New York’s plan to impose a congestion toll on drivers entering the lower parts of Manhattan has hit a bump in the road, with New York Gov. Andrew Cuomo (D) repeatedly claiming that federal officials are slow-walking needed approval of the policy.
“The federal approval, frankly, we just assumed it was going to be almost pro forma. They’re now using that opportunity to stop congestion pricing,” Cuomo told reporters on Monday, according to TheNew York Times.
The governor made the same claim last week according to the New York Post, saying in another press conference “Will [the Trump administration] hold congestion pricing hostage? Yes. That’s how they do business.”
New York’s congestion pricing plan was passed in April 2019 as part of the state’s budget. It would impose a toll on all drivers entering Manhattan streets below 60th Street, save for motorists who drive only on the island’s West Side Highway or FDR Drive.
The plan requires that some 80 percent of the revenue from these congestion tolls be spent on the city’s subway, with another 10 percent being dedicated to regional rail services.
The plan calls for having the tolls in place by January 2021, but there are still a number of details to be worked out, including how high congestion tolls should be, and who should get credits or exemptions.
That requires difficult political wrangling with powerful constituencies, from cops to truckers, who all have argued they deserve a carve-out. It also requires New York to get permission from the federal government.
Currently, there exists a general prohibition on states and localities adding tolls to roads that were funded in part by the federal government. The Federal Highway Administration (FHWA) does administer a couple of programs that make exceptions to this ban. That includes the Value Pricing Pilot Program (VPPP), through which the federal government can approve pilot congestion pricing programs to reduce congestion on existing roads.
Receiving authorization through VPPP also requires proposals to go through environmental reviews mandated by the National Environmental Policy Act (NEPA). How long that will take all depends on what level of NEPA review federal officials deem appropriate.
If New York were lucky, it would receive a categorical exemption from NEPA. More likely it will have to prepare an Environmental Assessment (an intermediate level of review) or worse, an Environmental Impact Statement (EIS). Those run an average of 670 pages and can take years to complete.
Right now, the FHWA is in the middle of determining which level of NEPA New York’s congestion pricing scheme requires. That determination will tell New York officials what information they’ll have to prepare for the feds.
Officials with the New York City government and the Metropolitan Transportation Authority (MTA)—the state agency that runs buses and trains in New York City—say they’ve been trying to get an answer from the feds about what kind of report they need to prepare since April 2019.
An FHWA spokesperson told Reason that the agency didn’t receive the supplemental information it needed to make a NEPA determination until January 2020, and it’s that delay, not Cuomo’s claimed political interference, that’s dictating the pace of federal review.
As recently as February 8, Cuomo told the Wall Street Journal that he wasn’t concerned about the potential for the Trump administration to hold things up for political reasons.
The governor could be doing a lot more to speed things along in the face of federal delays, argues Manhattan Institute transportation scholar Nicole Gelinas, who wrote in the New York Post:
[Cuomo could] have directed the MTA to take a more aggressive posture. The MTA could have prepared a short “environmental assessment,” hiring consultants to say the scheme will help the environment by discouraging people from driving. The MTA could start preparing the longer document, just in case. It requires public hearings, which are a pain, but the city completed its environmental-impact statement for its four-borough jails from start to finish in 14 months, meaning the MTA would be almost done now.
The fact that Cuomo hasn’t done those things, says Gelinas, suggests that he’s already gotten all the political mileage out of congestion pricing he can, and sees only liabilities in actually implementing the policy.
Cuomo risks pissing off motorists who will now have to pay for something they used to enjoy for free. This dynamic isn’t made better by the specific design of New York’s congestion pricing scheme, says Baruch Feigenbaum of the Reason Foundation, the nonprofit that publishes Reason.
“I think the concern is that very little of the money from the congestion price is going to improve roadways,” he said, adding that the proposed toll levels seem to have more to do with hitting revenue targets for funding transit than with easing congestion.
Feigenbaum notes that Trump isn’t above petty retribution when it comes to New York, noting his administration’s brazenly political decision to bar residents from that state from participating in Trusted Traveller programs that allow quicker passage through airport security.
Still, Feigenbaum says he hasn’t seen any evidence that this is the case with congestion pricing. Indeed, Trump has proposed reforms that would speed up NEPA reviews of projects, and limit the use of EIS.
Congestion pricing as a concept has a lot to offer a place like New York City, says Feigenbaum. There’s a lot of demand for driving on the roads, but very little space for adding new road capacity. As with most major reforms, it’s the politics of implementation that are slowing things down.
from Latest – Reason.com https://ift.tt/3af3ZRZ
It appears the White House press pool has been ushered to the West Wing this evening for an unscheduled event, reported Bloomberg’s Josh Wingrove. President Trump wants to talk about the correction in the stock market.
The White House press pool is being called for an unscheduled event in the West Wing, per @JenniferJJacobs. Looks like Trump wants to talk after markets got hammered again today.
CDC Waited Days To Test California’s Latest ‘Mystery’ Patient For Coronavirus: NYT
By the time President Trump kicked off his coronavirus press conference last night, top officials in California’s Department of Health were preparing an announcement of their own in conjunction with the CDC: They were preparing to confirm a Washington Post report about a new coronavirus patient whose infection was of unknown provenance.
But according to a story published Thursday morning by the New York Times, Californian health officials could have known about the infection – and thus taken the critical early steps to quarantine the individual – days earlier if it weren’t for restrictive federal criteria determining when federal or state officials can use one of the limited number of coronavirus testing kits available in the US.
One of the CDC’s virus testing kits
When the patient, who reportedly lives somewhere in Solano County, was first admitted to Davis Medical Center a week ago, doctors suspected she might have the virus. But they weren’t able to secure a test…
Doctors at the University of California, Davis Medical Center considered the novel pathogen a possible diagnosis when the patient was first admitted last week.
But the federal agency that conducts the testing did not administer the test until days later because the case did not fit the agency’s narrow testing criteria, university officials said in a letter to the campus community late Wednesday.
…Because the case didn’t fit the CDC’s ‘criteria’…
The C.D.C. has restricted testing to patients who either traveled to China recently or who know they had contact with someone infected with the coronavirus.
…Even though the patient was already on a ventilator and suffering from severe pneumonia when she arrived at UC Davis from another hospital in Northern California.
The patient was transferred to the medical center from another hospital in Northern California with a suspected viral infection, and was already on a ventilator upon arrival, according to the university’s letter.
Interestingly the NYT never explains why the patient – who also happens to be the 60th confirmed case in the US – was finally given a test.
“Upon admission, our team asked public health officials if this case could be Covid-19,” the letter said. The medical center requested testing from the C.D.C. “Since the patient did not fit the existing C.D.C. criteria for Covid-19, a test was not immediately administered. U.C. Davis Health does not control the testing process.”
Though doctors have developed a theory that the patient may have been exposed to one of the other California cases in passing, it’s apparently relatively thin. As the NYT explains, if doctors can’t identify the source of the patient’s infection, that could be a sign that more infected people are out there, still spreading the virus.
Until now, public health officials have been able to trace all of the infections in the country to a recent trip abroad or a known patient, and to identify the sources of exposure.
“The thing that would immediately make all of us uneasy is if this person has no direct contact with someone who comes from an affected country,” said Dr. William Schaffner, an infectious disease specialist at Vanderbilt University.
“That would suggest there are other undetected cases out there, and we have already started some low-grade transmission.”
If you ask us, we’re pretty uneasy already – and by the looks of it, most of the market feels the same.
In order to determine if a geopolitical or economic threat is legitimate, I find it helps to watch how the mainstream propaganda narrative flows and changes. For example, for the past year as almost every fundamental indicator was flashing warning signs on the global economy the primary message in the mainstream was that central banks would never allow any major shocks to the financial system. In other words, they would pour in cash at the slightest hint of trouble. The conclusion for the investment world? To “buy the F’ing dip!” Why not? You can’t lose.
Despite the fact that fraudulent stock markets artificially inflated by corporate stock buybacks are irrelevant to the health of our system, they still represent a psychological placebo for the masses. Very few people care that it is a historic bubble; as long as everything is in the green they assume that all is well with the economy.
In the past, anyone who pointed out that this attitude was a recipe for disaster, anyone who argued that the system was breaking and the Everything Bubble was popping was called a “doom monger” or “chicken little”.
I’ve noticed very recently (in the last week) that this attack response is shifting in an interesting way. Where propaganda peddlers used to call us “paranoid”, now they argue that “our prepping or precious metals stacking won’t save us…” People are “coming to take our supplies…” they say. That’s quite a 180 degree flip flop. As preppers and alternative economists are proven more and more right everyday, the narrative has changed from telling us we’re wrong, to telling us we will be sorry for being right.
Well, I’m not sorry for being right and neither should any other liberty analyst or preparedness advocate. I believe the information we have provided to millions of people has encouraged them to remain vigilant and ready for crisis, and hopefully this will keep them alive in the future. The so-called “skeptics” seem to be determined to convince people to do absolutely nothing; to remain blind to any data that does not fit the recovery narrative and to have no backup plan in the event that something goes wrong. Why all the hostility towards the idea of simply being prepared?
Who benefits the most if you and the majority of people have no contingency plan? Who has something to gain by trying to convince you to ignore the obvious?
As mentioned, if they can’t win by conning the liberty movement into turning a blind eye to the facts, they have decided to let us know that it doesn’t matter and we will still be made to suffer for our defiance. This confirms my long-time argument that prepping is only the beginning of the fight; it is a means to an end. The real fight will be for our freedoms and the freedoms of future generations. Those who think the goal is only about survival are severely mistaken. Personal survival would be nice, but the survival of our principles and our way of life takes precedence, and this will require us to do a lot more than merely stock supplies and hide out in the woods.
I have also noted in recent days that the public narrative of globalists has also changed in a strange but rather predictable way. In past articles I have outlined instances in history when the global elites have openly admitted to the mechanics of an impending crisis right before it happens. The Bank For International Settlements did this right before the crash of 2007, warning specifically that crash of the credit bubble was imminent. Of course, what the globalists do not mention is that they are so good at predicting these events because they helped to create them in the first place.
I was amused the other day to watch an interview by Bloomberg of globalist Mohamed El-Erian in which he essentially spilled the beans on the reality of the coronavirus situation. Some people might be surprised to hear El-Erian sound a whole lot like an alternative economist in the Liberty Movement, admitting that the virus will disrupt the global supply chain and that it will have far reaching consequences for the economy for much longer than many people assume.
El-Erian and certain other globalists in the BIS and IMF have been setting themselves up as the prognosticators of the coming collapse, while other globalists and their media outlets have worked tirelessly to attack alternative analysts for the same exact observations. The message is clear – there can be only one group that the public listens to as the crash unfolds, and the liberty movement is not it. The globalists want to have their cake and eat it too; they want to cause a crash, and then they want to be worshiped as the saviors that warned people about the crash.
El-Erian’s comments on the coronavirus outbreak and its far reaching effects suggest to me that this is indeed one of the trigger events we have all been waiting for and warning about. But the narrative that the coronavirus is itself the cause of all of this economic chaos is an elaborate lie. The economy was crashing well before the virus ever appeared.
Remember the market shock at the end of 2018 when the Federal Reserve tightened liquidity and cut its balance sheet? Remember how the mainstream finally had to admit that recession was a distinct possibility even though they had been telling us for years that the economic recovery was a fact and that the central banks had saved us? A considerable amount of jawboning and global central bank stimulus measures (primarily from China) was used to keep the economy crawling for another year, but the banks never intended to actually fix anything.
The underlying mechanics of that event have not changed. Dollar liquidity is still disappearing as Federal Reserve repo markets indicate the massive demand for easy cash by banks and other companies continues. They cannot survive for long without it, which is not how an economy in recovery is supposed to function. Yet, the Fed says it intends to cut off that cash flow in the coming months. The Fed knows as many of us know that their repo purchases are nothing but a stop gap, and that without bailouts and real QE on the level of the $16 trillion TARP measures there is no way to stall the crash for much longer.
Another issue that I think goes largely ignored is that Fed Chairman Jerome Powell knew all along that tightening liquidity into economic weakness would cause a crash. He is even recorded in the October 2012 Fed minutes as saying so. Yet he did it anyway and then pretended as if the systemic crash response was nothing to be concerned about. Why? Well, my theory has always been that the Fed and the international bankers WANT a crash, on a timetable of their preference.
It would be awfully convenient for them to cut liquidity again while the world is in the shadow of a viral pandemic; after all, whatever happens, the virus will be blamed and the fed will escape most scrutiny.
In the meantime, global and US exports, manufacturing and freight shipments have ALL be telling us for months that a recession/depression is on the way.
The export crash was not only limited to the US and China, multiple top economies including Japan and Germany have been witnessing extensive declines in manufacturing and export demand.
In the US, freight shipments and volume have collapsed by 9.4%; the most since 2009. US manufacturing remains weak and 4th quarter retail sales have been revised down, showing consumer activity slowing. And, all of this data is for the months BEFORE the coronavirus appeared.
But don’t be surprised when the media and the globalists use the virus event as the end all excuse for why the economic system is breaking down. Certainly, the disruption of the supply chain will be the final nail in the coffin of the Everything Bubble, and people dying in large numbers from a SARS-like virus can really put a damper on economic activity. But the central banks killed the economy years ago by feeding the largest debt bonanza in history, addicting companies and markets to easy cash and then cutting that liquidity just enough to cause the system to go into convulsions. Currently, corporate debt, consumer debt and national debt are all at historic highs.
There is no stimulus measure that can fix this problem – at the most the central banks could prolong the inevitable for another year perhaps, but why would they when they have multiple scapegoats to blame the crash on?
Donald Trump continues to set himself up as one of these scapegoats as he still dismisses the coronavirus pandemic as nothing to be worried about, claiming “some people think” it will be gone by April. His constant habit of attaching his administration to the performance of the stock market is bizarre when one takes into account that he called the markets a massive “bubble” inflated by the Fed during his 2016 campaign.
I continue to believe according to the evidence that this is his job. The banking elites he is surrounded by in his cabinet call the shots in the White House. Trump’s purpose is to act as a magnet for controversy and distraction while ignoring blaring alarms of impending crisis; he is meant to play the role of the bumbling villain. His response to the Cov19 virus so far fits that theory.
Whatever happens in the coming months, never forget that the economic and geopolitical situation has been dire for years. The coronavirus, while a legitimate threat that must be taken seriously, is also highly beneficial to a select group of elites who now have perfect cover to move forward with an economic collapse that they have been planning for some time.
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The Dow has collapsed from a record high into ‘correction’ in the space of just six days. As we detailed earlier, this is the fastest collapse from an all-time peak since 1928, just ahead of The Great Depression:
As Guggenheim’s Scott Minerd exclaimed on Bloomberg TV:
“…this is possibly the worst thing I have seen in my career… it’s hard to imagine a scenario in which you can contain the virus threat,” adding that “Europe and China are probably already in recession and US GDP will take a 1.5-2.0% hit.”
“The stock market could be down 15-20%… and would likely force The Fed’s hand.”
Investors are piling into safe-havens (bonds and bullion) as they dump stocks…
Still, could be worse…
The market is already demanding 3 rate-cuts this year…
With the odds of an emergency cut in March soaring…
And, stocks have erased most of the ‘NotQE’/Repo liquidty bailout gains…
From the turn down last Wednesday, all the major stock indices are in correction territory, down over 10%…
The Dow was down over 12% from its highs at the lows of the day today…
Today was the biggest single-day point drop in Dow history…
Today’s price action was stunning. Weakness overnight extended lower after the open, then a massive ramp higher (pushing Trannies and Small Caps briefly green), before it all fell apart again…
Dow futures show the action best – Futures were down almost 1000 points, extending the overnight losses through the open, that was followed by a quick 800 point ramp – which failed to take out overnight highs – and then faded back towards the lows into the close…Dow 26k seemed the Maginot Line…
S&P closed below 3,000…
…and broke below its 200DMA (as did the Dow and Russell 2000), Nasdaq closed below its 100DMA…
FANG Stocks have lost $350 billion in market cap in the last 6 days…
Bank stocks continue to bloodbath…
Airlines staged an epic comeback today after crashing at the open, but faded lower into the close to end red…
Why is everyone so surprised at the drop in the Dow, when earnings expectations have already plummeted…
VIX topped 36 intraday, dipped a little, then ramped back to 34 in the last hour…
VIX is also catching up to the outlook suggested by the collapsing yield curve…
Credit markets are crashing wider in cash and derivatives…
And rather stunningly, XOM’s dividend yield has exploded to its highest since Feb 1986 (as the stock price crashes)…
Before we move on to bonds, this is utterly insane!!! China is now dramatically outperforming US and EU stocks since the start of the virus headlines…
Today’s two hour panic-buying stocks, panic-selling bonds effort looked a lot like pension-rebalancing…
Lots of volatility in bond land today with yields crashing overnight to fresh lows, ramping back to unch after the US cash equity open, then falling back towards the record lows (down 4-5bps across the curve on the day)…
30Y Yields fell to a 1.74% handle!
The dollar tumbled today to one-week lows…
Cryptos bounced back today after an ugly week…
Gold and copper were flat today as silver and crude tumbled…
WTI collapsed today to a $45 handle, down a stunning 30% from the early January spike highs on Iran missile strikes…
And as oil prices crash, Energy credit markets are collapsing – HY Energy OAS at widest since April 2016…
Finally, gold was flat today as the odds of a Bernie nomination slipped modestly… but that correlation is quite stunning…
Partying like its the end of 1999…
We’re gonna need more liquidity…
Somebody’s got to get their boot back on the throat of global financial market volatility…
Seemed like the right time to bring out the deer!!
In the South Seas there is a Cargo Cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.
Richard Feynman, The Cargo Cult Science (Speech at Caltech in 1974)
I tease Ben sometimes for devoting his graduate studies to political science. Not because it isn’t a worthy field of study. I tease him because the idea of politics being a science is absurd on its face. And then he usually reminds me that my economics degree is nominally referred to as a science degree, too.
I am immediately chastened.
There are a lot of scientifically minded people in the investment industry. In general, this is for the good. I mean, of course it is. Investing in risky assets constantly appeals to our baser tendencies toward fear and greed. Worse, we do not respond to those appeals in isolation. We are surrounded by others who are watching us and responding to our actions for their own benefit. Process is a gift to investors.
When we are free to be, shall we say, uncommercial, outside of the behavioral benefits accruing to process-adherence it is very difficult to find much that we do in the investment industry that is not what Physicist Richard Feynman called cargo cult science. When he wrote and spoke about cargo cults, he usually referred to very obvious pseudosciences like phrenology, astrology or reflexology. But his fundamental analogy is much more expansive, and in classic Feynman style, works in micro, macro AND meta. It is simultaneously an illustration of the practice of pseudoscience and the philosophy underlying pseudo-scientific practice.
If you imagine the islanders trying to recreate the landing of the airplane that brought goods and supplies, you are seeing the frustration yielded in the practice of pseudoscience. They observed a pattern: runway is cleared, fires are lit, man sits in a shack with things on its head, plane with goods and supplies lands. Easy peasy. They want to reproduce the final result, so, they get to clearing and manufacturing a makeshift set of wooden headphones.
It sure looked better in the backtest.
But Feynman’s analogy is not just an illustration of what cargo cults do. It’s also an illustration of why they do it. Instead of thinking about the airplane as an illustration of some feature of the world a scientist might be trying to research, think about the airplane as science itself. People who earnestly want to be more scientific see what scientists do. They do experiments. They measure data. They write it down. They perform calculations based on the data their experiments yielded. They build things based on those experiments. Alas, adhering to the cartoon of sciencey-looking process is not science. Neither is the closely-related meme of Yay, Science!
I don’t mean to be unkind. I’m also not condemning inductive reasoning in full, since in sciences where it can be combined with observation in ways that aren’t available to us in financial markets it has been responsible for some of our great discoveries.
But if your adviser or consultant does a lot of slicing and dicing of quintiles and quartiles on some good-sounding fundamental dimension and showing you the returns over the last 20 years if you’d bought this one and sold that one, you’re probably paying a cargo cultist to clear you a runway. Many quantitative managers do a lot better than this, of course. Some are, I think, doing something that is close enough to science to warrant the name. But even then, the airplane landing is dependent on some actual transmission mechanism to make it land. And the actual transmission mechanism in markets after removing abstraction layers is always – ALWAYS – another human making a decision for whatever reason they make decisions. This thwarts a lot of good theories. Ours included.
The right question to ask, both in science and in the maybe-science variant we perform in financial markets, is always this:
Why do you believe the measurements you are producing and the actions you are taking based on those measurements are related to the actual mechanic in the real world which produces the thing being measured?
It’s the right question if you’re thinking about what Covid-19 means for your portfolio, too.
The biggest concern I have as a risk manager is related to this question. It isn’t that I am concerned (as an investor) about how many people are infected with Covid-19 in the United States today. It isn’t even that I don’t know how many people are infected.
It’s that it isn’t knowable.
It isn’t knowable because we completely botched testing on initial suspected cases, and we have continued to permit that error to compound. To be clear, I don’t mean “unknowable” in the sense that we will always be inexact in our predictions. I mean unknowable in the sense of uncertainty: that you could produce a dozen different estimates of where we are at today in the development of Covid-19, and any attempt to assign probabilities to each of those estimates would be no better than an arbitrary guess. If your epistemic uncertainty about the predictive power of any of your models is not keeping you up at night, I think you’re making a mistake.
I think that has two implications for investors and asset owners.
The first is that we must be extremely cautious of anyone peddling quantitative, predictive or scenario analysis of what this means for your portfolios. Anyone who is acting positively on the belief that they know something is a cargo cultist. Anyone showing you charts of prior contagions and pandemics and showed you what happened next – whether they intend to frighten you or calm you – is a cargo cultist. Ignore it. And for God’s sake, don’t act on it.
Not until measurement has meaning again.
The second is somewhat related to the first. Acting positively because you think you know something is not the same as responding to the fact that you don’t.Every position in our portfolio is an implicit bet on a variety of things. Your active security positions – overweights and underweights – are bets that other investors will recognize or change how much they care about certain traits that exist today or that you are predicting will exist in the future. How confident are you that the kind of bets you are making will not be swamped by bets and responses other investors will inevitably make about Covid-19?
Your exposure to risky assets in general represents an implicit bet, too.
It’s a bet on functioning economies and trade. It’s a bet on available credit and liquidity. It’s a bet on productivity and the way capital marshals that into equity value. And, uh, I’d be going a bit off-brand if I didn’t mention that it’s a bet on a friendly and accommodative institutional apparatus that includes both central banks and the cadre of MMTers who occupy both political parties. Most importantly, it’s a bet that investors still care about those things. I still think they’re good bets in the long run. I actually still think they’re good bets in the short run, by which I mean that if your central case is that the world will largely continue to spin in 2020, history tells us that you are more likely than not to be correct.
But distributions get a bit funny in the face of the unknowable, folks. While the chest-pounding prediction game practiced by the media, banks and asset managers coerced by their head of sales to go on CNBC IS about acting on what’s more likely than not to be true, investing is not.
In short, if your confidence that the models leading you to active positions will matter in the near term is high, or if your confidence that the aforementioned uncertainty is already being discounted is high, we think you are wrong.
Part of the reason is epistemological. Uncertainty alone may be enough. But that isn’t all. We’re concerned about where we are on the Covid-19 narrative, too.
Our analysis of narrative structure shows that Covid-19 is dominating the last two weeks of markets coverage in a way that no topic has since we begin tracking macronarratives. Here’s the activity in traditional media:
And here’s the activity in social media.
But here’s the thing: our attention measure for Covid-19 over the same period is LOWER than each of Trade War AND Central Banks. It’s lower than the AVERAGE of all financial markets news.
What does that mean?
It means that authors reference the Fed when they’re talking about banks, when they’re talking about consumer borrowing activities and mortgages, when they’re talking about fears of Covid-19 and other market risks, when they’re jawboning for more easing, and when they’re talking about President Trump. It means that authors reference the Trade War when they talk about Boeing, and Tesla, and farmers, and consumer prices, and Trump’s reelection, and factory shutdowns, and supply chains.
But Covid-19 news? Right now, it’s mostly just about Covid-19 and the initial investor response. There’s a smattering of supply chain linkages, and a couple of companies reporting and warning about its impacts. But generally speaking, we haven’t yet seen the deluge of linking-everything-to-Covid-19 that we expect is coming. Even at a high volume of coverage, it’s its own beat. A sideshow.
As of February 27, even after a 10% drawdown, we believe the narrative about Covid-19 is complacent.
What would we be doing if we were an asset owner or adviser? Most importantly, we’d be ignoring the cargo cultists. We’d avoid actions predicated on predictions, and respond instead to the fact that we don’t know. What does that mean?
It means we’d be actively trimming the risks of ruin. That means leverage, concentration and illiquidity. The last one’s definitionally tougher to trim, so focus would be on the first two.
It means we’d put off hiring new active managers in search of idiosyncratic alpha, and we’d avoid paying for existing active strategy exposure if frictional costs were low (e.g. anything on swap, accessed through platforms like DB Direct, etc.)
It means we’d be thinking long and hard about our dependence on backward-looking covariance estimates. If I was a steward for investors with a short investment horizon or a low risk tolerance that was based on some conversation I had with them about a remote probability of a major loss, I’d be inclined to pull back exposure to risk assets.
It means we’d be couching our investment committee conversations for the near future in terms of insurance. In short, are you an institution whose objectives are better served by paying a 10% premium on your equity book by locking in this drawdown and avoiding potential tails? Or does your agency structure, investment policy and institutional temperament permit you to self-insure and avoid the uncertainty of foregone gains from the brutal difficulty of timing re-entry?
It means we’d be doing all of the above until the cargo cult of Covid-19 analysis turns back into science. In short, we’d be doing the above until we felt that the measurements being provided about the state of Covid-19 infections reflected some underlying reality.
Turkish Army Is Targeting Russian Planes In Idlib With Shoulder-Fired Missiles: Report
We reported previously that an increasing number of advanced shoulder fired “Man-portable air-defense systems” or MANPADS are showing up in Idlib, alarmingly in the hands of al-Qaeda linked factions such as US terror designated Hayat Tahrir al-Sham.
But now the Kremlin is charging Turkey’s military with orchestrating the campaign to shoot down Russian aircraft over the war-torn northwest Syrian province.
Reuters now reports that “Russian state television said on Thursday Turkish military specialists in Syria’s Idlib region were using shoulder-fired missiles to try to shoot down Russian and Syrian military aircraft.”
“Their own and Russian planes are saving the lives of Syrian troops in a literal sense,” said the Rossiya 24 report. “Syrian and Russian planes are stopping the rebels again and again. But the sky above Idlib is also dangerous. The rebels and Turkish specialists are actively using portable air defense systems.“
Jihadists on the ground fighting a major Syrian-Russian air and land offensive have over the past month downed at least two Syrian helicopters and possibly other aircraft.
Syrian aircraft operating over al-Qaeda occupied Idlib have lately been shot down:
Meanwhile, it appears that as Turkey and Russia are at the height of tensions over Idlib, Putin and Erdogan are back to not talking. A widely reported meeting between the two leaders set for next week has been denied by the Russian side.
Clear video showing Turkish soldiers targeting a Russian jet with a Stinger missile and trying to down it.
Israeli Scientists Say They Will Have Coronavirus Vaccine “In A Few Weeks”
Yesterday, Dr. Anthony Fauci, the head of the CDC’s infectious disease unit, affirmed that even though Gilead and Moderna might be ready, or almost ready, for Phase 1 trials, the US likely won’t have a workable vaccine for another year to 18 months.
And on Thursday, a team of Israeli scientists one-upped the US, boasting that they could have a vaccine ready “in a few weeks.”
According to a statement cited by the Jerusalem Post, a team of Israeli scientists are on the cusp of developing the first vaccine against the novel coronavirus, according to Israel’s Science and Technology Minister, Ofir Akunis. If all goes as planned, the vaccine could be ready within a few weeks and available for human use in 90 days.
“Congratulations to MIGAL [The Galilee Research Institute] on this exciting breakthrough,” Akunis said. “I am confident there will be further rapid progress, enabling us to provide a needed response to the grave global COVID-19 threat,” Akunis said.
For four years, a team of scientists at MIGAL has been developing a vaccine to combat infectious bronchitis virus (IBV), which causes a bronchial disease affecting poultry. The effectiveness of the vaccine has been demonstrated during preclinical trials carried out at the Veterinary Institute.
During the process, they discovered a process for developing new vaccines that they expect will help facilitate a novel coronavirus vaccine in world-beating time.
“Our basic concept was to develop the technology and not specifically a vaccine for this kind or that kind of virus,” said Dr. Chen Katz, MIGAL’s biotechnology group leader. “The scientific framework for the vaccine is based on a new protein expression vector, which forms and secretes a chimeric soluble protein that delivers the viral antigen into mucosal tissues by self-activated endocytosis, causing the body to form antibodies against the virus.”
Here’s how the team discovered their project would be useful for the coronavirus vaccine.
In preclinical trials, the team demonstrated that the oral vaccination induces high levels of specific anti-IBV antibodies, Katz said.
“Let’s call it pure luck,” he said. “We decided to choose coronavirus as a model for our system just as a proof of concept for our technology.”
But after scientists sequenced the DNA of the novel coronavirus causing the current worldwide outbreak, the MIGAL researchers examined it and found that the poultry coronavirus has high genetic similarity to the human one, and that it uses the same infection mechanism, which increases the likelihood of achieving an effective human vaccine in a very short period of time, Katz said.
“All we need to do is adjust the system to the new sequence,” he said. “We are in the middle of this process, and hopefully in a few weeks we will have the vaccine in our hands. Yes, in a few weeks, if it all works, we would have a vaccine to prevent coronavirus.”
Akunis said his government has ‘fast-tracked’ all the approval processes for the vaccine to get it out as soon as possible.
MIGAL would be responsible for developing the new vaccine, but it would then have to go through a regulatory process, including clinical trials and large-scale production, Katz said.
Akunis said he has instructed his ministry’s director-general to fast-track all approval processes with the goal of bringing the human vaccine to market as quickly as possible.
“Given the urgent global need for a human coronavirus vaccine, we are doing everything we can to accelerate development,” MIGAL CEO David Zigdon said. The vaccine could “achieve safety approval in 90 days,” he said.
It will be an oral vaccine, making it particularly accessible to the general public, Zigdon said.
“We are currently in intensive discussions with potential partners that can help accelerate the in-human trials phase and expedite completion of final-product development and regulatory activities,” he said.
Israel has only confirmed a handful of cases among travelers who visited South Korea and Italy (one case they confirmed on Thursday). We wonder: If Iran does roll out a vaccine, will it share it with Iran?
Stock markets have crashed this week with the Dow Jones Industrial Average down over 3000 points from its highs, entering a formal correction (-10.4%).
As stocks dropped, the bond market was red-hot. Prices soared and yields dipped to record lows. Bonds are considered a safe-haven, but in his latest podcast, Peter said US Treasuries aren’t a safe-space.
When it’s all said and done, the only safe-haven left standing will be gold.
Coronavirus fear was the immediate catalyst for the sell-off as the virus spread outside China, but Peter noted that US stock markets were already vulnerable before the virus outbreak.
Remember, we’re talking about the US stock market that’s at bubble territory, nosebleed valuations, long in the tooth, the longest bull market in US history that has been fueled by the most monetary and reckless fiscal policy in US history. But this is a bubble in search of a pin. So, maybe the coronavirus is going to be the pin. But if we had a healthy market, if we had a healthy economy, it wouldn’t matter about the coronavirus. It’s because the economy is sick. That’s the problem, not the people who are infected with this virus.”
Peter said it looks like the coronavirus is going to have a bigger effect on the global economy than he originally thought. But there is a lot to worry about even if we didn’t have the coronavirus.
So now, when you have this too – you have another straw on a camel’s back that is ready to just implode at any moment because he’s already barely able to support all the straws that are already up there. I mean, hey, why not sell? Why not lighten up in the stock market?”
While people were selling in the stock market, they were buying in the bond market. The yield on the 10-year Treasury was pushed all the way down to 1.377% — a record low. The 30-year US Treasury yield is also at record lows. Peter talked about the bubble in the bond market in his previous podcast and he reiterated his point in this one.
This is the biggest bubble of them all. And what is fueling this bubble, the reason that so many speculators are piling in the US treasuries is because they assume the Fed is going to cut rates. And they’re right. The Fed is going to cut rates.”
In fact, markets are now pricing in at least two Federal Reserve rate cuts before the end of the year.
But investors are ignoring the specter of inflation. Inflation is the enemy of the bond investor. These people are piling into 30-year Treasuries and accepting a nominal yield of 1.8% in front of what’s going to be a massive surge of inflation.
The dumb money is piling into Treasuries because they think they’re doing something safe when they’re actually doing something extremely risky and probably extremely foolish if the music stops playing and they still hold those Treasuries.”
Gold closed yesterday just above $1660 mark before some profit-taking overnight. During the day on Monday, the yellow metal surged as high as $1,690. But gold stocks continued to lag and there was some selling early in the day even as physical gold was rallying. Peter said this is another indication that this is an “unloved bull market.”
Nobody is looking for a reason to buy. Everybody wants to sell. People don’t believe this gold rally. We keep on making new high, after new high, after new high, yet nobody wants to come on and recommend gold or recommend these gold stocks.”
Peter said he watched CNBC throughout the day Monday and gold was barely even mentioned. But gold is exactly what you want to hold when inflation is hot and the stock market is crashing. It is a true safe-haven and his historically preserved wealth.
During this podcast, Peter also talked about Warren Buffet and the possibility of a Bernie Sanders presidency…
“Let’s Call It ‘Trumpvirus'”: Hillary-Loving NYT Columnist Blames Coronavirus Outbreak On Trump
Once again, the NYT Opinion Page has produced an editorial so obviously at odds with reality, that we couldn’t help but comment. Longtime columnist Gail Collins, a Democratic centrist and staunch Hillary Clinton supporter, wrote in a column that the coronavirus outbreak is President Trump’s fault.
Her latest column, entitled “Let’s Call It Trumpvirus” completely ignores the fact that the virus emerged in China, before spreading around the world as Communist Party officials hesitated to try and contain it for fear of sparking a holiday ‘panic’.
No; instead, Collins rattles off a list of a list of loosely linked complaints about the Trump Administration: From Azar’s seeming inexperience, to obscure personnel choices made by John Bolton, to picking Pence to run the virus task force, to Trump’s offhand comment about the flu.
Oddly enough, even Trump’s penchant for hand sanitizer (given Trump’s reputation for being a “germaphobe”) seems to offend Collins.
Our president had to be going crazy over a problem that involves both declining stock prices and germs. This is the guy, after all, who thinks shaking hands is “barbaric,” who is followed around by aides bearing sanitizer. During his press conference he told the story of a fever-ridden supporter who gave him a hug. Do you think it was an apocryphal fantasy? Either way, the idea has been haunting him forever.
She dismissed Trump’s blaming the Democrats for the market’s pullback (even as more than a few have claimed it played some roll).
Meanwhile, he’s come up with a totally new explanation for the stock market skid. It turns out investors were not frightened so much by the pandemic as the Democratic debate.
“I think the financial markets are very upset when they look at the Democrat candidates standing on that stage making fools out of themselves,” Trump told reporters.
And let’s not forget Trump’s atrocious spelling, one of his greatest political sins, according to the New York Times newsroom.
Earlier in the day Trump argued, via tweet, that despite the expressions of concern by the evil media and “incompetent Do Nothing Democrat comrades,” the government is perfectly prepared to handle the coronavirus. Which he misspelled “caronavirus.” But nobody’s perfect.
Here’s the nonsense about Bolton.
The run-up to the Pence unveiling had not been exactly calming for citizens who wanted to have faith in competent White House oversight. Barack Obama used to have special epidemic-watching groups just in case this kind of crisis developed. One was headed by the highly regarded Rear Adm. Timothy Ziemer, who got sent packing by John Bolton. Another infectious disease expert, Tom Bossert, suddenly vanished from the Department of Homeland Security in 2018, presumably also at the hand of John You-know-who.
If Bolton’s memoir ever makes it into print, do you think it’ll have a chapter called “My War on Pandemic Fighters?” OK, probably not.
What are you talking about, Gail?
Moving on, personnel seems to be her main focus. For example, dear reader, did you quiver with apprehension when Chad Wolf, Trump’s acting homeland security secretary, appeared to not know basic facts about the outbreak during an obscure Senate subcommittee meeting?
Because Collins did. But somehow, we suspect that most voters missed that one.
Virus Week hasn’t really provided a whole lot of comfort to citizens who wanted to believe the president’s replacements were super high quality.
The nation got its first real look at Chad Wolf, the acting homeland security secretary, who appeared before a Senate subcommittee and admitted he had no idea how the virus was transmitted among humans, exactly how dangerous it was, or … pretty much anything.
When Senator John Kennedy, a Louisiana Republican not known for anti-administration bias, asked whether the country had enough respirators to deal with a coronavirus epidemic, Wolf answered in the affirmative.
“We just heard testimony that we don’t,” Kennedy responded.
“OK,” said Wolf.
To be fair, he’s only been on the job since November. He’s the fifth head of Homeland Security Trump’s had in the last three years. Good thing he has a deputy — or at least an acting deputy — to help. That would be Ken Cuccinelli, who made news this week when he went on Twitter to ask for tips on how to find an online map of coronavirus sites posted by Johns Hopkins University. (“Here’s hoping it goes back up soon.”)
Before signing off, Collins takes a shot at former Trump body man Johnny McEntee, the 29-year-old former UConn football quarterback, who was fired from another White House job and now runs the Presidential Personnel Office.
Losing faith in presidential appointees for health protection? Stop being so negative. They’re all vetted by the Presidential Personnel Office, which is now headed by John McEntee, 29, who was previously fired from another White House job because of concerns about a history of gambling problems and tax issues.
McEntee will be getting plenty of help from other stellar appointees, the newest being a 23-year-old college undergraduate. Together they’re going to be cleaning house, getting rid of folks who are insufficiently loyal to the president. Or maybe aren’t qualified or something. Never can tell.
At least when it comes to making hard decisions about quarantining large numbers of people, Trump likely won’t hesitate like his Democratic colleagues probably would.
Ben Shapiro put it best:
So China unleashes a highly viral and significantly deadly virus and actively shuts down information about it, the virus hits every populated continent…and you’re calling it Trumpvirus? https://t.co/6hFZk88uLm