercise – a near-exact simulation which took place a mere few weeks before the current COVID-19 outbreak went viral globally.
Even on the Event 201 website the “prominent individuals from global business, government, and public health” who participated were identified as “players” which, in fact, should be interpreted as practicing for the real thing.
Again, please note how an entity entitled the “World Economic Forum” co-sponsored the Event 201 exercise along with the Bill and Melinda Gates Foundation & John Hopkins University:
The Johns Hopkins Center for Health Security in partnership with the World Economic Forum and the Bill and Melinda Gates Foundation hosted Event 201, a high-level pandemic exercise on October 18, 2019, in New York, NY. The exercise illustrated areas where public/private partnerships will be necessary during the response to a severe pandemic in order to diminish large-scale economic and societal consequences.
And now consider this article dated March 31, 2020 describing a “project” the World Economic Forum “has christened” as “Known Traveler Digital Identity (KTDI)”.
KTDI is a “surveillance-by-design” vision for tracking and control of travelers…
KTDI would use a blockchain-based distributed ledger to bind together, through an app on a traveler’s mobile device, all of the following data:
– Biometrics (initially facial images, possibly also fingerprints, etc.)
– Government-issued ID credentials (passport number, etc.)
– Travel history including logs of border crossings, hotel stays, and possibly also car rentals and/or other events
– Purchase logs and possibly bank account information and/or other financial and transaction records
– Pre-crime predictive “risk assessment” and profiling scores generated at each “intervention” point before and during each trip or transaction
Additionally, Microsoft founder Bill Gates has been all over the news lately advocating for new initiatives such as “disease surveillance, including a case database that is instantly accessible to relevant organizations, and rules requiring countries to share information” and “Digital Certificates to be issued to those who have been tested for COVID-19.”
Gates has also recently offered his unsolicited national advice on “best-case scenarios” for American “total isolation” measures as well as “social distancing” and “mandated shutdowns”. Moreover, during a CNN Global Town Hall on March 26, 2020 Gates outlined three steps for the U.S. Government’s response to the COVID-19 outbreak to include lockdown, testing, and vaccination.
Did you vote to elect Bill Gates to advise on public policy in America? Because I didn’t. Was he appointed by someone? Because, paradoxically, we’re witnessing the founder of a software company that spies on its customers now advising a government that violates the constitutional rights of its citizens.
Should it be any surprise, therefore, the response to COVID-19 has served the Orwellian ends of tyranny, centralization, and control?
In an article from early March 2020 entitled “Six Reasons Why Covid-19 Fails The Sniff Test”, I wrote:
It also has become completely obvious that certain names/entities consistently appear in the COVID-19® coverage (in both the mainstream and alternative media): The Gates Foundation, John Hopkins University, and UK’s The Guardian.
And a recent article posted a few days ago described nine governors of U.S. states “resisting stay-at-home orders” and how the pressure brought to bear on them has been formidable; perhaps not unlike the pressure American citizens now face if they don’t wear masks in public. Contained in the above-linked article is a map courtesy of The Guardian, Event 201 sponsor John Hopkins University and, apparently, George Orwell:
Notice how the polka-dots are blood-red? It’s like the splatter on a wall at a murder scene – all for psychological effect. Because nothing is random.
In the meantime, citizen journalists are ignoring their shelter-in-place orders to see if there are other reasons why “authorities” want people to remain in their homes. The below video demonstrates a stark contrast between
official Orwellian narratives versus the cell-phone footage of multiple Americans at various hospitals around the country. It is over 27-minutes in length but, at the very least, view the 4.5-minute segment from the 17:45 mark to the 22:23 mark where an administrator of an urgent care facility assaults a citizen journalist for merely asking questions:
Furthermore, other videos have been posted online including dummies being used in (apparently) staged pandemic footage and one even by a hospital worker who claims Coronavirus is a lie.
Can you explain this? Because I can’t. In fact, it raises more questions. Why would locals participate in a cover-up? What kind of leverage could be applied on them to lie? And if there is something amiss afoot – as the multiple videos seem to show – wouldn’t there at least be some more whistleblowers? I mean, wouldn’t more patriots emerge to confirm any deception and pressure? And, why haven’t the videos been censored on YouTube?
Regardless, look around and see how far the entire nation has progressed in such a short time.
This last weekend, I drove to a big box store for some lumber and outdoor supplies as the wife rode along to pick up a few items at a nearby grocery. Inside the big box retail center, several customers were wearing masks and some had on rubber gloves. The cashiers now check people out behind sheets of plexiglas as the new authoritarian messaging sounds “social-distancing” instructions overhead and even now barks orders up from the floor: “WAIT HERE”
At the grocery, I remained in the rig as the wife completed her shopping. A masked female Caucasian placed her items in her car, doused her hands with sanitizer, lit up a smoke, and then drove away. Another woman returned to an SUV where her husband and kids awaited. The man popped the hatch and secured their groceries as his wife returned the cart. They both hand sanitized and drove away. A black woman exited, got in her car, checked her phone and drove away.
There’s no denying the fact COVID-19 has, at the very least, infected the minds of the masses. It has become a VERY big deal worldwide. Perhaps because it is a bioweapon killing legions of folks. Yet I told my wife I’m having difficulty accepting the new dystopia because my instincts tell me the billionaires have gaslighted the world – that it’s an illuminati mind-f*ck.
Still, at the same time, I know a young man who recently came back from spring break and now has all of the COVID-19 symptoms. He was denied a test by his local hospital and told to self-quarantine. Then my wife read me a tweet from a nurse who said not to believe any of the reports we see on television. She said they’re only working half shifts at her hospital.
And, yet, the psychological suppression is complete in all but a few, and most Americans now remain in shock. They’re scared because it has become such a big deal. They see it every day; many from behind their masks.
Currently, small businesses have collapsed and Wal-Mart has gained new dictatorial powers to the point of restricting how people can move and shop in their stores; and concurrently denying the ability of customers to grow their own food by mandating garden items as NON-essential.
Undeniably, the Centralizers have the momentum. Or, rather, the momentum has been building for decades. Anything outside the domain of the Centralizers has been deemed a threat: growing food, harvesting rainwater, or even treating COVID-19 with malaria drugs and/or hydroxychloroquine.
Coronavirus has become the musical force of musician Frank Zappa’s “Joe’s Garage” that so threatened the “Central Scrutinizer”:
This is the CENTRAL SCRUTINIZER… it is my responsibility to enforce all the laws that haven’t been passed yet. It is also my responsibility to alert each and every one of you to the potential consequences of various ordinary everyday activities you might be performing which could eventually lead to The Death Penalty….
.. Our studies have shown that this horrible force is so dangerous to society at large that laws are being drawn up at this very moment to stop it forever! Cruel and inhuman punishments are being carefully described in tiny paragraphs so they won’t conflict with the Constitution … which, itself, is being modified in order to accommodate THE FUTURE.
It remains to be seen whether the New Society transitions into tyrannical centralization or neo-localism; even if the momentum currently favors the former. To be sure, we have progressed to the point it would take a nation of rugged individualists and freethinkers, indeed, to turn this coronavirus-riddled ship around in time to arrive in a new age of innovation, localism, and self-reliance.
But, hey, anything can happen, right?
Well, maybe not.
No matter what, though, understand this: The billionaires are completely committed. They’ve crossed the Rubicon; they’ve passed the point of no return. They can’t go back because this either ends with them against walls and hanging from ropes or with the masses in digital chains. And they’re very close to succeeding.
It’s a war. And, so far, the momentum is on one side.
It is possible the narrative may be unraveling, however, because I know some sleepy sheeple who are now questioning the official reports. So maybe it means we’re close too. But close never wins anything. Not in a war.
In the meantime, the media onslaught is dialed to maximum volume. The other night I saw a commercial on TV where the following message was repeated several times:
“Staying home saves lives!”
And I started to wonder if that wasn’t a threat?
We also now have helicopters flying above American public spaces dictating Orwellian messages to the proles:
“For your own safety and for your family’s safety, please maintain social distancing“.
Doesn’t that sound like a threat? I might think so if I didn’t fully understand how government’s throughout history have always been completely dedicated to the welfare of their citizens. The State is here to protect and serve, correct? Because… if even TIGERS in a New York Zoo can get Coronavirus, then it must be bad. Super bad. We must be protected. We must be safe.
And the babies! The poor little babies.
We must think of the children!
I wonder if historians looking back on this time will comprehend the paradoxes: As societies ostensibly sought to save each other, they oppressed one another; in a time of social distancing families sheltered-in-place together; and, as headlines screamed, people wearing masks were silent.
A few nights ago, I looked up at the stars and they seemed more intimately near for some reason. I was thinking about summer coming soon and thought of the neighbor kids home from school playing under the sun.
I contemplated the old Bible stories: Of those who built their houses on sand compared to those who built on a solid foundation. How the storms came and the wind blew, and all was carried away but for some. Also Noah’s Ark and the fate of those drowning unprepared.
I considered Neo in The Matrix as well, when my kid and I were experimenting with Zoom video conferencing while on two separate floors of the same home. We were exploring privacy settings and I wanted to see some of the hosting configurations so I stepped away from my office to go look through the other portal. Soon, I was peering down back into my own tiny world. Without me, my office looked like a set on a Hollywood stage. It was surreal. Like I had passed on and was floating above…. or merely remembering. I wondered if there was a difference.
Coronavirus has driven us even further into the grid – where gnostic spirits, and hidden eyes, can see. And strange ears hear. The cameras now peer into private honeycombs all throughout an immense hive of lives separated.
My own custom-built system has no camera or audio capabilities, but I can hook up a video/audio feed through USB and disconnect when not in use. Of course, all the Zoom settings default away from privacy; like our smart(?)phones and all of the other apps in the Matrix.
It won’t be a virus that kills us in the end. History will show we died of convenience.
I have been sent footage of judge Vanessa Baraitser appearing in a school musical. Even though this is a remarkable survival of the scrubbing of her existence from the internet, I saw no public interest in publishing it until yesterday, when she ruled that in the interests of “open justice” the identities of Julian Assange’s partner and small children should be made public. So in the interests of “open justice”, here is Vanessa singing.
In these difficult times we must all find what pleasures we can. So rather than #clapforBoris, I invite you to give it full voice, belt it out and #Singalongavanessa. With grateful thanks to Joe M for adding my subtitles.
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Update: (1610ET): Johnson will spend his third night in the ICU, Downing Street said, once again, as a precaution.
* * *
As promised, Downing Street has released its morning update on the condition of Prime Minister Boris Johnson. And according to Spokesman James Slack, who spoke with reporters on a conference call on Wednesday, Johnson is still in "stable" condition, but remains in intensive care after spending Tuesday night there.
Slack also said Johnson is "responding" to whatever treatment he is receiving.
"The prime minister remains clinically stable and is responding to treatment," Slack said. He added that Johnson is in "good spirits", but is unable to work right now.
“The PM is not working, he is in intensive care. He has the ability to contact those that he needs to. He is following the advice of his doctors at all times”
Slack affirmed that Foreign Secretary Dominic Raab has been deputized to stand in for Johnson.
News of the PM's recovery, though still not guaranteed as he remains in the ICU, is still unquestionably good news for a country that has rallied around Boris Johnson, a politician whose popularity inside and outside Britain have made him a uniquely beloved figure in British politics.
One nationwide movement involved neighborhoods walking outside at the same time to 'clap for Boris'.
Johnson, the consummate politician, will hopefully emerge from treatment strengthened and ready to deploy this new political capital to finish guiding the UK through the outbreak, and then through Brexit.
Taïwan avec 23,8 millions d’habitants n’a eu que… 5 décès à déplorer sur des personnes atteintes de ce coronavirus !
Taïwan, c’est un tiers de la France, trois fois la Suisse.
C’est le pays qui a le mieux réussi, et de loin, à protéger efficacement sa population de ce virus et sans confinement !
Comment ? Pourquoi ?
Les réponses sont simples, tout est simple, comme toujours…
Tous les ans, des virus se propagent dans l’hémisphère Nord en hiver. Personne ne sait comment ces épidémies naissent ni comment elles réussissent à prendre de l’ampleur ni pourquoi elles partent généralement de la Chine.
Ce sont souvent des virus de la grippe (influenza) et des coronavirus dont personne ne parlait dans les médias au cours des années précédentes.
Cette année, c’est ce Covid-19 qui domine les autres virus et il ne provoque pas plus de morts pour ce type de maladie transmissible que pour les années précédentes car la mortalité due à la grippe est moins importante que les années précédentes.
Comme ce coronavirus n’est pas d’origine de Taïwan, les autorités ont tout simplement contrôlé drastiquement et très efficacement toutes les personnes entrant à Taïwan depuis que l’épidémie a été connue, partant de la Chine toute proche (à 180 km).
Tout personne entrant sur le territoire de Taïwan devait et doit être testée (au coronavirus) et si elle est positive, elle est obligatoirement mise en quarantaine stricte tant qu’elle porte ce virus.
Et il en est de même pour toutes les personnes qui ont pu être en contact avec ces primo-infectés.
Dès lors, ce coronavirus n’a pas pu se propager dans la population qui a pu continuer à travailler normalement, sans être confinée, évidemment.
Simple et efficace !
Tout pays indépendant et souverain a un territoire, des frontières. Il lui appartient de les contrôler et de les défendre. C’est simple mais c’est quand même trop compliqué à comprendre pour des fonctionnaires et des hommes politiques occidentaux…
La décision d’interdire aux gens de travailler, sous prétexte de ce coronavirus, en obligeant les gens à rester confinés chez eux, est complètement folle.
Elle a des conséquences qui seront dramatiques.
Le confinement n’arrête pas la propagation du coronavirus comme le montre clairement ce qui se passe en Espagne, en Italie et en France.
Pour rappel, pendant le confinement, la production, c’est-à-dire la création de richesse s’effondre et en même temps, comme dirait l’Autre, les autorités publiques distribuent de l’argent… qui n’existe pas !
C’est de la création monétaire indue, ex nihilo qui est toujours létale.
La zone euro est la plus touchée, pour toujours.
After the deadliest virus day in the world yesterday, today started with optimistic comments by Fauci about a turning point and the total deaths likely be lower than predicted... only to be crushed by the deadliest day ever in UK, the deadliest day ever in New York and New Jersey, and Italy new cases re-accelerate... and the biggest plunge in consumer confidence ever... and the lowest home purchase mortgage applications.
Worst day yet...
Screw it - buy Mortimer buy... it appeared that the algos had already made their mind up as every dip was bought today back to yesterday's highs...
The market ripped all day but once again - in the last hour there was some weakness again...
Notably The Dow and the S&P made lower highs today...
As Bespoke notes, the S&P 500's close above 2684.88 today means we are in a new bull market, and each of the last three bull markets (starting 11/20/08, 3/9/09, and current) will have entered bull market territory within 12 or fewer trading days of the bear market low.
Another epic 3-day short-squeeze deja vu all over again...
VIX refuses to play along with the bullish pump...
Look over there!
Oil prices mirrored yesterday's contract-roll/settlement puke by going vertically higher around 1430ET...
WTI settled around 6% higher because of the Algerian Oil Minister, the same day the EIA reported the largest ever inventory build...
Gold was flat on the day...
The Dollar was also flat on the day - roundtripping overnight gains to end unchanged...
Treasury yields were mixed today with the short-end outperforming once again (2Y -1bps, 30Y +7bps)...
While the moves have been of note, we remain rather range bound still...
The yield curve steepened dramatically...
Cryptos held on to their gains today...
Finally, despite every economist knowing what a bloodbath it was likely to be, economic data has still massively disappointed expectations...
And fun-durr-mentals don't matter again...
And don't forget its jobless claims day tomorrow (and Friday is closed in the US and Europe, and Europe is closed Monday).
In a mirror image of yesterday's last 10 minutes action, when the S&P dumped by 40 points in seconds, when a $2.4BN "market on close" sale imbalance was announced at 3:50pm ET...
... moments ago, at exactly 350pm again when the market on close imbalance was unveiled, and revealed that there was $2 billion left to buy, the Emini future (i.e., the S&P500) spiked higher by 20 points, from 2,732 to 2,752, which was also the session high as algos scrambled to frontrun the residual buy orders in the last minutes of trading.
As a reminder, this is at least the 4th time in the past two weeks - it started on March 26 - that the MOC imbalance announcement has led to a stunning move in the market, a striking phenomenon which is attributable to one simple thing: there is absolutely no liquidity in the market, and as a result the headline MOC announcement is sufficient to send the entire market surging or tumbling just due to the end of day rebalance, which as we reported last night, is now wreaking havoc on both option pricing and realized volatility.
Nelson Peltz and Trian Partners were amongst those not "immune" to the coronavirus impact on markets to start the year, with his portfolio taking a 16% hit in March alone.
Year to date, it puts the asset manager down nearly 25%, far exceeding the S&P's nearly 18% drop YTD, according to Bloomberg. Trian investments General Electric and Proctor and Gamble saw their shares drop 37% and 9.7%, respectively, for the year.
Trian also owned shares of food distributor Sysco, which fell disproportionately to the rest of the market as its customer base shut down across the U.S. and Europe. Sysco shares are down 46% on the year and the company has since said it's going to suspend its share buyback program. It also drew down $1.6 billion of a $2 billion credit line.
Trian is also the largest holder in Wendy's, which is down 33% from the beginning of the year. Wendy's also suspended its share buyback program.
One of the Trian's newest investments, plumbing equipment maker Ferguson Plc, is also down about 26% this year. Trian expects that things could get worse, stating that Ferguson's business could be "significantly impacted" by the ongoing lockdown.
Trian said: “Despite the current economic disruption caused by Covid-19, we believe that Ferguson is positioned to withstand a market downturn and continue to believe it will generate attractive returns over a long-term holding period.”
Specifically, Trian's "long only" focus and "lack of hedges" makes the fund more vulnerable than usual when markets turn lower, Bloomberg noted.
Peltz joins a long list of big name investors who, despite being heralded as geniuses during an 11 year Fed-induced "bull market", were unable to predict or mitigate the impact of the coronavirus on markets.
In mid-March, for example, we reported that Ray Dalio's macro fund was crushed 20% when the market crashed weeks after Dalio claimed "cash is trash".
Following an earlier note from Morgan Stanley's quants which observed that the rally in stocks and the plunge in the VIX has been abnormally fast for a country sliding into a deep recession, something which Reuters picked up on later in the day...
... a follow up report has found something outright bizarre about the current bear market rally: namely, that while both the S&P the SX5E rally from 2300 to 2600 lacked participation, it was even worse beyond 2600. In other words, not only is there no buying, but there isn't even short covering or forced "stop outs."
Among the observations highlighted by the bank, there has been:
Furthermore, the moves have been "gappy" and there is little evidence investors are being "stopped in." And while the improving virus-related data and some optimism about exit-strategies had put a floor on the market, the economic impact (as yet unknown) remains a major headwind for bullish flow and Morgan Stanley expects the SX5E to be in a range between 2400-2900 for the time being.
Some more details: on Monday, SX5E spot rallied +5% but for a move >4.5% it was the lowest volume rally since 2010 (sample size = 10 days). Meanwhile, the participation on the way down was ~3x larger than on the way up (left chart below), a legacy pattern observed when either central banks or stock buybacks are the dominant buyers of stock.
At the same time, on the cash side, hedge fund re-grossing simply isn’t happening, and historically, as long as HF P&L Volatility remains greater than 7v, re-grossing is unlikely (10 day HF P&L vol is 18v, 30 day is 14v).
Going further back, the 2300 to 2600 rally saw at the end of March a lot of short covering in SX5E futures (~$20bn worth) but beyond 2600 Morgan Stanley estimates clients actually started to re-hedge adding ~$2bn of net new shorts., We estimate total outstanding short balances (net) are now -$35bn (left chart below).
Another remarkable observation: the "digging in" on the short futures is linked to a lack of options activity. Tactical Put and Call volumes continue to drop, with on average just $550MM/day of gamma trading in the last week (lowest in 2Y, right chart below). In delta terms, call volumes are now 60% below the March peak of $14bn/day, Put volumes are 90% lower vs. the $40b/day March peak.
There was one bright spot in all the confusing flows: after a record $17BN of Actively Managed EU Equity Funds saw redemptions in March, the first week of April saw that come to an end indicating that supply from retail investors is slowing, at least in the near term.
One final note: we previously flagged that systematic accounts were the quickest to de-lever: the last 2 weeks of Feb were the biggest outflows since 2014, coinciding with a period where Quantitative directional funds P&L fell -7%. And while systematic flows are still mildly negative but have slowed sharply since (right chart below), the one group net accumulating equity over the past 2 weeks are Real Money/Institutional Accounts (bottom right chart).
Zoom has had quite a ride over the past few weeks, from darling WFH stock to virtually a piece of malware, as we declared earlier, especially now that attorneys general from at least 27 states have either raised questions or requested more information from Zoom about alleged privacy lapses that look more like negligence - or worse, greed.
And now, Buzzfeed reports that Google has banned employees from using Zoom on company laptops and computers because of the security risks associated with the software, according to internal company emails.
It's unclear why Google allowed employees to use Zoom on company equipment since Google has its own competitor app, Hang. The app has become wildly popular during the quarantine, as people have used it to do "virtual hangouts" including happy hours and workout sessions.
For Google, the math on Zoom is pretty straightforward: It's a competitor, and it could potentially expose company secrets to hackers and "Zoom Bombers".
But though Google of course has an ulterior motive, this certainly isn't a vote of confidence, and if more companies follow suit, that could be all she wrote for Zoom.
While the use of hydroxychloroquine (and zinc) to treat COVID-19 has dominated headlines for weeks, a new method of treatment developed by Johns Hopkins Hospital has just been given special approval by the FDA to be fast-tracked.
Known as convalescent serum therapy, the antibody-rich blood plasma from COVID-19 survivors is drawn, bagged, and given to critically ill patients.
While the FDA began allowing limited use of the therapy on March 24 for hospitals in Houston and New York City (with an "expanded access program" pending), Johns Hopkins is concurrently developing the therapy with the goal of preventing otherwise healthy front-line medical staff from getting sick. The university is awaiting FDA approval for a second clinical trial on patients who are slightly to moderately ill to see if it can reduce or eliminate COVID-19.
Under the leadership of immunologist Arturo Casadevall, the Johns Hopkins team is collaborating with physicians and scientists around the country to establish a network of at least 40 hospitals and blood banks in 20 states for the collection, isolation, and processing of blood plasma.
More via Johns Hopkins (emphasis ours):
People who recover from an infection develop antibodies that circulate in the blood and can neutralize the pathogen. Researchers hope to use the technique to treat critically ill COVID-19 patients and boost the immune systems of health care providers and first responders. Currently there are no proven drug therapies or effective vaccines for treating the novel coronavirus.
"At the end of January, I knew this disease was going to get out of China, and I knew there was a huge history of the use of plasma and serum in the 20th century," says Casadevall, a Bloomberg Distinguished Professor of molecular microbiology and immunology and infectious diseases at the Johns Hopkins Bloomberg School of Public Health and School of Medicine. "This [medical effort] has become a juggernaut… We're racing to deploy this."
Thousands of survivors might soon line up to donate their antibody-rich plasma, according to physicians. But that's only if early promising studies on the therapy done in China are confirmed by U.S. trials that show "dramatic effects and improvements" in patients, according to Tobian. He is optimistic the therapy will do just that. "I absolutely think this could be the best treatment we have for the next few months."
This passive-antibody therapy has been used since the 1890s to combat diseases as wide-ranging as measles, SARS, Ebola, H1N1 flu, and polio—and holds the promise of keeping the virus at bay until a vaccine can be developed. (Current estimates are that a vaccine for emergency use could be available by early 2021.) During the SARS outbreak in 2002–2003, an 80-person trial of convalescent serum in Hong Kong found that people treated with it within two weeks of showing symptoms had a higher chance of being discharged from hospital than did those who weren't treated.
The beauty of the therapy, says Casadevall, is that it involves the well-established—and safe—method of blood donation. Except in this case, survivors' plasma (or serum), which contains the antibody to COVID-19, is separated from red blood cells and transfused into the three categories of recipients: the critically ill as a last-stop "compassionate care" measure; patients who are slightly or moderately ill to keep them out of ICUs and off scarce ventilators, and front-line medical workers to prevent them from getting sick. Nearly a cup of the serum (200 milliliters, or one unit) would be administered to each recipient, according to Tobian, with each donor providing enough serum for up to four patients. (Each donor, depending on body size, can provide two to four units.)
Casadevall had the vision for this treatment. He also had the wisdom not to micromanage his team of doctors, whom he set free to create their own fast-flowing mini-teams. Together, they united with peers around the world in a marathon of selfless, round-the-clock work toward an urgent common goal—to overwhelm and crush the COVID-19 virus. "Looking forward to another day of working with an incredible set of colleagues," tweeted Casadevall in late March. "Day began at 4 a.m. and will go to near midnight." In this process, doctors, researchers, and regulators from as far away as Israel and Ethiopia banded with Hopkins doctors to create treatment protocols, open labs, win regulatory and institutional approvals, identify donors, compile data, and organize and share vital information. The research effort received a welcome boost in late March with a gift of $3 million from Bloomberg Philanthropies and $1 million in funding from the state of Maryland.
"We usually spend a year preparing for the next flu season," says Andy Pekosz, vice chair of the Department of Molecular Microbiology and Immunology at the Bloomberg School of Public Health. "What we do for flu in a year, we're trying to do in a month for COVID-19. Our window of acting is a small one." The fast-spreading coronavirus has already killed at least 70,000 people around the world, with nearly 1,300,000 total confirmed cases. Numbers that continue to grow.
From the beginning, Casadevall knew he faced more than a medical problem. Plasma therapy's history was unknown to most people, so he needed to draw public attention to his cause. Realizing a medical journal commentary would reach a limited audience, Casadevall shopped around an editorial that urged the use of convalescent serum. The essay, published in the Feb. 27 edition of The Wall Street Journal, told the story of an ingenious Pottstown, Pennsylvania, doctor who in 1934 arrested a measles outbreak at a boys boarding school by using serum therapy. "A remarkable victory against a highly contagious disease," Casadevall wrote.
Casadevall fired off the essay to dozens of colleagues who encouraged him in his plan to also publish a scholarly paper that conveyed sufficient technical information to prove to the medical community he had done his homework. In four days, he and long-time collaborator Liise-anne Pirofski, head of the infectious diseases department at the Albert Einstein College of Medicine in New York City, wrote what Casadevall calls "maybe the most important paper in my life"—'The Convalescent Sera Option for Containing COVID-19,' which appeared in the Journal of Clinical Investigation on March 13. Written in the cool, precise language of clinical experts, the paper concluded, "We recommend that institutions consider the emergency use of convalescent sera and begin preparations as soon as possible." But its final sentence carried a sharp and decidedly unscholarly sounding warning—"Time is of the essence."
The result? "Everything took off," says Casadevall. "Its publication coincided with the major increase in cases in the United States. The media jumped on it."
Had it not been for a tropical pet bird whose guano infected its owner in 1995, Casadevall's path might never have crossed with that of infectious disease specialist Shmuel Shoham, an associate professor of medicine at the School of Medicine. "That was how we bonded," recalls Shoham, who hammered out the first protocol for the treatment of potential COVID-19 patients.
Back then Casadevall was at Albert Einstein in the Bronx while Shoham was at Boston University, but thanks to a mutual friend, they co-authored a ground-breaking paper in the Annals of Internal Medicine that was picked up by The New York Times. Their research proved the hitherto unknown link between human fungal illness and "cockatoo poo," as Shoham puts it.
Over the years, their careers took them to different cities and in separate directions, but when Casadevall arrived at Hopkins five years ago, they renewed their friendship and became key collaborators again. In mid-February, when Italy reported mounting cases, Shoham began thinking: "If there's a hole in the boat, it doesn't matter if it's on my side or your side, we're all going down. If this is happening in Italy, there is absolutely no reason why this could not happen in Baltimore." Then he saw a tweet from Casadevall: "Plasma is going to be the solution." At first, Shoham pushed back, saying the therapy hadn't worked on influenza patients. But those patients were too ill, Casadevall replied, and in a flurry of back-and-forth tweets, he won over his colleague to his point of view.
With the virus beginning to rage in the U.S., Casadevall convened a 7:30 a.m. conference call on March 4, five days after his WSJ op-ed appeared, with a group from Hopkins' Division of Infectious Diseases. Shoham hopped on the call while driving to work. "I told them we had to do [something]," Casadevall recalls. "This was something that was just not on the radar screen. There was silence, and I said, 'We're going to need a protocol.'"
Shoham volunteered to write it. Although he typically spends two-thirds of his time with patients, by fortunate happenstance he had few patients on his calendar, and that gave him time to dive into COVID-19. By the next day he had pounded out the bare bones of a protocol to prevent infection by administering the plasma to those who had been exposed. "It was sort of a really messy protocol with highlights like a 'This Space Left Intentionally Blank' place holder," Shoham says. He finished a more detailed, but still rudimentary, draft in time for Casadevall's next conference call a few days later.
Casadevall fired off the protocol to a Mayo Clinic colleague, who converted it into one for the treatment of early-to-moderate disease, which Hopkins doctors further refined and revised in collaboration with Mayo doctors. This pattern of rapid, long-distance collaboration would be repeated endlessly among other doctors for other needs in the days to come.
"All of a sudden, centers all over the country were saying, 'Oh, my God, this is something we can do.' So, then we had big conference calls with dozens of centers," says Shoham, who is now the FDA's principal investigator for the prophylaxis study, which makes him responsible for all execution and oversight of clinical research on that protocol.
The team had to know how to collect donor serum and how to transfuse it. So, pathologist Tobian and his colleague Evan Bloch, an associate professor of medicine, came aboard. Today, Tobian and Bloch help lead the transfusion group. "We get emails every single day from other hospitals on how we start collection, how we work on the regulatory aspects," Tobian says. "And we're in touch with transfusion medicine physicians across the nation numerous times a day." The pace has been "crazy," adds Bloch, a specialist in neglected infectious diseases.
In a sign of these high-tech times, Casadevall has never met either man. "I don't even know what Evan Bloch looks like," he says, "and I talk to him all the time. These men are magnificent. They rise to the occasion." In-person meetings happen but are mostly regarded as "a luxury" they can't afford because they would put people at risk, says Shoham.
To analyze the serum, Casadevall called in Pekosz. Until March, Pekosz, a basic researcher, had not thought he would be so directly involved in such an effort. But after Casadevall shared his plans, Pekosz realized some of his work could support the need to measure antibodies in the blood before transfusions were done.
"It became a whirlwind, a tornado we got swept up in, part of a massive effort to treat patients and make a direct impact on the pandemic," says Pekosz. In late March, Casadevall emailed Pekosz to say Vice Provost for Research Denis Wirtz had provided $250,000 in funding to launch a new lab to assess COVID-19 antibody responses in serum earmarked for the hospital's patients.
"Arturo said I needed to set up a lab to do this because this may be a really daunting task in terms of the number of patients we want to treat," Pekosz recalls. "At that point, I really understood, 'Wow, this is going to be a beast unto itself.'"
A big piece of Pekosz's job—besides supervising six new lab employees, a staff that may soon double—entails advising other hospitals on how to proceed. "I can't even remember the number of institutions that have contacted me who want to do the same thing. We're trying to work with them to be as close to each other's test results as possible, so we can have consistency across sites."
After Casadevall's initial burst of enthusiasm and organizational action, he confesses there was a moment when things seemed dark. "You realize the magnitude of what you're trying to do, and, in particular, you realize there could be huge regulatory issues," he says. He reminded himself that projects like this had been done by prior generations and in other countries, and with determination, he says, "I never for a minute doubted we could pull it off."
The FDA's approval process is a two-edged sword, according to Shoham, who says one of the biggest issues is the regulatory environment. Seemingly antiquated FDA requirements have sometimes left doctors shaking their heads. A submission of an IND (the application for an investigational new drug) is not official unless it is physically mailed with numerous copies of paperwork. "We could have sent an email [with PDF attachments]," says Tobian, referring to an IND that Hopkins prepared. "Instead we [were] trying to find who can make all these photocopies and send a FedEx package, and everyone's mostly been told they need to be working from home."
Nonetheless, neither he nor Casadevall believes the old-fashioned delivery system slowed the FDA's decisions or their work. "The FDA has an impossible job," Casadevall says. "I would never criticize them. They are working really hard. Their job is safety, and our job is to get this done."
Lysander, the Spartan admiral who conquered Athens in 405 B.C., is Casadevall's hero. "He did something that was unheard of at the time," Casadevall marvels. "He spared the city, and by sparing the city, he preserved Athens.
"To me, my heroes are always humanists—people who do their job, but there is a humane aspect to how they do it," he says. "The greatest thing about being human is the capacity for empathy, the ability to care for others and be optimistic in the worst of times."
Casadevall's team lavishes praise on his leadership. "He is a force of nature," says Shoham. Brilliant, charismatic, enthusiastic, and generous is how Bloch describes him.
"Arturo pulled off what few people could do," Pekosz adds. "He got multiple institutions across the nation to pull together in this project to create the momentum that led the FDA to say, 'We have to do this, because people are moving forward.' There was such a groundswell of enthusiasm for this approach, the FDA had to pay attention to us."
For most of the team, there's been little rest for weeks. When asked how much sleep he's been getting, Bloch replies, "Last night wasn't bad—about four to five hours. It's just continuous work through weekends, through nights." What drives him is partly the worst-case scenario forecasts he reads which he says are "frightening. … You're thinking about the people in the background—the health, social, and economic impacts. Having insight into what is going on can be a little bit stressful."
"There isn't going to be a day off for many, many months," Casadevall says.
People in medicine often think about delayed gratification, according to Shoham, because they never know whether some bit of knowledge they possess today might be needed tomorrow for an unforeseen reason.
"We're not thinking about the next thing," he says. "This is it. This is the one."
Results from the trials in the two New York City hospitals are expected around the end of April. How widely serum therapy is used after that for the time being remains unclear.
"We want now to get the clinical trials done," Casadevall insists. "Compassionate use is going to be available [in the trials]. Convalescent sera is going to be used in the country, there's no question about that. It's already been deployed in Europe. I think the next task is to learn if, when, and how to use it, and for that, we have to do clinical trials."
The Red Cross is seeking people who are fully recovered from COVID-19 and may be able to donate plasma to help current patients with serious or immediately life-threatening COVID-19 infections, or those judged by a health care provider to be at high risk of progression to severe or life-threatening disease. For more information, visit the website of the American Red Cross.
One month after turmoil was unleashed on capital markets, when the combination of the Saudi oil price war and the sweeping impact of the coronavirus pandemic finally hit developed nations, what was until now mostly a liquidity crisis is starting to become a solvency crisis as more companies realize they will lack the cash flow to sustain operations and fund debt obligations.
As Bloomberg's Laura Cooper writes, cash-strapped companies are finding little relief from stimulus measures, and from Europe to the US, cash in hand has been hard to come by even as governments pledge funds for small businesses to bridge the financial gap until lockdowns are lifted:
US: The March NFIB survey of U.S. small businesses noted challenges in submitting loan applications and the urgent need for federal assistance
UK: A British Chamber of Commerce survey showed only 1% of companies reported being able to access funds dedicated for business. A complex application process for the U.K. Coronavirus Business Interruption Loan Scheme comes as 6% of U.K. firms say they have run out of cash while nearly two-thirds have funding for less than three months
Canada: A proposed six-week roll out of emergency funds is unlikely to prevent 1 in 3 companies from laying off workers. More than 10% of the labor force has already filedemployment claims
Europe: existing structures are aiding in the deployment of funds, but concerns remain that more is needed with EU leaders failing to reach agreement on further initiatives
As we have noted previously, small businesses - everywhere from China, to Europe, to the US - make up the majority of firms in advanced economies and account for a sizeable share of private sector employment. Quick delivery of stimulus measures is needed to curb widespread insolvencies. This could mean the difference between a short, yet sharp recession and a prolonged erosion to the labor market and economy regardless of containment of the health crisis.
Meanwhile, as we get increasingly more urgent reports that the lack of available funding is starting stress corporate solvency, liquidity itself is getting worse, and on Wednesday the closely watched June FRA/OIS - an indicator of intrabank funding stress - spiked, reaching 61.2bp, the highest level since its March 16 collapse after the Fed’s emergency rate cut.
The spread was as much as 6.5bp wider on the session with most of the move occurring after 3-month dollar Libor fixed 0.85bp lower than Tuesday at 1.31138%, its third straight decline.
One possible reason for the accelerating shortage of bank liquidity is the sharp rise in demand from corporates, which as we reported over the weekend, has manifested itself in a record $293BN in credit facility dradowns as of last Thursday...
... a number which has only risen following several prominent revolver drawdowns so far this week.
At the same time, coupled with the fact that some investors have been borrowing in euros and swapping them into the dollars, euribor’s rise to the highest since May 2016 was also inevitable, and as of Wednesday morning, the three-month Euro Interbank Offered Rate advanced a third day to minus 0.254%.
The increase comes despite the European Central Bank relaxing its collateral rules on Tuesday, which didn’t really channel “new money” to banks, according to Frederik Ducrozet, global strategist at Banque Pictet & Cie.
As Bloomberg adds, there’s also evidence in European markets that corporates are stockpiling cash. Not only did the three-month Euribor climb 3.9 basis points to minus 0.254%, but its spread over OIS rates jumped to over 20 basis points, the highest since 2014. It also signals companies have increased their activity in funding markets over the past month.
At the same time, accessing cash in Europe’s commercial paper market is becoming more expensive for corporates. There’s been a modest widening of where new issues in commercial paper markets are pricing.
There was some good news: 3-month A1/P1 rated commercial paper rates dropped another two basis points on Tuesday, a fourth consecutive decline. Spreads over OIS tightened as volumes and activity in the underlying markets improve. That suggests current Fed measures are supportive and the prospect of looming Commercial Paper Funding Facility on April 14 is boosting sentiment.
– The following is from a Pro-Trump website, for transparency. However, it should be known that from Cuba to Serbia and around the world, Hydroxychloroquine is what is being used effectively in combination with other treatments and regimens. Studies in China have proven its effectiveness. Here in Belgrade, we can confirm that first-hand. That’s why […]
Country after country has reported extremely dark economic numbers. The gigantic jobless claims, 6.6 million from the U.S. last week, are just the tip of the iceberg. For example, the service sector PMIs have been simply ghastly across the globe. We are now in a crisis of epic proportions.
But, how massive can the crisis eventually get? Since our inception, in 2012, we have contemplated three scenarios as a part of our quarterly forecasts. While we have not referred to them in each report, we have repeated them periodically. They are: the optimistic, the most probable and the pessimistic.
But at this point our main worry is the approaching realization of the pessimistic, or the worst, scenario. It’s likelihood, while still low, is increasing fast in our estimate.
Underpinning its severity is not the virus, but the fragility of the global economy.
The Global Financial Crisis (GFC) was considered a Black Swan event to many. However, it was no such thing. It was a massive failure of hedging and diversification within the global banking system, most notably in the U.S., and a number of prominent analysts saw it coming. See our blog, 10 years from Lehman. And nothing has been fixed, for an insight view on that crisis.
While banks were wound down and recapitalized in the U.S. after the GFC, an equivalent restructuring did not happen in Europe. Stricken European banks were left to linger in a state of permanent financial distress.
“Outright Monetary Transactions” or “OMT”, negative interest rates, and ECB’s QE program all aggravated the predicament of European banks. The failure to resolve the 2008 crisis ‘zombified’ the European banking sector, a situation which persists today. (See Q-Review 3/2019 for a detailed account).
Another pivotal moment for the world economy came in March of 2009, when the Fed vastly expanded its asset purchase program of U.S. Treasuries and mortgage-backed securities. This became known as the notorious Quantitative Easing or “QE” program, and has persisted in one form or another ever since. (See Q-Review 1/2018 for a detailed explanation.)
Central banks quickly assumed the role of “lender of first resort” in the capital markets, and their balance sheets ballooned. Asset prices rose to never-before-seen heights. Continuous market bailouts, culminating in the ‘pivot’ of the Fed in early January 2019 and its repo-bailout in September, removed all market discipline and incentivized investors to wild speculation (see Q-Review 4/2019 for details).
Chinese leaders also reacted quickly when the financial crash of 2008 precipitated a global recession.
China initiated a massive infrastructure programs that jump-started the world economy to a renewed upward trajectory. These programs were financed by credit issued by state-controlled banks, which Beijing can compel to lend, and the banks responded by doubling the volume of loans YoY. Between 2007 and 2015, 63% of all new money created globally came from China, and most of this increase was created by commercial banks.
During 2016, China unleashed a never-before-seen credit bonanza, tripling the size of the “shadow banking sector” as a response to a slump in the Chinese housing market, which had become the backbone of the Chinese economy over the past two decades.
By the end of 2017, the assets of the shadow banking sector stood at a mind-boggling 367% of GDP. The commercial banking sector has also become extremely levered, posting over 500% growth in credit since 2008.
Alas, the Chinese banking sector is now totally incapable of coping with any significant shock, and these Chinese economy became riddled with unprofitable investments.
These fragilities, combined with the massive economic impact of the coronavirus, leads us to our most pessimistic scenario.
In it we assume that
Many governments will not be prudent enough in suppression measures, which will lead to severe global pandemic peaking in summer.
Due to the worsening outbreak and delays in containment, suppression measures will eventually be prolonged and they become draconian (“Wuhan style”).
The massive stimulus measures enacted by governments and central banks will be ineffective in providing support for the economy, as the tardy application of draconian suppression measures lock people at home in several key countries of the global economy for a prolonged period of time.
Global economic activity plunges to never-before-seen lows.
European banking sector breaks.
Eurozone unravels violently.
China ‘lands hard’.
Global financial system collapses.
A systemic crisis engulfs the world.
A systemic crisis simply means that the banking sector and financial markets collapse. In practice, this implies that most banking services will stop and funding through financial markets will cease. This also means that the monetary system is likely to collapse (see Q-Review 4/2019 for a detailed explanation).
It should be acknowledged that we have never faced such a scenario on a global scale (though the collapse of the Soviet Union could certainly be classified as “systemic meltdown”). That is why the sheer scale of such an apocalyptic scenario will be horrifying. They are presented in the Figure below.
Figure. The forecasted (Y-to-Y) GDP growth rates in the U.S. and in the Eurozone in 2020 – 2023. Source: GnS Economics, OECD
The Covid-19 pandemic will reveal all the fragilities of the world economy. The near collapse of the U.S. capital markets in mid-March was averted only through unprecedented socialization of the financial markets. However, when the Flood of corporate bankruptcies begins, central banks will not be able to withstand the onslaught. Then we will face only extreme economic options.
The global collapse scenario, presented above, would bring in its wake massive unemployment, poverty, misery and the eventual re-structuring of our whole social and economic order. The world would be utterly and permanently changed as a result.
This is something we absolutely need to be prepared for, even though its likelihood is still relatively low.
But it is increasing fast, and that should worry us all.