The Blowups Continue: LMR Shuts Down Two Funds After Bets On Volatility “Backfire”
London-based LMR Partners is shutting down two hedge funds in a bid to supposedly focus more on the firm’s main funds.
One fund being shut down, the LMR Long Horizon Fund, is being liquidated after “bets on volatility backfired”, according to Bloomberg. Which, of course, reminded us of the OptionSellers.com fund blowup that took place after a natural gas short squeeze back in 2018.
The other fund being shut down, the LMR Strategic Equity Fund, was up about 3% this year. There doesn’t seem to be an explanation as to why this fund was shut down, though we guess it could be just for liquidity/deleveraging purposes.
The LMR Long Horizon Fund was managed by James Herlihy and the LMR Strategic Equity Fund was managed by Cedric Choffat. Between the two funds, they had about $300 million under management. Both managers remain employed by the firm and help run money for the firm’s main hedge fund.
LMR’s main fund is down 20% in March, as of March 20 and the firm’s smaller LMR Alpha Rates Fund is down about 6.5% on the year.
LMR had previously never lost money in a calendar year since starting about a decade ago and is now looking to raise more capital for its two main funds. In 119 months since its inception, it has only posted losses in 19 months. Which is easy to do when you’ve been in a Fed-rigged market that does nothing but jam higher on a daily basis every day for the last decade.
LMR is partly owned by Goldman Sach’s Petershill Fund, which has also suffered declines this year.
Now, we’ll start to see who is worth their weight as asset managers as volatility continues to shake up the market as a result of coronavirus and its ensuing lockdowns. Anybody could provide good looking results over the last decade, likely leading to an entire industry full of “asset managers” who just grabbed on to whatever beta trade they could and collected their fees. That gravy train appears to be over.
The Federal Reserve is poised to spray trillions of dollars into the U.S. economy once a massive aid package to fight the coronavirus and its aftershocks is signed into law. These actions are unprecedented, going beyond anything it did during the 2008 financial crisis in a sign of the extraordinary challenge facing the nation.” –Bloomberg
Currently, the Federal Reserve is in a fight to offset an economic shock bigger than the financial crisis, and they are engaging every possible monetary tool within their arsenal to achieve that goal. The Fed is no longer just a “last resort” for the financial institutions, but now are the lender for the broader economy.
There is just one problem.
The Fed continues to try and stave off an event that is a necessary part of the economic cycle, a debt revulsion.
John Maynard Keynes contended that:
“A general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers.”
In other words, when there is a lack of demand from consumers due to high unemployment, then the contraction in demand would force producers to take defensive actions to reduce output. Such a confluence of actions would lead to a recession.
On Thursday, initial jobless claims jumped by 3.3 million. This was the single largest jump in claims ever on record. The chart below shows the 4-week average to give a better scale.
This number will be MUCH worse next week as many individuals are slow to file claims, don’t know how, and states are slow to report them.
The importance is that unemployment rates in the U.S. are about to spike to levels not seen since the “Great Depression.” Based on the number of claims being filed, we can estimate that unemployment will jump to 20%, or more, over the next quarter as economic growth slides 8%, or more. (I am probably overly optimistic.)
More importantly, since the economy is 70% driven by consumption, we can approximate the loss in full-time employment by the surge in claims. (As consumption slows, and the recession takes hold, more full-time employees will be terminated.)
This erosion will lead to a sharp deceleration in economic confidence. Confidence is the primary factor of consumptive behaviors, which is why the Federal Reserve acted so quickly to inject liquidity into the financial markets. While the Fed’s actions may prop up financial markets in the short-term, it does little to affect the most significant factor weighing on consumers – their job.
Another way to analyze confidence data is to look at the consumer expectations index minus the current situation index in the consumer confidence report.
This measure also says a recession is here. The differential between expectations and the current situation, as you can see below, is worse than the last cycle, and only slightly higher than prior to the “dot.com” crash. Recessions start after this indicator bottoms, which has already occurred and will show up when the current data is released.
Importantly, bear markets end when the negative deviation reverses back to positive.
While the virus was “the catalyst,” we have discussed previously that a reversion in employment, and a recessionary onset, was inevitable. To wit:
“Notice that CEO confidence leads consumer confidence by a wide margin. This lures bullish investors, and the media, into believing that CEO’s really don’t know what they are doing. Unfortunately, consumer confidence tends to crash as it catches up with what CEO’s were already telling them.
What were CEO’s telling consumers that crushed their confidence?
“I’m sorry, we think you are really great, but I have to let you go.”
Confidence was high because employment was high, and consumers operate in a microcosm of their own environment.
“[Who is a better measure of economic strength?] Is it the consumer cranking out work hours, raising a family, and trying to make ends meet? Or the CEO of a company who is watching sales, prices, managing inventory, dealing with collections, paying bills, and managing changes to the economic landscape on a daily basis? A quick look at history shows this level of disparity (between consumer and CEO confidence) is not unusual. It happens every time prior to the onset of a recession.
Far From Over
Why is this important?
Hiring, training, and building a workforce is costly. Employment is the single largest expense of any business, but a strong base of employees is essential for the prosperity of a business. Employers do not like terminating employment as it is expensive to hire back and train new employees, and there is a loss of productivity during that process. Therefore, CEOs tend to hang onto employees for as long as possible until bottom-line profitability demands “leaning out the herd.”
The same process is true coming OUT of a recession. Companies are “lean and mean” and are uncertain about the actual strength of the recovery. Again, given the cost to hire and train employees, they tend to wait as long as possible to be certain of justifying the expense.
Simply, employers are slow to hire and slow to fire.
While there is much hope that the current “economic shutdown” will end quickly, we are still very early in the infection cycle relative to other countries. Importantly, we are substantially larger than most, and on a GDP basis, the damage will be worse.
What the cycle tells us is that jobless claims, unemployment, and economic growth are going to worsen materially over the next couple of quarters.
“But Lance, once the virus is over everything will bounce back.”
Maybe not.
The problem with the current economic backdrop, and mounting job losses, is the vast majority of American’s were woefully unprepared for any type of disruption to their income going into recession. As discussed previously:
“The ‘gap’ between the ‘standard of living’ and real disposable incomes is shown below. Beginning in 1990, incomes alone were no longer able to meet the standard of living so consumers turned to debt to fill the ‘gap.’ However, following the ‘financial crisis,’ even the combined levels of income and debt no longer fill the gap. Currently, there is almost a $2654 annual deficit that cannot be filled.”
As job losses mount, a virtual spiral in the economy begins as reductions in spending put further pressures on corporate profitability. Lower profits lead to more unemployment, and lower asset prices until the cycle is complete.
While the virus may end, the disruption to the economy will last much longer, and be much deeper, than analysts currently expect. Moreover, where the economy is going to be hit the hardest, is a place where Federal Reserve actions have the least ability to help – the private sector.
Currently, businesses with fewer than 500-employees comprise almost 60% of all employment. 70% of employment is centered around businesses with 1000-employees, or less. Most of the businesses are not publicly traded, don’t have access to Wall Street, or Federal Reserve’s bailouts.
The problem with the Government’s $2 Trillion fiscal stimulus bill is that while it provides one-time payments to taxpayers, which will do little to extinguish the financial hardships and debt defaults they will face.
Most importantly, as shown below, the majority of businesses will run out of money long before SBA loans, or financial assistance, can be provided. This will lead to higher, and a longer-duration of, unemployment.
One-Percenter
What does this all mean going forward?
The wealth gap is going to explode, demands for government assistance will skyrocket, and revenues coming into the government will plunge as trillions in debt issuance must be absorbed by the Federal Reserve.
While the top one-percent of the population will exit the recession relatively unscathed, again, it isn’t the one-percent I am talking about.
It’s economic growth.
As discussed previously, there is a high correlation between debts, deficits, and economic prosperity. To wit:
“The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.”
However, simply looking at Federal debt levels is misleading.
It is the total debt that weighs on the economy.
It now requires nearly $3.00 of debt to create $1 of economic growth. This will rise to more than $5.00 by the end of 2020 as debt surges to offset the collapse in economic growth. Another way to view the impact of debt on the economy is to look at what “debt-free” economic growth would be.
In other words, without debt, there has been no organic economic growth.
Notice that for the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate, which averaged roughly 8% during that period. Since then, the economic deficit has only continued to erode economic prosperity.
Given the massive surge in the deficit that will come over the next year, economic growth will begin to run a long-term average of just one-percent. This is going to make it even more difficult for the vast majority of American’s to achieve sufficient levels of prosperity to foster strong growth. (I have estimated the growth of Federal debt, and deficits, through 2021)
The Debt End Game
The massive indulgence in debt has simply created a “credit-induced boom” which has now reached its inevitable conclusion. While the Federal Reserve believed that creating a “wealth effect” by suppressing interest rates to allow cheaper debt creation would repair the economic ills of the “Great Recession,” it only succeeded in creating an even bigger “debt bubble” a decade later.
“This unsustainable credit-sourced boom led to artificially stimulated borrowing, which pushed money into diminishing investment opportunities and widespread mal-investments. In 2007, we clearly saw it play out “real-time” in everything from sub-prime mortgages to derivative instruments, which were only for the purpose of milking the system of every potential penny regardless of the apparent underlying risk.”
In 2019, we saw it again in accelerated stock buybacks, low-quality debt issuance, debt-funded dividends, and speculative investments.
“When credit creation can no longer be sustained, the markets must clear the excesses before the next cycle can begin. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE, to tax cuts, only delay the clearing process. Ultimately, that delay only deepens the process when it begins.
The biggest risk in the coming recession is the potential depth of that clearing process.”
This is why the Federal Reserve is throwing the “kitchen sink” at the credit markets to try and forestall the clearing process.
If they are unsuccessful, which is a very real possibility, the U.S. will enter into a “Great Depression” rather than just a “severe recession,” as the system clears trillions in debt.
As I warned previously:
“While we do have the ability to choose our future path, taking action today would require more economic pain and sacrifice than elected politicians are willing to inflict upon their constituents. This is why throughout the entirety of history, every empire collapsed eventually collapsed under the weight of its debt.
Eventually, the opportunity to make tough choices for future prosperity will result in those choices being forced upon us.”
We will find out in a few months just how bad things will be.
But I am sure of one thing.
The Fed can’t fix what’s broken.
While the financial media is salivating over the recent bounce off the lows, here is something to think about.
Bull markets END when everything is as “good as it can get.”
Bear markets END when things simply can’t “get any worse.”
Britain’s Housing Market Freezes As Wave Of Delayed Mortgage Payments Looms
One of the more unorthodox measures implemented by No. 10 Downing Street when it placed the entire UK on lockdown earlier this week was a virtual freeze of the country’s housing market. For nearly a week now, the housing market across the country has ground to a halt as agents have been prohibited from marketing new homes.
And on Thursday, the government took things a step further, and banned visitors from viewing properties while the “stay-at-home” measures are still in force.
The edict affects all transactions, blocking all transfers of title until further notice, while also banning evictions, it’s basically forcing the entire county to stay put in whatever housing situation they have been living in. For those who don’t have permanent housing arrangements, it’s presumably been a struggle. But that’s a relatively small slice of the population.
This is about all prospective homebuyers in the UK can do right now:
“You can speak to estate agents over the phone and they will be able to give you general advice about the local property market and handle certain matters remotely but they will not be able to start actively marketing your home in the usual manner,” the government said on Thursday night.
A number of banks and specialist lenders have already withdrawn new mortgages to “focus on existing customers”, even as demand for loans is expected to soar. The decision was meant to reduce stress on call centers as most places are expected to be low on staff in the coming weeks.
Lloyds and Barclays have already withdrew most of their mortgage offers, and are expected to cut off all loans currently in the process of being made unless the borrower can put down 40%.
Barclays told brokers it would no longer offer mortgages for customers who did not have a deposit of at least 40%, but it would continue with some remortgaging deals.
With so much uncertainty and such extreme fluctuations in interest rates and credit markets, banks are hoping to put things on pause until things have calmed down a bit.
Bankers told the FT that the withdrawal of mortgage products wasn’t a signal that they were running short of financing, as happened in 2008 when funding markets froze.
But with so many borrowers warning lenders to expect delays on their mortgage payments until the federal stimulus checks have been issued, issuing new mortgages right now would almost be stupid. To continue lending money at a time when reliable borrowers are already having trouble doesn’t seem to make sense, which is one problem that the government is going to need to solve with this bailout,
Spain Reports Deadliest Day On Record, Trump Invokes Power To Call Up Retired Troops: Live Updates
Update (1100ET): The Pentagon is taking steps to clarify its powers now that it has the ability to call up reservists and retirees.
PENTAGON SAYS IT HAS ACCELERATED THE PROCESS FOR HOW DEPARTMENT OF DEFENSE AUTHORIZES THE USE OF NATIONAL GUARD FORCES UNDER TITLE 32
Additionally, Italy has now passed China in total infections, with 86,498 to China’s 81,996. Following several days of back-and-forth criticism with Michigan Gov. Gretchen Whitmer, whom President Trump infamously referred to as “that woman” and criticized for not taking the outbreak seriously enough, the president finally granted her request for a disaster declaration, as well as one for Massachusetts, according to White House statements released Saturday.
Finally, some good news out of Italy: A centenarian from northern Italy has reportedly been released from a hospital after a battle with COVID-19 that he managed to survive despite being a high-risk candidate with a weak immune system..
The man, identified only as “Mr. P”, was admitted to the hospital last week and released on Thursday, according to Gloria Lisi, the deputy mayor of the city of Rimini, told the local Italian language press.
* * *
Yesterday, the US reached a critical milestone: it became the first country to record more than 100,000 cases of COVID-19, the illness caused by the novel coronavirus.
Though more people were almost certainly infected in China – epidemiologists have estimated that hundreds of thousands were likely infected in Wuhan alone – the surge in America’s testing capacity, something that’s only going to continue to improve thanks to a slate of new rapid-response tests are hitting the market, means the US will almost certainly record the largest number of infected patients going forward.
Already, the global total of confirmed cases surpassed 600,000 overnight, thanks mostly to the US, though Spain and Italy also reported large numbers of new cases and deaths reaffirming that the lockdowns in each of their respective countries are far from over.
A chart produced by the New York Times and published last night sparked a heated debate online as journalists, scientists and other wannabe ‘experts’ weighed in on the possibility that the outbreaks in New York City, Detroit and New Orleans might be more severe than what Italy has seen in Lombardy.
Meanwhile, Spain recorded its deadliest day so far, but new infections are slowing after two weeks of lockdown. The Spanish Health Ministry reported 832 new deaths, bringing the country’s death toll to 5,690 as of early Saturday, a 17% jump. The number of confirmed cases climbed to 72,248 from 64,059. Spain now has the second-highest number of deaths, outside of Italy.
In the latest hint at how the outbreak-induced recession will reverberate through secondary and tertiary industries, Airbnb confirmed on Friday that it’s suspending all third-party marketing work in an attempt to save some $800 million, one of several initiatives that it hopes will save the company lots of money during the crisis. As UK Prime Minister Boris Johnson and his Health Secretary Matt Hancock strugle to continue performing their duties after being diagnosed with COVID-19, Fitch downgraded the UK’s credit rating from AA to AA-, citing the budget impact of the coronavirus pandemic and continued uncertainty over Brexit.
As a third UK cabinet minister, Scottish Secretary Alister Jack, announces plans to quarantine after showing mild symptoms, Japanese Prime Minister Shinzo Abe pledged on Saturday to fight the coronavirus outbreak with an economic package of “an unprecedented scale” as Japan reports a sudden resurgence of cases, many of which have been travel-related.
On Saturday, the UK case total climbed to 17,089, while 160 new deaths were confirmed, bringing the UK death total above 1,000, to 1,019.
According to Nikkei Asian Review, Abe said that in addition to pushing through his “boldest-ever” economic stimulus package, his government will deliver speedy approval of the flu drug Avigan as a treatment for those infected with COVID-19.
“We are on the brink,” Abe said at a news conference, referring to the possibility of an explosion of COVID-19 cases in Japan after 63 new infections were confirmed on Saturday in Tokyo, a third-consecutive day where authorities confirmed more than 40 new cases.
Abe also stressed that Japan must be ready for a “long-term battle” to keep COVID-19 from surging out of control and overwhelming health care systems, as it’s beginning to do in Italy and other places, like NYC.
Still, he said “now is not an emergency” and called on citizens to continue taking steps such as avoiding large gatherings to limit infections.
Abe
Regarding the economy, Abe said that his government will formulate a “strong stimulus package of unprecedented scale” to lessen this blow to businesses and individuals brought about by the coronavirus. All of this comes after Tokyo’s governor warned about the prospect for an “unprecedented” outbreak if nothing is done.
In addition to boosting spending on medical infrastructure and other necessities, Abe said a special measure will be established to allow for the deferral for up to one year of tax and social insurance premium payments to support corporations suffering from constricted cash flow. Also, interest-free and unsecured lending will be expanded to assist them, he said. All of this should trickle down to deferred tax payments for individuals as well.
Meanwhile, the New York Post has been keeping careful track of how many New Yorkers have been dying from COVID-19, and on Saturday, the paper determined that for the past two days, New Yorkers have been dying at a rate of “one every 17 minutes”. That’s up from one an hour nearly a week ago.
On both Thursday and Friday, another 84 people died in the city from the coronavirus, as the number of positive cases and of those who are critically ill also climbed. Total citywide coronavirus cases rose to 26,697, a 4.4% increase from the 25,573 reported Friday morning.
Over in Asia, Japan, South Korea, Singapore, and Hong Kong have recorded unnerving bursts of new cases over the past couple of weeks, but these ‘aftershock’ outbreaks appear to have quieted down in South Korea, while more cases have been confirmed in Singapore, Hong Kong and Tokyo.
Meanwhile, In Seoul, authorities marked a new milestone in the fight against the virus as, for the first time since the start of the outbreak, the number of coronavirus patients being discharged has outnumbered those currently undergoing treatment. Some 4,811 South Koreans have recovered from the virus as of Saturday, while 4,500 patients still remain in isolation and are undergoing treatment.
In the US, Trump signed the CARES Act into law last night, approving direct payments of $1,200 to millions of Americans, including those earning up to $75,000, and an additional $500 per child. It will substantially expand jobless aid, providing an additional 13 weeks and a four-month enhancement of benefits, and for the first time will extend the payments to freelancers and gig workers, an extraordinary step that will go a long way toward quelling the concerns of all those freelance writers who live off handouts from their parents and the occasional paycheck in Brooklyn.
However, across the US, experts are pointing at Abe and Japan as examples of what might happen if the entire country starts going back to normal before the outbreak is truly under control.
As Navy hospital ships head to New York and the West Coast, President Trump on Friday night gave Defense Secretary Mark Esper the power to call up national guardsmen and army medics to serve in the effort to combat the virus. The president said Friday night that the decision will “allow us to mobilize medical, disaster and emergency response personnel to help wage our battle against the virus by activating thousands of experienced service members including retirees.”
It almost sounds like the start of an action movie: somewhere, in the remote mountain west, a former ace army medic is hearing the sound of tires crunching gravel in his driveway…
After President Trump’s approval rating jumped to record highs in the wake of the crisis, some early poll results from this past week suggest that Trump’s insistence that the US get back to work “by Easter” has dented confidence in his handling of the crisis.
Per WaPo, Trump didn’t clarify whether anyone will be involuntarily recalled to duty, but said some retirees have “offered to support the nation in this extraordinary time of need.”
A Pentagon spokesman told WaPo that the order was still being reviewed, and that generally, these members will be persons in Headquarters units and persons with high demand medical capabilities whose call-up would not adversely affect their civilian communities.
“It’s really an incredible thing to see,” Trump said. “It’s beautiful.”
Though we suspect that, like his decision to invoke the Defense Production Act, though he finally did invoke it to try and boss around GM.
Dr. Anthony Fauci, chief medical advisor to the Trump administration’s coronavirus task force, said Thursday that Italy has been impacted particularly badly by the coronavirus pandemic because the country hosted a high number of Chinese tourists in recent months.
“When you look at the different patterns of what happened in different countries, China versus South Korea versus what we’re seeing in northern Italy, it really gives you some interesting insight into certain things, not only in the explosive nature in certain places versus others, but as you get to your peak, how do you know when you’re turning the corner,” Fauci said on CNN.
“It’s when the new infections each day start to level off to be the same and then start going down, then you see the curve go down,” Fauci said, adding that Italy is “not there yet.”
Italy has reported another 6k new cases today, bringing the national total to 86,498 from 80,539.
Again, it looks like the pace of new deaths is unequivocally beginning to accelerate once again.
“Italy got hit very badly because they had a large number of importations from China by Chinese tourists,” Fauci said.
“Before they even knew what was going on, there was enough baseline people spreading that it essentially got out of hand, and it became difficult for them, as good as they are, and they’re very good, to be able to contain it in a way that is contact-tracing. It was more mitigation,” the director of the National Institute of Allergy and Infectious Diseases continued.
Fauci also noted that the outbreak of the virus in Washington state differs from the outbreak in New York City, which is “getting hit terribly hard.”
“We’re a big country, and there are different patterns,” he explained.
Washington state’s outbreak involved the coronavirus spreading in several elder care homes, while New York City is a travel hub that experiences an “influx of travelers,” Fauci said.
New York City reported 100 new deaths from the coronavirus on Thursday, bringing the death toll to 385 as the number of infections topped 37,200.
“Unprecedented Decline” – The Collapse In World Trade Is A Once In A Generation Shock
COVID-19 is expected to produce a global recession depression as nearly all of the world’s major economies have ground to a halt between February and March, expected to continue through April.
The crash in China’s economic activity, shown last month, suggests that Europe and the US will face similar outcomes. There is some concern that the longest economic expansion on record will end this quarter as the global economy has been battered by bat soup.
As the fast-spreading virus terrorizes the US, China, Italy, Spain, Germany, France, Iran, the UK, Switzerland, South Korea, and other countries, more than 537,000 confirmed cases had been recorded across the world, with 24,100 deaths.
Governments have had no other choice than to order a complete shutdown of their respected economies to flatten the curve and slowdown infections. As World Trade Organization (WTO) Chief Economist Robert Koopman told Bloomberg, mass quarantines and shuttering of businesses has resulted in a plunge in world trade — “could be seen as a war-like scenario without the physical asset destruction.”
Data from the world’s busiest ports in China showed containers were piling up with no place to go after supply chain disruptions were seen due to shutdowns in the country. There’s also been a significant decline in maritime activity from China to North America, China to the Mediterranean, and China to Europe as the virus crisis worsens in the Western Hemisphere.
In early March, we showed how supply chain disruptions from China started to wash ashore on US West Coast ports, especially collapsing containerized volumes at the Port of Long Beach. IHS Markit data compiled by Bloomberg shows US import and export volumes dramatically slowed in the weeks leading up to the shutdowns of US cities.
Former White House economist Phil Levy told Bloomberg that the US economy is expected to fall ‘very sharply’ over the second quarter, calling it an “unprecedented decline…because of the speed at which it is happening.”
“If we are already starting to match Great Recession statistics, that means we are on pace for the modern record,” said Levy, now the chief economist at freight logistics company Flexport.
And to sum up, so far, the global economy has likely crashed, as per JPMorgan’s chief US economist, Michael Feroli, who recently slashed his Q2 US GDP forecast to a staggering -14%
If Feroli’s forecast revision for the US is right, then the US is headed for an outright depression next quarter, if not already in one.
With the world’s largest economy: the US, and the second-largest economy: China, still entangled in virus-related shutdowns, then it makes sense why A.P. Moller-Maersk A/S, the world’s largest container line, told customers on Thursday that demand for containerized shipping will be lower well into April.
The US has now become the epicenter of the virus outbreak, surpassing the total number of confirmed Chinese cases on Thursday. However, there is reason to believe that India could see a surge in cases and deaths in weeks ahead, as nearly one billion people have been forced into lockdown.
As for Europe — Italy, Spain, Germany, France, the UK, and Switzerland, have seen a surge in cases and deaths in the last month. The pandemic is disrupting not just supply but also demand, creating twin shocks, damaging all developed world, and many emerging markets.
The collapse in world trade is happening all at once, and very quickly – this is a once in a generation shock.
The French government is arguably helping Big Pharma profit from the Covid-19 pandemic…
What’s going on in the fifth largest economy in the world arguably points to a major collusion scandal in which the French government is helping Big Pharma to profit from the expansion of Covid-19. Informed French citizens are absolutely furious about it.
My initial question to a serious, unimpeachable Paris source, jurist Valerie Bugault, was about the liaisons dangereuses between Macronism and Big Pharma and especially about the mysterious “disappearance” – more likely outright theft – of all the stocks of chloroquine in possession of the French government.
Respected Professor Christian Perronne talked about the theft live in one of France’s 24/7 info channels: “The central pharmacy for the hospitals announced today that they were facing a total rupture of stocks, that they were pillaged.”
With input from another, anonymous source, it’s now possible to establish a timeline that puts in much-needed perspective the recent actions of the French government.
Let’s start with Yves Levy, who was the head of INSERM – the French National Institute of Health and Medical Research – from 2014 to 2018, when he was appointed as extraordinary state councilor for the Macron administration. Only 12 people in France have reached this status.
Levy is married to Agnes Buzy, who until recently was minister of health under Macron. Buzy was essentially presented with an “offer you can’t refuse” by Macron’s party to leave the ministry – in the middle of the coronavirus crisis – and run for Mayor of Paris, where she was mercilessly trounced in the first round on March 16.
Levy has a vicious running feud with Professor Didier Raoult – prolific and often-cited Marseille-based specialist in communicable diseases. Levy withheld the INSERM label from the world-renowned IHU (Hospital-University Institute) research center directed by Raoult.
In practice, in October 2019, Levy revoked the status of “foundation” of the different IHUs so he could take over their research.
French professor Didier Raoult, biologist and professor of microbiology, specializes in infectious diseases and director of IHU Mediterranee Infection Institute, poses in his office in Marseille, France. Photo: AFP/Gerard Julien
Raoult was part of a clinical trial that in which hydroxychloroquine and azithromycin healed 90% of Covid-19 cases if they were tested very early. (Early, massive testing is at the heart of the successful South Korean strategy.)
Raoult is opposed to the total lockdown of sane individuals and possible carriers – which he considers “medieval,” in an anachronistic sense. He’s in favor of massive testing (which, besides South Korea, was successful in Singapore, Taiwan and Vietnam) and a fast treatment with hydroxychloroquine. Only contaminated individuals should be confined.
Chloroquine costs one euro for ten pills. And there’s the rub: Big Pharma – which, crucially, finances INSERM, and includes “national champion” Sanofi – would rather go for a way more profitable solution. Sanofi for the moment says it is “actively preparing” to produce chloroquine, but that may take “weeks,” and there’s no mention about pricing.
A minister fleeing a tsunami
Here’s the timeline:
On January 13, Agnes Buzyn, still France’s Health Minister, classifies chloroquine as a “poisonous substance,” from now on only available by prescription. An astonishing move, considering that it has been sold off the shelf in France for half a century.
On March 16, the Macron government orders a partial lockdown. There’s not a peep about chloroquine. Police initially are not required to wear masks; most have been stolen anyway, and there are not enough masks even for health workers. In 2011 France had nearly 1.5 billion masks: 800 million surgical masks and 600 million masks for health professionals generally.
But then, over the years, the strategic stocks were not renewed, to please the EU and to apply the Maastricht criteria, which limited membership in the Growth and Stability Pact to countries whose budget deficits did not exceed 3% of GDP. One of those in charge at the time was Jerome Salomon, now a scientific counselor to the Macron government.
On March 17, Agnes Buzyn says she has learned the spread of Covid-19 will be a major tsunami, for which the French health system has no solution. She also says it had been her understanding that the Paris mayoral election “would not take place” and that it was, ultimately, “a masquerade.”
What she does not say is that she didn’t go public at the time she was running because the whole political focus by the Macron political machine was on winning the “masquerade.” The first round of the election meant nothing, as Covid-19 was advancing. The second round was postponed indefinitely. She had to know about the impending healthcare disaster. But as a candidate of the Macron machine she did not go public in timely fashion.
In quick succession:
The Macron government refuses to apply mass testing, as practiced with success in South Korea and Germany.
Le Monde and the French state health agency characterize Raoult’s research as fake news, before issuing a retraction.
Professor Perrone reveals on the 24/7 LCI news channel that the stock of chloroquine at the French central pharmacy has been stolen.
Thanks to a tweet by Elon Musk, President Trump says chloroquine should be available to all Americans. Sufferers of lupus and rheumatoid arthritis, who already have supply problems with the only drug that offers them relief, set social media afire with their panic.
Morocco buys the stock of chloroquine from Sanofi in Casablanca.
Pakistan decides to increase its production of chloroquine to be sent to China.
Switzerland discards the total lockdown of its population; goes for mass testing and fast treatment; and accuses France of practicing “spectacle politics.”
Christian Estrosi, the mayor of Nice, having had himself treated with chloroquine, without any government input, directly calls Sanofi so they may deliver chloroquine to Nice hospitals.
Because of Raoult’s research, a large-scale chloroquine test finally starts in France, under the – predictable – direction of INSERM, which wants to “remake the experiments in other independent medical centers.” This will take at least an extra six weeks – as the Elysee Palace’s scientific council now mulls the extension of France’s total lockdown to … six weeks.
If joint use of hydroxychloroquine and azithromycin proves definitely effective among the most gravely ill, quarantines may be reduced in select clusters.
The only French company that still manufactures chloroquine is under judicial intervention. That puts the chloroquine hoarding and theft into full perspective. It will take time for these stocks to be replenished, thus allowing Big Pharma the leeway to have what it wants: a costly solution.
It appears the perpetrators of the chloroquine theft were very well informed.
Bagged nurses
This chain of events, astonishing for a highly developed G-7 nation proud of its health service, is part of a long, painful process embedded in neoliberal dogma. EU-driven austerity mixed with the profit motive resulted in a very lax attitude towards the health system.
As Bugault told me, “test kits – very few in number – were always available but mostly for a small group connected to the French government [ former officials of the Ministry of Finance, CEOs of large corporations, oligarchs, media and entertainment moguls]. Same for chloroquine, which this government did everything to make inaccessible for the population.
They did not make life easy for Professor Raoult – he received death threats and was intimidated by ‘journalists.’
And they did not protect vital stocks. Still under the Hollande government, there was a conscious liquidation of the stock of masks – which had existed in large quantities in all hospitals. Not to mention that the suppression of hospital beds and hospital means accelerated under Sarkozy.”
This ties in with anguished reports by French citizens of nurses now having to use trash bags due to the lack of proper medical gear.
At the same time, in another astonishing development, the French state refuses to requisition private hospitals and clinics – which are practically empty at this stage – even as the president of their own association, Lamine Garbi, has pleaded for such a public service initiative: “I solemnly demand that we are requisitioned to help public hospitals. Our facilities are prepared. The wave that surprised the east of France must teach us a lesson.”
Bugault reconfirms the health situation in France “is very serious and will become even worse due to these political decisions – absence of masks, political refusal to massively test people, refusal of free access to chloroquine – in a context of supreme distress at the hospitals. This will last and destitution will be the norm.”
Professor vs president
In an explosive development on Tuesday, Raoult said he’s not participating in Macron’s scientific council anymore, even though he’s not quitting it altogether. Raoult once again insists on massive testing on a national scale to detect suspected cases, and then isolate and treat patients who tested positive. In a nutshell: the South Korean model.
That’s exactly what is expected from the IHU in Marseille, where hundreds of residents continue to queue up for testing. And that ties in with the conclusions by a top Chinese expert on Covid-19, Zhang Nanshan, who says that treatment with chloroquine phospate had a “positive impact,” with patients testing negative after around four days.
The key point has been stressed by Raoult: Use chloroquine in very special circumstances, for people tested very early, when the disease is not advanced yet, and only in these cases. He’s not advocating chloroquine for everyone. It’s exactly what the Chinese did, along with their use of Interferon.
For years, Raoult has been pleading for a drastic revision of health economic models, so the treatments, cure and therapies created mostly during the 20th century, are considered a patrimony in the service of all humanity.“That’s not the case”, he says, “because we abandon medicine that is not profitable, even if it’s effective. That’s why almost no antibiotics are manufactured in the West.”
On Tuesday, the French Health Ministry officially prohibited the utilization of treatment based on chloroquine recommended by Raoult. In fact the treatment is only allowed for terminal Covid-19 patients, with no other possibility of healing. This cannot but expose the Macron government to more accusations of at least inefficiency – added to the absence of masks, tests, contact tracing and ventilators.
On Wednesday, commenting on the new government guidelines, Raoult said, “When damage to the lungs is too important, and patients arrive for reanimation, they practically do not harbor viruses in their bodies any more. It’s too late to treat them with chloroquine. Are these the only cases – the very serious cases – that will be treated with chloroquine under the new directive by [French Health Minister] Veran?” If so, he added ironically, “then they will be able to say with scientific certainty that chloroquine does not work.”
Raoult was unavailable for comment on Western news media articles citing Chinese test results that would suggest he is wrong about the efficacy of chloroquine in dealing with mild cases of Covid-19.
Staffers pointed instead to his comments in the IHU bulletin. There Raoult says it’s “insulting” to ask if we can trust the Chinese on the use of chloroquine. “If this was an American disease, and the president of the United States said, ‘We need to treat patients with that,’ nobody would discuss it.”
In China, he adds, there were “enough elements so the Chinese government and all Chinese experts who know coronaviruses took an official position that ‘we must treat with chloroquine.’ Between the moment when we have the first results and an accepted international publication, there is no credible alternative among people who are the most knowledgeable in the world. They took this measure in the interest of public health.”
Crucially: if he had coronavirus, Raoult says he would take chloroquine. Since Raoult is rated by his peers as the number one world expert in communicable diseases, way above Dr. Anthony Fauci in the US, I would say the new reports represent Big Pharma talking.
Raoult has been mercilessly savaged and demonized by French corporate media that are controlled by a few oligarchs closely linked to Macronism. Not by accident the demonization has reached gilets jaunes (yellow vest) levels, especially because of the extremely popular hashtag #IlsSavaient (“They knew”), with which the yellow vests stress that French elites have “managed” the Covid-19 crisis by protecting themselves while leaving the population defenseless against the virus.
That ties in with the controversial analysis by crack philosopher Giorgio Agamben in a column published a month ago, where he was already arguing that Covid-19 clearly shows that the state of exception – similar to a state of emergency but with differences important to philosophers – has become fully normalized in the West.
Agamben was speaking not as a doctor or a virologist but as a master thinker, following in the steps of Foucault, Walter Benjamin and Hannah Arendt. Noting how a latent state of fear has metastasized into a state of collective panic, for which Covid-19 “offers once again the ideal pretext,” he described how, “in a perverse vicious circle, the limitation of freedom imposed by governments is accepted in the name of a desire for security that was induced by the same governments that now intervene to satisfy it.”
There was no state of collective panic in South Korea, Singapore, Taiwan and Vietnam – to mention four Asian examples outside of China. A dogged combination of mass testing and contact tracing was applied with immense professionalism. It worked. In the Chinese case, with the help of chloroquine. And in all Asian cases, without a murky profit motive to the benefit of Big Pharma.
There hasn’t yet appeared the smoking gun that proves the Macron system not only is incompetent to deal with Covid-19 but also is dragging the process so Big Pharma can come up with a miracle vaccine, fast. But the pattern to discourage chloroquine is more than laid out above – in parallel to the demonization of Raoult.
Abbott Labs Unveils COVID-19 “Gamechanger”: Portable Test Can Detect Virus In Under 5 Minutes
One week after the FDA granted emergency approval to a point-of-care test purporting to produce results in under 45 minutes, the agency has granted “emergency use authorization” to Abbott Labs so the company can bring to market a rapid-response test for COVID-19 that can tell if somebody is infected in under five minutes, and is portable enough to be used in practically any health-care setting.
The medical-device maker plans to supply 50,000 tests a day beginning April 1, said John Frels, vice president of research and development at Abbott Diagnostics. The molecular test scans samples for fragments of the coronavirus genome, which can quickly be detected when present at high levels. An even more thorough search to definitively rule out an infection can take up to 13 minutes, BBG reports.
However, the FDA has only authorized the test for use in “authorized laboratories and patient care settings”, mostly hospitals and approved public and private labs that are already running tests.
The company described the test as a “gamechanger.”
“This is really going to provide a tremendous opportunity for front-line caregivers, those having to diagnose a lot of infections, to close the gap with our testing,” Frels said. “A clinic will be able to turn that result around quickly, while the patient is waiting.”
Here’s how the test works, according to Bloomberg:
The technology builds on Illinois-based Abbott’s ID Now platform, the most common point-of-care test currently available in the U.S., with more than 18,000 units spread across the country. It is widely used to detect influenza, strep throat and respiratory syncytial virus, a common bug that causes cold-like symptoms.
The test starts with taking a swab from the nose or the back of the throat, then mixing it with a chemical solution that breaks open the virus and releases its RNA. The mixture is inserted into an ID Now system, a small box weighing just under 7 pounds that has the technology to identify and amplify select sequences of the coronavirus genome and ignore contamination from other viruses.
The equipment can be set up almost anywhere, but the company is working with its customers and the Trump administration to ensure the first cartridges used to perform the tests are sent to where they are most needed. They are targeting hospital emergency rooms, urgent-care clinics and doctors’ offices.
Last week, Abbott’s m2000 RealTime system got U.S. Food and Drug Administration approval for use in hospitals and molecular laboratories to diagnose the infection. That system can churn through more tests on a daily basis, up to 1 million a week, but it takes longer to get the results. Abbott plans to provide at least 5 million tests a month between the two systems.
The breakthrough comes as the left bashes President Trump for falsely claiming that the US has conducted more tests for COVIDd-19 than any other nation, when South Korea, Italy and China have all run far more tests per capita.
Volkswagen Says COVID-19 Shutdown Costs Are “Acute Economic Risk” To The Company
Volkswagen has come out and said that it may need to start slashing jobs if the coronavirus pandemic isn’t brought under control quickly. The company admitted on German TV that it was torching $2.2 billion in cash per week, every week, while production has been halted.
Chief Executive Herbert Diess said on Thursday that the company wasn’t making sales outside of China and was actively looking at ways to resume production that wouldn’t harm its staff, according to Reuters.
“We need to rethink production. The discipline which we had in China we do not yet have at our German locations. Only if we, like China, Korea or other Asian states, get the problem under control then we have a chance to come through the crisis without job losses. It requires a very sharp intervention,” Diess said.
While demand has picked up in China again, it is only half the level it was at prior to the crisis, Diess noted.
“We are not making sales or revenues outside of China and have a high level of fixed costs of around 2 billion euros a week.”
Meanwhile, the ECB is doing its best to prop up businesses for the time being. VW’s Chief Financial Officer Frank Witter called for the ECB to continue to accelerate purchases of short-term debt. Witter said he wanted to ECB to show “clear signals” that it would step in and buy 6 month or 9 month paper. VW is one of Europe’s most regular corporate issuers of commercial paper, Reuters notes.
“There’s a lot of pressure on the incoming money flow. We have different diversified funding sources available but not all of them are as liquid as they were,” said Witter.
For now, the company will continue to pay its dividend but is looking closely at all of its spending and investment needs.
Recall, we highlighted yesterday how auto sales in the United States and U.K. were plunging. Looking at a recent business update from Group 1 automotive, a company that owns and operates 186 auto dealerships along with 242 franchises and 49 collision centers, gave us insight into the collapse of the overall broader auto market.
A police force in the UK has created a tool that allows people to snitch on others for not engaging in proper “social distancing.”
Humberside Police have created an online portal that allows people to alert them to violations of lockdown measures introduced by the government this week to fight the spread of coronavirus.
“The force says the portal has been made in response to an increase in the number of calls to its non-emergency 101 number following the government’s announcement earlier this week around new police powers to disperse groups,” reports ITV.
According to rules implemented earlier this week, people are not allowed to congregate in groups of more than two unless it’s a family from the same household.
“We will not be able to deploy officers to every single report of social gatherings that contradict the Government’s advice and dependent on the information within the report will determine our response,” according to Humberside Police’s Chris Philpott.
“However it may be some of the reports are referred on to our partner agencies, our Local Authorities for example, who could take further action to stop gatherings in certain places.”
As we highlighted earlier, Derbyshire Police revealed that they had used a surveillance drone to track dog walkers in a remote part of the country and then searched their license plates to find out where they live.
Police in North Yorkshire, another remote region, have also revealed that they will start conducting road checkpoints to make sure people have a valid reason for being outside.
Earlier this week, police in London were dispatched to send people home who had congregated on a local green area.
It’s not a holiday, it’s a lockdown, which means you don’t just come here and sunbathe.” pic.twitter.com/vS2j8kex73
In Spain, where COVID-19 lockdown rules are even tighter, a neighbor snitched on another neighbor after seeing two brothers playing soccer in a back yard.
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