Category: zerohedge

Despite the issues of months past, including shutting down Fremont for the coronavirus, laying off hundreds of contractors and staff and putting himself on the hook for his own board’s D&O insurance, Elon Musk still seems set to cash in on a ~$845 million payday in the form of 1.69 million stock options at $350 per share.

If the company can hold its 6 month market cap average over $100 billion this week, Musk will qualify for the payout in Tesla stock, which came as a result of a March 2018 compensation package that could pay Musk a total of $56 billion in stock options over the course of 10 years, should he meet certain milestones. 

As you can see from these two charts, many of these milestones have nothing to do with GAAP net income, profit or cashflow.

Instead, they focus on revenue, adjusted EBITDA and market cap – all targets that can be met without the company necessarily having to show any type of tangible and consistent cash generation or GAAP profit.

The compensation package could wind up totaling nearly $56 billion if Musk meets all of his targets. Given the current share structure, it means that Tesla stock would be approaching nearly $4,000 per share. It also means that Musk will have been awarded compensation equating to about 8% of the company’s total market cap, assuming he hits the $650 billion market cap target.

What has been driving Tesla’s stock to where it is today remains to be seen. Those reporting on Musk’s compensation package, like The Observer, can only call it “two rounds of wild stock rally”. 

The $100 billion market cap goal, which needs to be held for 90 days, looks like it has been met. That will award Musk options to buy 1.69 million shares at $350 which, at today’s priced, could be exercised and valued at around $845 million almost instantly. 

When Tesla plunged with the rest of the world as a result of the coronavirus, it looked as though Musk may have had lost his chance at his bonus. But, Tesla stock magically sprung back to life and its 6 month average market cap stood at $96 billion as of the beginning of this week. 

Given the stock’s rise after yesterday’s earnings report, despite Musk’s insane behavior on the company’s conference call, it looks as though the $100 billion threshold has been met and Musk will get his payday. 

Maybe he’ll hire back some of the hundreds of people he’s fired with that money. Or payback some of the money he’s taken from the U.S. taxpayer. Of course, we’re just joking. He’ll spend it on private jet fuel. 

Authored by David Robertson via RealInvestmentAdvice.com,

How to survive the market’s ups and downs. This is what everyone wants.

In normal circumstances it is common to do a lot of things with little conscious thought or effort — almost as if on autopilot. When something disturbs that normalcy, however, we need to start paying attention in order to navigate the new situation successfully.

The recent turbulence in the market, then, creates an excellent opportunity for investors to start paying attention and freshly assess the situation. That effort can certainly be advanced by learning more about the investment landscape, but it also helps to incorporate some principles for managing adversity in general.

While the path for stocks since 2009 can be characterized as a fairly smooth recovery, that path has included considerably more volatile swings over the last year and a half. A dismal fourth quarter in 2018 led to a rapid and persistent recovery through 2019 and then a punishing selloff in the first quarter of 2020.

It’s Only Natural

It’s only natural that investors might try to understand what is going on. Indeed, John Authers reports in his “Points of Return” note for Bloomberg Opinion from April 27, 2020 that interest in the keyword “investment book” rocketed higher over the last couple of months to a level that is double that of last year.

While it is certainly healthy to want to learn about investing, it takes a lot of time and experience to develop meaningful expertise.  Alternatively, investors can learn some extremely useful principles from Laurence Gonzales in his book, Deep Survival. I have had it on my shelf for years and regularly refer to it. Further, Michael Mauboussin recently highlighted it on Twitter as “an awesome book” and one that is “especially relevant in these times.”

Gonzales wrote the book because he was fascinated by cases of “otherwise rational people doing inexplicable things to get themselves killed — against all advice, against all reason.” After a great deal of research, he found a number of principles that “apply to wilderness survival,” but that also “apply to any stressful, demanding situation …” As a result, his lessons are also extremely useful for investors as well.

Gonzales introduces us to his research with an interesting notion. He declares, “What we call ‘accidents’ do not just happen. There is not some vector of pain that causes them.” In other words, not only do we often play a key role in facilitating our accidents, such situations often have identifiable signatures that mark them as dangerous situations to be avoided.

Iffy Environments

Much of this starts with how we try to make sense of the complicated world around us. One of the key strategies is that we construct mental models. Gonzales describes these as “stripped down schematics of the world.”

While mental models help us manage complexity, we also routinely make mistakes with them. A common mistake is to falsely attribute success to skill. Gonzales describes:

“If you’ve tallied a lot of experience in dangerous, iffy environments without significant calamity, the mental path of least resistance is to assume it was your skill and savvy that told the tale.”

Many investors today have succeeded in the stock market by ignoring or downplaying evident risks. Not only have they avoided significant calamity, but they have been rewarded by impressively appreciating stocks. Such an extremely benign investment environment conditions investors and makes it easy to attribute skill as the primary cause of success.

Lack of experience also presents its own set of hazards for constructing appropriate mental maps. If we have no experiences with bear markets or avalanches or whatever the hazard may be, we don’t know what markers to keep an eye out for. Gonzales points out, “for most people who are raised in modern civilization, the wilderness is novel, and full of unfamiliar hazards.” True enough. And the investment world is full of unfamiliar hazards as well.

It is also important for mental models to change with the circumstances in order to be useful. Part of this is simply recognizing when things change. Gonzales describes a working definition of being lost as “the inability to make the mental map to match the environment”. If you aren’t paying attention, it is easy to wander astray.

When You’re Lost

It also matters what you do when you’re lost. The best thing to do is to recognize that you are lost, stop, and reassess. Some people refuse to accept the reality in front of them, however, and instead try to “make reality conform to their expectations.”

In short, mental models must be kept up to date. On this point, Gonzales pulls no punches: “Some people update their models better than others. They’re called survivors.”

It is easy to see how many of these lessons can be applied to the investment landscape. Investors who were not tracking the divergence between stock prices and economic reality didn’t recognize the fragility of market conditions earlier this year. Investors who were not following shadow banking and the eurodollar system didn’t see important warning signals in the fall of 2018 and the fall of 2019. The Fed has repeatedly resisted acknowledging model failures and instead has tried to make reality conform to its expectations.

Further, our physiological reaction to stress often makes difficult challenges even more so. Gonzales highlights that “most people are incapable of performing any but the simplest tasks under stress”. The reason is that stress impairs our capacities of “perception, cognition, memory, and emotion.” As a result, it is often when we are in most need of all our faculties that they are the least accessible. Gonzales describes:

“But it’s easy to demonstrate that many people (estimates run as high as 90 percent), when put under stress, are unable to think clearly or solve simple problems. They get rattled. They panic. They freeze.”

In a sense, then, the selloff in February and March may have done investors a favor. The stress induced by such a selloff simply can’t be replicated by abstract discussions or by questionnaires on risk tolerance. As a result, the selloff may have provided something like a stress simulator.

Getting Rattled

Did you get rattled? Did you panic? If that happens, it is important to realize that “you’re not all there.” It is a terrible time to try to figure things out. Because investors can’t be all there in a moment of stress, it is all the more important to plan ahead and prepare.

As it turns out, Deep Survival also serves as an extremely useful guide for such preparation by sharing tips for staying out of trouble and for dealing with trouble when it comes.

One important thing to do is “Get the information” about “hazard zones”. Knowing where trouble is especially likely to crop up is an important part of the battle. Gonzales adds, “Avoiding accidents, avoiding survival situations, is all about being smart.” He continues, “A deep knowledge of the world around you may save your life.”

When trouble does arrive, it is extremely important to “Take correct, decisive action”. As Gonzales explains, “Survivors are able to transform thought into action. They are willing to take risks to save themselves and others.” Obviously, this is difficult to impossible for people who have a tendency to panic or freeze in stressful situations.

While it is important to “Do whatever is necessary”, it is also important to be realistic. Gonzales notes: “Survivors have meta-knowledge: They know their abilities and do not over- or underestimate them.”

Another point that is important in surviving adversity is that it is critical to let go of the past. This can be especially hard for investors who savor paper investment gains (and everything they imply) but cannot accept when those gains become losses. Gonzales notes, “The best survivors spend almost no time … getting upset about what has been lost, or feeling distressed about things going badly.”

An important silver lining in these studies of survival, and one that should hearten investors, is that making it through difficult situations normally does not require absurdly high skill sets:

“You don’t have to be an elite performer [to survive]. You don’t have to be perfect. You just have to get on with it and do the next right thing.”

Key Tips

Helpfully, there are a couple of key tips for successfully navigating any potentially hazardous situation. One is, “Be here now. It’s a good survival rule. It means to pay attention …” In other words, be actively engaged in assessing and evaluating your environment. Many investors only check in periodically, if at all, and miss fundamental changes to the landscape that happen gradually over time.

Another useful insight is that the “greatest skill [of people with strong navigational abilities] lay in keeping an up-to-date mental map of their environment.” This is something I always try to do with my blog posts and there are several commentators who also regularly provide useful updates and insights. It is all designed to help keep mental models up to date.

Needless to say, the insights from Deep Survival have some broader implications for investors. One is that a number of investors are probably “lost” in this investment environment and need to get reoriented in order to avoid trouble. Many people were surprised at the violence and depth of the selloff in March and they shouldn’t have been. In addition, John Hussman observed recently, “My sense is that investors remain disoriented about where they actually are in the cycle.”

Another implication is that investors should be thoughtful in drawing on resources to orient, or re-orient, themselves. After the financial crisis in 2008, several investors shunned Wall Street research as being far too conflicted to be useful. As a result, many investors embraced new and independent research services and used them to inform a DIY approach to investing. Other investors stuck with very conventional asset allocations constructed with passive funds.

Conclusion

Both approaches worked fairly well for as long as the market kept going up. With far more problematic challenges for stocks in the context of Covid-19 lockdowns, investors face greater challenges than they have for over ten years.

Interestingly, Mike Green made a point to highlight the concept of “adult swim” in an April 8, 2020 interview on Realvision. He meant that there are certain investment vehicles that should only be employed if you have an excellent understanding of the risks. The same is true of the environment for stocks right now – this is adult swim – and a lot of investors and advisors will find out the hard way.

Finally, there are ups and downs in markets and then there are events that can really cause investors harm. The best course is to avoid trouble from the start but that requires effort, knowledge and awareness. The recent turbulence creates an excellent opportunity to freshly assess the situation and get models up to date.

On Tuesday, with stocks already solidly in positive gamma territory – meaning any incremental gains would force dealers to buy even more stocks in a the now infamous gamma feedback loop – we reported that according to Nomura calculations a close in the S&P futs above 2901 would trigger a flip in CTAs from “-69% Short” to a “+100% Long”, with Nomura’s Charlie McElligott not accidentally adding “that anecdotally on these days where the model indicates a “flip” potential, said buying to cover and go long is likely already part of the flow creating the current move (ES1 +1.2%)”

One day later, that’s precisely what happened, because even as yesterday’s dismal GDP print confirmed the US has now entered a recession – the CTA “flip” threshold serving as the bogey for all momentum-chasers to ramp the “pain trade” rally which has seen virtually no hedge fund participation, even higher and the S&P had no problem spiking to new post-crisis highs, just shy of 3,000 in the S&P.

Commenting on this reversal, McElligott today writes that his CTA model’s S&P futures position flipped yesterday, from the recent “-69% Short” signal to the current “+100% Long,” they bought a total of $36.8BN across Emini futures yesterday.

And as stocks seek to recapture 3,000 and the Nasdaq unchanged for the year, McElligott points out that the “buy to cover” triggers are getting closer across various other Global Equities futures legacy “short” positions as well, and worth keeping track of (still “-100% Short” in HSCEI, Nikkei, Estoxx & RTY):

Meanwhile, as pointed out previously, the higher the market rose – start of the recession notwithstanding – the greater the gamma push, and as we have recently seen the aggregate SPX/SPY dealer positioning flip from what had been “short gamma” to then a “neutral gamma” one and now increasingly outright “long gamma” (approaching overwriter strikes), Nomura “sees the benefits of “vol suppressing” dealer hedging behavior with these grinding, less spastic market moves, while the largest Gamma strikes shift higher on the move, with the biggest gamma strike now at the nice, round 3,000.

Incidentally, despite today’s modest drop in stocks, we are still deep in positive gamma territory…

… so don’t be surprised to see another forceful levitation higher, further infuriating purist investors who still care about such market trivia as fundamentals. Here is McElligott explaining in his own unique way why fundamentals are meaningless when one has technicals: 

US Equities continue to sit near 2 month highs, to the shock of many who “fundamentally” remain focused on the obviously horrific economic ramifications of the COVID19 shutdown…but without an appreciation of the ability within the Equities market to “pull forward” future inflections, on top of client positioning dynamics, vol dealer positioning / hedging realities and the “sling-shot” that is a market structure built-upon “negative gamma” which creates this seemingly rolling “Crash DOWN, then Crash UP” cycle.

Effectively, in a “VaR” risk management world where volatility is the exposure toggle—the implications of vol resetting LOWER (following a “macro shock” spike) then has a tendency to contribute to sling-shot HIGHER in spot Equities, as vol control & target volatility strategies mechanically need to re-leverage risk exposures, while “expensive vol” / inverted VIX term-structure, per the back-testing model-driven systematic community, signals an “all-clear” to load back into “short vol” behavior…all of which feeds into the risk virtuous cycle

It is precisely this “slingshot” risk we discussed on Tuesday when we said to expect a “Violent “Slingshot” Higher” if “CTAs Flip From -69% Short To +100% Long On Close Above 2901.”

There is another reason for the relentless grind higher in stocks, which is completely disconnected from fundamentals: the continued massive short squeeze which as we discussed earlier this week has been the most furious on record:

“Peak pessimism” in late March (selling into cash, slashing net length exposure, grossing-up of shorts, dynamic hedging in futs / downside in index and ETF options/ upside in VIX futs), historic “Momentum Unwind” seasonality in April, unprecedented CB asset purchases & liquidity on top of government fiscal stimulus,  and the tendency for “reflation” sensitives to outperform “as the recession hits” have all created a brutal backdrop for said “shorts” to explode to the upside—all despite being economically sensitive plays into a crashing economy

 

Via SchiffGold.com,

The mainstream is a fickle place.

• On the one hand, we had Bank of America raising its 18-month price projection for gold to $3,000.

• On the other hand, some people argue the price of gold could crash later in the year.

Gold is up over 13% on the year, but the yellow metal has seen some price pressure over the last couple of days as various government agencies have started to move toward reopening the economy.

An article published by CCN offers three reasons gold could “crash to earth” in the coming months – none of them particularly compelling.

1. A coronavirus vaccine.

2. A quick economic recovery

3. Deflation and a soaring dollar

The first two reasons both embrace the mainstream narrative that the economy was great before the pandemic and that it will quickly go back to “normal” as soon as governments open things back up again.

But there is no normal to go back to. The economy wasn’t normal before the pandemic.

Coronavirus was merely the pin that popped the economic bubble. Everybody is still fixated on the pin, but getting rid of it doesn’t stop the air from coming out of the bubble. A coronavirus vaccine would ease the pandemic, but it wouldn’t do anything to address the malinvestments and debt that were already rampant in the economy before coronavirus reared its ugly head.

In fact, gold was already on an upward trajectory before COVID-19. In 2019, the yellow metal charted its best year since 2010. The price increased by 18.4% in dollar terms. This was in large part due to the Fed’s pivot to loose monetary policy last year. Keep in mind, the central bank was already cutting interest rates, running repo operations and relaunching quantitative easing prior to the pandemic. The response to coronavirus simply put the Fed’s extraordinary monetary policy into hyper-drive.

The economy was already broken thanks to the efforts of the Fed in response to the 2008 financial crisis. To fight the impact of coronavirus, the central bank doubled down on those policies. This is basically like the arsonist throwing gasoline on the fire he set and then claiming he’s trying to put it out.

And that leads us to CCN’s reason #3 – deflation.

This kind of Federal Reserve monetary is the exact opposite of deflation. In fact, it is literally inflationary – increasing the money supply. That doesn’t necessarily mean it will manifest in rising consumer prices, but it certainly doesn’t scream “deflation.” Peter Schiff recently said that with this monetary policy, hyperinflation has gone from the worst-case scenario to the most likely scenario.

During a recent interview, Peter made a strong case for rampant price inflation.

When you create money, you are creating inflation. Now, that inflation will manifest in various ways. I mean, when the stock market went up a lot, when the real estate market went up a lot, it was inflation that was driving those price increases, not the real increase in the value of the businesses, but the nominal price. And prices are going to rise. The Fed is putting money into the economy at a time where production is actually going down. What’s happening as a result of the coronavirus is businesses are not operating. Goods are not being produced. Services are not being provided. Yet, we are creating more demand by flooding the economy with freshly printed money. You’re just focusing on certain prices. Yes. Airline tickets are down. Nobody is flying. OK. Gas prices are down. Nobody is driving. This is only temporary. But look at what’s happening to other prices. They’re already rising. And they’re going to rise even faster in the days, weeks and months ahead.”

The CCN article focuses on the plunge in oil prices. But this is purely a function of supply, demand and overproduction. It does not imply a broader drop in consumer prices. In fact, other prices are skyrocketing. As Peter explained, “When you have a rise in consumer prices, it’s a broad-based rise in the general level of prices. But within that, prices can be falling. … Oil prices can go down in an inflationary environment. Don’t be fooled by what you are seeing in the oil market.”

And it will take months for the impacts of all of this Fed money-printing to work its way through the economy. In a nutshell, deflation is not the worry here. And the dollar isn’t likely to soar. In fact, Peter said people will likely start dumping dollars.

Nobody can hold dollars. Nobody can hold any bonds denominated in dollars. This is now like a game of musical chairs where nobody wants to get caught with dollars when the music stops playing.”

And when that happens, what will they buy?

Gold.

What else are they going to do? I mean, what are they going to use as an asset? They’re not going to just swap dollars for euros or swap dollars for yen. They’re going to just buy gold.”

Indeed, the environment is bullish for the yellow metal. After all, the Fed can’t print gold.

The last time a couple of local cops stumbled on a freezer truck packed with dozens of dead bodies, it became an international news story and object of lurid fascination for millions around the world.

But during the age of COVID-19, it’s just another quickly forgotten headline amid a global crisis that has produced a surfeit of misery and suffering. If Internet-surfing consumers weren’t inured to photos of dead bodies already, after seeing thousands of morbid photos out of China, Europe, you probably are now.

The latest disturbing headline comes from the outerboroughs of NYC, where a funeral home in Brooklyn was apparently busted for illegally storing bodies in a freezer truck after being absolutely swamped with deaths related to COVID-19. According to Sky News, roughly 50 bodies were found stored in ice trucks rented by a funeral director at the Andrew T Cleckley funeral home on Utica Ave. in South Brooklyn’s Flatlands neighborhood.

The corpses were discovered after passers-by (New Yorkers presumably scurrying out to pick up their daily food and booze) complained about the smells and leaks.

Here’s the kicker: The funeral home was apparently in violation of no laws. It was cited for “failing to control the odours”, and the police moved on.

Instead, the home ordered an even larger refrigerated truck and all the bodies were transferred into it later that day by workers at the home clad in protective gear.

As Steven Mnuchin previewed last week when he said he’s considering an additional lending facility for troubled U.S. energy companies, at 10am on Thursday the Fed – which is now joined at the hip with the Treasury – announced that it is expanding the scope and eligibility for the Main Street Lending Program which was developed “as part of its broad effort to support the economy” and “to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic.”

Specifically, the central bank said businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms which were for companies with up to 10,000 employees and $2.5 billion in revenue, doubling the revenue limit from previous guidelines and raising the employee limit by 5,000.

The maximum loan size would be limited to 4x adjusted 2019 EBITDA while the minimum loan size was lowered to $500,000 from $1 million.

The Fed also added a third loan option for companies was higher debt. Under the new loan option, lenders would retain a 15% share on loans that when added to existing debt do not exceed 6x EBITDA. This compares to the existing loan options where lenders retain a 5% share on loans, but have different features.

Under all of the loan options, lenders will be able to apply their industry-specific expertise and underwriting standards to best measure a borrower’s income. All the loans will have a 2-4 years term and pay interest at a rather high Libor+3% rate (on the flipside, there are no covenants).

In total, three loan options—termed new, priority, and expanded—will be available for businesses. The chart below summarizes the different loan options.

It wasn’t immediately clear if the adjustments on the Fed facility are meant to make it easier for energy companies to access the Fed’s loans. Previously, the Fed’s reading of its emergency lending authority has been that it doesn’t permit the central bank to erect a facility to support a specific industry.

The unspoken message here is that with every passing day, the Fed is expanding its various bailout programs suggesting that demand for Fed backstops is far greater than expected, which then also means that the economic damage is much broader than the Fed anticipated just weeks ago.

Authored by Charles Hugh Smith via OfTwoMinds blog,

And so we’ve reached the precarious state of disunion in which the only thing the warring elites can agree upon is that the Federal Reserve should rescue their private wealth, regardless of cost or consequences.

America’s divides are proliferating and deepening by the day. The key political and economic divides predate the pandemic, but the pandemic is acting as a catalyst, creating new divides and exacerbating existing ones.

Let’s start with the politicization and subsequent polarization of re-opening the economy. In a reasonably sane, coherent society, this issue would be subject to common sense debates about risks, trade-offs, policies, responses to new data, etc.

But American society is neither sane nor coherent, so what should be a non-partisan debate was immediately politicized, to the absurd extreme that “progressives” must favor continuing strict lockdowns lest they be accused of being “conservative.”

The erosion of middle ground and the disappearance of de-politicized policy debates is a clear sign that a society is doomed to disintegration not just of the social order but the political and economic orders.

Author Peter Turchin has described the disintegrative stage in his book Ages of Discord, in which he modeled a Political Stress Index comprised in part of these three dynamics:

1. Stagnating real wages due to oversupply of labor.

2. Overproduction of parasitic elites.

3. Deterioration of central state finances.

The pandemic has catalyzed the oversupply of labor and the deterioration of central state finances, and illuminated America’s vast overproduction of parasitic elites, most of whom feed off various cartels and monopolies or the financial system, which has been saved yet again from gravity by the super-wealthy’s most important protector, the Federal Reserve.

The pandemic has created new divides that highlight existing extremes of inequality. Those Americans in poor health and in jobs that cannot be performed at home are at greater risk than healthy Americans who can work at home.

Those Americans whose regular pay was considerably less than unemployment plus the federal bonus have zero financial motivation to return to work, while overpaid parasitic elites are getting paychecks even if they’re performing little or no work.

The top 10% who own 90% of all assets are breathing a sigh of relief that the Federal Reserve printed up a couple of trillion dollars to save the stock market from a well-deserved collapse, while the bottom 80% who own a tiny slice of America’s wealth are not directly impacted by the market’s swoon or recovery.

The top 10% has financial reserves to smooth out any disruptions arising from the pandemic and policy responses, while the majority of the bottom 80% have few if any reserves or resources to tap.

Meanwhile, the splintering of America’s failing elites has been amplified by the pandemic. The moral decay of the elites is as visible as their insatiable greed. The two are of course intimately connected: once the morals of the ruling Elites degrade, what’s mine is mine and what’s yours is mine, too.

I’ve previously covered two other key characteristics of an empire in terminal decline: complacency and intellectual sclerosis, what I have termed a failure of imagination. We can see both complacency and intellectual sclerosis in the elites’ response to the pandemic.

Michael Grant described these causes of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.

This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.

This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all.

And so we’ve reached the precarious state of disunion in which the only thing the warring elites can agree upon is that the Federal Reserve should rescue their private wealth, regardless of cost or consequences. America is doomed, not because its citizenry is incapable of adaptation, but because its ruling, warring elites are incapable of surrendering any of their wealth, power or control, or allowing anything to threaten their precious cartels and monopolies, starting of course with the key controlling monopoly, the Federal Reserve.

*  *  *

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*  *  *

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After the season’s first heatwave last weekend and tens of thousands, if not hundreds of thousands of people flocked to beaches in Southern California, ignoring social distancing rules, Gov. Gavin Newsom is expected to close all state beaches and parks starting Friday, according to a memo first seen by CNN.

“We wanted to give all of our members a heads up about this in order to provide time for you to plan for any situations you might expect as a result, knowing each community has its own dynamics,” the memo reads.

The closure could be announced as soon as Thursday, and state park officials, along with local law enforcement, will support efforts to close the sites, the memo adds.

The memo comes as overcrowded beaches were seen in Orange County and Ventura County last weekend as residents poured onto the coast looking for relief from the heatwave.

On Monday, Newsom blasted beachgoers:

“This virus doesn’t take the weekends off. This virus doesn’t go home. We have to manage and augment our behavior,” he said. “The only thing that will set us back is people stopping practicing physical distancing.”

At one point, estimates showed at least 90,000 beachgoers flocked to Newport Beach in Orange County.

Photos of the coast crowds have circulated social media who appear to be breaking social distancing rules.

Newport Beach appears to be pretty crowded, as Southern California is hit by a heat wave. https://t.co/abDlBmkZo0 pic.twitter.com/1DDSjvPhT5

— NBC Los Angeles (@NBCLA) April 25, 2020

The memo comes as the state is preparing to reopen the economy in phases. Newsom said the state is now in the first stage, as opening retail businesses and schools could be “weeks away.”

As confirmed cases top one million with more than 60,000 deaths across the country, President Trump is quickly trying to reopen the economy amid threats a second coronavirus could be lurking around the corner.

Authored by Steve Watson via Summit News,

The communist Chinese government was painfully aware that bio-labs including the Wuhan Institute of Virology, where it is thought the coronavirus could have originated, were in desperate need of safety upgrades to prevent accidental leaks.

An article in Asian Review notes that Chinese President Xi Jinping has been discussing the need for “biosafety” improvements for the past year.

“Beijing had been preparing biosecurity law, but not fast enough,” the report notes, adding that “China has been preparing for it carefully for quite a long time, conscious of how the country was perceived overseas.”

The report goes on to explain that France, a country instrumental in the construction of the lab, found a significant flaw in the framework for ensuring the safety of virus research in China.

“China wanted to catch up with advanced countries in biotech research as soon as possible. To that end, it needed to establish related laws on par with those in countries like France, the U.S. and Germany.” the report continues.

A report was received by the Chinese parliament last October, detailing 8 points where safety needed to be upgraded:

1) The prevention and control of major emerging infectious diseases, animal and plant epidemics.

2) Research, development and application of biotechnology.

3) Ensuring biosecurity in laboratories.

4) Ensuring the security of China’s biological resources and human genetic resources.

5) Preventing the invasion of alien species and protect biodiversity.

6) Dealing with microbial drug resistance.

7) Preventing bioterrorism attacks.

8) Defending against the threat of biological weapons.

The report notes that “the measures were not introduced in time for China to prevent the Wuhan outbreak. Instead, information was initially covered up and China’s first steps were delayed.”

In February, when it was clear that the outbreak was spreading, “Xi urged top leaders to enhance the country’s governance capacity for biosafety and to enact “a biosecurity law” at the earliest possible date,” according to the report.

This only enhanced the suspicions of those who believe the virus leaked from the lab.

Since that time, China has denied the US access to the Wuhan lab, according to US Secretary of State, Mike Pompeo. The facility has come under increased scrutiny after it was revealed that the US government under the Obama administration funded research there for a number of years.

In addition, a world renowned Russian microbiologist claimed last week that the novel coronavirus responsible for the COVID-19 pandemic was the result of Wuhan scientists doing “absolutely crazy things” in their lab.

Furthermore, a University of Texas Medical Branch lab director who visited the Wuhan institute in 2017 says that it would be foolish to dismiss the idea that the coronavirus escaped from the facility, and that “Accidents happen” in such labs.

Footage from inside the lab, broadcast in 2018, showing scientists working on coronavirus in bats, has increased scrutiny on the lab even further.

This morning, European energy giant Royal Dutch Shell made history when it became the first supermajor to cut its dividend for the first time since the second world war as the coronavirus pandemic cut quarterly earnings in half and forced the oil major to slash spending in order to preserve liquidity. The board of Shell said it had decided to reduce the quarterly dividend to 16 cents per share from 47 cents.

“Shareholder returns are a fundamental part of Shell’s financial framework,” Chad Holliday, chair of the board of Royal Dutch Shell, said in a statement.

“However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the Board believes that maintaining the current level of shareholder distributions is not prudent.”

According to the FT, the cut in the payout by two-thirds is part of a “reset” of the Anglo-Dutch group’s dividend policy and not a short-term measure, amid concerns about economic growth as well as questions over future oil prices in a world that shifts towards cleaner fuels.

Net income adjusted for cost of supply, the company’s preferred profit measure, dropped to $2.9bn in the three months to March 31. This compared with $5.3bn in the same period the previous year and analysts’ estimates of $2.3bn.

The company is taking the first steps of a “fundamental shift for Shell over the next 30 years”, CEO Ben van Beurden told reporters on Thursday, “balancing short-term needs with long-term goals” to become a net-zero emissions business by 2050. “Today is a very difficult day for the company,” said van Beurden. “But it is the prudent thing to do . . . We absolutely want to preserve the financial resilience of the company even though we have no idea what could happen.”

van Beurden described energy market conditions through the first three months of the year as “extremely challenging.”

“Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell,” he added.

Shell warned that the situation would be even “more severe” in the second quarter, with oil prices at the start of the year likely to be a “high point” for 2020. Brent crude, the international benchmark, is trading around $24 a barrel having hit an 18-year low last week. “We don’t expect a recovery in demand in the medium term,” Mr van Beurden added.

Alongside the cut to its dividend, Shell announced it would not continue with the next tranche of its share buyback program. Since the launch of the program, the oil major said it had bought back almost $16 billion in shares for cancellation.

“On the face of it, the dividend cut and cancellation of share buybacks may be seen by some shareholders as a negative move in the short term,” David Barclay, senior investment manager at Brewin Dolphin, said in an email.

Energy consumption worldwide could drop 6% in 2020, the International Energy Agency said on Thursday, equivalent to India’s total annual demand. van Beurden said it was “hard to say” if oil demand would ever return to previous highs.

Shell was already under pressure before the coronavirus outbreak with weaker refining and chemical margins and challenging economic conditions forcing the company to slow shareholder distributions and re-evaluate debt reduction targets. Since then, in response to the pandemic, Shell has said it will suspend its share buyback program altogether and announced that capital expenditure would fall to $20bn or less this year, from initial plans for $25bn. It also said its operating costs would decline by $3bn-$4bn.

The current environment stands in stark contrast to last year, when Shell’s cash bonanza prompted it to say that oil prices above $60 a barrel could enable the company to distribute at least $125bn to shareholders in the form of dividends and buybacks over the next five years.

The CEO said that pledge was “against a totally different backdrop”, adding that Shell was preparing for a deep and protracted downturn. Not cutting the dividend would have left Shell “without options” to reposition the company for the future. The annual payout will fall from almost $15bn to just over $5bn, freeing up $10bn of capital.

Commenting on the move, Tom Ellacott at Wood Mackenzie said: “A permanent dividend reset could also accelerate the strategic pivot [from Big Oil] to ‘Big Energy’ through the reinvestment of more retained earnings in the youthful zero-carbon energy sector.”

Richard Buxton, head of UK equities at Merian Global Investors, who counts Shell among his top 20 holdings, said he was “absolutely delighted” at the cut, adding: “We could not square the circle of investing in the energy transition, managing long-term reserves and their ultimate decline with over-distribution.”

Until now, oil companies – especially dividend aristocrats – had largely pulled on a series of financial levers, also including bond issuance and securing new credit lines, to safeguard their dividends. Yet analysts said these measures were not enough to offset the hit to cash flows. This week BP maintained its dividend despite a 66 per cent drop in first-quarter profits but said it would review the shareholder distributions in the second quarter. However, last week, Norway’s Equinor became the first oil major to cut its dividend this earnings season. It raised concern that other energy giants may follow suit.

Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Oil companies have been in crisis mode as lower energy prices and a collapse in demand for fuels and chemicals puts intense pressure on their finances, with severe lockdowns and travel bans in place across much of the world.