Unemployed Americans Spent More With $600 Weekly Boost Than Before Pandemic; That’s About To Go Away

Unemployed Americans Spent More With $600 Weekly Boost Than Before Pandemic; That’s About To Go Away

Tyler Durden

Thu, 07/16/2020 – 12:04

At the end of this month, millions of unemployed Americans are set to lose their $600-per-week federal unemployment boost on top of their standard benefit. The program, part of the CARES Act, constituted a good portion of the $108.5 billion the US Treasury paid towards unemployment benefits in June.

And according to a new study released Thursday, Americans who received enhanced unemployment benefits spent roughly 10% more than when they were working, according to Reuters. This of course makes sense, as some 63% of jobless workers making more on unemployment than when they were working.

Researchers analyzed transactions for 61,000 households that received unemployment benefits between March and May. Spending dropped for all households as the virus spread and led to business shutdowns, but then rose when households began receiving jobless benefits, the study found.

That contrasts with a typical recession, when households receiving unemployment benefits usually cut spending by 7% because regular jobless benefits amount to only a fraction of a person’s prior earnings, the research found. –Reuters

“Some folks are getting unemployment benefits that are larger than what they were getting paid [at] their previous jobs. That really potentially creates some wealth disincentive effects,” said Harvard Economics professor Raj Chetty earlier this month at an event sponsored by the left-leaning Center on Budget and Policy Priorities.

Via Bloomberg

Ending the program has stoked concerns over a steep fall in spending after the payments expire, as the ‘bonus’ unemployment benefits have been helping to prop up consumer spending for some 25 million unemployed Americans. According to the Century Foundation, if the supplemental payment isn’t extended through the end of the year, the poverty rate will jump from 12.3% to 16.3% (via Washington Examiner).

Via Bloomberg

“Our estimates suggest that expiration will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” said the researchers cited by Reuters, who also found that households forced to wait several weeks for their first unemployment checks cut spending by around 20%.

For Chris Bolei, 63, the extra $600 a week is “a lifeline to our pre-pandemic existence.” Before the pandemic, Bolei, from San Rafael, California, was making about $75,000 a year as a maintenance supervisor. Even with the government aid he and his wife, who is high-risk for severe complications from Covid-19, struggle to pay their bills. Without the weekly bonus, he said his rent payments and wife’s medical bills will become impossible. –Bloomberg

Democrats are pushing to extend the $600 weekly payment as more than 30 million Americans are estimated to be receiving unemployment benefits.

Many employers, meanwhile, have argued that the federal supplement has discouraged employees from returning to work.

For example, at the diner chain Waffle House Inc., based in Norcross, Georgia, some employees aren’t coming back to work because they make more money from unemployment, creating a shortage during some shifts, according to spokeswoman Njeri Boss. –Bloomberg

A Goldman Sachs survey found that 84% of small businesses participating in the Paycheck Protection Program (PPP) are expected to exhaust their funding by the first week of August, while just 16% are confident they can continue to pay staff without more bailouts.

Meanwhile, jobs are difficult to come by. As of July 10, job postings were around 23% lower than the same period in 2019 according to Indeed.

Job postings for higher-wage occupations have dropped the most – at 32% below trend vs. 14% for lower-wage occupations.

The pandemic has affected hospitality and tourism jobs the most, which have seen job postings down 35% or more vs. 2019.

By region, Honolulu, San Francisco and San Jose have seen the largest downtrend in job postings, but have picked up in places such as Orlando, Miami and Las Vegas.

So – with $2,400 per month federal unemployment bonus set to evaporate in two weeks and the jobs picture ‘less than rosy,’ one has to wonder if GOP lawmakers will cave to Democrat demands and extend the program.

via ZeroHedge News https://ift.tt/30lLmZ2 Tyler Durden

Soon, You Will Need To Wear A Mask To Enter Virtually Every Major Retail Store In America

Soon, You Will Need To Wear A Mask To Enter Virtually Every Major Retail Store In America

Tyler Durden

Thu, 07/16/2020 – 11:45

Authored by Michael Snyder via TheMostImportantNews.com,

If you are adamant about not wearing a mask, you are not going to like this news one bit.  Coming into this week, Costco, Starbucks, Best Buy and Panera Bread were requiring customers to wear masks to come into their stores, but most other major retailers were still giving people the freedom to choose whether they wanted to wear a mask or not.  I know that a lot of people appreciated this freedom to choose, but it is about to come to an abrupt end.  On Wednesday, Walmart and Kroger announced that they will be starting to require consumers to wear masks in all of their stores, and the National Retail Federation is pushing all of the rest of their members to do the same thing.  In the days ahead it is expected that most of them will follow suit, and that means that soon there will be very few major retail stores that you are able to enter without wearing a mask.

Walmart says that they decided to make this change in order to “bring consistency” across all of their stores.  The following comes from the official Walmart website

As the number of confirmed cases has spiked in communities across the country recently, so too have the number and types of face covering mandates being implemented. Currently about 65 percent of our more than 5,000 stores and clubs are located in areas where there is some form of government mandate on face coverings. To help bring consistency across stores and clubs, we will require all shoppers to wear a face covering starting Monday, July 20. This will give us time to inform customers and members of the changes, post signage and train associates on the new protocols.

In the region of the country where I live, there are a ton of people that feel very strongly about not wearing masks, and this announcement is going to hit them really hard.

There is only one Walmart within a 90 minute drive of where I live, and virtually everyone in the region pops in there at some point.  But now those that do not want to wear masks will be excluded, and there will be some very hard feelings over this.

If you try to enter a Walmart without a mask next week, you will be greeted at the door by a “Health Ambassador” wearing a black shirt.  I find it very interesting that they specifically chose the color black, and I think that it would have been helpful if they had chosen a more friendly color.  In any event, these new positions are being created in order to ensure that only people wearing masks are able to get into the stores.  Of course Walmart is trying to make this sound as non-threatening as possible

In addition to posting clear signage at the front of our stores, Walmart has created the role of Health Ambassador and will station them near the entrance to remind those without a mask of our new requirements. Our ambassadors will receive special training to help make the process as smooth as possible for customers. The ambassadors, identifiable by their black polo shirts, will work with customers who show up at a store without a face covering to try and find a solution. We are currently considering different solutions for customers when this requirement takes effect on July 20.

Needless to say, this announcement by Walmart is likely to spark an avalanche of other announcements by major retailers.

In fact, Kroger made an announcement just hours after Walmart did

Within hours, Kroger — the largest U.S. supermarket chain — said it will also require shoppers to wear masks starting July 22.

And as I mentioned above, the National Retail Federation is already pushing all of their members to fall in line

The president of the  National Retail Federation trade group wants retailers to adopt a nationwide policy that requires customers to wear masks, and hopes Walmart’s decision to do so would galvanize other companies to take similar action, reports Reuters.

“Shopping in a store is a privilege, not a right. If a customer refuses to adhere to store policies, they are putting employees and other customers at undue risk,” the NRF says.

We will be told that this is just a “temporary” thing, but at what point will we be able to start shopping without masks again?

It certainly won’t be any time in 2020.  This week, CDC director Robert Redfield said that he anticipated that this fall and winter “are probably going to be one of the most difficult times that we’ve experienced in American public health”…

I am worried. I do think the fall and the winter of 2020 and 2021 are probably going to be one of the most difficult times that we’ve experienced in American public health because of what you said — the co-occurrence of Covid and influenza, and this is where I’d like to continue to work with you to get the American public to embrace the influenza vaccine so we can try to minimize the impact of inluenza, because I think those two respiratory pathogens hitting us at the same time do have the potential to stress our health system.

Ultimately, we will probably be forced to wear masks until the pandemic ends.

But what if this pandemic lasts for years?

A couple days ago, I authored an article in which I discussed three separate scientific studies which all showed that COVID-19 antibodies disappear very, very rapidly.  In fact, some patients no longer had detectable antibodies just weeks after originally testing positive for antibodies.

What this means is that it appears that COVID-19 is very similar to many other less dangerous coronaviruses that are floating around out there.  Just like there is no lasting immunity to “the common cold”, there also appears to be no lasting immunity to COVID-19.

That means that no “vaccine” is going to save us, we will never get to the point of “herd immunity”, and this virus will circulate all over the globe year after year.

So does this mean that wearing masks will now become a permanent requirement in our society?

We should certainly hope that won’t be the case, but unfortunately we aren’t the ones making the decisions.

via ZeroHedge News https://ift.tt/3eANiSG Tyler Durden

The #1 destination for American expats is still very compelling

I’m an immigrant.

And I’ve been an immigrant for most of my adult life.

Over the past 20+ years, I’ve lived in ten different countries across Asia, Latin America, and the Middle East, and I’ve spent far more time outside my native country (the United States) than in it.

In most cases, whenever I moved to a new country I went through a formal process to obtain legal residency.

Each time the process was straightforward, and I never got the impression that I wasn’t welcome.

Quite the opposite, actually.

Most places around the world tend to see foreigners as a vital source of investment, capital, spending, and skilled labor.

They like it when talented, hard-working people come to their countries. Everyone benefits.

In my case, I started businesses and hired people in just about every country that I lived in, so there was more investment, employment, and prosperity as a result of me living there.

And that’s why I’ve always been strongly in favor of honest people having the same freedom as I’ve had– to move to a new country where they can work hard and make a life for themselves, just like anyone else who just happened to be born there.

(“Work hard” doesn’t mean ‘live on government welfare and taxpayer funded goodies’… but that’s a different story.)

Nationality is nothing more than a pure accident of birth, and it seems silly for people to be chained to this accident forever.

What’s interesting is that most Westerners assume it’s always people from developing countries who want to immigrate.

In the US, for example, there’s plenty of folklore about Mexicans streaming into the US over the southern border.

But this isn’t entirely true. There are actually more Mexicans leaving the United States than entering.

The latest data from 2017, for example, showed a NET 200,000 Mexicans LEFT the US that year alone, and that even includes estimates of illegal border crossings from the Department of Homeland Security.

But it’s not just native Mexicans returning to their homeland. Americans are following them south.

The US-born population living in Mexico is now at least 800,000, with estimates as high as 1.5 million. And around 75% of all immigrants to Mexico are from the US.

Mexico obviously has its issues – crime, drugs, corruption, etc.

But Mexico’s story is not simply the violence that’s presented in the news.

For example, Mexico’s state of Yucatan has the same per-capita violent crime rate as peaceful Wyoming.

Besides the Yucatan’s rich culture and great weather, it’s also CHEAP, less than half of a typical cost of living in the US (and much more if you’re from high-cost, high-tax New York or California.)

One of Sovereign Man’s team members recently relocated to Mexico’s Playa Del Carmen; he and his family have enjoyed not only a great deal of freedom, but also a low cost of living.

Mexico is one of the few places in the world where you can immediately apply for permanent residency if you can prove you are retired and demonstrate a healthy bank balance or pension.

And you can complete nearly the entire process at a Mexican consulate without ever leaving your home country.

You won’t need to travel to Mexico until your legal residency is approved.

Also, unlike many other countries, Mexican permanent residency does not expire, and there is no need to renew it. So Mexican permanent residency is indeed permanent.

Now, I’m not trying to convince you to move to Mexico. This is just one option of countless others.

But the world is a big place full of fantastic business, investment, and lifestyle opportunities.

And whether it’s due to another wave of lockdowns, riots in the streets, the chance to work remotely, a desire to slash your living expenses, or the Rise of the Bolsheviks, there’s no downside in at least considering some options overseas.

My team just finished updating our in depth article on dual citizenship for Americans.

It’s a good place to start answering some questions you might have, and give you more ideas of how and where to obtain a second residency and citizenship.

Source

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Tesla’s Share Of The Global Auto Market Is 0.8% But Its Market Cap Is 3x The Entire S&P Autos Sector

Tesla’s Share Of The Global Auto Market Is 0.8% But Its Market Cap Is 3x The Entire S&P Autos Sector

Tyler Durden

Thu, 07/16/2020 – 11:25

We have said much about the staggering surge in Tesla stock (in no small part thanks to generous “gamma gamblers” who keep buying massively OTM money call options expiring in a few days), and here, courtesy of Deutsche Bank’s Jim Reid, is some more since one can never have enough Tesla.

As the credit strategist notes, Tesla is up +330% since March 18th, and over +760% since June 2019 when it was troubled by bankruptcy concerns. Just 2 weeks ago it surpassed Toyota to become the world’s largest automaker.

As the chart shows, Tesla’s market cap ($287bn) has grown to over a third of the combined market cap of the US, EU and  Japanese auto indices.

Since March, Tesla has added just over 8 Ford Motor Companies, 27 Renaults, or more than the entire market cap of Toyota. In fact, Tesla is over 3 times the size of the “S&P 500 Automobiles and Parts” sector, even though it’s not a member or in the S&P 500 (it would be the 15th largest).

According to our US Autos Analyst Emmanuel Rosner, Tesla’s overall share of the global autos market has grown from 0.1% in 2017 to an expected 0.8% in 2020, but remains minuscule. For context VW is at c.14%. However Tesla’s market share growth in its areas of focus has been particularly impressive, displacing many incumbents.

There are a few reasons for the stunning price action. Electric vehicles are seen as the future, ESG investing is growing, and Tesla is a darling of the Robinhood investment community. We see earnings next week.

For a flash survey: Do you think Tesla is overvalued or not? You can also pick don’t know. Click on the hyperlinks to vote. Answers ahead of earnings.

 

via ZeroHedge News https://ift.tt/391kp0K Tyler Durden

Millennial Renters Abandon Their Plans To Buy A Home

Millennial Renters Abandon Their Plans To Buy A Home

Tyler Durden

Thu, 07/16/2020 – 11:04

Authored by Mike Shedlock via MishTalk,

Many renters who were in the market to buy a home pre-Covid just threw in the towel.

A lifestyle survey shows millennials top the list of those canceling home-buying plans.

At the start of 2020, 11% of renters said they were ready and planning to buy a home this year, according to a recent survey conducted on RENTCafe.com. Conditions were looking up for Gen X renters, 15% of whom were making plans to buy a home this year, as well as for 14% of Older Millennials.  However, the pandemic has obstructed the path to homeownership for 43% of renters ready to buy, our survey results revealed

The survey, which ran at the end of May 2020, asked 7,000 renters about their housing plans before and after the coronavirus hit.

One in Ten Renters Were Ready to Buy a Home

43% of prospective home buyers who said they changed their plans quoted economic uncertainty as the top reason for doing so, followed by loss of income as the second most cited reason. Given the unprecedented times we’re living in, even the few renters who were determined to make the commitment to buy a home this year are now getting cold feet. Moreover, as many as 50% of Older Millennials, the most likely demographic to become homeowners, were forced by the pandemic to let go of their dream.

The Math 

11% were planning to buy a home. 43% canceled those plans. 

Is the net impact 0.43 * 0.11 = 0.0473?

I suspect that is on the low side but even a 5% impact is significant.  

Of course we are dealing with surveys as well. And we have not seen a sustained 43% decline in sales.

We will know much more in 6 months or so.

Other Plans

Half of Baby Boomer renters expressed no intention of ever buying again. The less costly, more convenient renting lifestyle may play a role. With renter households over 60 increasing considerably in the past decade, Boomers seem to be getting more and more comfortable with renting.

1/4 of Renters Will Never Buy a Home

Reflections on Moving

Moving is a pain in the ass.

I speak from recent experience having just driven a U-Haul from Illinois to Utah these past four days.

That applies moving from house-to-house or apartment-to-house or any other combination. But a owning a house ties you down. If we do not like Utah we can try another place. That is not so easy if you own a house. 

We left with an unsold house but we do own it free and clear, except of course for property taxes which are monstrous in Illinois: $15,000 a year on a $400,000 home. 

Until I am convinced I have found the home I want to die in, put us in the never buy again category.

It Takes 3 Weeks to Escape Illinois

Why 3 weeks? That’s how long it takes to reserve a one-way U-Haul outbound.

Everyone is leaving. No one is coming,” a U-Haul agent told us a few weeks ago.

For discussion, please see It Takes 3 Weeks to Escape Illinois

Why Utah?

I discussed Utah in my October 5, 2019 post Escape Illinois: Get The Hell Out Now, We Are

via ZeroHedge News https://ift.tt/2ZA8N1O Tyler Durden

Bad News For Moderna: More Evidence Shows COVID-19 Antibodies Disappear Not Long After Infection

Bad News For Moderna: More Evidence Shows COVID-19 Antibodies Disappear Not Long After Infection

Tyler Durden

Thu, 07/16/2020 – 10:45

Following trial results released yesterday showing Moderna’s vaccine candidate might not be safe for human consumption – apparently, the candidate caused “adverse” reactions in roughly 50% of patients who participated in a recent study – the dozens of companies, universities and governments working on COVID-19 vaccine candidates just received another piece of disheartening news: A growing body of evidence gleaned from research into the virus suggests that antibodies may not offer protection for more than 2-3 months, for many people.

Now, a study produced by researchers at King’s College London is showing recovered patients antibodies declined significantly within months of infection, raising the critical question of whether a vaccine could ever provide lasting protection. Moderna’s vaccine candidate has shown the capacity to produce antibodies in test subjects, but it’s still unclear exactly how much protection this might provide.

University of Nottingham Emeritus Professor in Immunology Herb Sewell, who consulted on the study, said it appeared to show that antibodies to the virus disappeared more quickly than antibodies for MERS and other coronaviruses. Viruses like SARS elicited an immune response that lasted at least a couple of years. 

This suggests that the eventual COVID-19 vaccine might need to be administered every year to offer a reliable level of protection.

“If the vaccine response drops off like the natural response does, it does mean we’d have to give repeat ones,” he said.

But that’s not set in stone – at least, not yet. As the FT points out, seeing some degree in decline of efficacy is typically expected. That doesn’t mean the body won’t be able to reproduce those same antibodies even more quickly the next time it is infected. 

Researchers also apparently found evidence showing a link between the intensity of symptoms and the durability of antibodies. The lighter the symptoms, the lower the level of apparent immunity.

It is normal to see some decline in antibody loads after a vaccine, which will still be effective if the body can subsequently produce antibodies more quickly when exposed to the virus again. Importantly, the body does not always respond in the same way to a vaccine as it does to an infection. Tal Zaks, chief medical officer at Moderna, said he believed it was “entirely plausible” that the antibodies fade, but that it might be because those patients were asymptomatic or started with lower levels of antibodies.

“They seem to lose them more quickly, which probably speaks to the quality and type of immune response to begin with,” he said. “It’s reassuring to see that we achieve neutralising antibodies that are consistently above what you see from people who’ve actually been sick, so we expect they are going to be protected.”

Several high profile studies have raised doubts about whether these antibodies are permanent, or effective, or not. But only large-scale clinical trials will eventually lead humanity to the truth, even as local officials rely on antibody detection tests of questionable quality to try to estimate the number of people in an area who contracted the virus.

Only large-scale clinical trials will eventually lead humanity to the truth.

“Confirmation of the correlation between antibody titers [concentration] and protection against Covid-19 will be possible only in a large clinical efficacy study,” she wrote in an opinion article that accompanied the publication of the peer-reviewed data on Moderna’s vaccine candidate.

And as scientists try to leave all their options open, some of the vaccines in development are examining the body’s T-cell response to the infection, something researchers suspect could help hold the key to developing a successful vaccine.

Mr Raffat said he had heard AstraZeneca would show a robust response from both T-cells and antibodies to the vaccine it is developing with the University of Oxford. AstraZeneca did not respond to a request for comment. On the call with investors on Wednesday, Mr Raffat said: “If I want to take a vaccine in January, I’ll probably want to take Astra for a T-cell response and Moderna or Pfizer BioNTech for a neutralising antibody response.”

If stocks keep moving lower, we imagine we’ll be seeing some more positive-sounding vaccine news in the very near future.

via ZeroHedge News https://ift.tt/3h6PMd0 Tyler Durden

More Mudslinging in the Debate Over School Reopening

westendrf521105

Efforts to help homeschooling parents draw criticism, because everything is partisan these days. U.S. Secretary of Education Betsy DeVos is saying it’s “not acceptable for schools not to reopen” classrooms this fall. It would be nice if federal authorities rejected a one-size-fits-all approach to reopening schools and instead let states and municipalities decide for themselves what’s best for local students.

Still, much of the current anger at DeVos and the Department of Education’s plans for pandemic-era schooling is woefully misplaced.

For instance, sociologist Jessica Calarco complains in a New York Times piece aimed at DeVos that the CARES Act only provides $13.5 billion to help schools make safety changes, not the $245 billion that the Council of Chief State School Officers requested. “Instead, Education Secretary Betsy DeVos is pressuring schools to open and threatening to cut off funds to public schools that don’t fully open in the fall,” writes Calarco. “She has suggested that those federal funds could be diverted to families to help pay for private or religious education. She has already put in place ‘micro-grants’ for families that want to home-school their children this fall.”

But DeVos had no control of the CARES Act or how it allocates funding; that was Congress. And aside from that complaint, what exactly is Calarco upset about—that homeschooling families might get some help? That people who have immuno-compromised kids or otherwise have good reason to keep them out of physical schools may still have some options? That federal money set aside for schools that are now not opening might be reallocated to schools that are? What strange complaints.

Sure, the usual caveats apply here about the federal government overspending and usurping local decision-making through targeted funds conditioned on political demands. Still, it doesn’t seem like such a bad idea to withhold funds designated to improve school safety from schools that aren’t planning to reopen and offer it instead to programs that could make a difference for students and their struggling parents.

And it’s simply silly to pretend (as Calarco does) that providing grants to support homeschooling, private schooling, and charter schooling is somehow likely to increase “inequality in education.”

Calarco laments that “families with more resources and more flexibility will presumably be the ones most able to keep their children out of unsafe schools,” since “wealthy families may hire private tutors or send their children to private schools that can afford to minimize risk.” Yet that’s exactly what DeVos’ efforts at funding school choice options are meant to offset!

Ultimately, the department’s emphasis on school choice at a time like this is refreshing, even if DeVos’ rhetoric doesn’t fully match her department’s efforts. With so much uncertainty, different families facing widely varying risks and economic circumstances, and such huge stakes across the board, it only makes sense to try and meet people where they are rather than trying to force all families and educators back into the same pre-pandemic patterns. Restructuring federal education priorities to give families across a range of socioeconomic brackets greater choice is a great step.

Alas, many commentators seem so primed to believe the worst about DeVos and the Trump-era Department of Education that any good they are doing is getting lost in partisan mudslinging and internet conspiracy theories.

Last week, for instance, a meme went around that falsely quoted DeVos as saying “only” 0.02 percent of U.S. students, or about 14,740 kids, would die as a consequence of reopening schools. There’s no public record of DeVos saying that, however. DeVos spokesperson Angela Morabito told USA Today that “the Secretary has never and would never say such a thing. This is a total lie. She would not be working to get kids back in school if it were unsafe.”


FREE MARKETS

A new study on vaping and lung disease finds earlier links were due to vapers who are also current or former cigarette smokers. “Previously documented associations between e-cigarette use and lung disease are driven by users who are also smokers. Applied econometric methods are needed to identify causal effects, from Donald S. Kenkel, Alan D. Mathios, and Hua Wang,” tweeted the National Bureau of Economic Research in summary.


FREE MINDS

World population to peak earlier than expected, say scientists. It’s strange to think how not very long ago, overpopulation was such a huge concern. Now, we’re rapidly nearing a period of population decline, scientists say.

“United Nations demographers have been anticipating since last year that the world’s population may stop growing by 2100 as fertility rates decline, projecting a peak of 10.9 billion people by century’s end, compared with roughly 7.8 billion now,” reports The New York Times. And that estimate may be too conservative:

… a study published on Tuesday in The Lancet, the medical journal, has challenged that forecast, with major economic and political implications. The study asserted that the global population could peak at 9.7 billion by 2064—nearly four decades earlier—and decline to 8.8 billion by 2100.

Moreover, the study concluded, the elderly will make up a bigger chunk of the total than foreseen in the U.N. forecast, and the populations of at least 23 countries, including Japan, Thailand, Italy and Spain, could shrink by more than 50 percent. The study also projected significant declines in the working-age populations of China and India, the two most populous countries, portending a weakening in their global economic power.

The study’s projections, if borne out, also carry significant consequences for the United States, whose economy is expected to trail China’s in size by 2035. As China’s working-age population declines in the second half of the century, the study said, the United States could reclaim the top spot economically by 2098 — if immigration continues to replenish the American work force.


QUICK HITS

• A massive Twitter hack yesterday that led to an array of celebrities and public figures—including Barack Obama and Elon Musk—tweeting out a bitcoin scam was reportedly aided by a Twitter employee.

• Georgia Gov. Brian Kemp (R) is using an executive order to override mask mandates passed in 15 Georgia municipalities.

• Berkley’s city council approves police reforms:

After hours of emotional public testimony, councilmembers in the northern California city approved a reform measure that calls for a committee tasked with police reforms. They include removing the police department from responding to calls involving people experiencing homelessness or mental illness and finding ways to eventually cut the police budget by half. The vote also called for the creation of a separate city department to handle the enforcement of parking and traffic laws.

• A new study provides more evidence that masks protect health care workers:

• As we learn more about how varying viral loads affect COVID-19 transmission and the severity of COVID-19 symptoms, it’s becoming clearer that masks protects the wearer, not just those around them. “That’s the argument Dr. Monica Gandhi, UC San Francisco professor of medicine and medical director of the HIV Clinic at Zuckerberg San Francisco General Hospital, is making about why—if you do become infected with the virus—masking can still protect you from more severe disease,” notes the Los Angeles Times.

• “One of America’s favorite advice books of the moment,” White Fragility, “is actually a racist tract,” writes John McWhorter. “Despite the sincere intentions of its author, the book diminishes Black people in the name of dignifying us.…Few books about race have more openly infantilized Black people than this supposedly authoritative tome.”

• Parler, the Twitter-alternative currently trendy among Republican politicians, is “facing the same evolution that bigger social media companies have confronted for years—balancing free expression with creating safe and inviting online communities.”

• Biden now beats Trump by 15 points in a national poll:

• A new lawsuit alleges that “with weapons drawn, Louisville Metro Police SWAT officers raided a home last July to serve a warrant on an alleged drug suspect, but instead, they handcuffed a man hired to paint the vacant house, his girlfriend and her 10-year-old daughter,” according to WDRB.

• The governor of Oklahoma has COVID-19.

• A defamation case against MSNBC host Joy Reid has been revived:

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More Mudslinging in the Debate Over School Reopening

westendrf521105

Efforts to help homeschooling parents draw criticism, because everything is partisan these days. U.S. Secretary of Education Betsy DeVos is saying it’s “not acceptable for schools not to reopen” classrooms this fall. It would be nice if federal authorities rejected a one-size-fits-all approach to reopening schools and instead let states and municipalities decide for themselves what’s best for local students.

Still, much of the current anger at DeVos and the Department of Education’s plans for pandemic-era schooling is woefully misplaced.

For instance, sociologist Jessica Calarco complains in a New York Times piece aimed at DeVos that the CARES Act only provides $13.5 billion to help schools make safety changes, not the $245 billion that the Council of Chief State School Officers requested. “Instead, Education Secretary Betsy DeVos is pressuring schools to open and threatening to cut off funds to public schools that don’t fully open in the fall,” writes Calarco. “She has suggested that those federal funds could be diverted to families to help pay for private or religious education. She has already put in place ‘micro-grants’ for families that want to home-school their children this fall.”

But DeVos had no control of the CARES Act or how it allocates funding; that was Congress. And aside from that complaint, what exactly is Calarco upset about—that homeschooling families might get some help? That people who have immuno-compromised kids or otherwise have good reason to keep them out of physical schools may still have some options? That federal money set aside for schools that are now not opening might be reallocated to schools that are? What strange complaints.

Sure, the usual caveats apply here about the federal government overspending and usurping local decision-making through targeted funds conditioned on political demands. Still, it doesn’t seem like such a bad idea to withhold funds designated to improve school safety from schools that aren’t planning to reopen and offer it instead to programs that could make a difference for students and their struggling parents.

And it’s simply silly to pretend (as Calarco does) that providing grants to support homeschooling, private schooling, and charter schooling is somehow likely to increase “inequality in education.”

Calarco laments that “families with more resources and more flexibility will presumably be the ones most able to keep their children out of unsafe schools,” since “wealthy families may hire private tutors or send their children to private schools that can afford to minimize risk.” Yet that’s exactly what DeVos’ efforts at funding school choice options are meant to offset!

Ultimately, the department’s emphasis on school choice at a time like this is refreshing, even if DeVos’ rhetoric doesn’t fully match her department’s efforts. With so much uncertainty, different families facing widely varying risks and economic circumstances, and such huge stakes across the board, it only makes sense to try and meet people where they are rather than trying to force all families and educators back into the same pre-pandemic patterns. Restructuring federal education priorities to give families across a range of socioeconomic brackets greater choice is a great step.

Alas, many commentators seem so primed to believe the worst about DeVos and the Trump-era Department of Education that any good they are doing is getting lost in partisan mudslinging and internet conspiracy theories.

Last week, for instance, a meme went around that falsely quoted DeVos as saying “only” 0.02 percent of U.S. students, or about 14,740 kids, would die as a consequence of reopening schools. There’s no public record of DeVos saying that, however. DeVos spokesperson Angela Morabito told USA Today that “the Secretary has never and would never say such a thing. This is a total lie. She would not be working to get kids back in school if it were unsafe.”


FREE MARKETS

A new study on vaping and lung disease finds earlier links were due to vapers who are also current or former cigarette smokers. “Previously documented associations between e-cigarette use and lung disease are driven by users who are also smokers. Applied econometric methods are needed to identify causal effects, from Donald S. Kenkel, Alan D. Mathios, and Hua Wang,” tweeted the National Bureau of Economic Research in summary.


FREE MINDS

World population to peak earlier than expected, say scientists. It’s strange to think how not very long ago, overpopulation was such a huge concern. Now, we’re rapidly nearing a period of population decline, scientists say.

“United Nations demographers have been anticipating since last year that the world’s population may stop growing by 2100 as fertility rates decline, projecting a peak of 10.9 billion people by century’s end, compared with roughly 7.8 billion now,” reports The New York Times. And that estimate may be too conservative:

… a study published on Tuesday in The Lancet, the medical journal, has challenged that forecast, with major economic and political implications. The study asserted that the global population could peak at 9.7 billion by 2064—nearly four decades earlier—and decline to 8.8 billion by 2100.

Moreover, the study concluded, the elderly will make up a bigger chunk of the total than foreseen in the U.N. forecast, and the populations of at least 23 countries, including Japan, Thailand, Italy and Spain, could shrink by more than 50 percent. The study also projected significant declines in the working-age populations of China and India, the two most populous countries, portending a weakening in their global economic power.

The study’s projections, if borne out, also carry significant consequences for the United States, whose economy is expected to trail China’s in size by 2035. As China’s working-age population declines in the second half of the century, the study said, the United States could reclaim the top spot economically by 2098 — if immigration continues to replenish the American work force.


QUICK HITS

• A massive Twitter hack yesterday that led to an array of celebrities and public figures—including Barack Obama and Elon Musk—tweeting out a bitcoin scam was reportedly aided by a Twitter employee. Georgia Gov. Brian Kemp (R) is using an executive order to override mask mandates passed in 15 Georgia municipalities.

• Berkley’s city council approves police reforms:

After hours of emotional public testimony, councilmembers in the northern California city approved a reform measure that calls for a committee tasked with police reforms. They include removing the police department from responding to calls involving people experiencing homelessness or mental illness and finding ways to eventually cut the police budget by half. The vote also called for the creation of a separate city department to handle the enforcement of parking and traffic laws.

• A new study provides more evidence that masks protect health care workers:

• As we learn more about how varying viral loads affect COVID-19 transmission and the severity of COVID-19 symptoms, it’s becoming clearer that masks protects the wearer, not just those around them. “That’s the argument Dr. Monica Gandhi, UC San Francisco professor of medicine and medical director of the HIV Clinic at Zuckerberg San Francisco General Hospital, is making about why—if you do become infected with the virus—masking can still protect you from more severe disease,” notes the Los Angeles Times.

• “One of America’s favorite advice books of the moment,” White Fragility, “is actually a racist tract,” writes John McWhorter. “Despite the sincere intentions of its author, the book diminishes Black people in the name of dignifying us.…Few books about race have more openly infantilized Black people than this supposedly authoritative tome.”

• Parler, the Twitter-alternative currently trendy among Republican politicians, is “facing the same evolution that bigger social media companies have confronted for years—balancing free expression with creating safe and inviting online communities.”

• Biden now beats Trump by 15 points in a national poll:

• A new lawsuit alleges that “with weapons drawn, Louisville Metro Police SWAT officers raided a home last July to serve a warrant on an alleged drug suspect, but instead, they handcuffed a man hired to paint the vacant house, his girlfriend and her 10-year-old daughter,” according to WDRB.

• The governor of Oklahoma has COVID-19.

• A defamation case against MSNBC host Joy Reid has been revived:

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Calibrating The Craziness

Calibrating The Craziness

Tyler Durden

Thu, 07/16/2020 – 10:26

Authored by David Robertson via RealInvestmentAdvice.com,

After a record drawdown in the first quarter and a record rebound in the second quarter, no one is disputing that the first half of 2020 has been memorable. What is open for question is whether the first or the second quarter is a better portent for the foreseeable future.

There is no doubt that public policy is part of the equation. While overwhelming policy responses to the Covid-19 related lockdowns certainly affected the markets, the Fed didn’t force anybody to do anything either. The key to managing through this is understanding what has happened and why.

A pattern to which investors have become all too accustomed, the Fed pounced into action soon after stocks fell precipitously in March. And pounce it did. In a set of measures that were mind boggling both in terms of magnitude and breadth, the Fed sent a strong signal of its commitment to support markets. In addition, it kept rolling out new policies throughout the second quarter in order to quell any remaining doubt as to its intent.

Not only did stocks rebound, but they seemed to be completely reinvigorated. As markets continued bounding despite evidence of a relatively weak economic recovery, commentators have tried to capture the growing disconnect. Michael Every from Rabobank proclaimed, “Markets are, across the board, totally divorced from reality. Facts no longer matter”. Jeffrey Gundlach chimed in saying, “There’s no price-discovery mechanism”.

A Permanent Distortion Of Markets

Nomi Prins exclaimed, “I call this a ‘Permanent Distortion.’  I have not used this term in prior books, but I am using it because . . . the disconnect between financial assets, equity markets and the real economy . . . has become massive…” Upon leaving ValueAct Capital, the hedge fund he founded, Jeff Ubben declared, “Finance is, like, done. Everybody’s bought everybody else with low-cost debt”.

Other phenomena have corroborated these observations. Retail trading picked up significantly and focused much more on “story” stocks than fundamentals. On the other side of the spectrum, high profile hedge funds continued to close down, further highlighting how troublesome the environment has become.

Criticisms abound and revolve around the same points. The economy is weaker than people believe. Asset prices are disconnected from economic reality. The markets are manipulated. Many blame the Fed. The idea is that stocks have become untethered from reality because central banks have hijacked the capital markets.

Investor Realizaton

What should investors make of this? What does it imply for investment strategy?

These questions can be distilled down into more specific ones. What we seem to be observing is speculative fervor run amok. What we want to know is when it will end. Recent research by Mike Green of Logica Funds provides some extremely useful insights into these issues. A key element in looking for the cause of the problem is to consider sources other than the Fed. He sums it all up in his piece, Talking Your Book About Value, Part 3, by saying, “it’s all about flows”.

“As we have repeatedly discussed, the widespread transition to index products (both futures and passive mutual funds/ETFs) has changed the behavior of markets. Transactions focused on buying or selling all stocks and profitability derived from index arbitrage (again, both futures and the creation/redemption process of ETFs) rather than security selection have irrevocably changed the incentive structure on Wall Street.”

In other words, the widespread adoption of passive funds at the expense of actively managed ones has significantly changed the way the market works. It used to be that Wall Street would make money by executing trades and providing research on stocks. Now, Wall Street makes money by lending securities and arbitraging indexes.

The Inevitable Conclusion

The combination of the inexorable flows of money from active to passive and the new incentive system on Wall Street means that there is a declining cohort of investors willing to make investment decisions based on fundamentals. Just as soon as this intrepid fundamental investor makes a nonconsensus trade, that trade is overwhelmed by the wall of money coming in from passive funds. The investor underperforms by failing to keep up with stocks enjoying stronger flows and, adding insult to injury, loses assets.

“We have reached the inevitable conclusion that no one is standing in the way of insanity. We are seeing this in our social lives where Cancel Culture has raised the stakes for anyone willing to stand in the way of the shaming mob, and we are seeing it in our public (and private) markets where any attempt to express rationality is met with underperformance and redemptions.”

A key element in understanding the craziness of the market, then, is realizing that the key suspect is not the Fed but rather passive investing. Green elaborated on these mechanics in a separate presentation, a podcast hosted by Grant Williams and Bill Fleckenstein.

Passive Issues

An important starting point is identifying the marginal investor because that is who establishes prices. Part of Green’s insight is recognizing the owner of a passive target date fund as that marginal investor. This is useful because these investors have unique characteristics. The funds are “balanced” in the sense that there is some allocation to stocks and some to bonds. The bond portion diversifies the risk of the stocks which has allowed for the aggregate portfolio to appreciate fairly reliably.

As such, target date fund owners do not experience volatility in the same way that equity-only investors do. Being insulated from the vicissitudes of the stock market, they don’t really care about Fed announcements. The owners certainly don’t experience volatility in any kind of deep, visceral way. They just keep directing a portion of their paycheck into the fund and the flows are pretty much on autopilot. They do not care about stock prices.

Change Of Affairs

As a result of this behavior, however, they become an important enabler of market craziness. But it is not because of what they do. It is because of what they do NOT do. They do not police prices, nor do they make any effort to “stand in the way of insanity.” They do not sell because stock prices seem too high.

What could change this state of affairs? “The minute 10-year bonds in the United States offer a negative yield or are at zero … I think that’s the endgame,” is Green’s ready response. The reason is at that threshold, bonds no longer offset the volatility of stocks. When that happens, a number of investment strategies stop working altogether. Volatility targeting funds shut down. Risk parity is forced to liquidate.

Further, the target date portfolio takes on completely different characteristics. All of a sudden, that retirement nest egg starts bouncing around all over the place. It can even drop by a lot. Absent the protective diversification of bonds, these passive investors suddenly become fully exposed to volatility. It’s like someone turned a light on and now all the ugly volatility is visible.

It’s Worse

It’s actually worse than this though. Once passive investors decide to start selling, who will be the buyer? The remaining active investors aren’t touching stocks at anywhere close to current valuations. Newly unprotected passive investors just want out. As Green describes, liquidity becomes the thing to watch out for: “When the scale [of selling] that hits the market is incapable of being absorbed by the market … that’s where chaos occurs”.

While there is a lot to unpack from this analysis, there are a couple of general lessons that stand out. First, inordinate focus on the Fed creates an unhelpful distraction. Yes, it is certainly true that the Fed massively expanded monetary policy. Yes, it is also true that some of these expansions are effectively fiscal policy. And yes, all these things affect expectations and make it easier to speculate. But only in the context of a market structure that has no mechanism to stand in the way of insanity can craziness proliferate the way it has.

Second, the environment for much of traditional active management is brutal. As long as money keeps flowing into passive vehicles, there is little point in selecting securities. As Green makes clear, “The opportunity for traditional active management to outperform … is radically reduced in this environment as security selection becomes largely irrelevant.” The message for stock pickers is, “this market is just not that into you”.

Active Management Lives

Importantly, however, this does not mean that there is nothing for active managers to do. In fact, quite the opposite is true. As Green sees it, “Regulators have encouraged a process of consolidation in the name of ‘efficiency’ that has left us with nearly unimaginable levels of systemic risk.” Arguably then, the single biggest investment priority is to manage that systemic risk.

Although Green’s answer for dealing with current market dynamics is fascinating and intellectually stimulating, it is also designed for ultra high net worth investors. Nonetheless, there are important takeaways for everyone.

One is that exposure to the market is much more of a Faustian bargain than a reliable route to retirement riches. Exposure to risk assets may very well provide attractive incremental gains for some period of time, but that exposure is also likely to lead to substantial losses at some point.

This is especially important to remember since there are several compelling arguments that favor exposure to stocks. For example, the increasing liquidity from central banks does provide a tailwind for stocks. Stocks can also help reduce vulnerability to rising inflation since companies can increase prices. Further, bonds are so stretched at this point that stocks offer relative value. Finally, US stocks can be attractive assets for foreign investors at least partly because they are denominated in dollars. These arguments do have at least some merit, so don’t forget that stocks also come with “nearly unimaginable levels of systemic risk”.

The Silver Lining

Another takeaway is that this new market structure puts a fresh perspective on value investing. A key tenet of value investing is reversion to the mean which essentially means when things get out of hand, they will eventually normalize. This key tenet is undermined by passive investing, though. In the current market structure, the mechanism by which adjustments have been made in the past is disabled. There is “no one is standing in the way of insanity”. Until the market structure changes, the success of value investing is likely to be episodic at best.

In addition, investors should keep an eye on 10-year yields. If they remain comfortably positive, there is no reason to believe that things should change much. If those yields close in on zero, however, that could set up for a huge change in market action.

Finally, for those of us who have invested a great deal to develop skill and expertise in security selection and value investing, we need to recognize the limited usefulness of these tools in this environment. That doesn’t mean these things won’t be incredibly valuable at some point in the future; I believe they will be. I also believe risk management matters like it never has before. However, it is also important to respect the distinct possibility that there is no necessary reason for environment to change soon.

Conclusion

In conclusion, this market has been far more resilient than I, and many other value-oriented investors, ever thought possible. Passive flows go a long way in explaining this phenomenon. They also suggest whatever craziness we have experienced can continue for some time. Fundamentals really don’t matter much in this environment and as result, stock prices have little information content.

While this establishes a less than satisfying prospect for investors, there is a silver lining: We won’t have to keep wracking our brains trying to understand how in the world prices can become so crazy. So, at least we have that going for us.

via ZeroHedge News https://ift.tt/30ln9SE Tyler Durden

Homebuilder Optimism Explodes Higher As Mortgage Rates Plunge To Record Lows

Homebuilder Optimism Explodes Higher As Mortgage Rates Plunge To Record Lows

Tyler Durden

Thu, 07/16/2020 – 10:12

US Homebuilders’ Confidence index soared higher in July (to 72 from 58 last month), back to March (pre-COVID) levels.

  • Measure of present single family sales rises to 79 vs 63 last month

  • Future single family sales gauge rises to 75 vs 68 last month

  • Prospective buyers traffic measure rises to 58 vs 43 last month

“New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead,” Robert Dietz, NAHB chief economist, said in a statement.

“Flight to the suburbs is real.”

At the same time, the average rate on a 30-year fixed mortgage fell to 2.98%, mortgage-finance giant Freddie Mac said Thursday, its lowest level in almost 50 years of record keeping. It is the third consecutive week and the seventh time this year that rates on America’s most popular home loan have hit a fresh low.

Below 3% is a “tremendous benchmark,” said Jeff Tucker, an economist at Zillow Group Inc.

“It’s also an indication that we remain in a crisis here.”

But, the relative spread over Treasuries remains dramatic to say the least…

There’s just one thing, while homebuilders are almost at euphoric levels, homebuyers aren’t so convinced…

Source: Bloomberg

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