Lisa Page Simmers After CPAC ‘Lovebirds’ Skit Mocks Infidelity, Bias

Lisa Page Simmers After CPAC ‘Lovebirds’ Skit Mocks Infidelity, Bias

Former FBI attorney Lisa Page is spitting mad after a dramatized reading of text messages between her and former FBI agent Peter Strzok was performed at the Conservative Political Action Conference (CPAC) near Washington.

Page and Strzok famously sent anti-Trump, pro-Clinton text messages to each other while they were spearheading separate investigations into each 2016 presidential candidate. The two were also having an affair at the time – which has resulted in President Trump frequently mocking their tryst at rallies with full-on theatrics.

Here are highlights of stars Dean Cain and Kristy Swanson performing it in September (longer version here).

And after a Washington Post Op-Ed revealed that President Trump met with the cast and crew of “FBI Lovebirds: Undercover” the day before CPAC, Page raged on Twitter – quoting the Post: “More than three years later, long after his election victory, Donald Trump is still obsessed with two officials who did their jobs while personally not liking him. They are still the stars of Trump rallies, where the president performs their exchanges, grotesquely.”

Efforts to mock the pair arguably reached a new level at CPAC. The skit where the texts were dramatized was performed by actors Dean Cain, who once portrayed Superman on television, and Kristy Swanson, star of the 1992 film, “Buffy the Vampire Slayer.” The effort was written and produced by Phelim McAleer and Ann McElhinney.

“We met the president of the United States today in the Oval Office for 40 minutes,” McElhinney told the conference during a Q&A session after a performance. “He loves the play.”

He said he wants to play a part,” added Swanson. –Bloomberg

Page raged on MSNBC last December, saying that Trump had performed a “vile, sort of simulated sex act” about her and Strzok.


Tyler Durden

Sun, 03/01/2020 – 20:10

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Coronavirus Panic Is Causing A Worst-Case Scenario For Oil

Coronavirus Panic Is Causing A Worst-Case Scenario For Oil

Authored by Julianne Geiger via OilPrice.com,

As the World Health Organization on Friday upgraded its global risk assessment for the coronavirus to “very high”, anxious oil markets are wondering when might be a good time to panic about the oil demand and its effect on inventories, investment dollars, and ultimately, oil prices.

Now could be as good of a time as any.

Where We Stand

So far, the coronavirus has infected more than 80,000 people worldwide, claiming nearly 3,000 lives. It has spread to 49 different countries in just a few short weeks, and continues to disrupt airline travel on a massive scale. In California, one possible case of community transmission reared its head—bringing awareness of what the virus can do to a whole new level.

And make no mistake, there is more pain coming.  

Already, COVID-19 is disrupting manufacturing and industrial output, specifically in China, and the FDA said this week that the world is experiencing its first drug shortage from these coronavirus-induced manufacturing disruptions.

China’s massive oil refiners have felt the pain too, scaling back their petroleum products output, resulting in a big gaping hole in the demand side of the now precarious supply and demand equation for crude oil. Some suggest that China’s fuel demand now has a 4-million-barrel-per-day hole, and China’s imports of crude oil is expected to have dropped by 160,000 bpd in February. March may be worse, if Saudi’s oil exports to China next month are any indication.

This decreased fuel demand has caused at least one trading arm of independent Chinese refiner Tianhong Chemical Co to go into receivership this week after feeling the coronavirus pinch. While this is just a single instance of an oil trader going under due unfavorable market conditions courtesy of COVID-19, the development is cause for alarm. Is this just the first of many in China’s independent oil arena to go under?

This would spell disaster for China, and be painful for any of China’s many crude oil suppliers. After all, it is these independent refiners—the teapots—that have driven most of China’s oil import growth in recent years. Crude suppliers that would feel the pain of China’s refining industry meltdown would naturally be Russia, Saudi Arabia, Angola, and Iraq—who together represented 55% of all China’s crude oil imports as of 2018.

Saudi Arabia, for example, typically ships between 1.8 million bpd and 2 million bpd, but already for March the Kingdom is cutting its oil exports to China by 500,000 bpd as refineries are throttling output. 

But smaller suppliers, too, would be hit, particularly countries that ship most of their oil to China—countries like Iran, for example, which ships 50-70% of its oil to China.

Where We’re Headed

So things are bad, but surely the virus has run its course? 

Nothing could be further from the truth. US health officials warned Americans this week to roll up their sleeves, pull up their bootstraps and settle in, because the coronavirus is on its way.

“It’s not so much a question of if this will happen anymore but rather more of a question of exactly when this will happen,” Nancy Messonnier, director of the National center for Immunization and Respiratory Diseases said in a press briefing this week.

And if you want a preview of what’s to come, you only need to look at how major institutions such as the federal reserve are behaving.  

The Federal Reserve and other central banks are expected to act soon—as early as this weekend—to staunch the market bleeding in the financial markets. The Fed’s have suggested that they will indeed cut rates “if” a global pandemic were to develop.

About that “if” scenario, Moody’s Analytics yesterday suggested that the risk of the current coronavirus outbreak turning into a pandemic has actually doubled from 20% to 40%, calling their previous assumptions that COVID-19 would be contained to China as “optimistic”.

This pandemic, Moody’s said, would result in a global recession during H1 2020.

““The economy was already fragile before the outbreak and vulnerable to anything that did not stick to script. COVID-19 is way off script,” Moody’s said.

And Moody’s isn’t the only one who is rethinking their former optimism about the deadly virus.

The IMF is likely to downgrade its global growth projections due to the virus, according to an IMF spokesperson on Thursday. And no doubt, because lethal viruses tend to scare people away from mingling among the potentially sick at places such as malls and other public areas—a situation that naturally lends itself to serious stifling of economic activity. And all that economic stifling will have a profound effect on industry, and industry in turn will have an effect on oil demand. 

The IMF is now warning that there is the potential for greater economic fallout, and it is cutting its forecast for 2020 global growth by 0.1%.

Rystad, too, stepped into the doom-spreader game on Friday, warning that the virus outbreak could cut oil and gas industry investments by $30 billion and could delay oil platform deliveries slated for Asia by three to six months. Those hit hardest would likely be shale operators in the US, and offshore E&P companies, according to Rystad. 

Rystad doesn’t see the situation on the road to improvement. In fact, it sees the situation worsening in March, and affecting the entire global service industry.

Overall, travel restrictions, reduced industrial throughput, people staying home because they’re scared—these factors have not peaked, and when they do, they will dent oil demand even further. Already WTI has sunk below $45, with Brent below $50. And OPEC may lack the fortitude to cut enough production to offset the major demand losses.

It’s not out of the realm of possibility to suggest that more pain is on its way to the oil industry in the months that follow. The only question is, how painful will it be.


Tyler Durden

Sun, 03/01/2020 – 19:45

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

Goldman Now Sees 2 Rate Cuts In Next 2 Weeks, Expects “Coordinated” Central Bank Easing

Goldman Now Sees 2 Rate Cuts In Next 2 Weeks, Expects “Coordinated” Central Bank Easing

It was just Friday that Goldman finally gave up on its bizarrely optimistic global outlook that it had adopted in late 2019, and instead of seeing no rate cuts – or hikes – in 2020, the bank’s chief economist Jan Hatzius capitulated, and said that the Fed will likely cut at least three times in the first half to offset the global economic slowdown due to the coronavirus, late on Sunday, just 48 hours after its first rate forecast revision, Goldman has officially thrown in the towel on even a trace of optimism for the foreseeable future, and now expects not only the Fed to cut 4 times by the end of Q2, but also cautions of a a high risk that the easing it expects over the next several weeks could occur “in coordinated fashion, perhaps as early as the coming week“, which of course is disappointing for all those who were hoping the Fed would step in as soon as Sunday afternoon/evening.

In justifying the implosion of its outlook, Haztius writes that “on Friday morning, we downgraded our baseline view of global GDP growth in 2020 from just over 3% to around 2% on the back of developments related to the coronavirus, with weakness concentrated in the first half of the year. We also changed our Fed call to project 75bp of rate cuts by June, starting with a 25bp cut on March 18.

This was on Friday morning. Since then, so over the weekend, it appears that newsflow has taken a decided turn for the worse, and as Goldman adds, “the news on the outlook has remained negative, with significant further increases in infections outside of China and an exceptionally weak China PMI release. Moreover, the statement by Fed Chair Powell on Friday afternoon that the Federal Reserve is “closely monitoring” developments and “will use [its] tools and act as needed to support the economy” strongly hints at a rate cut at or even before the March 17-18 FOMC meeting.”

Based on these developments, Goldman is making further adjustment to its Fed call and now projects a 50bp rate cut by March 18 followed by another 50bp of easing in Q2, for a total of 100bp in the first half. Which means that the US Fed Funds rate will be just above zero as the US enters the second half, and has a high chance of tipping negative around the time of the election. Hatzius explains:

The clear signal in Chair Powell’s statement has led the bond market to price in more than 25bp of easing, and the FOMC will not want the cut to come as a disappointment in the present situation.

But wait, there’s more: Goldman is now also forecasting rate cuts by most other G10 (and some EM) central banks, including a cumulative 100bp of cuts in Canada, 50bp in the UK, Australia, New Zealand, Norway, India and South Korea, and 10bp in the Euro area and Switzerland. The chart below shows Goldman’s new central bank forecasts along with market pricing as of Friday’s close.

So does 4 rate cuts seem excessive? Not at all, and in fact Goldman even says that relative to some of its new policy rate forecasts, “the risk is on the downside, at least in terms of timing.”

Specifically, we see a high risk that the easing we expect over the next several weeks occurs in coordinated fashion, perhaps as early as the coming week. Chair Powell’s statement on Friday suggests to us that global central bankers are intensely focused on the downside risks from the virus. We suspect that they view the impact of a coordinated move on confidence as greater than the sum of the impacts of each individual move. If a coordinated move does occur, we think some central banks for which we are projecting a first 25bp cut in our new baseline forecast may well join the Fed in cutting by 50bp. This might apply to New Zealand and—if the move occurs very soon—Australia. While it is a close call, our baseline is that the UK and Canada will both cut the policy rate by 50bp at their next meetings, even if a coordinated move does not occur very soon.

Finally to all those who point out the obvious, namely that monetary policy is ill-suited to address the impact of
the virus on the economy, and that it is really public health policy (and fiscal policy more broadly) that needs to act, Goldman agrees “but thinks that central bankers will still want to do their part” to support what Goldman erroneous calls the economy, when it clearly means the market, especially since there is not a trace yet of the US economy being impacted by the coronavirus, and last time we checked, the Fed is not a pre-cog cutting rates in advance of data developments. And while that obvious, what the Fed does do, is cut when stocks tumble, as they have now, and with the world habituated to a central bank bailout any time there is even a modest, 10% correction, this will be the first time we have a global coordinated central bank action in response to… the flu.

 


Tyler Durden

Sun, 03/01/2020 – 19:20

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Coronavirus: A Great Opportunity For Dems To Attack Trump?

Coronavirus: A Great Opportunity For Dems To Attack Trump?

Authored by Lorraine Silvetz via LibertyNation.com,

As Coronavirus continues to make its way around the world, sickening and killing thousands, the U.S. government’s response to the crisis has become riddled with dissension between President Trump and the Democrats.

Trump requested $2.5 billion in funding from Congress to deal with the outbreak. Senate Minority Leader Chuck Schumer (D-NY), however, said that amount was too little as he put down the administration’s preparedness for a disease federal officials say could cause “severe” disruption to everyday life in the U.S.

“With no plan to deal with the potential public and global health crisis related to the novel coronavirus, the Trump administration made an emergency supplemental appropriations request on Monday,” Schumer said in a statement on Feb. 26.

It was too little and too late — only $1.25 billion in new funding. For context, Congress appropriated more than $6B for the Pandemic Flu in 2006 and more than $7B for H1N1 flu in 2009.”

Donald Trump and Mike Pence

House Speaker Nancy Pelosi (D-CA) also insulted the president’s funding request, calling it “completely inadequate” and criticized the president for previously cutting funding to public health programs. She called the response “anemic.”

After Trump tapped Vice President Mike Pence to lead the Coronavirus response in the U.S.,  Democrats, including Rep. Alexandria Ocasio-Cortez (D-NY), attacked Pence for his handling of HIV while still the governor of Indiana. True to form, in the words of Obama’s former Chief of Staff, Rahm Emmanuel, Democrats “never let a good crisis go to waste.”

“As governor, Pence’s science denial contributed to one of the worst HIV outbreaks in Indiana’s history,” AOC tweeted.

“He is not a medical doctor. He is not a health expert. He is not qualified nor positioned in any way to protect our public health.”

Speaker Nancy Pelosi on Thursday said she spoke with Pence and voiced her concerns regarding Trump’s choosing him to spearhead the Coronavirus initiative. “We have always had a very candid relationship and, I expressed to him a concern that I had of his being in this position,” she said at her weekly press conference on Capitol Hill.

At Trump’s announcement of his position on Wednesday, Pence said his time serving as governor provided valuable training for this.

 “I know full well the importance of presidential leadership, the importance of administration leadership, and the vital role of partnerships of state and local governments, and health authorities in responding to potential threats and dangerous infectious diseases,” the vice president said.

Pence announced the appointment of Debbie Birx, a medical doctor and HIV and global health expert, as the “White House Coronavirus Response Coordinator.” She had previously been appointed by President Obama to the position of U.S. Global AIDS coordinator and confirmed by the Senate.

Presidential candidates didn’t hesitate to jump on the Coronavirus bandwagon declaring how they would respond to the outbreak.

“Like so much else, the Trump administration’s bungled response to the coronavirus outbreak is a mess,” Sen. Elizabeth Warren (D-MA) tweeted. 

“As president, I will lead a competent administration prepared to combat outbreaks—because our public health, economy, and national security depend on it.”

Mike Bloomberg

Former New York City Mayor Mike Bloomberg also joined the clamor of Trump insults regarding his approach to the coronavirus.

“I led NYC through its recovery after 9/11 and the financial crisis,” the billionaire tweeted Wednesday.

We faced health epidemics and weather emergencies. The key to leading in a crisis like the coronavirus is sharing the facts, demonstrating control and trusting the experts. Unfortunately, not Trump’s strong suit.”

Trump said that Democrats and the media are playing up the Coronavirus threat for political gain, as he sought to ease fears about the virus this week both in his Wednesday press conference and in public appearances during his trip to India and on Twitter.

And it turns out the majority of Americans have faith in Trump to handle it…

It is clear that the jury’s still out regarding how malignant Coronavirus will be both in the U.S. and around the world. Some experts estimate the mortality rate is 20 times higher than that of the seasonal flu. And while the seasonal flu kills roughly 35,000 Americans a year, if the coronavirus infects half the U.S. population, the 2% mortality rate still means 3.3 million American lives lost. Is Trump being misled by some of his advisors as to the magnitude of the coronavirus threat?


Tyler Durden

Sun, 03/01/2020 – 18:55

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

5 more travel tips for flying

Earlier this month, I blogged about my top travel tips. I received a number of favorable comments from Volokh readers–fellow road warriors. Here are five more tips for flying. My general goal: make my time in the air as familiar and predictable as possible.

1. Always select the same seat on every plane.

Travel is difficult precisely because it is unfamiliar. You are not sleeping in your own bed, you are in a strange hotel. You are not driving your own car, you are in a rental car, a taxi, or a train. You aren’t working in your own private office, but are working in a cramped airplane seat next to strangers. And the list goes on. To reduce such unfamiliarity, I try to make travel as as familiar as possible.

The most effective way to make your trip predictable is to establish a routine. For example, on planes, I will always select the same seat. Here, I will refer to three of the most popular planes on United’s fleet. These planes will appear in most major fleets. (Southwest, for example, only flies the Boeing 737.) These principle should extend to all fleets.

On a Boeing 737 I will always sit in Seat 11C. Why 11C? I have several reasons.

As a general matter, I prefer aisle seats. I do not want to have to ask permission of my seat mate if I need to use the bathroom. Also, after the plane arrives at the gate, the person in the aisle seat can quickly get up and retrieve his or her bag before he queue forms down the aisle.

Aisle seats have another perk: you can lift up the arm rest. Under most seats is a little button–push it, and you can pull up the arm rest. Removing the arm rest gives you a few more inches to spread out. This extra space is especially helpful if the person in the middle seat is crowding you. (It happens.)

In particular, I prefer the aisle on the left side of the plane, over the right side of the plane. That is seat C rather than seat D. Why? I am a righty. When I use the trackpad on my laptop, my right elbow naturally sticks out to the right. It is possible to use a trackpad with a straight arm, but the motion is unnatural. (Try it.) When I sit in seat C, my elbow juts out into the aisle. It doesn’t bother anyone. (When the drink cart comes down the aisle, I have some temporary restraints). When I sit in seat D, my elbow juts out into the person sitting in seat E. As a result, I much prefer Seat C. Indeed, if there are no seat Cs available, I will sometimes prefer a Seat F (window on the right side). That way, my elbow juts into the window, rather than the person next to me.

Of all the C seats, why 11C? First, the 8C and 20/21C are out. (I explain below why the bulkhead and exit row seats are overrated). 15C, the row immediately before the exit row, is also out. That seat cannot recline. (I am on the pro-side of the recline debate; it’s my seat, I can use it as I choose.) That leaves us with 9C, 10C, 11C, and 12C. If I am in a pinch, I will select any of these four seats, but I prefer 11C the most. I consider three factors.

  • Proximity to the front of the plane: Flights board by status (Zone 1 before Zone 5) but deplane by row (Row 1 before Row 11). The closer you are to the front of the plane, the closer you get off the plane. A person in Zone 5, who sits in 10A will usually get off the plane before a Zone 1 passenger in 11C. Based on my rough timing, it takes a row (6 passengers abreast) about 30 seconds to a minute to get out of their seats, retrieve their overhead bags, and move forward. Passengers in every row, further back, will have to wait more time to get off the plane.
  • Availability of overheard space: Generally when I board early, I don’t have to worry about overhead space above my seat. But if I am running late, or if the gate agent boards early (I really wish they wouldn’t), I sometimes have a tougher time locating overhead space. I find that among rows 9-12, the overhead space fills up the quickest towards the front. Sometimes the airline will store some type of emergency equipment by the bulkhead–fixed space you cannot move. Also, pilots and other crew will put their bags up there. I rarely have problems with bag space in row 11 or 12.
  • Likelihood that the middle seat remains empty: On a less-than-sold out flight, middle seats are often open. I will usually prefer an aisle seat with an empty middle seat to a business class seat. (On shorter flights, I’ve declined last-minute upgrades to avoid the hassle of moving from a spacey position.) Sometimes the airline will “upgrade” someone from a regular economy seat to a middle seat in economy plus. (I am not sure that is an upgrade; I would rather have a cramped aisle seat than a roomy middle seat.) In my experiences, the middle seat in Rows 11 and 12 fill up after the middle seats in Rows 9 and 10. No science here. My anecdotal observations.

Given these three considerations. I have made 11C my default choice. It is my mobile office. Wherever available, I take it. Indeed, I am comfortable with it. When I have to use 10C, I feel too close to the front. 12C feels too far from the front. If you ever see me on a plane, and I am not in 11C (or in business class), you can assume that I didn’t buy the ticket early enough.

All of the C seats I mentioned are in the Economy Plus section of the plane. United (and most carriers) designate the first few rows of the plane as “premium.” You have more space between seats. Specifically, there are more inches from the end of one seat to the beginning of another. This unit is known in the industry as “pitch.” (I will explain later why “pitch” is not a useful measurement.) With premium seats, you can also board earlier (with Zone 1 or 2). All passengers can choose to pay extra for these seats (between $50 and $75). Passengers can also buy an annual subscription and receive unlimited economy plus seats (about $600 a year). And members with gold status or higher receive complimentary economy plus seating. (Traditionally gold status was awarded to passengers with 50,000 miles flown a year, but now status is primarily based on spending money.)

The seating configuration is different on the Embraer Regional Jet (ERJ) 175. Instead of two rows of three, the smaller plane has two rows of two. In other words, no middle seat. The seats themselves are also much thinner, and less comfortable. For a short flight, the seats are fine. But United treats some three-hour flights (Houston to DC) as “regional.”

The first four rows of the ERJ 175 are Economy Plus. I usually prefer 9B. (The aisle side on the left side). I avoid the bulkhead (7B). I also avoid 10B. This row is immediately in front of the regular Economy Section. It is harder to recline onto someone who has space. I prefer to recline onto people who have the added space of an economy plus seat. 8B also works in a pinch. As a general matter, I will take a D window seat in Economy Plus over a C aisle seat, to avoid having my elbow jut into the seat mate.

Finally, we have the ERJ 145, the tiny regional jet with a 2-1 configuration. This plane is (thankfully) being phased out. It is very cramped and uncomfortable. Some smaller airports can only be reached by these tiny planes. Here, the A seats are preferred. You sit by yourself, in your own row. But there is very little leg room. My knees always touch the seat in front of me. If the person in front of me reclines, I have to lift the tray table up, and put my laptop on my lap. Here I actually prefer the exit row (Row 18A). There is more leg room, and I can comfortably work. Also, the tray table is not in the arm rest, so there is more lateral space.

I have given seating a lot of thought.

2. Bulkhead seats and Exit Row seats are overrated

Bulkhead seats refer to the first row on a plane. On the Boeing 737, for example. There are two bulkheads. First, Row 1 in business class. Second, Row 7 in economy class. Generally, there is a wall in front of the first row to separate the seats.

Also, every plane has at least one or more exit rows. These are the rows that align with the plane’s wings. In the event of the emergency, people may need to evacuate through the exit rows, onto the wing. Some travelers prefer the bulkhead and exit rows. I think these seats are overrated.

One law professor described me as “tall and muscular.” I agree with the first half of that statement. I am about 6’2″, with long legs. I’m also wide. The bulkhead seats, located in the first row of the plane, don’t work for me for three reasons. First, there is actually less room for my legs. In seat 11C, I can stretch my legs all the way out under the seat in front of me (10C). But for the bulkhead, there is a partition in front of the seats. The bulkhead offers more knee room–that is, no one will recline a seat into my knees. (This measurement is referred to as “pitch.”) But there is less leg room–I have less space to stretch out. Indeed, with most economy plus seats, I seldom have problems with knee room. Even if the person in front of me reclines, I still have plenty of room. (Though I have to reposition my laptop on the tray table slightly).

Second, in the bulkhead, I cannot keep my laptop under my seat during taxi, takeoff, and landing. The path in front of the bulkhead must be clear. This FAA rule never made much sense to me. There is no quick escape by the bulkhead seat. I’m not sure why this path must remain free, but other rows can be cluttered. This rule is enforced unevenly. Some flight attendants will let me keep the laptop under my seat. Others will let me put it in the seat pocket (which hangs off the partition). But some flight attendants make me put my computer in the overhead bin. That change deprives me of about 20-30 minutes of working time per flight. Why? You can’t get the computer from the overhead until you reach cruising altitude (double chimes). And you have to stow your computer during the descent. Depending on weather, that could be as much as a 20-minute. No thanks.

Third, in the bulkhead the tray tables are stored in the arm rest. As a result, there are fixed boundaries on both the right and left side of the seat. I feel cramped inside that unit. Unlike with my beloved 11C, the exit rows do not allow me to lift up the arm rest, and extend into the aisle. Also, the tray tables that fold of the arm rests are far more flimsy. They are likely to sit on top of my knees, creating undue pressure throughout the entire flight.

The exit row seats will also place the tray table in the arm rest. You have more knee, and leg room, but there is less lateral space. But the exit row has plenty of knee room and even more leg room. I can’t even reach the seat in front of me. On some planes, the exit row is colder because of the proximity to the window. The temperature doesn’t bother me, but it could be a factor for other passengers.

I think the exit row and the bulkhead seats are overrated. They provide some benefits, but also add costs for taller, and wider passengers.

3. Tips for trading seats

This tip will be unpopular among unfrequent flyers, but will resonate with frequent flyers. I will generally switch seats switch to allow a parent to sit next to his or her child–the younger the child, the more likely I will make the switch. As a general matter, there are inconveniences to sitting next to a young child: they can make a lot of noise, can jump and kick around, and there are frequent bathroom breaks. Sometimes moving away from a child on a plane is win-win. Also in rarer cases, a person will want to sit next to an elderly parent with some health conditions. That switch will also usually work for me.

But I won’t entertain a switch for a husband, wife, boyfriend, girlfriend, etc. Seat 11C is very important to me. (See #1 above.) If I have to sit in a window seat, or an aisle seat, I will not be able to get work done that I had planned to finish. And I will likely have to sit in a cramped position, leading to discomfort for the rest of the day. Indeed, I won’t switch from seat 11C to 11D. Recently, someone asked to switch an “aisle for an aisle.” I declined. I’ve tried to explain in the past the difference between 11C and 11D while someone is asking me to switch, but it is too complicated. Now I just say no, without an explanation. (That incident, in part, spurred this lengthy post.)

Refusing to switch in such cases generates a lot of glares and dirty looks. And I have to sit next to the person who wanted to switch for 2+ hours. There are costs. But I am efficient at looking ahead and focusing on my work. I usually forget about the issue by the time we reach cruising altitude.

Indeed, my general tactic when my seat mate is unpleasant is to simply look forward and ignore them. Responding or engaging in any way simply escalates the issue. There are no rational conversations when a passenger is irate. On rare occasion, if the situation escalates, I press the call button and let the flight attendant deal with it. In some cases, reaching up to press the button could escalate the situation further–especially if the seat mate perceives the sudden motion as an act of aggression. In such cases, I get up “to go to the bathroom” and mention something to the flight attendant.

For example, on a recent flight, the passenger next to me was really, really drunk. (By my count, he had four vodka drinks, and probably started drinking before the flight.) He kept asking me bizarre questions and saying obnoxious things. I looked forward and ignored him. Alas the behavior did not stop. I got up and told the flight attendant to cut him off. And the flight attendant did so, and brought him coffee.

Back to switching for parents and children. The mechanics of the switch are complicated. And parents are seldom thinking about what they are asking. Their sole concern is to sit next to their kid. I can truly relate. Here I offer some general tips to make the process smooth.

As a threshold matter, parents who buy tickets well in advance would not knowingly seat their child apart. Parents and children are generally are assigned separate seats because they missed a connection, and were automatically rebooked. It happens. On most flights, stand-by passengers are assigned to the middle-seats (the most unpopular seats). As a result, a child may be assigned to 11B (an economy plus middle seat on the left side of the plane) while the parent may be assigned to 22E (an economy middle seat on the right side of the plane).

Usually, the parent will ask me (in 11C) to move back to 22E. That certainly seems like the easiest swap. I am in the aisle, and easy to talk to. The person in the window is further away. This is probably the worst trade. The parent is asking someone seated in a premium, aisle seat to go back to a non-premium middle seat. I addressed above how that seat would affect my trip.

Rather than swapping 11C for 22E, the parent should consider two other options.

First, send the child back to row 22. The parent should ask the person in 22D or 22F to move up to 11B This person did not purchase a premium seat, but would be getting that benefit. True enough, they would be giving up a window or aisle for a middle seat. But the added legroom may make it worth it. Also, I’ve found that people in row 22+ aren’t as persnickety about their seats. If they were, they wouldn’t be sitting in row 22+.

Second, ask the person in 11A to go back to 22E. This swap also represents a downgrade (window seat to a middle seat). But if 11C (me) declines, 11A should be the next bet.

I’ve been on some flights where parents try to organize three-way trades, so that mom, dad, and kid can sit in the same row. I won’t participate. These switches are too complicated and seldom pan out. The boarding process is fairly short, and everyone must be seated by the time the door closes. Waiting around for these trades to materialize is a waste of time.  Sometimes people try to organize a trade while in the air. At that point, people are seated, and are less likely to move.

On rare, rare occasion, a parent and child will be seated in my seat before I board. (Parents with children 2 and under board before members with “1K” status). Their hope is that if they are seated in my seat, I would be happy to move. I’ve acquiesced to this plan a few times. It is gutsy, but works. I would not recommend it. It could backfire, and create a scene at boarding.

 

4. Always use a neck pillow on planes, Ubers, and everywhere else

I have a neck pillow clipped to my bag. I bring it everywhere I go. I wear it all the time on planes, in Ubers, and everywhere else. Indeed, I usually put it on during the boarding process. It looks ridiculous. I’ll admit. But it prevent neck strain and cramping. Moreover, the neck pillow allows me to easily sleep for two hours at a time. (Something usually wakes me up during longer naps).

Not all neck pillows are created equal. I’ve tried them all. The best model I’ve seen is the Cabeau Evolution Memory Foam Travel Neck Pillow. It is perfect. The grooves on the slide let me rest my neck. And the memory foam material is quite comfortable. And the strap easily clips onto any bag handle. I have 2 or 3 extra ones at home, in the event I ever lose it.

 

5. To create extra leg room, remove the literature from the seat pocket

Most airplanes load lots of literature in the seat pocket: a magazine no one reads, safety cards no one reads, applications to sign up for credits cards, wifi instructions, etc. Those pages take up precious inches. Remove them. Put them on the floor. You will buy yourself a few inches of free room. Flight attendants will sometimes rebuke you for moving the safety card. (I once got yelled at while flying a 747 from Hong Kong to San Francisco–it was a tight ship.)

Some of the newer models place the literature pouch higher up, so there are no problems with knee room.

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5 more travel tips for flying

Earlier this month, I blogged about my top travel tips. I received a number of favorable comments from Volokh readers–fellow road warriors. Here are five more tips for flying. My general goal: make my time in the air as familiar and predictable as possible.

1. Always select the same seat on every plane.

Travel is difficult precisely because it is unfamiliar. You are not sleeping in your own bed, you are in a strange hotel. You are not driving your own car, you are in a rental car, a taxi, or a train. You aren’t working in your own private office, but are working in a cramped airplane seat next to strangers. And the list goes on. To reduce such unfamiliarity, I try to make travel as as familiar as possible.

The most effective way to make your trip predictable is to establish a routine. For example, on planes, I will always select the same seat. Here, I will refer to three of the most popular planes on United’s fleet. These planes will appear in most major fleets. (Southwest, for example, only flies the Boeing 737.) These principle should extend to all fleets.

On a Boeing 737 I will always sit in Seat 11C. Why 11C? I have several reasons.

As a general matter, I prefer aisle seats. I do not want to have to ask permission of my seat mate if I need to use the bathroom. Also, after the plane arrives at the gate, the person in the aisle seat can quickly get up and retrieve his or her bag before he queue forms down the aisle.

Aisle seats have another perk: you can lift up the arm rest. Under most seats is a little button–push it, and you can pull up the arm rest. Removing the arm rest gives you a few more inches to spread out. This extra space is especially helpful if the person in the middle seat is crowding you. (It happens.)

In particular, I prefer the aisle on the left side of the plane, over the right side of the plane. That is seat C rather than seat D. Why? I am a righty. When I use the trackpad on my laptop, my right elbow naturally sticks out to the right. It is possible to use a trackpad with a straight arm, but the motion is unnatural. (Try it.) When I sit in seat C, my elbow juts out into the aisle. It doesn’t bother anyone. (When the drink cart comes down the aisle, I have some temporary restraints). When I sit in seat D, my elbow juts out into the person sitting in seat E. As a result, I much prefer Seat C. Indeed, if there are no seat Cs available, I will sometimes prefer a Seat F (window on the right side). That way, my elbow juts into the window, rather than the person next to me.

Of all the C seats, why 11C? First, the 8C and 20/21C are out. (I explain below why the bulkhead and exit row seats are overrated). 15C, the row immediately before the exit row, is also out. That seat cannot recline. (I am on the pro-side of the recline debate; it’s my seat, I can use it as I choose.) That leaves us with 9C, 10C, 11C, and 12C. If I am in a pinch, I will select any of these four seats, but I prefer 11C the most. I consider three factors.

  • Proximity to the front of the plane: Flights board by status (Zone 1 before Zone 5) but deplane by row (Row 1 before Row 11). The closer you are to the front of the plane, the closer you get off the plane. A person in Zone 5, who sits in 10A will usually get off the plane before a Zone 1 passenger in 11C. Based on my rough timing, it takes a row (6 passengers abreast) about 30 seconds to a minute to get out of their seats, retrieve their overhead bags, and move forward. Passengers in every row, further back, will have to wait more time to get off the plane.
  • Availability of overheard space: Generally when I board early, I don’t have to worry about overhead space above my seat. But if I am running late, or if the gate agent boards early (I really wish they wouldn’t), I sometimes have a tougher time locating overhead space. I find that among rows 9-12, the overhead space fills up the quickest towards the front. Sometimes the airline will store some type of emergency equipment by the bulkhead–fixed space you cannot move. Also, pilots and other crew will put their bags up there. I rarely have problems with bag space in row 11 or 12.
  • Likelihood that the middle seat remains empty: On a less-than-sold out flight, middle seats are often open. I will usually prefer an aisle seat with an empty middle seat to a business class seat. (On shorter flights, I’ve declined last-minute upgrades to avoid the hassle of moving from a spacey position.) Sometimes the airline will “upgrade” someone from a regular economy seat to a middle seat in economy plus. (I am not sure that is an upgrade; I would rather have a cramped aisle seat than a roomy middle seat.) In my experiences, the middle seat in Rows 11 and 12 fill up after the middle seats in Rows 9 and 10. No science here. My anecdotal observations.

Given these three considerations. I have made 11C my default choice. It is my mobile office. Wherever available, I take it. Indeed, I am comfortable with it. When I have to use 10C, I feel too close to the front. 12C feels too far from the front. If you ever see me on a plane, and I am not in 11C (or in business class), you can assume that I didn’t buy the ticket early enough.

All of the C seats I mentioned are in the Economy Plus section of the plane. United (and most carriers) designate the first few rows of the plane as “premium.” You have more space between seats. Specifically, there are more inches from the end of one seat to the beginning of another. This unit is known in the industry as “pitch.” (I will explain later why “pitch” is not a useful measurement.) With premium seats, you can also board earlier (with Zone 1 or 2). All passengers can choose to pay extra for these seats (between $50 and $75). Passengers can also buy an annual subscription and receive unlimited economy plus seats (about $600 a year). And members with gold status or higher receive complimentary economy plus seating. (Traditionally gold status was awarded to passengers with 50,000 miles flown a year, but now status is primarily based on spending money.)

The seating configuration is different on the Embraer Regional Jet (ERJ) 175. Instead of two rows of three, the smaller plane has two rows of two. In other words, no middle seat. The seats themselves are also much thinner, and less comfortable. For a short flight, the seats are fine. But United treats some three-hour flights (Houston to DC) as “regional.”

The first four rows of the ERJ 175 are Economy Plus. I usually prefer 9B. (The aisle side on the left side). I avoid the bulkhead (7B). I also avoid 10B. This row is immediately in front of the regular Economy Section. It is harder to recline onto someone who has space. I prefer to recline onto people who have the added space of an economy plus seat. 8B also works in a pinch. As a general matter, I will take a D window seat in Economy Plus over a C aisle seat, to avoid having my elbow jut into the seat mate.

Finally, we have the ERJ 145, the tiny regional jet with a 2-1 configuration. This plane is (thankfully) being phased out. It is very cramped and uncomfortable. Some smaller airports can only be reached by these tiny planes. Here, the A seats are preferred. You sit by yourself, in your own row. But there is very little leg room. My knees always touch the seat in front of me. If the person in front of me reclines, I have to lift the tray table up, and put my laptop on my lap. Here I actually prefer the exit row (Row 18A). There is more leg room, and I can comfortably work. Also, the tray table is not in the arm rest, so there is more lateral space.

I have given seating a lot of thought.

2. Bulkhead seats and Exit Row seats are overrated

Bulkhead seats refer to the first row on a plane. On the Boeing 737, for example. There are two bulkheads. First, Row 1 in business class. Second, Row 7 in economy class. Generally, there is a wall in front of the first row to separate the seats.

Also, every plane has at least one or more exit rows. These are the rows that align with the plane’s wings. In the event of the emergency, people may need to evacuate through the exit rows, onto the wing. Some travelers prefer the bulkhead and exit rows. I think these seats are overrated.

One law professor described me as “tall and muscular.” I agree with the first half of that statement. I am about 6’2″, with long legs. I’m also wide. The bulkhead seats, located in the first row of the plane, don’t work for me for three reasons. First, there is actually less room for my legs. In seat 11C, I can stretch my legs all the way out under the seat in front of me (10C). But for the bulkhead, there is a partition in front of the seats. The bulkhead offers more knee room–that is, no one will recline a seat into my knees. (This measurement is referred to as “pitch.”) But there is less leg room–I have less space to stretch out. Indeed, with most economy plus seats, I seldom have problems with knee room. Even if the person in front of me reclines, I still have plenty of room. (Though I have to reposition my laptop on the tray table slightly).

Second, in the bulkhead, I cannot keep my laptop under my seat during taxi, takeoff, and landing. The path in front of the bulkhead must be clear. This FAA rule never made much sense to me. There is no quick escape by the bulkhead seat. I’m not sure why this path must remain free, but other rows can be cluttered. This rule is enforced unevenly. Some flight attendants will let me keep the laptop under my seat. Others will let me put it in the seat pocket (which hangs off the partition). But some flight attendants make me put my computer in the overhead bin. That change deprives me of about 20-30 minutes of working time per flight. Why? You can’t get the computer from the overhead until you reach cruising altitude (double chimes). And you have to stow your computer during the descent. Depending on weather, that could be as much as a 20-minute. No thanks.

Third, in the bulkhead the tray tables are stored in the arm rest. As a result, there are fixed boundaries on both the right and left side of the seat. I feel cramped inside that unit. Unlike with my beloved 11C, the exit rows do not allow me to lift up the arm rest, and extend into the aisle. Also, the tray tables that fold of the arm rests are far more flimsy. They are likely to sit on top of my knees, creating undue pressure throughout the entire flight.

The exit row seats will also place the tray table in the arm rest. You have more knee, and leg room, but there is less lateral space. But the exit row has plenty of knee room and even more leg room. I can’t even reach the seat in front of me. On some planes, the exit row is colder because of the proximity to the window. The temperature doesn’t bother me, but it could be a factor for other passengers.

I think the exit row and the bulkhead seats are overrated. They provide some benefits, but also add costs for taller, and wider passengers.

3. Tips for trading seats

This tip will be unpopular among unfrequent flyers, but will resonate with frequent flyers. I will generally switch seats switch to allow a parent to sit next to his or her child–the younger the child, the more likely I will make the switch. As a general matter, there are inconveniences to sitting next to a young child: they can make a lot of noise, can jump and kick around, and there are frequent bathroom breaks. Sometimes moving away from a child on a plane is win-win. Also in rarer cases, a person will want to sit next to an elderly parent with some health conditions. That switch will also usually work for me.

But I won’t entertain a switch for a husband, wife, boyfriend, girlfriend, etc. Seat 11C is very important to me. (See #1 above.) If I have to sit in a window seat, or an aisle seat, I will not be able to get work done that I had planned to finish. And I will likely have to sit in a cramped position, leading to discomfort for the rest of the day. Indeed, I won’t switch from seat 11C to 11D. Recently, someone asked to switch an “aisle for an aisle.” I declined. I’ve tried to explain in the past the difference between 11C and 11D while someone is asking me to switch, but it is too complicated. Now I just say no, without an explanation. (That incident, in part, spurred this lengthy post.)

Refusing to switch in such cases generates a lot of glares and dirty looks. And I have to sit next to the person who wanted to switch for 2+ hours. There are costs. But I am efficient at looking ahead and focusing on my work. I usually forget about the issue by the time we reach cruising altitude.

Indeed, my general tactic when my seat mate is unpleasant is to simply look forward and ignore them. Responding or engaging in any way simply escalates the issue. There are no rational conversations when a passenger is irate. On rare occasion, if the situation escalates, I press the call button and let the flight attendant deal with it. In some cases, reaching up to press the button could escalate the situation further–especially if the seat mate perceives the sudden motion as an act of aggression. In such cases, I get up “to go to the bathroom” and mention something to the flight attendant.

For example, on a recent flight, the passenger next to me was really, really drunk. (By my count, he had four vodka drinks, and probably started drinking before the flight.) He kept asking me bizarre questions and saying obnoxious things. I looked forward and ignored him. Alas the behavior did not stop. I got up and told the flight attendant to cut him off. And the flight attendant did so, and brought him coffee.

Back to switching for parents and children. The mechanics of the switch are complicated. And parents are seldom thinking about what they are asking. Their sole concern is to sit next to their kid. I can truly relate. Here I offer some general tips to make the process smooth.

As a threshold matter, parents who buy tickets well in advance would not knowingly seat their child apart. Parents and children are generally are assigned separate seats because they missed a connection, and were automatically rebooked. It happens. On most flights, stand-by passengers are assigned to the middle-seats (the most unpopular seats). As a result, a child may be assigned to 11B (an economy plus middle seat on the left side of the plane) while the parent may be assigned to 22E (an economy middle seat on the right side of the plane).

Usually, the parent will ask me (in 11C) to move back to 22E. That certainly seems like the easiest swap. I am in the aisle, and easy to talk to. The person in the window is further away. This is probably the worst trade. The parent is asking someone seated in a premium, aisle seat to go back to a non-premium middle seat. I addressed above how that seat would affect my trip.

Rather than swapping 11C for 22E, the parent should consider two other options.

First, send the child back to row 22. The parent should ask the person in 22D or 22F to move up to 11B This person did not purchase a premium seat, but would be getting that benefit. True enough, they would be giving up a window or aisle for a middle seat. But the added legroom may make it worth it. Also, I’ve found that people in row 22+ aren’t as persnickety about their seats. If they were, they wouldn’t be sitting in row 22+.

Second, ask the person in 11A to go back to 22E. This swap also represents a downgrade (window seat to a middle seat). But if 11C (me) declines, 11A should be the next bet.

I’ve been on some flights where parents try to organize three-way trades, so that mom, dad, and kid can sit in the same row. I won’t participate. These switches are too complicated and seldom pan out. The boarding process is fairly short, and everyone must be seated by the time the door closes. Waiting around for these trades to materialize is a waste of time.  Sometimes people try to organize a trade while in the air. At that point, people are seated, and are less likely to move.

On rare, rare occasion, a parent and child will be seated in my seat before I board. (Parents with children 2 and under board before members with “1K” status). Their hope is that if they are seated in my seat, I would be happy to move. I’ve acquiesced to this plan a few times. It is gutsy, but works. I would not recommend it. It could backfire, and create a scene at boarding.

 

4. Always use a neck pillow on planes, Ubers, and everywhere else

I have a neck pillow clipped to my bag. I bring it everywhere I go. I wear it all the time on planes, in Ubers, and everywhere else. Indeed, I usually put it on during the boarding process. It looks ridiculous. I’ll admit. But it prevent neck strain and cramping. Moreover, the neck pillow allows me to easily sleep for two hours at a time. (Something usually wakes me up during longer naps).

Not all neck pillows are created equal. I’ve tried them all. The best model I’ve seen is the Cabeau Evolution Memory Foam Travel Neck Pillow. It is perfect. The grooves on the slide let me rest my neck. And the memory foam material is quite comfortable. And the strap easily clips onto any bag handle. I have 2 or 3 extra ones at home, in the event I ever lose it.

 

5. To create extra leg room, remove the literature from the seat pocket

Most airplanes load lots of literature in the seat pocket: a magazine no one reads, safety cards no one reads, applications to sign up for credits cards, wifi instructions, etc. Those pages take up precious inches. Remove them. Put them on the floor. You will buy yourself a few inches of free room. Flight attendants will sometimes rebuke you for moving the safety card. (I once got yelled at while flying a 747 from Hong Kong to San Francisco–it was a tight ship.)

Some of the newer models place the literature pouch higher up, so there are no problems with knee room.

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Watch: SpaceX’s “Starship” Explodes On Launch Pad During Routine Pressurization Test

Watch: SpaceX’s “Starship” Explodes On Launch Pad During Routine Pressurization Test

When the world first caught a glance of SpaceX’s “Starship” super rocket, many joked about it looking like an abandoned grain silo wrapped in tin foil. 

OK, we admit. That was mostly us joking that it looked like an abandoned grain silo wrapped in tin foil. But look at it…

Now it turns out that had it actually been an abandoned grain silo, it may have performed better during SpaceX’s pressure test of the “vehicle” that was held right before the weekend. 

Instead, the product of Elon Musk innovation wound up blowing up on the launch pad at the company’s South Texas facility, after being tested for pressure with inert liquid nitrogen. The photographs from the morning after show the extent of the damage on the rocket, which we’re certain will not be reused. 

Initial reports claim that the tank may have suffered a structural failure during pressurization and information about injuries and the extent of the damage was not readily available from SpaceX. The protoype ship was designed only for an “initial round of tests”, according to Yahoo News, who said that future prototypes would be used for more ambitious tests.

But judging by the streaming video of this test, SpaceX has a long way to go. Next Spaceflight’s Michael Baylor  said on Twitter:

“Test, fail, fix, test, fail, fix is SpaceX’s game. They will learn from it and get it right.”

Streaming video caught the Starship N1 tank popping and imploding as the ship flew into the air, before crashing back down to Earth. 

Social media skeptics of Elon Musk couldn’t help but say “I told you so”. We wonder if Tesla skeptics will have a similar day at some point soon.

 


Tyler Durden

Sun, 03/01/2020 – 18:30

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Buttigieg Quits Democratic Presidential Race

Buttigieg Quits Democratic Presidential Race

One day after billionaire Tom Steyer dropped out of the presidential race after spending hundreds of millions on a very expensive ego trip, mayor Pete is also officially out after his dismal performance in South Carolina.

For a brief few moments after his narrow victory in the Iowa caucus, things looked good for the first openly gay major presidential candidate, but since then things have slumped and following a crushing loss in the South Carolina primary where his poor performance with black Democrats signaled an inability to build a broad coalition of voters, he has reportedly decided to pull the plug.

Buttigieg is on his way to South Bend where he will reportedly make the announcement later tonight (likely on his way to CNN, following Yang to become a ‘talking head’ commentator on the debacle ahead).

Mayor Pete had collapsed in the odds already but not as fats as Mike Bloomberg has since the first debate (and the second debate did nothing for him).

Biden’s rebound is of note, but Bernie remains the bookies’ favorite, but the real question is will Mike Bloomberg quit too after a surprisingly strong performance by Biden amid accusations mini Mike will steal from Biden’s centrist base if he does not quit before Super Tuesday.

What is perhaps just as worrying is the fact that with Buttigieg out, Hillary is now #4 in the odds…

As NYTimes notes, in the last presidential debate, on Tuesday in South Carolina, Mr. Buttigieg forcefully warned that nominating Senator Bernie Sanders of Vermont, the front-runner, would lead to crushing defeat in the fall, not just “four more years of Donald Trump,’’ but the loss of the Democratic House majority secured by moderate candidates who won in suburban swing districts in 2018.

It would appear that thesis is about to be tested… but of course, after Tuesday everything will change.


Tyler Durden

Sun, 03/01/2020 – 18:16

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Equity & Oil Futures Crash As Market Opens Without Fed Bailout

Equity & Oil Futures Crash As Market Opens Without Fed Bailout

After Friday afternoon’s combination of Jay Powell’s statement and a major rebalancing flow sent stocks soaring into the close, a lack of the much-demanded ‘coordinated global easing’ this weekend has spoiled the party and futures are opening down hard.

Friday’s almost 1000 point surge in less than an hour – on absolutely nothing but hope that somebody will do something –

Oil is also collapsing with WTI at a $43 handle…

And gold is bid…

And bond prices have hit a new high, erasing the late-Friday spike in yields…

Additionally, we detailed earlier, the following chart from Deutsche Bank shows, overall liquidity for S&P500 futures has fallen to all time lows even though the S&P was trading near all time highs as recently as a week ago. As such, the recent melt up levitation was nothing more than a mirage, propelled mostly by stock buybacks among the Top 5 tech stocks and fickle retail investors, and once these were removed, the market entered the proverbial “trapdoor opening” formation.

The problem is that virtually no liquidity, extreme moves to the downside are now very likely which in turn creates a reflexive relationship with risk sentiment, as the lower the liquidity and greater the selloff, the higher volatility surges leading to even lower liquidity, even more selling and so on.

In short: absent central bank intervention, it will be virtually impossible for any major player to arrest the market’s collapse.

Of course, that is a big ask the market is already pricing in almost 4 rate-cuts in 2020…

And almost completely priced-in 2 rate-cuts in March…

That’s a lot to expect from a Fed that doesn’t want to signal panic and burn through its ammunition so fast without evidence of economic disruption.


Tyler Durden

Sun, 03/01/2020 – 18:06

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Coronageddon: Can A “Minsky Moment” Be Avoided?

Coronageddon: Can A “Minsky Moment” Be Avoided?

Authored by Mike Whitney via The Unz Review,

There’s a chance that the coronavirus will be contained in the United States and that fewer people will be infected than in China or Iran. But there’s also a possibility that the highly-contagious virus will spread and that there will be sporadic outbreaks across the country.

If this latter scenario takes place, then the ructions in the stock market will intensify making it impossible to form a bottom or spark a relief rally.

If stocks can’t find a bottom, then pressure will build on the weak players, who purchased securities with borrowed cash, to sell their good assets along with the bad in order to repay their debts. These massive selloffs can quickly turn into firesales where it’s nearly impossible to find a buyer regardless of price. This is what the financial media calls “panic selling”, a vicious, self-reinforcing downward spiral in which stock prices collapse in a frantic, disorderly selloff. The phenomenon has also been described by Pimco’s Paul McCulley as a “Minsky Moment”. Here’s a definition from Investopedia:

“Minsky Moment crises generally occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize on market moves. Minsky Moment defines the tipping point when speculative activity reaches an extreme that is unsustainable, leading to rapid price deflation and unpreventable market collapse. What follows, as hypothesized by Hyman Minsky, is a prolonged period of instability.” (Investopedia)

So, how close are we to a Minsky Moment?

In the last week alone, US stocks have shed $3.6 trillion in market value while benchmark 10-year Treasury yields have dropped to all-time lows and the ominously-named “fear gauge” or VIX (Volatility Index) has spiked to levels not seen in more than two years. The losses have been savage and severe, but the credit markets have held up fairly well so far. Next week could be a different matter altogether though, after all, there’s only so much fat on the bone. Another week like last week, would lead to widening credit spreads, major dislocations in the corporate bond market and, very likely, a few sizable defaults. Over-extended corporations that have borrowed over a trillion dollars from Mom and Pop investors to buy back their own shares, would certainly face a day of reckoning as their cash flow vanishes overnight and their prospects for rolling over their prodigious pile of debt drops to zero. This is typically how credit cycles end, in a fetid cloud of blood and smoke.

Despite persistent warnings from the IMF and other establishment institutions, Central Banks have done nothing to curtail the 11-year orgy of debt-fueled spending or the rampant reckless speculation that has sent stock prices through the roof even while workers wages have remained flat and standards of living have continued to slip. For more than a decade the Fed has kept interest rates locked on their emergency setting while pumping trillions in liquidity into the financial system at the first sign of trouble. So now stocks are the biggest bubble in history and the Fed finds itself without the tools it needs to counter the effects of the coronavirus. This has all the makings of a major catastrophe.

So how does this end?

Well, next week the Fed will announce that it is slashing rates by 50 basis points and that it’s coordinating its action with its fellow central banks, the BoE, the BoJ, and the ECB. The Fed might also announce an additional liquidity program aimed at banks and financial institutions that suddenly find they themselves unable to borrow at the Fed’s discount rate. The announcement could ignite a relief rally, but the surge is not likely to last long since it will not have any material effect on either the virus or the disruptions to supply-lines. The Fed’s easy money will not create the Chinese-made components that laptop manufacturers need to sell their products. They won’t put skittish workers back in the factories or passengers back on airplanes or consumers back in the retail stores. The Fed’s low rates are designed to stimulate demand, but they do nothing to mitigate a “supply shock”. Regrettably, the problem is on the supply side not the demand side.

For a better understanding of how the coronavirus is roiling markets, I’ve transcribed a short interview with market analyst Mohamed El-Erian who explains recent developments and provides a window into the future. El-Erian sees the current drama unfolding in four phases.

Mohamed El-Erian — “Phase one, is the economic and corporate shock. Global growth slows, companies generate less earnings, their costs go up, and their supply chains get disrupted.” (This is already happening.)

“Phase two is financial disruptions. Now we will see pockets of illiquidity, pockets of distress selling, market dislocations, and a complete closure of markets for any kind of funding other than bank funding. These two phases feed onto each other.” (This is also happening now.)

“Phase three, the formation of a bottom which happens in finance first, then in the economy. But for that to happen, it’s not about central banks like a financial sudden stop. It’s about addressing the underlying issue, which is the virus.” (No bottom in sight.)

“Phase four, when we have to look at the longer-term (scare? inaudible) Central banks realize whatever they do, will be shown to be ineffective and the faith that investors have always had that central banks can bolster valuations, is going out the window…..The Fed will cut rates because markets will begin to dysfunction, but (rate cuts) will not deliver a better economic outcome.”

“The problem is…you need the fundamentals to stop deteriorating in order to form a bottom. But the “technicals” can not stabilize long enough to form a bottom in the face of the continuously negative news. …What we need is hope, realistic hope that we have a way to solve this issue, and a vaccine is the best way to do that but that’s not coming anytime soon.” (No vaccine, no remedy.)

Bloomberg –“Is this selloff still orderly?”

“It was until yesterday (Friday afternoon) but now we’re starting to see the things you typically see when too many people are trying to reposition themselves and their isn’t enough risk-taking capacity in the middle. So we are seeing massive price gaps, very little liquidity in certain sectors of the corporate bond markets and emerging markets, and finally people are realizing what you and I have talked about for a long time. They took on too much liquidity risk.” (Watch the whole interview on: “Mohamed El-Erian Breaks Down Coronavirus Impact Into Four Stages”, Bloomberg News)

This interview will help readers understand how hard it’s going to be to calm the markets and stop the downward slide. There are four points that need to be emphasized:

1– In order to turn markets around, a bottom must be formed. Unfortunately, forming a bottom is impossible when stocks are whipsawed every few hours by more bleak information. In short, the news cycle is driving stocks lower.

2– On Friday signs of distress began to appear as a result of the the 5-day Wall Street bloodbath. (“Financial disruptions, pockets of illiquidity, pockets of distress selling, market dislocations, and a complete closure of markets for any kind of funding other than bank funding.) These are the red flags signalling a Minsky Moment is approaching, that is, when speculative activity reaches a tipping point leading to “rapid price deflation and unpreventable market collapse”..followed by “a prolonged period of instability.” In short, a stock market crash.

3– “Markets will begin to dysfunction, but (rate cuts) will not deliver a better economic outcome.”
In other words, Wall Street is demanding lower rates, but lower rates won’t help, in fact, they will further undermine the Fed’s credibility.

4– Finally , what’s needed to stop the selloff is a vaccine. Regrettably, there probably won’t be a vaccine for another 12 to 18 months. By that time, Wall Street could be a pile of smoldering rubble.


Tyler Durden

Sun, 03/01/2020 – 18:05

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