Author: admin

Earlier this week we asked if “everyone was wrong” about the ongoing impact of the coronavirus pandemic, when we pointed out that despite the surge in new covid-19 cases, which according to Bank of America was largely a function of far more widespread testing, deaths were declining.

Specifically, we referred to a recent note by Nordea’s strategist Andreas Steno Larsen, who was looking at the growing divergence between the number of new covid cases in the US and shrinking number of fatalities, and observed that “we are entering “crunch time” on fatalities since they should start to rise in early July given the lead/lag structure versus new cases.“

As Larsen further predicted, “if fatalities don’t spike early in July, then people will conclude that it’s probably spreading amongst a part of the population that is not as sensitive, or that it is a resulted of increased testing or that the virus has become less deadly as we move into the summer months. Governors in Texas, California and Florida seem to have concluded that the below correlation holds, but the jury is still out.”

His conclusion was that “the next 6-10 days will be crucial.”

With that in mind, we followed up on Larsen’s prediction  one week later, and we found that there still no spike in fatalities at either the federal level or state level.

Which prompted us to ask whether “most experts were wrong that the surge in cases would also lead to a spike in deaths?” We also showed recent data compiled by Deutsche Bank, which could explain the lack of a rise in the mortality rate. As DB’s Jim Reid showed, unlike the 1918 Spanish Flu pandemic, there has been a major difference with the current covid crisis, namely in the age distribution of fatalities:

As DB further pointed out, for Covid-19, the elderly have been overwhelmingly the worst hit. For the Spanish flu of 1918, the young working-age population were severely affected too. In fact, the death rate from pneumonia and influenza that year among 25-34 year olds in the United States was more than 50% higher than that for 65-74 year olds, “a remarkable difference to Covid-19.”

So was it the case that the latest wave of covid was simply far less dangerous than the Spanish Flu, or were we merely counting the chickens early? After all, as Larsen said 10 days ago, the crunch time could take as much as 10 days to emerge.

Fast forwarding to today, in a troubling observation that suggests we may have indeed been premature with our optimistic assessment, Goldman’s writes that on Thursday confirmed cases in the US increased by 63K, the largest daily increase observed in the country so far. More concerning, however, is that while new fatalities have not begun to climb substantially at the country-level, some states with high rates of case growth have started to see an acceleration in deaths, which as shown below, is Goldman’s Chart of the Day.

Still, as even Goldman concedes, the increase in new fatalities has not been as rapid as that of new cases, and just like BofA, Goldman adds that “This likely reflects, at least partially, greater testing, which has captured more low-risk cases and, perhaps, more high-risk cases at earlier stages of infection, resulting in a longer lag between confirmed cases and deaths.”

In a separate ominous observation, Goldman also notes that hospitalizations are rising nationally as well, and COVID-19 patients now occupy 7.4% of hospital beds nationwide, up 2% compared to two weeks ago. As the bank further details, “patients receiving treatment for COVID-19 in Arizona hospitals now occupy nearly a quarter of total capacity. In Texas, and Florida, COVID-19 patient occupancy is still doubling about every two weeks. In each of these three states new case growth is still high and accelerating. In Georgia, Maryland, Nevada, South Carolina, and Alabama, COVID-19 patients occupy at least 10% of total hospital capacity while available capacity is already quite low. Prevalence of symptoms and cases are still increasing in each of these states.”

Still, putting the rise in hospitalizations in context, even Arizona – the most severely impacted state – still has another 20% to go before it catches up to where NY and NJ were at their peak.

Bottom line: it is still too early to rule out that the ongoing increase in cases across the US won’t necessarily translate into higher deaths.

Authored by Charles Hugh Smith via OfTwoMinds blog,

As the inverted pyramid collapses, the effects will be non-linear.

Round about late March, we entered a Financial FantasyLand in which all the sins and excesses of rampant financialization were going to be painlessly washed away. Mever mind the entire U.S. economy is an inverted pyramid of balance-sheet “value” and debt resting on a shrinking foundation of collateral; everyone would be made whole in the Federal Reserve’s Financial FantasyLand.

You are now leaving FantasyLand: trillions of dollars of phantom value have already vanished, and these catastrophic losses will be taken by somebody. The question is: who will get the concrete overshoes? Whose balance sheets will collapse to negative numbers, erasing all their phantom wealth?

Everyone was delighted to suspend reality and entertain the fantasy that there was a cost-free way to bail out financialization’s greed-soaked sinners: The Fed will simply print as many trillions as needed to make everyone whole. Since it doesn’t cost the Fed anything to digitally print endless trillions, this “solution” is completely, totally free.

What an amazing moment of grace: all our sins washed away in a rising river of Fed-printed money. With endless trillions available, everyone can get bailed out forever. Collateral, actual earnings and profits, none of that matters. The Fed’s grace is godlike in its infinite expansion.

This escape from karma, consequence and divine retribution was as temporal as the ride through FantasyLand. The wheel of karma has turned, The Tao is reversing, the banquet of asymmetric, non-linear consequences has been served and the Fed’s godlike powers will be revealed to be as delusional as the “value” and “wealth” that’s piled up in the balance sheets of the top 0.1%.

For there actually is a cost to digitally printing trillions to bail out all the predatory parasites of financialization. Put simply, every dollar that’s digitally printed that isn’t matched by an increase in the productive capacity of the economy, i.e. the means to generate goods and services with less capital and fewer hours of labor, is nothing but a hidden reduction in the purchasing power of every existing dollar.

The idea that the Fed or Treasury can print endless trillions and there will never be any consequence of this fraud is nothing more than a compelling Cargo Cult superstition. Just as South Pacific Cargo Cults painted radio dials on rocks to communicate their desire for the return of Uncle Sam’s shiploads of freebies, the “we can print our way out of any problem” cargo cult paints low inflation numbers and arcane equations on rocks and declares the magic will work: the Fed/Treasury can print as many trillions as we need to bail out every greed-soaked sinner, and there will never be any consequences–never ever, because the painted rocks have magical powers.

Now that we’re leaving Financial FantasyLand, a very hard lesson about non-linearity is about to be learned. In addition to the “we can wash away every sin with endless trillions” fantasy, there’s the fantasy of linearity in non-linear, fragile systems.

The fantasy of linearity holds that a 10% decline in revenues, profits, rents collected, etc. will only cause a 10% decline in isolated parts of the economy. The believers in the fantasy acknowledge that the 10% decline will hurt, but only a bit, and soon Mommy and Daddy (Treasury and Fed) will apply the Band-Aid and it will all go away.

As the inverted pyramid collapses, the effects will be non-linear: a 10% decline may trigger dominoes that end up generating an 90% decline in “value” and “wealth” because the collapse of collateral to a non-fantasy valuation will implode all the phantom valuations piled on steadily more fragile and fantastic layers of phantom “capital.”

The fantasy of the Neofeudal Aristocracy is that the losses can be painlessly transferred to the debt-serfs and taxpaying peasantry. Mommy and Daddy (Treasury and Fed) will load future generations of debt-serfs and taxpaying peasantry with the losses and the political-financial Nobility will have their fortunes preserved. Gee, thanks, Mommy and Daddy! You’re swell!

The Neofeudal Aristocracy overlooks one terribly inconvenient fact: the debt-serfs and peasantry own next to nothing. The non-linear collapse of phantom capital will have asymmetric consequences: all the “assets” most likely to go to zero are owned not by the peasantry but by the Neofeudal Aristocracy.

Now that we’re exiting Financial FantasyLand, reality will intrude. The Fed is not godlike and the sins of predatory, parasitic, exploitive financialization will be paid in full measure. The hubris-drenched punditry and Neofeudal Aristocracy who mock the notion that there was anything beyond the command of their conjured trillions will discover that The way of the Tao is reversal, and their child-like faith in their own perverse powers to shape the world to their liking will be destroyed along with their phantom wealth.

*  *  *

My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)

(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

A highly respected Chinese virologist has fled Hong Kong and says that the Chinese government knew about COVID-19 long before they claim they did, and that her supervisors – some of the top experts in the field – ignored research she was conducting at the onset of the pandemic which she says could have saved lives, according to an exclusive interview with Fox News.

Dr. Li-Meng Yan, who specialized in virology and immunology at the Hong Kong School of Public Health, fled Hong Kong on April 28 on a Cathay Pacific flight to the United States, knowing that if she were caught she could be jailed or “disappeared.”

She adds that they likely had an obligation to tell the world, given their status as a World Health Organization reference laboratory specializing in influenza viruses and pandemics, especially as the virus began spreading in the early days of 2020.

Yan, now in hiding, claims the government in the country where she was born is trying to shred her reputation and accuses government goons of choreographing a cyber-attack against her in hopes of keeping her quiet.

Yan believes her life is in danger. She fears she can never go back to her home and lives with the hard truth that she’ll likely never see her friends or family there again.

Still, she says, the risk is worth it. –Fox News

“The reason I came to the U.S. is because I deliver the message of the truth of COVID,” Yan told Fox from an undisclosed location.

Yan says she was one of the first scientists in the world to study COVID-19 (aside from Wuhan researchers, perhaps) after he supervisor, Dr. Leo Poon, asked her to look into “the odd cluster of SARS-like cases coming out of mainland China at the end of December 2019,” according to the report.

“The China government refused to let overseas experts, including ones in Hong Kong, do research in China,” she said. “So I turned to my friends to get more information.”

Yan’s mainland colleagues – one of whom worked at the Chinese Center for Disease Control and Prevention, allegedly told Yan on December 31 that the virus was transmissible between humans long before the CCP or the WHO reversed course and admitted this was possible. After she told her boss of this, “he just nodded,” she says.

Days after her CCP contacts told her about human-to-human transmission, the WHO put out a statement on January 9 saying: “According to Chinese authorities, the virus in question can cause severe illness in some patients and does not transmit readily between people… There is limited information to determine the overall risk of this reported cluster.”

The cover-up.

Yan said that discussion between colleagues in China about the disease took a sharp turn after “doctors and researchers who had been openly discussing the virus suddenly clammed up.” Contacts in Wuhan went completely dark and others warned not to ask them about the virus – telling Yan “We can’t talk about it, but we need to wear masks.”

“There are many, many patients who don’t get treatment on time and diagnosis on time,” said Yan, adding “Hospital doctors are scared, but they cannot talk. CDC staff are scared.”

She said she reported her findings to her supervisor again on Jan. 16 but that’s when he allegedly told her “to keep silent, and be careful.”

“As he warned me before, ‘Don’t touch the red line,'” Yan said referring to the government. “We will get in trouble and we’ll be disappeared.”

She also claims the co-director of a WHO-affiliated lab, Professor Malik Peiris, knew but didn’t do anything about it.

Peiris also did not respond to requests for comment. The WHO website lists Peiris as an “adviser” on the WHO International Health Regulations Emergency Committee for Pneumonia due to the Novel Coronavirus 2019-nCoV.

Yan was frustrated, but not surprised –Fox News

“I already know that would happen because I know the corruption among this kind of international organization like the WHO to China government, and to China Communist Party,” said Yan. “So basically… I accept it but I don’t want this misleading information to spread to the world.”

WHO denies that Professor Malik Peiris directly works for the organization, telling Fox in a statement “Professor Malik Peiris is an infectious disease expert who has been on WHO missions and expert groups – as are many people eminent in their fields,” adding “That does not make him a WHO staff member, nor does he represent WHO.”

Read the rest of the report here.

Meanwhile, a local Beijing resident says the CCP is covering up new virus cases in a local neighborhood, according to the Epoch Times:

Two people who live in the Liuyi residential compound, located in the city’s Daxing district, were recently found to be infected with the CCP virus, according to a resident named Ms. Li, who is familiar with local virus outbreak information.

The entire compound, which is home to roughly 1,000 residents, was locked down after the new cases were discovered, on July 4; only one small gate remains open for grocery deliveries, she said. 

However, the Beijing municipal health commission hasn’t reported any confirmed patients from the Liuyi compound in recent days. 

Li shared with The Epoch Times a government list of local businesses and residential complexes that were mandated to conduct systematic disinfection and nucleic acid testing, including a total of 43 locations in Beijing.

However, under the Daxing district category on the list, the Liuyi residential compound was missing, which Li believes is because Beijing authorities purposely sought to conceal the new infections. –Epoch Times

Why would China go to such great lengths to cover up a naturally occurring outbreak of an ultra-virulent coronavirus that they insist wasn’t created in one of their labs?

After three months of unprecedented gains, which saw an increase of $3 trillion to $7.2 trillion, the Fed’s balance sheet has posted its fourth consecutive weekly decline since the start of the corona crisis according to the latest H.4.1 statement.

The drop in the week ended July 8 amounted to $88.3 billion, surpassing the steep drop recorded three week earlier, and was the biggest weekly drop since May 2009.

However, as has been the case in the past three weeks, the drop in the balance sheet was not due to a reversal or even slowdown in QE which continues almost every single day, with the Fed adding another $18.2 billion in Treasurys even as the settlement calendar and prepays meant the amount of MBS was unchanged at $1.911 trillion (don’t worry, the Fed is also buying about $4.5BN in MBS every day), but once again due to a decline in liquidity swaps, which shrank by $46.3 billion to $179.1 billion, after a $49.5 billion drop in the week prior and $77.5 billion the week before that.

The amount of outstanding repo agreements also declined for a second consecutive week by a substantial $61 billion, after a $9 billion decline in the week prior, as financial conditions are clearly starting to tighten.

As shown in the chart below, the total amount outstanding in the swap lines, designed to ease a surge in demand for U.S. currency in the participating banks’ jurisdictions during the early weeks of the crisis, was the lowest since early April.

Coupled with other indications of shrinking demand for the Fed’s bevy of emergency liquidity facilities, the reduction in currency swap line usage is for many analysts a sign that global financial markets are returning to near-normal after being upended by the coronavirus outbreak in February and March. “We expect a more rapid decline over the coming months as the majority of the swaps will roll off,” Citigroup economists wrote in a recent note.

The flipside is that it also means that the system is once again seeing a shrinkage in the circulation of the world’s reserve currency, an explicit tightening in financial conditions, and the adverse global impact of any macroshock will be substantially greater when one hits in the coming weeks.

Meanwhile, with the S&P500 closely tracking the Fed’s balance sheet in the past three months, which has served as the only factor behind the rebound in the market and the modest boost to the economy by monetizing the $3 trillion in new debt issued recently, the latest weekly drop coincides with the period of heightened volatility in the past four weeks.

The shrinkage comes at a time when the Fed’s monthly liquidity injection has been tapered to approximately $120 billion, which suggests that while the balance sheet is likely to resume growing in the next week, it will be at a more gradual pace.

It also means that for the stock market to move substantially from this point on – since the market is now fully disconnected from fundamentals and is simply a derivative of endogenous liquidity and fund flow – Powell will need to find another justification to expand the Fed’s QE aggressively, as discussed in “JPMorgan Spots A Big Problem For Stocks.” Something like – for example – a second wave of the coronavirus pandemic…

Finally, those keeping track of how much corporate bonds the Fed has bought, the latest total for the Fed’s Corporate Credit Facilities LLC which includes purchases of both ETFs and corporate bonds, the Fed disclosed that as of July 8, there was $10.4 billion in book value of holdings (the Fed does not break out how many actual bonds it has bought vs ETFs), an increase of $754 million from the $9.7 billion a week prior. Which means that the Fed is now buying around $150MM in corporate bonds and/or ETFs every single day, a sharp drop from the roughly $300MM/week it was buying just one month ago.

Via Global Macro Monitor,

Great interview with Michael Novogratz, Galaxy Digital founder, CEO, and chairman.  He sounds exactly likey the global macro heads at GMM. 

His money quotes from the July 8th CNBC interview should sound very familiar to our readers.

• Macro set-up is so perfect for something like gold… central banks around the world keep printing money…more money, more money, more money

• Gold is going to take old highs and keep going… we are just starting this move

• We are in the irrational exuberance zone in the market but it’s hard to figure out where that stops

• Get on the airplane just make sure you are in a seat closest to the exit.

• We are in a bubble

• I think Biden is going to win by a landslide

• He [Biden] is going to jack up capital gains taxes to ordinary income… that won’t be good for the stock market… but they are going to pump in liquidity

• We are early in the cycle

• We are in a fairy tale world because the Fed is giving you so much money

• The real economy has issues

• Disposable income is up on the year, not down, which makes no sense

• My friends are getting richer than I am…

Watch the full clip below