Category: zerohedge

Update (0230 ET): Senate Minority Leader Chuck Schumer is set to propose a coronavirus response package of at least $750 billion to “wage war” against the coronavirus, according to Bloomberg.

Schumer’s proposal will “get money directly into hands of America people AND include federal funding to:”

• Address hospital and treatment capacity issues
• Expand Unemployment Insurance and increase Medicaid funding
• Ensure affordability of COVID-19 treatment
• Provide immediate loan payment forbearance for all federal loans, as well as a moratorium on evictions and foreclosures
• Deliver immediate help to small businesses
• Fund emergency child care, especially for health care workers and first responders
• Help schools with remote learning
• Ensure sencior citizens receive medicine and food delivery
• Provide assistance to keep public transportation running
• Utilize Defense Department to provide personnel, equipment, supplies and critical response capabilities to support on the nationwide response
• Address public health and economic needs in Indian Country

NEW: SCHUMER proposing new $750 BILLION comprehensive package to wage war against coronavirus COVID-19 pic.twitter.com/aOuNBV2ZWt

— Scott Wong (@scottwongDC) March 16, 2020

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The Senate may want to amend the House’s Phase Two coronavirus bill and not pass it immediately, according to Politico.

The deal, cut between Nancy Pelosi and Treasury Secretary Steven Mnuchin is unlikely to make it through in its current form, according to senior Senate GOP sources, who say that Senate Majority Leader Mitch McConnell and his chamber are going to insist on a much bigger say in the next stimulus package.

— MCCONNELL’S GOAL is to have the Phase Three package wrapped up before the EASTER RECESS, which begins April 3 — Congress is scheduled to be out from then until April 20. But, in reality, they want this done ASAP.

— Jake Sherman (@JakeSherman) March 16, 2020

“It doesn’t go far enough and it doesn’t go fast enough,” said Republican Sen. Tom Cotton of Arkansas, who predicted Monday on Fox & Friends that the House coronavirus bill wouldn’t pass the Senate.

“Most of the measures in this bill are something that the senators will support, I believe. … But we worry that the bill setting up a new and complicated system relying on businesses giving paid sick leave and then getting a refundable tax credit that won’t move quickly enough and could put pressure on those businesses to lay workers off,” Cotton added.

NEW … TOM COTTON is whipping up opposition to the Pelosi-Mnuchin bill.

After Fox and Friends this AM, the Arkansas Republican’s LD sent an email to his fellow LDs urging the Senate to adopt its OWN plan. pic.twitter.com/br64g8rxqp

— Jake Sherman (@JakeSherman) March 16, 2020

Meanwhile, Rep. Louie Gohmert (R-TX) “has signaled he will insist on approving the corrections to the bill, or else he will object to the unanimous consent request in the House,” which Politico says “would grind this process to a halt.”

NEW — LOUIE GOHMERT is insisting on reading the technical corrections to the House’s coronavirus bill.

As long as one person stands in opposition, the House cannot send the bill to the senate without bringing the chamber back for a vote.

— Jake Sherman (@JakeSherman) March 16, 2020

Earlier in the day, Politico reported that the bill remained “hung up in negotiations” amid “major differences” after the Senate canceled its week-long recess to address the COVID-19 pandemic.

House sources said Monday that “major differences” remained between the White House and House Democrats over what was adopted and needed to be changed. This is slowing down the time table for House completion of the bill and sending it onto the Senate.

Pelosi and administration officials still remain hopeful they can achieve a workable compromise, but were tight lipped about the state of play on Monday.

The House passed its emergency package early Saturday morning but needs to make some technical corrections. –Politico

Senate Majority Whip John Thune (R-SD) is asking members to submit their own ideas for an additional stimulus package by noon on MOnday, according to a Senate aide.

On Tuesday, Mnuchin is expected to attend the Senate Republican lunch – implying he may need to schmooze to sell the deal.

Authored by Dr. Stephen Davies via Al Arabiya,

Currently there is much debate over what kind of policy is best for dealing with the coronavirus epidemic. We are dealing with a true pandemic and have been ever since the virus was confirmed to have spread to every continent in early February. This will not be over by the summer but will last in a series of episodes for about eighteen months. The virus has a bad combination of qualities inasmuch as it is highly infectious but has serious effects in a large proportion of cases and a not-insignificant mortality rate while in addition another large part of those infected show no symptoms. What is worth doing is thinking about the likely longer-term results and here history is the best guide.

Pandemics and major epidemics are a recurrent feature of human history. A true pandemic is global but the term is also used for any epidemic that spreads widely beyond its geographical point of origin. In such cases it is spread by humans, though their movement and that of animals associated with us, such as rats and lice. Pandemics are epidemics that spread throughout what we may call an ecumene, a part of the world that has an integrated economy and division of labour, held together and produced by trade and exchange. What we now have is a truly global ecumene.

If we look at the history of pandemics, they tend to occur at the end of a period of increasing trade and economic integration over a large part of the planet’s surface. That is because those processes have results, such as much more human movement and increased urbanisation, that make major epidemics more likely. Historically pandemics have spread along trade and exchange routes. Several features of the way we live now make a serious pandemic more probable, particularly higher levels of globalization and modern intensive livestock farming because of the way it leads to new pathogens emerging in animals and then jumping species. Scientists have been concerned about this for some time and contingency plans drawn up, which are now being tested.

What will be the results of this pandemic?

The evidence of history is that pandemics arrest and delay, or even reverse, the process of economic integration. We are likely to see this now. There will be serious disruption to long distance supply chains and this will make many turn back to more local suppliers with consequently less long-distance integration of economies. This was already starting before the epidemic. We are also seeing far more controls over movement and not only across national borders but also within them. This is unlikely to be completely reversed so we will see a hardening of borders and much less international and long-distance travel. The pandemic will also possibly have significant political impacts. Historically epidemics weaken the legitimacy of states and rulers and often coincide with popular unrest.

They also weaken elites because they are proportionately more likely to catch infectious diseases, because they travel more and live in large metropoles that are the hubs of trade systems, and in today’s world are typically older than average. Another major and more widespread outbreak in China could have serious implications, particularly if the Communist Party is seen to have lost the “Mandate of Heaven” because of it. In addition, this particular epidemic may well add to other pressures on a fragile world finance and monetary system and trigger a sharp fall in asset values which will wipe out much of the wealth of the rich. As Walter Scheidel argues in The Great Leveller it is major catastrophes such as wars and pandemics that typically bring about big reductions in inequality.

Finally, and more speculatively, pandemics often have significant psychological and cultural effects. They are often associated with an upsurge in millenarian religion, with the idea that the end of the world is imminent, unless we change our wicked ways. This kind of quasi-religious belief has already found expression in movements like Extinction Rebellion and that is likely to gain strength, with unforeseeable political and cultural results. In contrast, many people react by thinking that if life is precarious, they may as well live for the moment and not hold back any of their desires. Some people have their trust in experts restored or strengthened but many lose what little faith they had and turn to fringe ideas – again a process that was already under way.

The pandemic the world is experiencing will pass but it will not be the last. Moreover, regardless of how severe it proves to be, history suggests that it will have consequences and impacts on the way people behave in the future, and these may be more important and have longer lasting consequences than the pandemic itself.

Top Iranian clerics who are close to the supreme leader have increasingly been testing positive for Covid-19, and one senior cleric has just died from it. Multiple regional news outlets have reported the death Ayatollah Hashem Bathaei-Golpaygani Monay after he tested positive for coronavirus over the weekend, in the very first instance of a member of the powerful Council of Experts diagnosed with the virus.

The Council of Experts is the top clerical-government advisory body that chooses the country’s supreme leader when the former dies or steps down.

It’s but the latest instance of the deadly virus appearing to come closer and closer to Ayatollah Ali Khamenei, the current supreme leader of the Islamic Republic.

The 79-year old Bathaei-Golpaygani had been rushed to a hospital the city of Qom on Saturday. Mehr News Agency reported that he passed away Monday morning in the ICU.

Starting weeks ago top Iranian officials began catching the virus, and a top former ambassador to Egypt and the Vatican also died from it, as it’s also increasingly penetrated the top ranks of the country’s elderly powerful clerical establishment.

For example, 71-year-old cleric Mohammad Mirmohammadi died of the virus early this month. He was a member of the Expediency Discernment Council – also an important advisory body to the Ayatollah Khamenei.

Meanwhile hard-hit Iran’s death toll has jumped overnight once again. Al Jazeera reports based on Iranian state sources: 

Iran state TV says new coronavirus has killed another 129 people, pushing the death toll to 853 amid 14,991 confirmed cases.

“Our plea is that everyone take this virus seriously and in no way attempt to travel to any province,” health ministry spokesman Kianoush Jahanpour said in a televised news conference.

“In the past 24 hours we had 1,053 confirmed new cases of coronavirus and 129 new deaths,” a top health official, Alireza Vahabzadeh, stated Monday.

The city of Qom, where the latest top clerical death has occurred, is the country’s main place of Shia pilgrimage and Iran’s epicenter for the outbreak.

Initially Qom’s clerical leaders strongly resisted shutting down key shrines which attract millions of people per month on religious pilgrimage. They’ve at times described the outbreak as the judgement of God and a “plague” from the West. But such rhetoric has naturally been less frequent these days as the virus continues to ravage the top layers of Iran’s government. 

Less than an hour ago, when previewing today’s emergency repo operation which the fed announced ad hoc on Monday morning in response to the latest credit market turmoil, this time affecting the GC repo rate, we said that “we don’t even need to wait until 1:45pm to tell you what will happen: “uptake on today’s half a trillion repo will be tiny, probably around $15BN-$20BN.”

The result? $19.4BN, precisely as we expected – a non-existant uptake of an overnight operation that allowed as much as half a trillion dollars in securities to be tendered to the Fed.

We also said that today’s repo operation “will do absolutely nothing to fix the broken credit and funding markets”, because the Fed no longer knows what is and what isn’t broken, and merely is throwing trillions in liquidity at anything that vaguely looks like a crisis. In some ways we sympathize – as we explained earlier, every day something new breaks:

• One day it is ETF NAV discounts blowing out;
• The next day the treasury Treasury Cash/Swap basis surges and funds suffer a historic VaR shock amid forced liquidations;
• Day three sees the FRA/OIS explode higher as a massive dollar funding margin call strikes;
• Then, day four sees the same repo crisis that was supposed to be fixed back in September return with a vengeance, as banks freak out about counterparty risk.

As we further said, “what the Fed needs is the monetary equivalent of Dr. House: someone who can diagnose what is actually wrong with the monetary plumbing, instead of using the same old shotgun approach of shoveling trillions in blunt liquidity into the market, which clearly is not working anymore.”

And sure enough that’s precisely what happened, because after the massive, $500BN facility came and went, the GC repo rate actually rose from 0.30% to 0.425% after the operation, the Global Basis Swap explosion continues…

… as nothing the Fed has done so far – not the rate cuts, not the QE, not the $5TN in repos, not the enhanced FX swap lines – has succeeded in unlocking any of the liquidity that remains frozen deep inside America’s increasingly broken financial system.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Subtract their immense debts and they have negative net worth, and therefore the market value of their stock is zero.

To understand why the financial dominoes toppled by the Covid-19 pandemic lead to global insolvency, let’s start with a household example. The point of this exercise is to distinguish between the market value of assets and net worth, which is what’s left after debts are subtracted from the market value of assets.

Let’s say the household has done very well for itself and owns assets worth $1 million: a home, a family business, 401K retirement accounts and a portfolio of stocks and other investments.

The household also has $500,000 in debts: home mortgage, auto loans, student loans and credit card balances.

The household net worth is thus $1,000,000 minus $500,000 = $500,000.

Let’s say a typical financial crisis and recession occur, and the household’s assets fall 30%. 30% of $1 million is $300,000, so the the market value of the household’s assets falls to $700,000.

Deduct the $500,000 in debts and the household’s net worth has fallen to $200,000. The point here is debts remain regardless of what happens to the market value of assets owned by the household.

Then the speculative asset bubbles re-inflate, and the household takes on more debt in the euphoric expansion of confidence to buy a larger house, expand the family business and enjoy life more.

Now the household assets are worth $2 million, but debt has risen to $1.5 million. Net worth remains at $500,000, since debt has risen along with asset values.

Alas, all bubbles pop, and the market value of the household assets decline by 30%, or $600,000. Now the household assets are worth $2,000,000 minus $600,000 or $1,400,000. The household net worth is now $1,400,000 minus $1,500,000 or negative $100,000. the household is insolvent.

On top of that, the net income of the family business plummets to near-zero in the recession, leaving insufficient income to pay all the debts the household has taken on.

This is an exact analog for the entire global economy, which pre-pandemic had assets with a market value of $350 trillion and debts of $255 trillion and thus a net worth of around $100 trillion.

The $11 trillion that has evaporated in the market value of U.S. stocks is only a taste of the losses in market value. Global stock markets has lost $30 trillion, and once yields rise despite central bank manipulations (oops, I mean intervention), $30 trillion in the market value of bonds will vanish into thin air.

The market value of junk bonds has already plummeted by trillions, and that’s not even counting the trillions lost in small business equity, shadow banking and a host of other non-tradable assets.

Then there’s the most massive asset bubble of all, real estate. Millions of properties delusional owners still think are worth $1.4 million will soon revert to a more reality-based valuation around $400,000, or perhaps even less, meaning $1 million per property will melt into air.

Once the market value of global assets falls by $100 trillion, the world is insolvent.

Everyone expecting the financial markets to magically return to January 2020 levels once the pandemic dies down is delusional. All the dominoes of crashing market valuations, crashing incomes, crashing profits and soaring defaults will take down all the fantasy-based valuations of bubblicious assets: stocks, bonds, real estate, bat guano, you name it. (Actually, bat guano will be the keeper of all the asset classes listed.)

The global financial system has already lost $100 trillion in market value, and therefore it’s already insolvent. The only question remaining is how insolvent?

Here’s a hint: companies whose shares were recently worth $500 or $300 will be worth $10 or $20 when this is over. Bonds that were supposedly “safe” will lose 50% of their market value. Real estate will be lucky to retain 40% of its current value. And so on.

As net worth crashes below zero, debts remain. The loans must still be serviced or paid off, and if the borrowers default, then the losses must be absorbed by the lenders or taxpayers, if we get a repeat of 2008 and the insolvent taxpayers are forced to bail out the insolvent financial elites.

Here’s the S&P 500. Where is the bottom? There is no bottom, but nobody dares say this.

Companies with negative profits have no value other than the cash on hand and the near-zero auction value of other assets. Subtract their immense debts and they have negative net worth, and therefore the market value of their stock is zero.

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With the global airline industry crashed, US airlines are seeking upwards of $50 billion in government aid, according to The Wall Street Journal sources.

The assistance program could include “government-backed loans, cash grants or other measures including relief from taxes and fees.” 

Over the weekend, Treasury Secretary Steven Mnuchin said the Trump administration is focused on providing relief for airlines, hotels, cruise ships, and other industries that have been heavily impacted by the virus.

“This is a unique circumstance,” Mnuchin was quoted by Bloomberg at a Saturday press conference at the White House.

“There’s no question, because of the things that we’re requesting to do, there are parts of the economy shutting down or slowing down dramatically.”

The global airline industry has plunged into chaos as governments impose flight restrictions across the world. This has resulted in a massive demand shock leaving airliners with absolutely no bookings. Many US carriers have had to slash international flights, with new risks emerging of domestic flights being grounded in the weeks ahead. 

Henry Harteveldt, a travel industry analyst in San Francisco, tweeted on Sunday evening that a “Growing number of sources within #airlines & DC telling me the WH giving serious consideration to grounding all passenger flights for 14-30 days (cargo would be exempted).”

Growing number of sources within #airlines & DC telling me the WH giving serious consideration to grounding all passenger flights for 14-30 days (cargo would be exempted).

Part of me hopes it is not true, the other part understands why it may need to happen.

Ugh.#coronavirus

— Henry Harteveldt (@hharteveldt) March 16, 2020

The worst-case scenario could play out for US airliners, who have already been suffering from international flight cancellations, could soon see domestic flights grounded, which is all in an attempt to flatten the curve and slowdown infections. And maybe it’s the proposed $50 billion in aid that would allow airliners to weather a shutdown.  

For the past 9 years ever since the downgrade of the US government by S&P from AAA to AA+, American energy giant Exxon, which back in 2007 had a market cap of over $500 billion only to see that cut by two thirds to $150BN today (half of where it was at the start of the year) , had the same Standard and Poor’s credit rating as the US government. That period of perplexing parity ended just after 1pm on Monday, when S&P, confirming it would move quickly on rating downgrades this time following a near record plunge in the price of oil last week, downgraded Exxon from AA+ to AA as Exxon’s “Lower Oil Price Assumption Weakens Cash Flow/Leverage Metrics”; and since the outlook is negative, it means more downgrades are coming.

Highlights from the downgrade below:

• U.S.-based integrated oil company Exxon Mobil Corp.’s cash flow/leverage measures fell well below S&P’s expectations for the rating in 2019, and with lower oil and natural gas prices, low refining margins and weak chemicals demand anticipated over the next two years, the rating agency expects measures to remain weak without a significant change in the company’s financial plans.
• S&P revised its estimates to reflect the recent reduction in our crude oil and natural gas price deck assumptions.
• As a result, S&P is lowering its issuer credit rating and unsecured debt ratings on ExxonMobil to ‘AA’ from ‘AA+’.
• The negative outlook reflects the potential for a further downgrade if the company does not take adequate steps to improve cash flows and leverage over the next 12 to 24 months, in order to bring funds from operations (FFO)/debt closer to 60% and debt to EBITDA to about 1.5x for a sustained period.

The full note is below:

Hit by moderating crude oil and natural gas prices and an increase in capital spending, and with downstream and chemicals margins dropping to a five-year low, ExxonMobil’s cash flow leverage weakened significantly in 2019 with FFO/debt falling below 45% from over 60% in 2018, and debt to EBITDA increasing to 1.8x from 1.2x. In addition, the company’s discretionary cash flow deficit came in at about $10 billion, leading to an increase in debt levels. Based on our revised oil and natural gas price deck assumptions and our outlook for continued weakness in the refining and chemicals sectors, we now expect cash flow leverage to remain weaker than our expectations for the ‘AA+’ rating over the next two to three years.

The negative outlook reflects S&P Global Ratings’ view that Exxon Mobil Corp.’s current financial leverage is weak for the rating, as well as the potential for a downgrade if credit measures do not improve over the next 12 to 24 months. We project FFO to debt to be in the 45% to 50% range and debt to EBITDA of about 1.7x in 2020 and 2021, as oil production increases and refining margins increase due to improved reliability relative to 2019. Our estimates assume the company exercises prudent financial policies in the near term including tempering capital spending and limiting share repurchases in 2020, and that it takes additional steps to improve leverage over the next two years.

We could lower ratings if we no longer expected leverage to improve such that FFO/debt approached 60% and debt/EBITDA approached 1.5x for a sustained period. This would most likely occur if the company did not adjust capital spending in light of lower commodity prices, failed to improve capital efficiency or refining and chemicals margins, did not execute on additional asset sales, or continued to return cash to shareholders beyond internally generated cash flow.

We could consider a revision of the outlook to stable if the company were able to bring FFO/debt back closer to 60% and debt/EBITDA to around 1.5x for a sustained period, achieving these levels even at our long-term West Texas Intermediate (WTI) price deck assumption of $50 per barrel (bbl). This would most likely occur if the company were able to boost operating efficiency, improve refining and chemicals margins, complete more asset sales than we are currently projecting, or reduce shareholder distributions.

And with Exxon down, we now await as some $140 Billion in BBB rated “investment grade” energy debt is cut to junk…

.. finally starting the fallen angel avalanche which we have been warning about since 2017.

Around the time the Fed stunned markets with its 5pm Sunday emergency bazooka intervention, Goldman was holding an emergency conference call in which some 1,500 clients and companies dialed-in, making the comparisons to “Lehman Sunday” especially apropos.

For those wondering what Goldman said, here is the bottom line via TME:

• 50% of Americans will contract the virus (150m people) as it’s very communicable. This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.
• 70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be effected.
• Peak-virus is expected over the next eight weeks, declining thereafter.
• The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather. The coming summer in the northern hemisphere should help. This is to say that the virus is likely seasonal.
• Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.
• Mortality rate on average of up to 2%, heavily weight towards the elderly and immunocompromised; meaning up to 3m people (150m*.02). In the US about 3m/yr die mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3m new deaths from the virus, it means elderly people dying sooner due to respiratory issues. This may however stress the healthcare system.
• There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop a natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow the rate of transmission giving the healthcare system more time to deal with the case load.
• China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.
• Global GDP growth rate will be the lowest in 30 years at around 2%.
• S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.
• There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.
• In the past week there has been a conflating of the impact of the virus with the developing oil price war between KSA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.
• Technically the market generally has been looking for a reason to reset after the longest bull market in history.
• There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like ‪9/11 than it does like 2008.

Earlier this morning we were quick to congratulate the Fed for seemingly stabilizing the repo market, as the utilization of the day’s first two repo ops – which also included one of the brand spanking new $500BN, 1 month ops – was tiny and the FRA/OIS rate appeared to normalize.

Unfortunately, a few hours later it has turned out that we spoke too soon, because this time the liquidity clog has shifted away from funding shortages (i.e., various OIS swaps) and right back to repo market access and availability, because a quick look at the overnight general collateral repo rate shows that despite the Fed’s multi-trillion liquidity bazooka-cum-ZIRP, its rate surged by more than 200 basis points in early Monday trading, with GC briefly exploding as high as 2.50%, more than 2% above the effective fed funds rate and proof that one again something is broken, before retreating modestly, and according to Bloomberg, just prior to noon ET, GC was bid at 1%.

While this deserves an extended discussion, we will merely point out that each day there a distinct part of the credit and/or funding market is breaking:

• One day it is ETF NAV discounts blowing out;
• The next day the treasury Treasury Cash/Swap basis surges and funds suffer a historic VaR crash amid forced liquidations;
• Day three sees the FRA/OIS explode higher as a massive dollar funding margin call strikes;
• Then, day four sees the same repo crisis that was supposed to be fixed back in September return with a vengeance, as banks freak out about counterparty risk.

At the risk of being flippant, we would say that what the Fed needs is the monetary equivalent of Dr. House: someone who can diagnose what is actually wrong with the monetary plumbing, instead of using the same old shotgun approach of shoveling trillions in blunt liquidity into the market, which clearly is not working anymore.

Alas, the man who actually knows how to fix everything that the Fed has fucked up over the past decade, has not been born yet (and likely never will) which means the Fed is stuck throwing even more liquidity at the problem, and sure enough, after today’s $500BN, 1 month repo, moments ago the Fed – clearly seeking to address the return of the repo crunch – announced that it will “conduct an additional overnight repurchase agreement (repo) operation for same-day settlement today from 1:30 PM ET to 1:45 PM ET. This repo operation will be conducted for up to an aggregate offered amount of $500 billion with a minimum bid rate of 0.10 percent.”

And, as the NY Fed explains:

This action is taken to ensure that the supply of reserves remains ample and to support the smooth functioning of short-term U.S. dollar funding markets.

Hey hold on, wasn’t the “supply of ample reserves” problem fixed last September when the Fed launched repos and, don’t laugh, “NOT QE”?

Guess not.

That said, we don’t even need to wait until 1:45pm to tell you what will happen: uptake on today’s half a trillion repo will be tiny, probably around $15BN-$20BN, and while we doubt the GC repo rate will stabilize, we expect that a new crisis symptom will emerge somewhere as the Fed’s liquidity is now no longer helping but is instead hurting a market which is flooding in excess liquidity and can’t put any of it to the proper use.

Check back at 1:45pm for the result from today’s repo which will do absolutely nothing to fix the broken credit and funding markets.

Authored by Jonathan Turley,

Michael Cohen, the former personal attorney and “fixer” for President Donald Trump, is calling on his former client to order the release of non-violent prisoners to avoid imposing a “death sentence” on him and others.

The petition is a “plea to the President of the United States to save lives” to avoid a threat of lethal exposure for inmates like Cohen. Of course, given the extreme animosity that exists between Trump and Cohen, that may not be the optimal spin for inducing presidential action.

Iran recently released thousands of prisoners to avoid the spread of the virus. The “chaos” reported in Iranian jails has not been reported in U.S. jails.

The petition calls for federal non-violent offenders to be allowed to go home to further protect themselves. It specifically states:

“The Federal Prison Camps are without adequate medical staff and are without proper medical equipment, sterilization techniques, gloves, sanitizers, masks, and other necessary items,” the petition says. It claims that placing non-violent offenders under home confinement “would give the prison facilities additional (and much needed) medical triage and logistic space for those who will become infected with the COVID-19 Virus, the spread of which is discussed as a mathematical certitude.”

Cohen is serving a three-year sentence and has been held at federal facility in Otisville, N.Y., since May 2019.

The “plea” to President Trump declares that “[w]ithout your intervention, scores of Non-Violent Offenders are at risk of death, and these people were not given a death sentence.”

The problem is that choosing between preserving Covid-19 and Cohen could be a touch choice for Trump. What is clear is that he would likely prefer to keep both contained.

Indeed, nothing saying “social distancing” like solitary confinement.