Category: zerohedge

Authored by Paul Joseph Watson via Summit News,

Despite its complicity in helping China cover-up the severity of the coronavirus pandemic, the head of the World Health Organization today claimed “the world should have listened” to the WHO.

Tedros Adhanom Ghebreyesus told a virtual press briefing that the WHO told the world the COVID-19 outbreak constituted a “Public Health Emergency of International Concern” on January 30, when there were only 82 cases registered outside China

“The world should have listened to WHO then carefully,” Ghebreyesus asserted.

The sheer inaccuracy of these statements would be funny if not for the fact that lives were lost due to the WHO’s mishandling of the outbreak.

At every step of the way, the WHO praised China’s actions on coronavirus, despite widespread evidence that the virus was leaked from a lab, that Beijing lied about the true fatality numbers and had known about coronavirus at least weeks before it informed the WHO.

On January 14th, the WHO amplified Chinese government propaganda that there had been no “human to human transmission” of COVID-19, despite this having actually occurred back in November.

According to sources who told Fox News that the virus was leaked from a lab in Wuhan, this represented the “costliest government coverup of all time” and “the World Health Organization (WHO) was complicit from the beginning in helping China cover its tracks.”

The WHO also blocked doctors from urging countries to impose border controls to stop the spread of coronavirus and repeatedly told countries not to close borders, despite this being an effective way of controlling the spread of the virus.

Right up until the end of February, the WHO continued “to advise against the application of travel or trade restrictions to countries experiencing COVID-19 outbreaks,” despite the rapid spread of the disease.

A Mount Sinai study found that New York City’s record-high coronavirus cases and deaths were “predominately” due to travel from Europe, meaning that many more lives could have been saved if borders had been closed down earlier.

But instead, the WHO insisted that maintaining the globalist principle of the international traffic of people was more important than stopping a global pandemic.

The organization also repeatedly told countries not to profile Chinese people in order to avoid “stigmatization,” something that almost certainly led to a lack of screenings of Chinese people passing through airports.

Given this history, more lives would have been saved if countries had in fact listened to the World Health Organization a lot less.

*  *  *

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We’ve been documenting the ongoing fire drill that is Tesla throughout the course of this pandemic. Most recently, we reported that workers at the company’s Fremont factory could be heading back in to work before the county’s stay-at-home order expires.

…what’s left of the company’s workers, that is. 

We also reported days ago that Tesla had furloughed a majority of its workers and instituted pay cuts until the end of Q2. Now, The Sun is reporting that the company has laid off “close to 300 janitors and bus drivers” while Elon Musk has seen his personal wealth grow by $650 million and Tesla’s stock rebounded from its coronavirus lows. 

Google, Apple and Facebook continue to pay workers in the same positions as those laid off from Tesla, the report notes.

Dianne Solis, the vice president of SEIU-United Service Workers West, which represents 11,000 janitors in northern California said: “Early on we had most tech giants, Google, Facebook, Cisco, Apple, Microsoft, all committed to keep workers on or offering continued pay and benefits in the case of layoffs. We were hoping Tesla would follow suit but they are an outlier.”

Esther Garcia Servin, a single mother with two children who worked for Tesla, commented: “This is having a devastating effect on workers, who are low wage workers and not seen. They’re subcontracted and that’s the way Tesla tries to remove any responsibility. Many of these workers have chronic conditions like diabetes and don’t have healthcare. There are no other jobs out there right now, and these workers don’t know how they’ll pay May rent or put food on the table.”

Servin said she could not afford to pay May rent as a result of being laid off.

To pay this collective of workers for 12 weeks at a rate of $15, it would cost Tesla about $2.016 million, The Sun estimated. That works out to about 0.3% of the $650 million in net worth CEO Musk has tacked on in April. 

Maria Noel Fernandez, campaign director at the grassroots community organization, Silicon Valley Rising, concluded: “Elon Musk is making a conscious decision to say Tesla doesn’t care about its contractors. Musk is saying ‘we’re not standing by our workers and their communities.’ And he could afford it. It’s a decision.”

Submitted by Marc Cohodes, first published in the FT

The fairness of capital markets is under threat due to the rise of digital media.

We live in an era where some stock promoters and short sellers open large positions prior to publishing market-moving information about a company, and rapidly close those positions after inducing a buying or selling frenzy.

Whipping up hype and hysteria is an easy way to make quick, riskless profit. In my view, it is also wrong. It goes against the spirit of our laws, and it is bad public policy. Whether you own shares or are betting against a company, I believe it is misleading to tell investors that you have a specific view on a company and then profit from a trade in the opposite direction.

A US circuit court said as much as part of the 1979 case of Zweig v Hearst Corp, which found that a newspaper columnist touting a stock could be sued for securities fraud for failing to disclose he owned the security and “his intent to sell when the market price rose”.

More recently, in the 2018 case of Lidingo Holdings, a writer was charged civilly with fraud for selling “stock at a profit soon after his article was published, which was contrary to the advice he gave in his articles advocating holding for the long-term”. This year he consented to a judgment without admitting or denying the allegations.

The two legal cases deal with people accused of trying to push prices up through publicity and then selling. US regulators should extend the rule, and make clear that it is equally unacceptable to encourage the sale of a security while planning to purchase shares to cover a short position soon afterwards.

Existing US law also fails to address fundamental changes to the media environment that are giving rise to new forms of market manipulation. Many bloggers and social media personalities who promote or attack stocks do not conduct a deep investigation of the companies involved. Instead, they republish theses acquired elsewhere and buy and sell quickly to make a fast buck. If you truly believe that a stock price is off — either because the company is a hidden gem or a fraudulent trash heap — he or she should be willing to hold open a position consistent with the advice he or she is giving to other investors.

It is time for Congress to enact a ten-day minimum holding period that would apply to any stock promoter or short seller who opens a large position and disseminates market-moving information, whether by publishing a report, going on media outlets such as CNBC, Fox or Bloomberg, speaking at conferences or posting on social media.

The idea is simple: if both longs and shorts are required to hold open a position they have advocated for 10 days, the market is given an opportunity to evaluate the quality and credibility of the information. If the promoter is worried that the price might crash back to earth within 10 days, they should not be touting the stock to begin with.

Similarly, if a short seller is concerned that the price might rebound in that window, investors are better off not selling in the first place. I recognise that a 10-day holding period is relatively brief, but short sellers already face expensive borrowing costs to hold open a position. A longer holding period might very well be cost prohibitive.

This is a modest rule which protects investors from predatory hedge funds seeking to exploit hype or hysteria about a public company. This is a fair and even-handed approach that avoids tipping the scales in favour of public companies or their critics. This is a simple way to protect the integrity of our capital markets, and it is one that the entire investment community — both long and short — can get behind.

North Korea’s Kim Jong Un hasn’t been seen since April 11, notably missing the country’s most important holiday on April 15 honoring his grandfather, Kim Il Sung.

What we do know is that China dispatched a team of medical experts to North Korea amid conflicting reports that Kim underwent a ‘botched’ cardiovascular surgery. According to the Daily NK, however, Kim has mostly recovered.

Last Monday though, MSNBC‘s Katie Tur tweeted “Kim Jong Un is brain dead,” and that both NBC and CNN had confirmed his status. She quickly deleted the tweet “out of an abundance of caution.”

So, with rumors over Kim’s fate swirling, here are the top theories as to what’s going on, according to Bloomberg.

Relax, he’s just fine

“Kim Jong Un is alive and well,” according to Moon Chung-in, special adviser to South Korea’s president. In a Sunday statement to Fox News, Moon said that Kim had been staying in the coastal resort town of Wonsan since April 13. 

He’s toast

According to CNN, so who knows, US intelligence suggests that Kim is in “grave danger” following the surgery. Meanwhile, Bloomberg reported that US officials were told Kim is in critical condition, but could not confirm his status.

While U.S. President Donald Trump said Thursday that he believed the CNN report was “incorrect” and based on “old documents,” rumors about Kim’s deteriorating condition only accelerated on social media. On Saturday, Reuters reported that the Chinese Communist Party’s International Department dispatched a team including medical experts to North Korea on Thursday to advise on Kim. The news service, which cited three people familiar with the situation, said it was unclear what the delegation signaled about Kim’s health. –Bloomberg

According to China’s foreign ministry, the ‘medical team’ was related to coronavirus testing. “That is not the same as a medical team,” said CCP spokesman Geng Shuang in a Monday night interview from Beijing.

Kim is social distancing

Not wanting to catch coronavirus since the 36-year-old is in a higher risk category on account of his obesity, some have suggested that the North Korean leader is simply quarantining amid the COVID-19 crisis, despite the fact that North Korea hasn’t disclosed any cases.

On Monday, Seoul-based JoongAng Daily newspaper reported that Kim is in self-quarantine, citing an unidentified source in China. According to the report, one of Kim’s bodyguards was confirmed to have contracted the virus, which is why China sent 50 or so medical staff.

Of course, this wouldn’t prevent Kim from providing proof-of-life.

Kim was injured during military drills

One rumor circulating is that Kim was injured during military drills in the eastern tourist enclave of Wonsan, where he owns a palatial family compound. According to satellite photos analyzed by 38 North, Kim’s armored train, or one which looks a lot like it, was seen parked at the local railway station last week.

On April 14, the day before the Day of the Sun celebration in Pyongyang, there was a burst of military activity which included cruise missile tests and fighter jet maneuvers, according to a statement by North Korean defector Ri Jong Ho, who currently lives in the US. Bloomberg suggests this is unlikely, and notes that satellite images from April 15 don’t show Kim’s train.

Seeking attention

Last but not least, Bloomberg cites South Korean lawmaker Yoon Sang-hyun, who heads a committee on inter-Korean relations, who suggested that Kim devised his disappearance in order to draw attention to the regime.

Yoon speculated that the North Korean leader would have to show up in public in the next couple of weeks to avoid a destabilizing debate about his grip on power and potential successors.

“If he doesn’t, it’s a real big issue,” Yoon told reporters Monday, according to the DongA Daily. “Kim is apparently not running the country as he would normally do now.” –Bloomberg

In 2014, Kim similarly vanished for six weeks, stoking all sorts of rumors ranging from ‘gout’ to ‘overthrown,’ after which he was seen walking with a cane. 

The US deficit is expected to soar to a record $3+ trillion this years… and Treasury buyers have no problem with buying all the bonds that will be needed to fund it.

Just over an hour after tremendous demand met the Treasury’s sale of $42BN in 2Y paper as documented earlier, moments ago the Treasury’s sale of $43BN in 5 year paper was no less spectacular, with the yield not only tumbling to an all time low of 0.394%, far below the 0.535% in March now that negative rates are just a matter of time for the Fed, but also stopping 0.7bps through the When Issued.

While the Bid to Cover also jumped, it was not nearly as impressive the 2Y’s surge, if still a solid rebound to 2.74, far above the 2.53 in March and the highest since Nov 2014.

The internals were also solid, with Indirects taking down 60.4%, or well above the 52.1% in March, and Directs soared to 20.2%, the highest since February 2019. That left Dealers holding just 19.4% of the auction, the lowest on record.

And so, between tremendous demand for both 2Y and 5Y Treasurys, we wonder just what Lloyd Blankfein – who can’t figure out why anyone would buy US debt at prevailing rates when there are tens of trillions in deficit spending to be funded in coming years – is thinking.

Authored by Darren Smith via JonathanTurley.com,

The government of Israel suspended a program enacted last month at the behest of the prime minister’s government granting the police the authority to track roaming and location data of those under quarantine order. A parliamentary oversight committee held that the loss of privacy was a greater cost to society than the proffered benefit of tracking those suspected of carrying or transmitting the COVID-19 virus.

The underlying technology used to track civilian COVID patients stems from that developed for Shin Bet (The Israeli General Security Service) for counter-terrorist tracking of cell phones carried by security risks to the state.  In this case the technology was co-opted for use against medical patients health officials suspected might violate quarantine orders.

While the reversal of policy is welcomed, it does provide a proof that any technology or power crafted under the promise of addressing a great and manifest danger to the people or the state usually finds a way to be used against ordinary citizens when politicians or government become tempted to broaden its application under “emergency” conditions.

The government invoked an emergency coronavirus regulation having a one month sunset to extend law enforcement powers into the ability to track the movement of suspected coronavirus victims. The regulation caused civil liberties organizations to file legal actions against the state on privacy grounds. While the prime minister’s office attempted to pass an extension to the tracking regulation, the Knesset Foreign Affairs and Defense Committee blocked the effort. Committee Member Ayelet Shaked tweete:

“The utility offered by this (cellphone tracking) is outweighed by the great harm inflicted to privacy.”

He believes that the police could instead maintain tracking levels by conventional means such as telephone calls and in-person visits without violating privacy.

The committee determined that police made five hundred random cellphone location pings per day against 13,500 persons enumerated on a list maintained by the health ministry. Police reported over two hundred arrests of quarantine absconders and that the cellphone location data played a role in the apprehensions and evidence gathering. Fifteen percent of home-quarantined persons were estimated by the health ministry to have violated the terms of their detention.

One could argue that the location ability certainly made enforcement more efficient, however it is not without shortcomings aside from privacy. The movement of a cellphone is not in of itself a guarantee that a particular person actually is in possession of the phone.

It could be just as easily a family member or the device could be stolen.

The controversy shows also tangentially how if the government is given the ability to fashion technology or ability to counter a pariah group, such as terrorists or an enemy state, that while it might be effective the good intentions at first provide a development environment and test bed for the tech to be used against an enemy, only to years later find the technology perfected and readily available to use against the civilian public whenever politicians or government find it convenient or “necessary”. One can say it is far too often inevitable. It would seem probably a good practice to not allow the government the ability to have the technology to begin with, lest it be abused later. But is this workable given actual threats by belligerent foreign actors that need to be mitigated and what is the likelihood that domestic politicians will abuse the tech? That is for everyone to decide on their own. But it is important to recognize that an enemy politician in a foreign land is still a politician–who just happens to be on the other side of an arbitrary border.  And a government willing to abuse the rights of its own citizens is a greater threat than one residing elsewhere.

We could extend the discussion to locally here in the U.S. where tech companies have been offering the services of coronavirus testing melded with real-time tracking of individuals through their cellphones. Some officials might believe this to be of benefit given the perceived great emergency of the pandemic and agree to such terms, only to find out later the tech might be used for some other application for the tech companies, post-pandemic, to generate data and intelligence on users with even greater efficiency.  It would be technology born out of a perceived emergency and almost inevitably abused later.

At the very least a potential absconder could simply leave their phone at home and cavort about to their own desire. Sometimes technology is not as omnipotent as might seem. Yet it is arguable the technology itself is not a per se threat, it is how it is used that matters. My point is once it is able to be used, it is often too late to control it.

Western intelligence agencies are “looking closely at the work of a senior scientist at the Wuhan Institute of Virology, Peng Zhou,” as part of a joint international investigation into the origins of COVID-19, according to the Daily Telegraph.

In a stunning expose, the Australian newspaper reports that “the Five Eyes intelligence agencies of Australia, Canada, NZ, UK and US, are understood to be looking closely at the work of a senior scientist at the Wuhan Institute of Virology, Peng Zhou, as they examine whether COVID-19 originated from a wet market or whether the naturally-­occurring virus may have been released from the level four laboratory in Wuhan that was studying deadly coronavirus pathogens from bats.”

Of course, the name of Peng has been long familiar to our readers, and would have been familiar to far more people had Twitter not decided to arbitrarily suspend the Zero Hedge account over a report exposing Mr. Zhou.

As we reported in January – posting publicly available professional contact information and suggesting people ask him about the outbreak near his lab – Peng, head of the Bat Virus Infection and Immunization Group, sought to hire two post-doc fellows last November, who would be tasked with using bats “to research the molecular mechanism that allows Ebola and SARS-associated coronaviruses to lie dormant for a long time without causing diseases.”

One press release from his lab was titled: “How bats carry viruses without getting sick.” Via the Telegraph:

It can be revealed that Zhou — the head of the Bat Virus Infection and Immunity Project at the Wuhan Institute of Virology — spent three years at the bio-containment facility, Australian Animal Health Laboratory between 2011 and 2014, where he was sent by China to complete his doctorate.

During this time, Zhou arranged for wild-caught bats to be transported alive by air from Queensland to the Australian Animal Health Laboratory in Victoria where they were euthanised for dissection and studied for deadly viruses.

His work was funded jointly by the CSIRO and the Chinese Academy of Sciences.

It examined bat immunology and the role of interferons and how “bats are rich reservoirs for emerging viruses, including many that are highly pathogenic to humans and other mammals” and “many of which cause significant morbidity and mortality in humans and other mammals.”

Western intelligence is also looking into the work of the original “Bat Woman” Shi Zhengli, a colleague of Zhou who is the director of the Center for Emerging Infectious Diseases at the Wuhan Institute of Virology.

As we reported in February, Shi notably co-authored a controversial paper in 2015  which described the creation of a new virus by combining a coronavirus found in Chinese horseshoe bats with another that causes human-like severe acute respiratory syndrome (SARS) in mice. This research sparked a huge debate at the time over whether engineering lab variants of viruses with possible pandemic potential is worth the risks.

As Nature.com reported in 2015, the findings reinforce suspicions that bat coronaviruses capable of directly infecting humans (rather than first needing to evolve in an intermediate animal host) may be more common than previously thought, the researchers say.

Zhengli also spent time in Australia as a visiting scientist for three months from February 22 to May 21, 2006 where she worked at the CSIRO’s top-level Australian Animal Health Laboratory.

She used faecal samples of horseshoe bats to identify that they were the natural host for SARS-like coronaviruses. -Daily Telegraph

Meanwhile, the Wall Street Journal reported earlier this month that researchers at the WIV had collected bats in a cave over 1,000 miles away in Yunnan which carried COVID-19.

Also disturbing is that the lab had been operating in part on a $3.7 million grant from the US government.

The Mail on Sunday has learned that scientists there experimented on bats as part of a project funded by the US National Institutes of Health, which continues to licence the Wuhan laboratory to receive American money for experiments. –Daily Mail

In mid-April, the Washington Post reported that the US State Department received two cables from US Embassy officials in 2018 warning of inadequate safety at Wuhan Institute of Virology, which was conducting ‘risky studies’ on bat coronaviruses, according to the report – which notes that the cables have “fueled discussions inside the U.S. government about whether this or another Wuhan lab was the source of the virus.”

According to the Telegraph, the revelation comes as Australian politicians are ramping up pressure on China to cooperate with the international investigation into the origins of the novel coronavirus. Accroding to Andrew Hastie, Chair of the Parliamentary Joint Committee on Intelligence and Security, “The Chinese Communist Party must take responsibility for the virus that began inside their borders and work with the rest of the world to prevent it from happening again. We are simply asking for transparency and co-operation.”

Australia’s official position is that the virus likely originated in the Wuhan wet market, however they are now considering whether the virus escaped fom the Wuhan Institute of Virology due to human error – a theory which US Secretary of State Mike Pompeo endorsed last week when he told Fox News: “Look, we know it began at one [lab], but we need to figure this out.”

A story in four parts pic.twitter.com/fHIWLOWJWo

— Quoth the Raven (@QTRResearch) April 27, 2020

For the second week in a row, the largest US oil ETF, the USO roiled oil markets after it unexpectedly starting selling its holdings of the most active West Texas Intermediate futures contract, triggering a massive swing in the price relationship between the June and July contracts, which – as we reported earlier – sent both the June WTI contract tumbling…

… which pushed WTI spreads even deeper into contango, as the discount between June WTI and the contract for December deepened sharply after the filing, reaching as low as $15.17 a barrel…

… while the price of USO to all time lows.

The changes, which were detailed in a Monday morning regulatory filing, represented the latest in a series that Bloomberg said “have wreaked havoc on crude prices.” The fund said it’s moving its money to contracts spread between July 2020 and June 2021 due to new limits imposed upon it by regulators and its broker. Specifically, USCF which manages the USO ETF, said it would now target the following allocation:

• 30% of its portfolio in the July contract,
• 15% of its portfolio in the August contract,
• 15% of its portfolio in the September contract,
• 15% of its portfolio in the October contract,
• 15% of its portfolio in the December contract,
• 10% of its portfolio in the June 2021 contract.

… and revealed that it would roll into the positions described above over a three-day period with approximately 33.3% of the investment changes taking place each day on each of April 27, 2020, April 28, 2020, and April 29, 2020, which explains why the June WTI contract is tumbling this morning as speculators frontran the USO selling.

The ETF has changed its investment policy five times in the last two weeks, as shown in the following chart which depicted the ETF’s holdings as of Friday’s close:

It also warned investors its valuation may deviate significantly from the underlying oil price, in effect acknowledging that it’s momentarily less focused on the price of WTI crude.

“While it is USO’s expectation that at some point in the future it will be able to return to primarily investing in the Benchmark Futures Contract or other similar futures contracts of the same tenor based on light, sweet crude oil, there can be no guarantee of when, if ever, that will occur,” it said in the filing, adding that USO investors “should expect that there will be continued deviations between the performance of USO’s investments and the Benchmark Oil Futures Contract, and that USO may not be able to track the Benchmark Oil Futures Contract or meet its investment objective.”

The fund listed factors including “a change in regulator accountability levels and position limits” as part of its reasons for the shift. As a result it will now struggle to meet its own investment objectives, it warned.

As Bloomberg notes, the long-only oil fund has in recent weeks become a magnet for retail investors looking to Buy The Fucking Dip and time the bottom to the historic price rout that’s pushed oil futures in New York into negative territory for the first time in history. The knock-on effects have impacted retail investors everywhere. While USO was not holding the May contract when it plunged below zero, traders pointed to retail money as having caused large gyrations in the market.

And while the USO has quickly become a rich target for speculators that are able to take advantage of the moves by trading ahead of it, thanks to its detailed regulatory disclosures, such as today’s crash, retail investors continue getting slaughtered and according to the latest Robin Hood data, there was now a record number of holders above 204,000…

… even though the USO is by definition a product designed to fleece retail, offering a detailed calendar and the exact contracts that’s selling and buying, allowing more sophisticated investors to place financial bets ahead.

Our advice: only when retail has “dumped it“, and hedge funds have to look elsewhere for sheep to fleece, will it be safe to expect a modest oil rebound.

Days after President Trump floated the idea that the US government could purchase five years of airline tickets in bulk as part of a stimulus package for crippled airline carriers, Boeing CEO’s Dave Calhoun has warned that air travel growth might not return to pre-corona levels for years. 

Calhoun made the comments on Monday morning at an annual shareholder meeting. He said it would take 2-3 years for air travel growth to return to pre-corona levels, adding that long term growth trends could take even longer to recover. 

“Based on what we know now, we expect it will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry’s long-term trend growth to return,” he said. 

Calhoun said the new reality in a post-corona world is a depressing one for airlines: “…they are making difficult decisions that result in grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments.”

This is more bad news for Boeing, who has drawn down on revolvers as it struggles to survive, requesting a government bailout as it’s faced with a wave of cancellation orders for its planes. 

Calhoun said Boeing would need to borrow more money in the next six months. He said it could be years until the company begins paying a dividend again, nevertheless, restarting its stock buyback program. 

His gloomy outlook echoed our report from April 20, which confirmed the airline industry has crashed as the virus pandemic drove travel demand down to the lowest in decades. 

We noted that United Airlines and other carriers have warned it could take several years for recovery as well. As a result of depressed passenger traffic, airlines are expected to slash tens of thousands of workers, cancel new plane orders, and trim costs across the board later this year. 

“Without a quick improvement in demand, we could see the airlines look to shed 800 to 1,000 aircraft, which could result in a reduction of 95,000 to 105,000 airline jobs,” Cowen analyst Helane Becker wrote in an April 13 client note.

United’s chief executive and president, Oscar Munoz and Scott Kirby said in an April 15 memo to employees that the industry has a “challenging economic outlook” and the overall workforce at the company will be smaller in the future than today.

Airlines cheered when Congress last month allocated $50 billion in bailouts to the sector that included $25 billion in grants and loans to keep 750,000 workers employed through September 30.

Cowen & Co. has predicted ticket sales won’t recover to pre-corona levels until 2025, which explains why President Trump wants to purchase bulk tickets for the next five years.

As for Boeing, well, they might be screwed for quite some time as a recovery in the airline industry is years away. This would be a perfect time for Boeing to restructure the company and change its name, along with the name of the 737 Max.

Bloomberg Economics estimates that the global economy will contract 4% in 2020 due to coronavirus lockdowns. However, these estimates are overly “optimistic,” assuming a V-shaped economic recovery would be seen in the back half of the year. 

The narrative of a V-shaped recovery before the November election has been recently drummed up by the Trump administration. Wall Street has bid stocks up in the last 24 sessions with high hopes that stimulus will stabilize asset prices, and lockdowns will be lifted across many states that would enable the economy to soar. MSCI All World has seen a near 25% gain in price on these hopes.

While optimism of stimulus, virus curve flattening, vaccines, and lifting lockdown restrictions in many regions across the world have aided in the idea that a second-half recovery is a sure bet, many are ignoring the unfolding economic depression and several other scenarios that could derail the economic rebound. 

Bloomberg’s Tom Orlik and Jamie Rush offer this reality check: 

“The economy has entered a downturn of unprecedented speed and severity, with most advanced economies facing their weakest performance since the Great Depression,” they said in a report, adding that, “relative to expectations at the start of the year, the cost of lost output is more than $6 trillion.” 

Their global $6 trillion estimates are based on “optimistic assumptions about both the outbreak and the recovery.” In this scenario, the US GDP will plunge 6.4%, Euro Area GDP -8.1%, and Japan -4%, while China’s rate of economic growth will be the slowest on record. 

The economists said, “downside risks are significant” and derailment of the second-half recovery is indeed possible:  

They warned about the risks of a second coronavirus wave that would prevent a global economic rebound.

They said a deeper contraction of 5.6% would then be possible, and if stimulus proved ineffective, a worst-case scenario of a 7.2% decline would be seen. 

“But unlike the Asian crisis in 1997 and the global recession in 2009, the current shock isn’t caused by fundamental economic and financial imbalances. This means that countries that have mobilized enough stimulus to compensate for the lost income could stage a swift recovery,” the economists wrote.

“Governments should err on the side of doing too much stimulus. In the end, the cost of doing too little would be higher.”

As central bank stimulus is flooding financial markets, the Organization for Economic Cooperation and Development warned in early April that their leading indicators detected a turning point in the global economy, suggesting a crash has been underway in all major economies.

China managed to flatten the pandemic curve in late February. Months later, Beijing is closing movie theaters and imposing travel restrictions on certain regions as the dreaded second wave could be materializing. If so, this would mean, since China created at least half of the world’s credit in the last decade, that the economic rebound forecasted for the second half of 2020 is pure fiction.