Category: zerohedge

With investor expectations for an imminent rate cut to 0% (or lower) running high, only surpassed by expectations for an imminent – and “very, very substantial” fiscal stimulus – Standard Chartered’s head of FX strategy Steve Englander has an unorthodox take: neither may be sufficient.

As Englander writes in a note titled “Emptying the monetary policy cupboard?”, while the Fed may think that aggressively reducing policy rates is a prerequisite to fiscal policy, investors are sceptical that monetary policy is effective (and perhaps so is the Fed). But since “the FOMC may feel that fiscal stimulus is practical politically only if monetary policy is maxed out”, the combination of low rates and fiscal stimulus may be the key to enabling borrowers to meet obligations, according to the FX strategist.

In terms of monetary expectations, Englander does not see the Fed doing anything too crazy, and expects the Fed to ease 25bps at its March and April meetings Fed easing likely in March and April, but as he admits, “recent Fed comments and asset market selling have led to markets pricing in just under 60bps for the March meeting.” Indeed, markets now price in end-April fed funds rates below 40bps. However, the problem is that per discussions with clients there is “little confidence that easier money will lead to a rapid economic rebound; many feel that that the recent 50bps move may have been ‘wasted’.“

As such, and given economic and credit market concerns, fiscal policy will likely be more effective than monetary policy, according to Englander. To be sure, Fed officials have argued that lower rates will lead to mortgage refinancing, among other activity spurs. But the counterargument to more monetary easing (absent Quaranatative Easing of course) is that neither consumer durables spending nor plant and equipment investment will likely be much affected by lower interest rates when uncertainty is so elevated.

Here’s the problem: as the Std Chartered strategist admits, “Fiscal stimulus may not be significantly effective, either, in generating additional spending. A tax cut that increases disposable income or business cash flow might not increase spending. However, it may enable businesses and households to avoid a major credit crunch, when payments are due but the expected revenues are not there.”

The impact of fiscal stimulus via lower taxes may be less in generating additional spending than in substituting federal government credit, which is looking pretty good, for private-sector credit, where market concerns are beginning to emerge.

And while this would not be a free lunch, but might be the cheapest eats out there as the objective of fiscal easing would be to keep households and businesses solvent so that supply and demand can bounce back quickly once the coronavirus abates.

There is another consideration when expecting a major fiscal stimulus: the US elections and the lack of cooperation between Republicans and Democrats complicate reaching agreement on fiscal matters. As we saw in 2008, there can be cooperation even in an election year, when the political costs of not cooperating are sufficiently high. However, other policy options have to be exhausted.

These considerations make a rapid response essential according to Englander, who cautions that the cost of repairing private-sector solvency, once impaired, is much greater than maintaining solvency by acting quickly. While the Fed has discussed fiscal policy in general terms, but has not come out squarely in its favor. However, in recent days we see signals of more urgency than we or the market expected in comments by Fed officials. As such, Friday’s comments by Boston Fed President Rosengren on the possibility of the Fed buying assets other than Treasuries can be seen in a similar light (although it is not clear if the Fed would just buy stocks or also barrels of oil after Monday’s record plunge).In any case, by narrowing the spread with already low-yielding US Treasuries, such purchases would directly reduce debt-servicing burdens.

Meanwhile, confirming the open-ended nature of the upcoming stimulus, St Louis Fed President James Bullard has made several television appearance in recent days with the message: “”Everything is on the table, we’re willing to do more,” and “We can meet at any time and move at any time in this situation” as he appeared to de-emphasise the March meeting, “I just don’t want people to focus so heavily on that particular day because the FOMC has already shown, Jay Powell has already shown, we can move between meetings.” And while Bullard says that the Fed could ease either before or after the March meeting, neither Englander nor others see “much to be gained by the Fed encouraging market speculation that the Fed would disappoint.”

Putting this together, the logic is to clear the table of monetary policy so that the focus can shift to fiscal policy – which is likely to be more effective. Any fiscal measures are likely to involve some government spending in order to help steady employment. If this analysis is correct, measures will include a heavy dose of temporary tax reductions to improve cash flow and enable private-sector firms and households to stay current on debt servicing. Meanwhile, “the Fed’s contribution would be to enable the government to increase its debt burden on as favourable terms as possible.”

After almost the biggest single-day drop since Black Monday, it is hardly surprising that markets are bouncing back a little and all it took was the promise of ‘very very substantial’ relief to hard-working Americans hurt by the impact of the virus.

During the daily virus update press conference, President Donald Trump said his administration will discuss a possible payroll tax cut with the U.S. Senate, saying they would seek “very very substantial relief” for the economy that has been roiled by the outbreak of coronavirus.

Trump, speaking at a White House news conference, added his administration plans to speak with lawmakers on Tuesday, seeking the aid to help hourly wage earners “so they don’t get penalized for something that’s not their fault.”

The president also said he that he plans to announce “very dramatic” actions to support the economy at a press conference on Tuesday.

And just like that WTI is up 4%…

And Dow futures are up over 400 points…

We wouldn’t hold our breath however, as we noted previously, the idea that Democrat-controlled Congress would ‘help’ is beyond a joke and in fact it could corner the President. If he comes asking for a payrolls tax-cut “for the people,” Democrats can easily respond “sure, just unwind the corporate tax cuts to pay for it and it’s a done deal.”

But of course that will crush the stock market – which is the only thing really matters – and so Trump will refuse and Dems can play the “see, he doesn’t work for the ‘little people’ card.”

Meanwhile, Daily Caller reporter Chuck Ross asked an excelent question:

“Confused why, from an expectations management standpoint, the White House isn’t letting public know that there will be a spike in COVID cases as testing ramps up.”

We can only imagine what that sudden jump will do markets.

Additionally, it appears Mnuchin ‘made the call’ again…

As CNBC’s Wilfred ZFrost reports that I can confirm that the White House meeting with bank CEO’s will be on Wednesday at 3p ET. The nation’s biggest 7 banks have all been invited – maybe more too. I know at least 2 will send their CEO – I imagine all (other than JPM) will do so. Some industry bodies like ABA invited.

All of a sudden, people are panic buying virus-related prevention products, such as N-95 respirators and surgical masks, Purell hand sanitizer, and disinfectants, amid the Covid-19 outbreak in the US. Many of these items have seen shortages at big-box retailers and on e-commerce platforms. The remaining supply has been shifted to Amazon, eBay, Craigslist, prepping sites, and or other e-commerce platforms, have seen prices skyrocket in the last several months. 

Price gouging of virus-related products has become a significant issue since confirmed cases in China began to soar in mid-January. We noted how 3M N-95 masks were becoming short supply at the start of the year. Now prices have jumped nearly 10x in some cases; a box of 20 3M N-95 masks is going for more than $200 on some websites. 

In the name of price gouging and just overall censorship of the virus, Facebook last Friday said it would block commerce listings and advertisements for respirators and surgical masks.

“We’re monitoring COVID19 closely and will make necessary updates to our policies if we see people trying to exploit this public health emergency,” Facebook Director of Product Management Rob Leathern tweeted. “We’ll start rolling out this change in the days ahead.”

Update: We’re banning ads and commerce listings selling medical face masks. We’re monitoring COVID19 closely and will make necessary updates to our policies if we see people trying to exploit this public health emergency. We’ll start rolling out this change in the days ahead.

— Rob Leathern (@robleathern) March 7, 2020

“We are temporarily banning advertisements and commerce listings that sell medical face masks,” a Facebook spokesperson said last week. “Our teams are monitoring the COVID19 situation closely and will make necessary updates to our policies if we see people trying to exploit this public health emergency.”

Facebook will also ban ads that imply medical products are in limited supply, as well as make claims about virus “cures” or prevention. The social media website will remove virus-themed groups and pages from its algorithmic recommendations.

On Friday, Google said it was blocking all ads that were virus-themed products. It said it has so far blocked tens of thousands of ads over the last month and a half. YouTube has also removed the content of virus prevention products. 

eBay announced last week that N-95 and N-100 masks, sanitizers, and alcohol wipes would be forbidden on the online auction site. 

Amazon said it’s working on banning sellers that are price-gouging customers. 

The narrative by big tech companies is that price gouging is evil, and censoring and banning products from platforms are the solutions to protect consumers. But in reality, this is just a ploy to censor the virus and prevent further mass hysteria. The less you know, the less you panic, and the more compliant you will become too big government who tells you: “it’s just the flu bro.” 

As researchers, doctors and epidemiologists spend more time studying the coronavirus under a microscope, as well as in the 100k+ infections that have yielded reams of useful data, a troubling trend has emerged: researchers have identified a “tipping point” at which the virus goes from dangerous to deadly in extremely susceptible patients.

According to research, while many patients experience nothing more than a mild cold, one in seven patients develops difficulty breathing and other “severe” complications, while 6% become critically ill and require hospitalization to stabilize their condition, risking death if they can’t receive the highest level of care.

Patients in these life-threatening situations typically suffer from respiratory and other vital system failures, according to the report by a team of WHO researchers delivered last month. Sometimes, sufferers can even experience sceptic shock.

Since roughly 10-15% of mild-to-moderate patients progress to this next severe state, it’s important for hospitals and doctors to understand which patients are at highest risk of a worsening infection so they can factor this into their risk assessments and direct resources and attention accordingly. Because of these 10-15%, 15% to 20% of that group may progress to critically severe infection stage requiring the highest level of attention and care to save a life.

Patients at highest risk include people at age 60 and older and those with pre-existing conditions such as hypertension, diabetes and cardiovascular disease.

This type of triage should at least be familiar to most doctors since it resembles the infection profile of the seasonal flu, albiet with more patients progressing to the final most critical stage, said Jeffery K. Taubenberger.

When everything goes well, white blood cells attack the virus and lock the infection down within a few days.

Infection generally starts in the nose. Once inside the body, the coronavirus invades the epithelial cells that line and protect the respiratory tract, said Taubenberger, who heads the viral pathogenesis and evolution section of the National Institute of Allergy and Infectious Diseases in Bethesda, Maryland. If it’s contained in the upper airway, it usually results in a less severe disease.

But if the virus treks down the windpipe to the peripheral branches of the respiratory tree and lung tissue, it can trigger a more severe phase of the disease. That’s due to the pneumonia-causing damage inflicted directly by the virus plus secondary damage caused by the body’s immune response to the infection.

“Your body is immediately trying to repair the damage in the lung as soon as it’s happening,” Taubenberger said. Various white blood cells that consume pathogens and help heal damaged tissue act as first-responders. “Normally, if this goes well, you can clear up your infection in just a few days.”

But if this doesn’t happen, if the virus persists, and continues to attack the tissue of the nose and throat, at some point, it will become more difficult for the body to fight off a secondary bacterial infection. Such secondary bacterial infections are particularly dangerous because they can damage the stem cells in the lungs, basically making it impossible for a patient’s lungs to heal.

Secondary bacterial infections represent an especially pernicious threat because they can kill critical respiratory tract stem cells that enable tissue to rejuvenate. Without them, “you just can’t physically repair your lungs,” Taubenberger said. Damaged lungs can starve vital organs of oxygen, impairing the kidneys, liver, brain and heart.

“When you get a bad, overwhelming infection, everything starts to fall apart in a cascade,” said David Morens, senior scientific adviser to the director of the National Institute of Allergy and Infectious Diseases. “You pass the tipping point where everything is going downhill and, at some point, you can’t get it back.”

That tipping point probably also occurs earlier in older people, as it does in experiments with older mice, said Stanley Perlman, a professor of microbiology and immunology at the University of Iowa in Iowa City, who has studied coronaviruses for 38 years.

But this isn’t the only way things can go wrong. Even healthy younger adults have succumbed to the virus, including Dr. Li Wenliang, the 34-year-old ophthalmologist who was one of the first to warn about the coronavirus in Wuhan. He died after receiving antibodies, antivirals, antibiotics, oxygen and having his blood pumped through an artificial lung. Scientists have theorized that some people have more of the distinctly shaped protein receptors in their respiratory epithelial cells that the virus targets.

“History is riddled with disastrous outcomes born of really good intentions.. and I think we’re seeing it now”

That is how veteran trade and CNBC regular Guy Adami began a spectacularly calm monologue (some might call it a filibuster today explaining what the hell is going on currently and that it is anything but normal.

“It all started in the 80s with Fed Chair Greenspan”, he begins, “who said ‘maybe we can take recession out of the equation’ and were successful for a period of time, but as Adami warns:

“recessions are a natural part of the cycle. It’s like the forest – old trees burn down, new trees grow – it’s unsightly, it’s devastating, but its essential… it’s the same thing with our economy.”

And the effect of unleashing various experimental policies and ‘puts’ under the market to avoid these recessions, has “made people lazy.”

Corporate America got lazy:

“GE and IBM got really lazy.. because they borrowed money cheap and bought back stocks and paid their dividends and off they went.”

Now, “everything is coming home to roost” warns Adami as people are forced to focus on their businesses.

Traders got lazy:

“For a long time, traders bought options for protection, but when they saw that the market just goes up day after day, they said to themselves, why bother? It’s a cost I don’t need, so they stopped.”

Then it got worse, as the veteran trader exclaimed

“… they said ‘wait a minute, maybe I can sell options – if the market is never going to go down again, we can create this synthetic dividend for ourselves and everything will be fine.”

And so whether they realized it or not or intended it or not,

“The Fed and other central banks dampened volatility to a point that was unnatural… that plays into other things, like passive investing…”

What pushed Adami over the edge in his realisation of the insanity of these markets was the weekend that apple came out and said, “you know what? Things will be rough, because of what is happening in China.”

The next day, he continued, “the stock went I think down from 3.22 to I think 3.15. Not a huge move at all. Next day, the stock is trading right back at all-time highs. What does that mean? People got – market participants got lazy,” as he warns, “all this passive investing looks past the news.”

The director of advisor advocacy at Private Advisor Group, then explained why “we’re seeing the manifestations” of this laziness play out so aggressively:

“…in terms of the option volatility, you’re seeing what’s happened when people have what I call and what market participants call negative gamma. What happens is, the lower the market goes, the more they have to sell, which exacerbates the downside and the same things happens to the upside. And we have seen it a number of times over the last couple of weeks. The bad news is that doesn’t get sorted out overnight.“

Unfortunately, Adami heralds, “this is 5, 6, 7 years of this going on that needs to be sorted out through the system. So, that’s I think what is going on.”

 I’m not here to call a bottom. I’m not here to assuage concerns or stoke any investment fears, or those types of things. I’m just trying the explain to you what’s going on.”

So, Adami concludes his monologues with a flourish that stuns the CNBC offices:

“Bond volatility is historic. And it’s been going on for years, yet nobody talks about it.

And currency volatility is historic and it’s been going on for years and nobody talks about it, because everybody is so equity centric.

And I understand that. But it’s not healthy.“

And the last point, you tell me to go back to September, the Fed Repo, when they said this is normal business as usual. There’s absolutely nothing normal about what happened in September. And as we’re now in March, what’s going on now they can say it’s normal. That’s fine. That’s their prerogative. But if you look under the hood, something is really very wrong and it’s manifesting itself now.”

So what are investors to do? We’ve seen these kind of drops before and they have always been buying opportunities as The Fed put described above always saves us… The problem is, as Adami notes:

“we’re seeing it in the course of week and a half and it’s freaking people out. I mean, that’s what happens when volatility gets tapered to the extent that it is. There’s nothing normal about this, I get it, except that this the new normal….

I’m one of probably a handful of people on the planet who thought on October 2018, 1019, when Jerome Powell was saying, “You know, we’re going to reduce this balance sheet, we’re raising rates,” that he was doing the right thing.

You know, why follow everybody else down the rabbit hole of negative rates when you don’t have to? If our economy is as strong as the administration said, there was no need to do that. And I think we’d be in a much better place now.”

But, says anchor Tyler Mathisen, “isn’t The Fed mandate to protect us…” but before he could finish, Adami jabbed back politely”

“What are they protecting us from? You know, in my opinion, the Federal Reserve’s job is not to make the stock market go higher. Right. It’s not. I mean, I understand that they sort of need to. And again, this is just my opinion.

But consumer confidence, through the roof until recently. I think all consumer optimism is an overlay of the S&P 500. Not to suggest that everybody own stocks. That’s not my point. But when people see the stock market go up every day, year after year, they say to themselves, ‘the economy must be strong. If the economy is strong, I can go on that trip. I can buy that Starbucks coffee.’ and that’s 73% of that economy is exactly that.

Go back to October and November of 2018, when the market went down 19.8% in a month and a half. Consumer spending stopped on a dime.

And then they realized, ‘we have a real problem here.’ we can’t normalize because it will upset the market. If it upsets the market, it will upset the consumer and we have a problem. And that I think is what you’re seeing now. Again, I’m not suggesting I’m right, it just happens to be my opinion.”

Some honesty finally peaks out behind the curtain at CNBC.

Watch the full clip here…

Authored by James Howard Kunstler via Kunstler.com,

Things Take A Turn

Around the same time that most Americans set their clocks ahead this weekend, something more momentous shoved the world into an epic phase-change, and the modern era, with all its mighty baggage, was finally swept away, along with that single lost hour of darkness. We’re in a new world, and one night later, out on the freeway of history, the engine of the global economy threw a rod. The chauffeur is still standing alongside the stricken vehicle in the breakdown lane, scratching his head while sour-smelling smoke wafts up from the hood.

You’d think that truly earthshaking events like that might change the so-called narrative, but The New York Times was at it again this morning with this front-page op-ed purporting to explain all the sorrows of our times:

That’s how out-of-it the narrators are, even while a thuggish reality whapped them repeatedly upside the head with a two-by-four for weeks leading up to this. No, Dean Baquet (NYT ed-in-chief), transphobia does not explain the quandaries of our time, any more than sorcery or the wickedness of black cats explained the plagues of the 1300s that put a chapter of the human story to rest and started a new one. That elaborate machine of globalism just never figured on a situation when so many people in all corners of the world would have to hunker down in place to wait out one of Gaia’s super-weapons — though it is still not known if corona virus was actually created by Gaia’s wards, Homo sapiens, themselves, who are suddenly feeling the blowback.

Lots of things are blowing back on us now, especially from the patches, tweaks, and work-arounds we applied to the shuddering system while the “check engine” light was flashing the past twelve years. After the awesome skid of 2008, you’d think the world’s money managers might have learned something about the hazards of stepping on the gas when those lights were flashing. Sadly, the tens of thousands of PhD economists in the back seat couldn’t think of anything else to do. And history will regard them as no better than the hooded priests of the 1300s who swung their smoking censors in the dark streets while the stricken town folk bundled their dead.

The new disposition of things is upon us, and the sooner we get with the program, the better. Welcome to The Long Emergency and its aftermath, a world made by hand. Expect that a lot of things crashing, grinding to a halt, and falling to pieces will not get patched back together and restarted. When the dust settles from all that, we’ll discover one of the primary conditions of the new era: we’re poorer — a lot of what we took to be money, or things that represented money, were figments. “Money” itself, as manifested in currencies, may become a slippery concept, with low credibility. If that’s the case, people ought to ask themselves: how can I be useful or helpful to the others around me in a way that will raise my own social capital and accumulate, at least, the good will of these other people, and perhaps some of their help or service in return for mine? That is the beginning of building a local community — people bound together by mutual obligations, responsibilities, duties, and rewards.

We’re lucky for one thing: this crisis of advanced civilization is striking at the very start of the planting season. If you’re prudent, you can begin at once to organize serious gardening efforts, if you live in a part of the country where that is possible. I’d go heavy on the potatoes, cabbages, winter squashes, and beans, because they’re all keepers over winter. Baby chicks sell at the local ag stores for a few bucks each now and you’ll be very grateful for the eggs. Get a rooster — even though they can be a pain-in-the-ass — and you won’t have to buy anymore chicks.

If you live in a part of the country where the terrain is rugged and well-watered — as I do — start scoping out local hydro sites that might potentially generate electricity or drive machinery directly from water power. We will probably need more of that. Around here many of those sites are signified by the ruins of decommissioned factories and hydro-stations from not much more than a century ago. They were originally built with a lot less machine power than we would use today, and a lot more power of men working in groups. We’ve forgotten how effective men can be working together with pretty simple tools. We were too busy devaluing men in recent decades for the sake of a moral crusade to erase “gender” differences. Well, that will be bygone so fast your head will spin.

The big cities won’t do well if supply chains stay down for a month or longer. This ought to be self-evident. If you have friends or relatives in places where food can be grown, or in the small towns favorably located near productive land and running water, maybe this is a good time to start negotiating some new arrangements and making a move, if you can. Nobody knows yet just how deeply the effects of corona virus will cut through daily life in the weeks ahead. The potential for disorder isn’t tiny, looking at the current situation, at least in terms of broken business relationships and the flow of vital goods.

We’ve apparently entered the hunkering-in-place stage of the crisis. Be prepared for plenty of action when the hunkering ends and the hungering begins.

New York Governor Andrew Cuomo unveiled a new line of NY-branded hand sanitizer, called ‘NYS Clean,’ during a press conference Monday morning where he confirmed that the number of Covid-19 cases in New York State had climbed to 142.

The hand sanitzer, Cuomo said, will be produced by Corcraft, the business name of the New York State Department of Corrections, which uses prison labor, and pays prisoners an average of 65 cents an hour, to create things like license plates, Gothamist reports. At $6 a gallon, the moonshine sanitizer will be significantly cheaper than the store-bought stuff, which has recently been selling as high as $100+ a gallon, even after Cuomo vowed to crack down on outbreak-related price gouging. Cuomo said the state should be able to produce 100,000 gallons of the stuff a week.

“We’re introducing NYS clean hand sanitizer, made conveniently by the state of New York,” Gov. Andrew Cuomo said. “This is a superior product to products now on the market.”

Here’s the clip:

NEW: Amid coronavirus outbreak, Gov. Andrew Cuomo announces state hand sanitizer—”made, conveniently, by the state of New York”—that will be provided to schools, MTA, prisons and more.

“It has a very nice floral bouquet.” https://t.co/IzVUYTHKhH #coronavirus #covid19 pic.twitter.com/TokZ1TsTav

— ABC News Politics (@ABCPolitics) March 9, 2020

Cuomo joked that the NYS-made hand sanitizer had a “floral bouquet”, and that NY State was sending a lesson to “Mr. Ebay and Mr. Amazon” – presumably referring to the sellers using those platforms to gouge consumers.

He added that the state’s product is 75% alcohol compared to name-brand competitor Purell, which is made of 70% alcohol. Health officials recommend using a hand sanitizer made of at least 60 percent alcohol, per the Hill.

“To Purell, and Mr. Amazon and Mr. eBay, if you continue the price gouging, we will introduce our product, which is superior to your product,” Cuomo said. “And you don’t even have the floral bouquet, so stop price gouging.”

New Yorkers won’t be able to buy the stuff, but it will be distributed for free in the subway and NYC schools: New York will distribute its product to government agencies, including schools, the MTA and – crucially – prisons (because it would be cruel to deny them a share of the stuff that they’re producing, right?)

Cuomo said creating and distributing the product is cheaper for the state than purchasing competing brands.

Less than a week after Powell panicked, and cut rates by 50bps, sparking an even broader market panic as traders freaked out over what Powell may (or may not) know, stocks suffered their biggest crash since the financial crisis, on a double whammy of crashing crude prices and growing coronavirus concerns. Only this time, Powell did nothing.

According to BMO, the Fed chair has apparently learned a few lessons from his first emergency rate cut:

1. One-and-done is hard to do,
2. Risk assets don’t respond positively to every dovish impulse, and
3. capitulating early isn’t necessarily the safest strategy.

Or, as BMO’s Ian Lyngen puts it, “the time-tested monetary policy wisdom goes: gotta know when to hold’rates, know when to ease’em, know when to walk’em back, and know when you’re done. They’ll be time enough for splainin’ when the cycle’s done.”

Unfortunately, the cycle’s countdown is almost up.

But going back to Powell’s market reaction function, this time the Chair has taken a markedly different tact this week versus last. Ironically, by doing nothing and not giving into calls for another 50 bp ease in response to the leg lower in domestic equities and the downdraft in the global energy complex, the Fed Chair may have boosted market confidence as “investors took some solace in the implied confidence in the current monetary policy stance communicated by the FOMC’s inaction.”

Which is not to say the market didn’t crash, it did… but it could have been even worse.

To be sure, triggering the circuit breakers in the S&P 500 was a milestone for the coronavirus – although as BMO admits, “certainly not a positive one in the broader context of how the market might have otherwise interpreted the Fed’s efforts to ease financial contagion fears.” Which is why the next few trading sessions will be particularly informative as to investors’ willingness to wait until next Wednesday for another installment of policy accommodation.

It would be folly to attempt to assign causation over correlation between the stabilization in risk assets and the passage of the morning without any official FOMC unscheduled announcement; nonetheless, the respite from declining risk assets after the earlier extreme surely offered solace to the Committee.

That’s one way of putting it. Another is that we just had a record point drop in the Dow, and S&P future that was halted for hours, and just barely skirted the biggest percentage change in the market in history.

And then there’s rates.

With 2-year yields at 38 bp, 10s at just 50 bp, and 30s below, gulp, 90 bp (after touching 70 bp overnight) the best phrase to characterize the tone in the market is ‘sticker shock’, and as BMO puts it, “the first 50 bp leg of this year’s drop in 10-year rates was eye-opening, but the last 100 bp was jaw-dropping.” The initial move took many by surprise, even if it conformed to a more bond bullish narrative, but “the repricing of 30-year yields below 1.0% was paradigm shifting, to put it mildly.”

Conversations have shifted from postulating whether or not the move has been overdone, to considering which sectors will be hardest hit by the new economic reality. Suffice it to say, uncertainty doesn’t bode well for any willingness to catch the proverbial falling knife.

Unfortunately, as Lyngen notes, between concerns about the credit implications for the high yield market from the energy sector and the broader reaching emerging market implication from sub-$35 crude, there are few bright spots save the spinning-up of the refi-machine (that’s the whirring sound in the background). That said, even the most direct transfer of lower rates to consumer spending will likely take months given capacity concerns on the origination side, to say nothing of an understandable reluctance on the part of lenders to rebase borrowing costs lower if 50 bp 10s could be an anomaly.

So putting today’s historic move in a bigger context, BMO cautions that the biggest risk (and the one undoubtedly troubling the FOMC) isn’t that the price action is overdone, but instead how long  rates and asset prices can remain at current levels. Indeed, if prices are too depressed for too long, BMO’s dire conclusion is that “it will become self-fulfilling by running highly leveraged energy producers into insolvency, undermine other related sectors, and eventually flow through to the labor market shaking consumer confidence.“

And as the Canadian banks points out further, it’s once sentiment is hit that attention quickly turns toward the pace of consumption – this will ultimately be the origin of any recession in the US. Of course, long before this, other global central banks will have an opportunity to follow the Fed’s lead in providing additional accommodation. The first such opportunity will be on Thursday, when ECB holds its meeting, and it will be critical to see how aggressive Lagarde is willing to be in the face of so many unknowns.

As Asian trading reopened and futures trading resumed, the US day session’s ugliness continued.

WTI Crude fell almost 3% to $30.20…

And Dow futures tumbled 350 more points…

…into a bear market, down 20% from their highs…

S&P is down harder – dropped 1.75% after the close…

Pushing the S&P into bear market – ending the 11-year bull market on its anniversary…

This is not a good start.

 

Authored by Paul Joseph Watson via Summit News,

Another hate crime hoax was exposed after the words “white pride” were carved into the sidewalk outside a black-owned gym in Tennessee – by a black woman.

Gym owner Derrick Carson arrived at the Johnson City branch of DC Fitness at 5am in the morning to discover the scrawl.

He immediately alerted police but upon reviewing security camera footage, the culprit turned out to be a black woman.

41-year-old Mahagany Teague was subsequently arrested for vandalism and held on $1,000 bail.

“Mahagany’s name may be an attempt to spell “mahogany,” which could be used to describe her pigmentation,” comments Dave Blount, who maintains a ‘hate hoax list’ of similar incidents.

There have been innumerable examples of hate crime hoaxes across America in recent years, all of which feed into the media’s hysterical narrative that white supremacy is on the rise once again.

As if White people dont get targeted enough by the Democrats..

Mahagany Teague Arrested for Carving ‘White Pride’ into Sidewalk https://t.co/I7SHpcJwXW

— ❌❌❌Angry Americans United❌❌❌ (@LastStand2019) March 7, 2020

The most egregious example was of course Jussie Smollett, who was indicted by a grand jury for staging a racist violent attack on himself and blaming it on Trump supporters.

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