Central Mueller Witness, A Child-Trafficking Pedophile, Sentenced To 10 Years In Prison

Central Mueller Witness, A Child-Trafficking Pedophile, Sentenced To 10 Years In Prison

Tyler Durden

Sun, 06/28/2020 – 19:30

A Lebanese businessman and central witness in former special counsel Robert Mueller’s Russia investigation was sentenced to 10 years in prison after pleading guilty in January to sex crimes involving minors.

Lobbyist George Nader – who had ties to both the Clinton and Trump campaigns during the 2016 US election for Middle Eastern associates (and was later indicted for illegal contributions to Hillary Clinton’s campaign) – was intercepted at Dulles Airport in January 2018 by agents working for Mueller. A search of his iPhones revealed child pornography, which we imagine was used as leverage to gain his cooperation.

Three months later, prosecutors filed charges against Nader for the images – however they were filed under seal and kept secret from Nader’s lawyers while he was working with Mueller.

In July of 201715 months after Mueller let a serial pedophile roam the streets in the hopes he’d be able to nail Trump, Nader was finally indicted on both the child porn and for sex-trafficking a 14-year-old boy.

Keep in mind, Mueller knew about Nader’s 1991 conviction on child pornography charges in the US – for which he served only six months in a halfway house thanks to his role in helping to free American hostages in Beirut. He was also convicted in the Czech Republic in 2003 on 10 counts of having sex with underage boys, and eventually received a one-year prison sentence.

Months after Nader’s indictment for pedophilia, he was indicted on campaign finance charges in December 2019, along with Ahmad “Andy” Khawaja – a Lebanese-American businessman who has donated to Clinton, Adam Schiff, Joe Biden, Chris Coons, Dianne Feinstein and a host of other Democrats who received up to $3 million in campaign funds. He also gave $1 million to Priorities USA, the primary super PAC supporting Clinton, and $1 million to Trump’s inaugural fund.

Khawaja was appointed to the US Commission on International Religious Freedom (USCIRF) by Sen. Chuck Schumer (D-NY) in June of 2018.

Nader embarked on the scheme in a bid to gain influence in Clinton’s circle while reporting to a foreign official, according to the Justice Department.

Among his alleged co-conspirators is Ahmad “Andy” Khawaja, the CEO of a payments processing company, according to the Justice Department news release announcing the unsealing of the indictment, which was made by a grand jury in the District of Columbia.

Nader conspired with Khawaja to secretly fund $3.5 million in donations that were made in the name of Khawaja, his wife and his firm, Allied Wallet Inc., according to the indictment. Politico

In 2016, Khawaja co-hosted an August fundraiser for Clinton which included a laundry list of high-profile guests, including Univision owner Haim Saban, movie mogul Jeffrey Katzenberg and basketball legend Magic Johnson, according to the report. According to the indictment, Khawaja conspired with six other individuals to conceal his excessive contributions. Others who were indicted were also linked to donations to Clinton and other Democrats.

The indictment quotes an alleged encrypted message that Nader sent an official from Foreign Country A via WhatsApp after Khawaja contributed $275,000 and invited Nader to attend and April 16, 2016, event for presidential Candidate 1.

“Wonderful meeting with the Big Lady . . . Can’t wait to tell you about it,” Nader allegedly wrote, in an apparent reference to Clinton.

The indictment noted that political committees that received funding unwittingly submitted false disclosure reports and were presumably victims of the plot. Still, Hillary Clinton apparently attended numerous events, including small gatherings, with Nader, who on July 19, 2016, messaged the foreign official a photograph of him with Candidate 1’s spouse — an apparent reference to Bill Clinton — at Khawaja’s home. –Washington Post

Nader is also known to have interacted with Jared Kushner, Trump’s son-in-law, according to The Hill, a well as former strategist Steve Bannon and Michael Flynn. He is also reported to have helped arrange Trump’s 2017 trip to Saudi Arabia – interactions which likely piqued Mueller’s interest.

via ZeroHedge News https://ift.tt/3eKL9ou Tyler Durden

41% Of Businesses On Yelp Have Permanently Closed As V-Shaped Recovery Implodes 

41% Of Businesses On Yelp Have Permanently Closed As V-Shaped Recovery Implodes 

Tyler Durden

Sun, 06/28/2020 – 19:00

President Trump’s economic COVID-19 response, through massive fiscal and monetary stimuli, was expected to generate a V-shaped recovery ahead of the elections. We noted, all along, there was never a snowball’s chance in hell that economic growth would revert to 2019 levels later this year; nevertheless, the labor market would fully recover. 

If readers recall, President Trump has given several press conferences where he declared that the economy is quickly recovering: “We’ve been talking about the V,” the president said. “This is better than a V. This is a rocket ship.”

A new report via Yelp, tilted “Local Economic Impact Report,” debunks the V-shaped narrative and tells a much different story of slow reopenings and widespread permanent closures, all suggesting the economic devastation continues to crush the economy with no recovery in sight. 

Yelp data shows large swathes of Americans remain in deep recession through mid-June. Since April 19, only 20% of the 175,000 Yelp-registered stores that were closed during lockdowns have reopened. 

“As of June 15, there were nearly 140,000 total business closures on Yelp since March 1. In April, we reported more than 175,000 business closures, indicating that more than 20% of businesses closed in April have reopened.

Las Vegas, NV, endured the highest number of closures relative to the number of businesses in the city (1,921 total closures), while Los Angeles, CA, had the largest total number of closures (11,774 total closures).” 

h/t Yelp 

 

Yelp makes a shocking claim: Of all business closures on Yelp since March 1, 41% are permanent closures.” 

“Our data shows the largest spikes of permanent closures occurred in March, followed by May and June, indicating that the businesses that were already struggling had to permanently close right away and the businesses that were trying to hold on, but unable to weather the COVID-19 storm, were forced to shutter in recent months.” 

Of the businesses that shuttered operations, restaurants and shopping/retail have led with the most permanent closures.  

“Among those with the highest rate of business closures are shopping and retail (27,663 closed businesses), restaurants (23,981 closed businesses), beauty (15,348 closed businesses) and fitness (5,589 closed businesses).

Retail was by far the hardest hit, experiencing the highest number of total closures, with the average daily rate continuing to increase since March. Of all closures on Yelp since March 1, 20% are for retail businesses and 35% of closed retail businesses are indicated as permanent on Yelp.

“In March, Restaurants had the highest number of business closures, compared to other industries, and have continued to close at high rates. Of the businesses that closed, 17% are restaurants, and 53% of those restaurant closures are indicated as permanent on Yelp. Restaurants run on thin margins and can sometimes take months or even years to break even, resulting in this higher rate of permanent closures.”

h/t Yelp 

What this all means is the recovery is losing steam. Consumer spending is set to plunge again this summer as the Paycheck Protection Program and other stimulus has run its course. With no recovery – more business closures/ likely more permanent closures and increased job losses are ahead.  

h/t THE LONG VIEW, @HayekAndKeynes

To make matters worse, the virus pandemic is re-emerging, resulting in states like Florida, Texas, and California to reverse reopenings, which will further pressure businesses.  

Readers should review our latest pieces on severe economic damage that is crushing the economy and how recovery might not be seen until 2023

By now, readers should realize the deep economic scarring by COVID-19 will have long-term impacts and a recovery that is years away.  

via ZeroHedge News https://ift.tt/2Agaojs Tyler Durden

The Second Round Of Lockdowns Won’t Be As Easy As The First

The Second Round Of Lockdowns Won’t Be As Easy As The First

Tyler Durden

Sun, 06/28/2020 – 19:00

Authored by Ryan McMaken via The Mises Institute,

The pressure is already mounting for state and local governments to move again toward coerced stay at home orders and mandatory business closures.

The constant drumbeat of headlines designed to convince people to adopt new draconian government controls is more of less exactly the same as what it was back in March. Arizona “lost control of the epidemic” one headline proclaims, while another insists “ICU beds full.” A government bureaucrat in Texas says the situation is “apocalyptic” and Bloomberg dutifully features the word in its headline. The governor of California is threatening another stay-at-home order. The Texas governor has re-imposed some restrictions. Florida has “paused” its scaling back of lockdown edicts.

Americans should expect more of this as the year proceeds. Once we arrive at September, hospitalizations due to the usual winter diseases like flu will begin to mount. At that point, the daily headlines about “full” or nearly-full hospitals will be a daily or even hourly occurrence.

There is no doubt politicians and government “experts” like Anthony Fauci will briefly emerge from their luxury homes and gated communities to demand that middle class and working class Americans be once again forced to abandon their jobs, take pay cuts, and sit at home. (The politicians decreeing lockdowns, of course, will keep collecting their six-figure salaries.)

But there’s a problem with the politicos’ plans. They assume Americans will comply with the stay-at-home orders to the same degree they did back in March and April.

This may not be a very prudent assumption. This will be due to at least two reasons.

First, more Americans now doubt the official narrative on the disease.

Second, Americans are now in a worse economic position compared to the time of the first lockdown.

Both of these factors will contribute to more resistance to lockdowns.

In other words, a second lockdown will be more difficult – both economically and politically – than the first. Economic pain will mount as political doubts grow.

The Economic Threat

A second round of lockdowns also poses a very large economic risk to families.

Advocates of coercive lockdowns have long tried to portray opponents of lockdowns as just “people who want a haircut.”  The reality is a lot more grim than that, however, and the threat to the economic well-being of many families is going to make a second round of lockdowns far worse than the first.

Many Americans voluntarily complied the first time around because they were starting from a relatively good economic position. The politicians kept assuring them it was all just for “two weeks” or maybe even a month. After all, when the lockdowns began, the economy was at very high levels of employment. The US was in the waning days of the boom phase of a boom-bust cycle. But it was nonetheless still in the boom phase. Since the spring lockdowns began, 40 million Americans have become unemployed. Twenty million of them are still unemployed, and more than 1.3 million Americans became newly unemployed over the past week. Tax revenue has also plummeted reflecting the downward spiral in Americans’ income.

The bankruptcies are now mounting. In recent weeks, just some of the companies that have declared bankruptcy are J.Crew, Gold’s Gym, Neiman Marcus, Hertz, GNC, and Chuck E. Cheese. Thousands of retail locations for these companies will be closed. Their staffs will be laid off.

The idea that everyone can just “work from home,” of course, has always been a fantasy of the well-off. The work-from-home myth is especially damaging for lower-income workers and for blacks and Hispanics. Moreover, if school closures remain, many parents who rely on government schools as a type of “free” day care will find themselves without schools as a resource.

So far, all of this has been cushioned by outlandish fiscal and monetary “stimulus” designed to bailout bankrupted industries, small businesses and households. Households have received stimulus checks as incomes dried up or were reduced.

The federal budget is likely to top ten trillion this year (well more than double last-year’s budget) as a result of literally trillions of new dollars being created out of thin air to finance the stimulus checks and bailouts.

If lockdowns are imposed again, expect even more “stimulus,” bringing the federal budget to 12 trillion, or maybe 14 trillion. There will be no end in sight.

But apparently-endless money printing can’t continue indefinitely. At some point the upward pressure on interest rates, and concerns over the value of the dollar, become so great that even Congress and the Fed fear another round of stimulus. If that comes this year, household finances will immediately collapse. More businesses will go under. Jobs will dry up. 30 percent of Americans already missed their house payments in June. Expect that to get a lot worse if lockdown mandates are tightened again.

And as economic  turmoil becomes worse expect more of what resulted during the lockdowns of March and April: more child abusemore suicide, more drug overdoses. Expect more death from non-COVID causes as  “elective” medical care is banned by executive order. 

The New Lockdowns Will Be Longer

Also complicating the situation is the fact that if lockdowns are tightened now, the duration of the lockdowns will likely last well beyond the month or two of lockdowns initially promised. Hospitalizations for a wide variety of diseases (not just COVID-19) will only get worse as the northern hemisphere approaches flu season three months from now. At that point, the end of the 2020-21 flu season will still be a long way away.

If the current plan for the “experts” and the politicians is to impose a six- or eight-month lockdown until next summer, get ready for an economic depression of unprecedented proportions.

The lockdown advocates have always claimed the economy would survive relatively unscathed because the job losses and closures were just “temporary.” Their narrative claimed workers would only be furloughed for a couple of months and then the recovery would begin.

But what if they get their wish for an open-ended lockdown that continues from mid-summer through May of next year? After all, that is the reality we’re looking at if rising hospitalizations justify lockdowns. We’ll be looking at month after month of mounting unemployment.

Compliance Will Be a Problem

The heightened economic pain means lockdowns will be harder to enforce, and Americans now estimate their risk of severe illness to be much lower now than was the case during the first lockdown.

Back in March and April, many Americans didn’t know what to expect. The experts and politicians assured us we were all facing a truly apocalyptic scenario. Bodies would be piling up in the streets. Gurneys would be lining the sidewalks as patients died unattended. Americans were concerned: does this disease affect everyone equally? What is my risk level? Many people took a wait-and-see attitude.

But now that so much more is known than was the case in March, it is clear risk is hardly equal for everyone — 40 percent of deaths were in nursing homes —and it makes little sense to lock down an entire population to protect certain specific populations. States that never enacted lockdowns during the first round, for example, had fewer deaths per capita.

Since March, the CDC has repeatedly reduced its estimated fatality rate. Many Americans have also gradually become aware, for example, that in the US 40 percent of deaths attributed to COVID-19 occurred in nursing homes. Many now know that among known cases under age 50, the fatality rate is now estimated at well under 1 percent. The CDC estimates that the symptomatic case fatality rate for people younger than 50 is just 0.05 percent, compared to 1.3 percent for people 65 or older and 0.2 percent for 50-to-64-year-olds. Those are just the symptomatic cases. Many who get the disease show no symptoms at all.

Americans have realized the risk to most Americans is much lower than what is suggested by the over-the-top panic-inducing rhetoric repeatedly employed my media outlets and politicians. Moreover, for many people, COVID-19 news has already receded to the point of becoming background noise. Every day they are bombarded with dire warning of impending death and destruction. Warnings of this sort soon have a diminishing effect.

Just as Americans long ago made peace with the relatively high risks associated with highway travel, many Americans are likely to do the same with COVID-19. After all, the most dangerous thing most people do every day — by far — is get in a motor vehicle and drive. Yet few people seem to let the risk limit their daily activities. The more the dangers of COVID-19 become just another daily bullet point, the easier the warnings are to ignore.

Many will also be less likely to comply because of the obvious hypocrisy of government officials over June’s riots and protests. Medical personnel who condemned any sort of gathering — and especially anti-lockdown protests — suddenly decided mass gatherings were perfectly fine so long as the politics behind the protests was to the experts’ liking. People won’t forget that.

For those who refuse to comply, the politicians will send in the police to enforce their edicts. Police who refused to stop rioters will nonetheless arrest peaceful business owners. This will also be remembered. The resentment will build. The impoverishment will continue. Americans will be going into foreclosure. “Deaths of despair” will mount.

Politicians will insist it’s all “worth it” and “we’re all in this together.” The longer it goes on, the less the public will agree.

via ZeroHedge News https://ift.tt/3dKfrpQ Tyler Durden

Futures Slide In Early Trading

Futures Slide In Early Trading

Tyler Durden

Sun, 06/28/2020 – 18:33

In a repeat of last Sunday’s gloomy open (which had fully reversed overnight with futures nice and green by morning), futures slumped after reopening at 6pm with two key catalysts emerging: i) coronavirus deaths around the world topped half a million and infections continued to mount in American states, coupled with ii) concerns about the growing advertiser boycott of Facebook.

S&P 500 futures opened below 3,000, just as they did last Sunday, sliding to 2,988, or 0.6% lower, alongside oil and the dollar, while gold rose. However, there was some comfort over the weekend from the latest Chinese “data” which showed local industrial production growth was +6.0% yoy in May compared with -4.3% yoy in April, the first positive year-over-year growth since the virus outbreak as downstream industries continued to see stronger profit growth compared with upstream industries, and overall profit margins widened in May (that said, by now we doubt anyone believes any Chinese reporting).

Offsetting this boost to sentiment were growing fears about Facebook’s revenue base as a growing number of advertisers have announced intentions to halt spending on social media, undermining the company’s sales outlook and putting its stock price under further pressure. A partial list of the companies that have said they’re curtailing ad spending on Facebook and its peers is shown below:

  • Unilever
  • Verizon
  • Hershey’s
  • Honda
  • The North Face
  • Ben & Jerry’s
  • REI
  • Patagonia
  • Eddie Bauer
  • Upwork
  • Mozilla
  • Magnolia Pictures
  • Birchbox
  • Dashlane
  • TalkSpace
  • LendingClub

Bloomberg writes that “as more brands publicize plans to join boycotts or otherwise rein in ad spending, Facebook shares remain under pressure. The stock tumbled 8.3% Friday after Unilever, one of the world’s largest advertisers, said it would halt spending on Facebook properties this year, eliminating $56 billion in market value and shaving the net worth of Chief Executive Officer Mark Zuckerberg by more than $7 billion. Shares closed at $216.08 Friday after reaching a record $242.24 the preceding Tuesday.”

While no single company can significantly dent growth at Facebook, which generated $17.7 billion in revenue last quarter alone, a rising tally adds to pressure on other brands to follow suit, and when combined with a pandemic-fueled economic slowdown, the threat to Facebook deepens.

“Given the amount of noise this is drawing, this will have significant impact to Facebook’s business,” Wedbush Securities analyst Bradley Gastwirth wrote in a research note. “Facebook needs to address this issue quickly and effectively in order to stop advertising exits from potentially spiraling out of control.”

Facebook aside, the continued emergence of the coronavirus in several US hotspots has been the dominant theme for short-term sentiment. As of this weekend, global confirmed cases have now topped 10mln worldwide with the death toll nearing 500,000. As such, Amplify Trading writes that “it remains critical to remain vigilant for further updates with the daily US case numbers… now a main feature of the daily calendar. Below is a snaphot of the total cases and deaths in the United States as of 28th June 2020 via the NYTimes.”

Amid the growing uncertainty from the rising number of covid infections and fears about Facebook’s tech dominance, last week’s risk-off stance could endure.

Of course, central banks are on their way: as Bloomberg notes, China’s central bank said it will implement new monetary tools to make sure liquidity reaches the real economy. The People’s Bank of China said it will increase the proportion of smaller company, credit and manufacturing loans, and continue to lower lending rates, while reiterating that it will keep the yuan stable.

Looking ahead, here are some of the key events and features to keep a close eye on, courtesy of Amplify Trading:

Payrolls & Powell

US Markets are closed on Friday due to the July 4th Independence Day holiday. As such, the latest US jobs report will be released on Thursday and I would make a mental note that the week as a whole will be somewhat front-loaded. Recent US economic indicators in the US have continued to surprise to the upside with the Citi Economic Surprise Index standing at a record high.

Expectations are that the US has added another 3.074mln jobs in the last month with unemployment expected to decrease once again to 12.3% from 13.3%.

However, I think it would be unwise to take these figures on face value as with an emerging second wave virus across several of the largest US states, in addition to the methodology quirks that have under reported the true level of unemployment, I think the data will do little to change markets current thinking.

Analysts at ING also note that average hourly earnings will fall sharply, but this is a statistical effect caused by lots of relatively low earning workers regaining employment, dragging the “average” level of hourly wages lower – therefore, it is meaningless.

On Tuesday, Fed Chair Powell is scheduled to testify again in Washington with Treasury Secretary Steven Mnuchin about the stimulus and lending facilities to support the economy in the pandemic. Although unlikely to be a market moving event it may give some indication as to the timing and appetite towards further stimulus measures from the US government following Trump’s comments last week that he favoured sending Americans another stimulus check..

Meanwhile, Wednesday night sees the release of the latest FOMC minutes which will be srutinised for any insights as to the risks to the recovery and what methods the central bank may adopt if the situation were to change.

Is Trump already too far behind Biden?

This was the headline from the FT’s Big Read this weekend and comes in the context of Biden holding a 9.4 point lead in the Real Clear Politics Average poll of polls.

The FT article explains how Trump’s ratings have nosedived as he has been criticised over his handling of the lockdown and the reaction to the killing of George Floyd. This has led to the President hitting the road again holding rallies in Oklahoma and Arizona, the latter being a crucial political pawn given the recent rise in COVID cases and a key battleground in the upcoming election.

By comparison, Biden has been hunkering down and in a similar tactic in what we saw the former Labour leader Jermey Corbyn deploy against Theresa May during the initial Brexit negotiations, he appears content to let Trump self-harm until these political hot potatoes cool off. The problem comes when, at some point, Biden will need to emerge and confront the combative President and therein lies the problem in my mind.

The FT notes that Biden has struggled to excite the Obama coalition of the young and people of colour and that is right where Trump has already been targeting the democrat candidate in numerous jibes and memes.

Although people are fully aware of Trump’s diversion and deflection tactics on Twitter, I still believe that this direct and unfilered line of communication is as effective as ever for the US President.

For now, my view is that the wound of division post the financial crisis never truly healed and the pandemic has only further amplified the underlying inequalities that exist in American society today. Although this should be the catalyst for change, I think it will only polarise the ‘law-and-order’ narrative over the coming months, whether that be against the protestors or the Chinese virus. As a result, I still see Trump winning the election come November, despite what the polls indicate as of today.

I asked my Twitter followers this weekend what they thought – this was the result:

Growing challenges in China

The Chinese central bank said on Sunday that the country’s economic growth faces challenges from the global coronavirus pandemic, despite signs of improvement amid business re-openings. The cautious observation comes ahead of the official manufacturing PMI data for June scheduled for release on Tuesday, which is expected at 50.6.

Despite the headline figure reflecting an expansion of the manufacturing sector, many analysts have begun to question the strength of the recent bounce back in confidence as the rest of the world continues to grapple with rising COVID cases and the subsequent impact on orders for Chinese products.

Not only this, reports in the SCMP this weekend say that a county in northern China (Anxin) has been “sealed off” with its 400,000 residents placed under tight restrictions after more than a dozen Covid-19 cases were reported – all linked to the Xinfadi market cluster in Beijing.

CALENDAR HIGHLIGHTS via newsquawk

Monday

  • Data: Japanese Retail Sales, EZ Consumer Confidence (Final), Economic Sentiment, German CPI (Prelim)
  • Speakers: Fed’s Daly, Williams, BoE’s Bailey & Vlieghe, ECB’s Schnabel

Tuesday

  • Data: Japanese Unemployment, Chinese NB Official Manufacturing PMI, UK GDP, EZ CPI (Flash), Canadian GDP, US Consumer Confidence
  • Speakers: Fed’s Powell & US Treasury’s Mnuchin Testify, Williams & Brainard, BoE’s Haldane & Cunliffe, ECB’s de Guindos, RBA’s Debelle
  • Supply: Germany

Wednesday

  • Data: Japanese Tankan, Chinese Manufacturing PMI (Final), German Retail Sales, Unemployment & Manufacturing PMI, EZ, UK & US Manufacturing PMI (Final), US ADP & ISM Manufacturing
  • Events: Riksbank Rate Decision, FOMC Minutes
  • Speakers: ECB’s Panetta, BoE’s Haskel
  • Supply: UK

Thursday

  • Data: US Labour Market Report, Initial Jobless Claims & Factory Orders
  • Speakers: ECB’s Mersch & Schnabel
  • Supply: French & UK

Friday

  • Data: Australian Retail Sales, Trade Balance, EZ & UK Services & Composite PMIs (Final)
  • Speakers: ECB’s Knot
  • Holiday: US Independence Day

via ZeroHedge News https://ift.tt/3i9VwnD Tyler Durden

CDC Antibody Studies Confirm Huge Gap Between COVID-19 Infections and Known Cases

COVID-19-antibody-tests-Newscom

Newly published antibody test results from half a dozen parts of the country confirm that COVID-19 infections in the United States far outnumber confirmed cases. The ratio of estimated infections to known cases in these studies, which the U.S. Centers for Disease Control and Prevention (CDC) reported on Friday, range from 6 to 1 in Connecticut as of early May to 24 to 1 in Missouri as of late April.

These results confirm something we already knew: The infection fatality rate—deaths as a share of all infections—is much lower than the crude case fatality rate—deaths as a share of known cases. That is bound to be true when testing is limited and a virus typically produces mild or no symptoms. At the same time, the CDC’s antibody studies imply that efforts to control the epidemic through testing, isolation, quarantine, and contact tracing will not be very effective, since they reach only a small percentage of virus carriers.

The CDC analyzed blood samples drawn for routine tests unrelated to COVID-19 from patients in New York City, Connecticut, South Florida, Missouri, Utah, and western Washington state. Although these samples may not be representative of the general population, they provide a clearer picture of virus prevalence than screening limited to people who sought virus tests because they had symptoms consistent with COVID-19 or because they were in close contact with known carriers.

In New York City, where the samples were drawn from March 23 through April 1, nearly 7 percent tested positive for COVID-19 antibodies, implying that infections outnumbered reported cases during that period by 12 to 1. The prevalence estimated by a state-sponsored antibody study conducted from April 19 to April 28 was three times as high, although the ratio of estimated infections to known cases (about 11 to 1), was similar. The difference in estimated prevalence can be at least partly explained by the spread of the virus between early and late April.

The gap between the two estimates may also be partly due to differences between the samples used in the studies. The CDC study was based on patients whose doctors ordered routine blood tests, while the New York State Department of Health study used blood drawn from randomly selected shoppers. Infections might have been unusually common among people who ventured out to stores during the study period, either because they were more likely to encounter carriers or because they had already recovered from COVID-19 and therefore felt safe leaving their homes. (Then again, the health department study might have missed people who were self-isolating because they had symptoms or because they had close contact with people who had COVID-19.)

In South Florida, where the samples were collected from April 6 through April 19, almost 2 percent tested positive. That is just one-third the prevalence that University of Miami researchers found in a random sample of Miami-Dade County residents about a week later. As with New York City, some of the difference might be due to rising infections, and some of it might be due to differences in sampling methods. The CDC study did not use a random sample of the local population, and it included patients from Broward, Martin, and Palm Beach counties as well as Miami-Dade. It is also possible that the antibody test used by the University of Miami researchers, which has relatively low specificity, generated more false positives than the test used by the CDC.

The CDC put the ratio of infections to confirmed cases in South Florida at 11 to 1, which is the same as the ratio it estimated in Utah, where the samples were collected from April 20 through May 3, and in western Washington, where the samples were collected from March 23 through April 1. Connecticut, where the blood was drawn from April 26 through May 3, had the lowest ratio of estimated infections to confirmed cases: 6 to 1. Missouri, where samples were collected from April 20 through April 26, had the highest ratio: 24 to 1.

What do these findings imply about the infection fatality rate (IFR) in these places? New York City had recorded 2,580 COVID-19 deaths as of April 1, when the CDC estimates 641,800 residents had been infected, which implies an IFR of 0.4 percent. (The IFR implied by the state health department’s study, by contrast, was around 0.6 percent.) The COVID-19 death toll in Connecticut was 2,495 as of May 3, when the CDC estimates the state had 176,700 infections. That implies a much higher IFR: 1.4 percent.

Utah had recorded 57 COVID-19 deaths as of May 3, when the CDC estimates the state had 47,400 infections, implying an IFR of just 0.1 percent. Missouri’s death toll was 388 as of April 26, when the state had an estimated 161,900 infections. That implies an IFR of about 0.2 percent.

These are just snapshots, and the IFRs in Utah and Missouri may have risen as the epidemic progressed in those states, especially if people infected in May were more vulnerable to the disease. But even now, there is a striking gap between the crude case fatality rates in New York City and Connecticut (8.4 percent and 9.3 percent, respectively) and the crude CFRs in Utah and Missouri (0.8 percent and 4.9 percent, respectively). That suggests COVID-19 patients have fared worse in New York and Connecticut than they have in Utah and Missouri, for reasons that may include the prevalence of preexisting medical conditions, the stress that the epidemic put on local health care systems, and policies regarding high-risk people such as nursing home residents.

It is plausible that the IFR for COVID-19, as well as the crude CFR, would vary from one part of the country to another, depending on local conditions. Based on the CDC’s “best estimates” of the death rate among all Americans who develop COVID-19 symptoms (whether or not they are tested for the virus) and the percentage of infections that are asymptomatic, the nationwide IFR is something like 0.26 percent.

Virus testing in the United States has expanded considerably since early May, which helps explain why the nationwide crude CFR has been falling, from more than 6 percent on May 16 to less than 5 percent today. As more people with mild or no symptoms get tested, the denominator includes more low-risk cases, driving down the apparent death rate. The gap between confirmed cases and total infections also could shrink as testing is expanded, but that depends on the pace of new infections, which have been rising at a fast clip in several states.

In Texas, where newly confirmed cases rose 10-fold between May 26 and June 25 before falling slightly, the share of virus tests that were positive rose from 4.3 percent on May 26 to 13.2 percent on June 26, which indicates that expanded testing is not keeping pace with rising infections. It looks like the gap between confirmed cases and infections is growing in places like Texas, while it is shrinking in places like New York City, where the test positivity rate (based on a three-day average) plummeted from 70 percent on March 30 to 2 percent on June 25.

When the ratio of infections to confirmed cases is high, there is little hope of containing transmission by identifying and quarantining carriers and their contacts, even if a state has the capacity to do contact tracing. The CDC’s antibody study “underscores that there are probably a lot of people infected without knowing it, likely because they have mild or asymptomatic infection,” CDC scientist Fiona Havers told The New York Times. “But those people could still spread it to others.”

The light gray lining of this dark cloud is that newly infected people in states such as Texas, Florida, Arizona, and California are substantially younger now than they were earlier in the epidemic, which means the death rate in those places should be falling. The seven-day average of newly reported COVID-19 deaths in Texas fell from 58 on April 30, when the statewide lockdown was lifted, to 20 on June 13. It has since risen to 29 and is apt to climb more as recently contracted cases progress. But the outcome would be far worse if new COVID-19 patients in Texas were older.

Since neither contact tracing nor a vaccine is likely to save high-risk Texans, the ultimate death toll will depend largely on precautions aimed at protecting them. Gov. Greg Abbott has responded to the new wave of infections, which he says is driven largely by young people who have been getting together for drinks in close proximity, by closing bars. But if young Texans are increasingly disinclined to follow social distancing rules, that step may not accomplish much. They can still get together in private, and their risk of exposure will in any case be higher as they return to work. Nor can those people, whose own risk of dying from COVID-19 is very low, necessarily be counted on to avoid contact with Texans who are much more vulnerable to the disease.

The onus for preventing contact between potential carriers and high-risk individuals seems to be shifting, fairly or not, from the first group to the second. Minimizing COVID-19 deaths will require adapting to that reality.

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CDC Antibody Studies Confirm Huge Gap Between COVID-19 Infections and Known Cases

COVID-19-antibody-tests-Newscom

Newly published antibody test results from half a dozen parts of the country confirm that COVID-19 infections in the United States far outnumber confirmed cases. The ratio of estimated infections to known cases in these studies, which the U.S. Centers for Disease Control and Prevention (CDC) reported on Friday, range from 6 to 1 in Connecticut as of early May to 24 to 1 in Missouri as of late April.

These results confirm something we already knew: The infection fatality rate—deaths as a share of all infections—is much lower than the crude case fatality rate—deaths as a share of known cases. That is bound to be true when testing is limited and a virus typically produces mild or no symptoms. At the same time, the CDC’s antibody studies imply that efforts to control the epidemic through testing, isolation, quarantine, and contact tracing will not be very effective, since they reach only a small percentage of virus carriers.

The CDC analyzed blood samples drawn for routine tests unrelated to COVID-19 from patients in New York City, Connecticut, South Florida, Missouri, Utah, and western Washington state. Although these samples may not be representative of the general population, they provide a clearer picture of virus prevalence than screening limited to people who sought virus tests because they had symptoms consistent with COVID-19 or because they were in close contact with known carriers.

In New York City, where the samples were drawn from March 23 through April 1, nearly 7 percent tested positive for COVID-19 antibodies, implying that infections outnumbered reported cases during that period by 12 to 1. The prevalence estimated by a state-sponsored antibody study conducted from April 19 to April 28 was three times as high, although the ratio of estimated infections to known cases (about 11 to 1), was similar. The difference in estimated prevalence can be at least partly explained by the spread of the virus between early and late April.

The gap between the two estimates may also be partly due to differences between the samples used in the studies. The CDC study was based on patients whose doctors ordered routine blood tests, while the New York State Department of Health study used blood drawn from randomly selected shoppers. Infections might have been unusually common among people who ventured out to stores during the study period, either because they were more likely to encounter carriers or because they had already recovered from COVID-19 and therefore felt safe leaving their homes. (Then again, the health department study might have missed people who were self-isolating because they had symptoms or because they had close contact with people who had COVID-19.)

In South Florida, where the samples were collected from April 6 through April 19, almost 2 percent tested positive. That is just one-third the prevalence that University of Miami researchers found in a random sample of Miami-Dade County residents about a week later. As with New York City, some of the difference might be due to rising infections, and some of it might be due to differences in sampling methods. The CDC study did not use a random sample of the local population, and it included patients from Broward, Martin, and Palm Beach counties as well as Miami-Dade. It is also possible that the antibody test used by the University of Miami researchers, which has relatively low specificity, generated more false positives than the test used by the CDC.

The CDC put the ratio of infections to confirmed cases in South Florida at 11 to 1, which is the same as the ratio it estimated in Utah, where the samples were collected from April 20 through May 3, and in western Washington, where the samples were collected from March 23 through April 1. Connecticut, where the blood was drawn from April 26 through May 3, had the lowest ratio of estimated infections to confirmed cases: 6 to 1. Missouri, where samples were collected from April 20 through April 26, had the highest ratio: 24 to 1.

What do these findings imply about the infection fatality rate (IFR) in these places? New York City had recorded 2,580 COVID-19 deaths as of April 1, when the CDC estimates 641,800 residents had been infected, which implies an IFR of 0.4 percent. (The IFR implied by the state health department’s study, by contrast, was around 0.6 percent.) The COVID-19 death toll in Connecticut was 2,495 as of May 3, when the CDC estimates the state had 176,700 infections. That implies a much higher IFR: 1.4 percent.

Utah had recorded 57 COVID-19 deaths as of May 3, when the CDC estimates the state had 47,400 infections, implying an IFR of just 0.1 percent. Missouri’s death toll was 388 as of April 26, when the state had an estimated 161,900 infections. That implies an IFR of about 0.2 percent.

These are just snapshots, and the IFRs in Utah and Missouri may have risen as the epidemic progressed in those states, especially if people infected in May were more vulnerable to the disease. But even now, there is a striking gap between the crude case fatality rates in New York City and Connecticut (8.4 percent and 9.3 percent, respectively) and the crude CFRs in Utah and Missouri (0.8 percent and 4.9 percent, respectively). That suggests COVID-19 patients have fared worse in New York and Connecticut than they have in Utah and Missouri, for reasons that may include the prevalence of preexisting medical conditions, the stress that the epidemic put on local health care systems, and policies regarding high-risk people such as nursing home residents.

It is plausible that the IFR for COVID-19, as well as the crude CFR, would vary from one part of the country to another, depending on local conditions. Based on the CDC’s “best estimates” of the death rate among all Americans who develop COVID-19 symptoms (whether or not they are tested for the virus) and the percentage of infections that are asymptomatic, the nationwide IFR is something like 0.26 percent.

Virus testing in the United States has expanded considerably since early May, which helps explain why the nationwide crude CFR has been falling, from more than 6 percent on May 16 to less than 5 percent today. As more people with mild or no symptoms get tested, the denominator includes more low-risk cases, driving down the apparent death rate. The gap between confirmed cases and total infections also could shrink as testing is expanded, but that depends on the pace of new infections, which have been rising at a fast clip in several states.

In Texas, where newly confirmed cases rose 10-fold between May 26 and June 25 before falling slightly, the share of virus tests that were positive rose from 4.3 percent on May 26 to 13.2 percent on June 26, which indicates that expanded testing is not keeping pace with rising infections. It looks like the gap between confirmed cases and infections is growing in places like Texas, while it is shrinking in places like New York City, where the test positivity rate (based on a three-day average) plummeted from 70 percent on March 30 to 2 percent on June 25.

When the ratio of infections to confirmed cases is high, there is little hope of containing transmission by identifying and quarantining carriers and their contacts, even if a state has the capacity to do contact tracing. The CDC’s antibody study “underscores that there are probably a lot of people infected without knowing it, likely because they have mild or asymptomatic infection,” CDC scientist Fiona Havers told The New York Times. “But those people could still spread it to others.”

The light gray lining of this dark cloud is that newly infected people in states such as Texas, Florida, Arizona, and California are substantially younger now than they were earlier in the epidemic, which means the death rate in those places should be falling. The seven-day average of newly reported COVID-19 deaths in Texas fell from 58 on April 30, when the statewide lockdown was lifted, to 20 on June 13. It has since risen to 29 and is apt to climb more as recently contracted cases progress. But the outcome would be far worse if new COVID-19 patients in Texas were older.

Since neither contact tracing nor a vaccine is likely to save high-risk Texans, the ultimate death toll will depend largely on precautions aimed at protecting them. Gov. Greg Abbott has responded to the new wave of infections, which he says is driven largely by young people who have been getting together for drinks in close proximity, by closing bars. But if young Texans are increasingly disinclined to follow social distancing rules, that step may not accomplish much. They can still get together in private, and their risk of exposure will in any case be higher as they return to work. Nor can those people, whose own risk of dying from COVID-19 is very low, necessarily be counted on to avoid contact with Texans who are much more vulnerable to the disease.

The onus for preventing contact between potential carriers and high-risk individuals seems to be shifting, fairly or not, from the first group to the second. Minimizing COVID-19 deaths will require adapting to that reality.

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Bears Capitulate: Institutions Hammered With 3rd Biggest Short Squeeze In History

Bears Capitulate: Institutions Hammered With 3rd Biggest Short Squeeze In History

Tyler Durden

Sun, 06/28/2020 – 18:30

After three months of relentless contrarian bearishness by institutional investors, even as retail investors first, and hedge funds subsequently (latest HF net leverage is 99%-ile) flooded into stocks, large institutions such as vanilla mutual funds and pensions finally capitulated to the Fed which is now openly pushing stock prices higher. In the CFTC’s latest weekly futures data, the amount of net short covering of Emini futures among non-commercial speculative investors exploded, and was the biggest since 2007 and the third highest on record.

As a result, in the week ended June 23, ES net specs surged to -97,078 from -303,305 which was the biggest ES net short position since the Sept 2011 US credit rating downgrade. The collapse in short exposure of more than 206K contracts was the third biggest on record, and was surpassed only by two short-squeezes observed right around the time of the great quant crash in the summer of 2007.

Were capitulating institutions the latest to ring the bell at the top of the market? It certainly seems like it: according to Deutsche Bank’s Parag Thatte, both consolidated….

… discretionary and systematic strategies, have all turned decidedly more bullish in recent days after mostly ignoring the recent market ramp.

That said, Risk Parity funds continue to lag re-entering the market, which means that after suffering substantial losses on the way down, RP funds such as Bridgewater have failed to recover losses on the upside.

The same thing appears true for CTAs, which as we reported last week, have been flip-flopping on either side of bullish or bearish in recent months.

Curiously, the general chaos and lack of directionality across markets means that CTAs have zero conviction about any assets class, not just stocks, with bonds, USD, gold and oil all at roughly 0% exposure.

Incidentally, as MacroCharts showed after we first pointed out this surge in short covering, the last time we observed such a dramatic move higher in net short exposure – which is basically an unwind of downside hedges – the market predictably tumbled. We doubt this time will be different.

And what’s worse: at least in 2007 there was liquidity as markets were still markets, not reliant on the Fed to backstop even a modest 5% drop. Now, between HFTs that turn off at the smallest sign of trouble, and asset managers who go bidless the moments there is a -1000 TICK, liquidity is non-existant. Which is why all that would take to trigger the next crash is some concerted selling.

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As COVID-19 Cases Spike Nationally, Black Lives Matter Plans More Rallies, Marches

As COVID-19 Cases Spike Nationally, Black Lives Matter Plans More Rallies, Marches

Tyler Durden

Sun, 06/28/2020 – 18:00

Authored by Daniel Payne via JustTheNews.com,

Though coronavirus cases are surging in some parts of the United States, many Black Lives Matter activists are nonetheless planning sizable rallies in the near future, defying public health concerns in favor of continuing what has become a month-long streak of aggressive public activism. 

The surge in coronavirus cases in some parts of the country — especially Texas, Arizona and Florida — has brought with it renewed fears that any form of reopening states after months of lockdowns will bring a new wave of COVID-19 infections.

The governors of Texas and Florida imposed fresh restrictions on residents this week in response to rising cases in their states, while other governors such as Washington’s Jay Inslee mandated that all state residents must wear face masks while out in public. 

In spite of those mounting concerns, multiple chapters of Black Lives Matter across the country are still planning rallies and marches, even as officials urge residents to refrain from gathering in large groups. 

‘Community visioning, education, and mobilization’

One chapter, Black Lives Matter Michigan, is hosting a “protest & rally” at the Michigan State Capitol in Lansing on Monday. That event promises “community visioning, education, and mobilization to #DefendBlackLives.” Its Facebook page shows nearly 600 confirmed attendees and 2,800 “interested” in attending,

The event urges attendees to create signs with slogans on them such as “defund the police,” “invest the funds in the Black community,” and “declare racism a public health emergency in Michigan.”

In Minneapolis, meanwhile, a consortium of groups including the Chicago chapter of Black Lives Matter, has planned for a July 12 rally called the “National Mother’s March.” The group specifically invites “families (mothers, fathers, grandmothers, Aunts, Uncles, sisters, brothers spouses, significant others anyone) that have lost loved ones to police violence” to attend. 

An “educational gathering” taking place that weekend will offer participants a host of workshops on subjects such as “the history and role of the police in US society;” “tools for organizing against police violence;” “DO’s and DON’T’s of organizing for families dealing with a more recent loss of a loved one;” and numerous other topics.

In Philadelphia on Sunday, a “Rally for Political Prisoners” will take place in the city’s Malcolm X Park. That event, which will be co-hosted by Black Lives Matter Philly and six other groups, has just over 200 confirmed attendees, though nearly 1,000 more are “interested” in going. 

The rally will “center the lives and stories of our Political Prisoners in Pennsylvania and incarcerated people as we struggle to defund the police, dismantle the Fraternal Order Police and Abolish Policing,” the Facebook event states. 

Citing the recent removal of former Philadelphia mayor and police commissioner Frank Rizzo, the description continues: “Now that the statue has been brought down, let’s bring home [Rizzo’s] victims.”

A spokeswoman for Black Lives Matter Philly said the group “ask[s] participant to wear masks at every action we plan.”

“We actively pass out masks, sanitizer, and wear gloves when we distribute items,” she said. “We’re very aware and cautious about risk with COVID-19.”

She added that one of the group’s supporters recently mailed the activists 500 masks to pass out to participants at rallies and marches.

On July 4, meanwhile, Black Lives Matter Boston will host an event called the “Say Her Name March & Rally.”

Participants will “gather to center and uplift the lives of ALL Black womxn in a march from Nubian Square to Boston Common, followed by a celebratory rally in the Common where we will share music, food, the arts.”

Nearly 300 participants are scheduled to go, while 2,000 have signaled an interest. 

‘Avoid large gatherings’

The rallies, protests and marches that have rolled throughout the country over the past several weeks broke a months-long moratorium on large public gatherings throughout the United States. Sporting events, concerts, symposiums, conferences and other densely packed affairs were almost entirely cancelled from mid-March onwards, while restaurants and other popular gathering spots were all largely shuttered. 

Federal, state and local politicians from the start of the outbreak aggressively promoted “social distancing” measures, urging and often mandating that citizens avoid each other, shelter in place and refrain from getting together outside of household family units. 

Following the emergence of the protests after the police-involved death of Minneapolis resident George Floyd, however, political leaders rapidly shifted their rhetoric, coming out in tacit and sometimes outward support of the huge, densely crowded demonstrations that spread throughout the United States.

That apparent double standard was checked this week in a New York federal court, when a judge declared that Gov. Andrew Cuomo and New York City Mayor Bill de Blasio had unfairly discriminated against religious worshippers while giving preferential government sanction to protesters. 

Though most authorities appear reluctant to criticize the large gatherings, Facebook in its event listings for the upcoming demonstrations still urges potential participants to stay away from them. 

“It’s up to all of us to slow the spread of COVID-19,” a Facebook warning declares atop each event.

“Everyone, including young and healthy people, should avoid large gatherings during this time.”

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Chesapeake Files For Bankruptcy, Wiping Out $7 Billion In Debt And Any Existing Equity Value

Chesapeake Files For Bankruptcy, Wiping Out $7 Billion In Debt And Any Existing Equity Value

Tyler Durden

Sun, 06/28/2020 – 17:33

After years of melting, the Chesapeake icecube is finally history: at exactly 350pm on Sunday afternoon, the company that launched the US shale boom, finally gave up and filed for a pre-packaged bankruptcy in the Southern District of Texas. In so doing, the company with roughly $9.5 billion in debt has become one of the biggest victims of a spectacular collapse in energy demand from the virus-induced global recession, and follows the collapse of another high-flyer in the US oil patch, Whiting Petroleum, which filed for Chapter 11 at the start of April after championing what was once the premiere U.S. shale field, the Bakken of North Dakota.

As part of its prepack agreement, Chesapeake announced that it had entered into a Restructuring Support Agreement (“RSA”) with 100% of the lenders under its revolving credit facility, holders of approximately 87% of the obligations under its Term Loan Agreement, approximately 60% of its senior secured second lien notes due 2025, and approximately 27% of its senior unsecured notes, pursuant to which Chesapeake will implement a Chapter 11 plan of reorganization to eliminate approximately $7 billion of debt.

Of course, since 73% of unsecured bondholders refused to sign off on the deal, expect a very vicious bankruptcy fight over the recoveries, as hedge funds that accumulated positions in the bonds unleash hell in their fight with the secureds (even as the equity committee claims that all classes above it should be unimpaired).

Also, we have some bad news for Jefferies, which won’t be able to repeat its hilarious attempt to fund the company in bankruptcy by selling stock to Robnhood daytraders: as part of the RSA, the Company has secured $925 million in debtor-in-possession financing lenders under Chesapeake’s revolving credit facility.  The DIP will provide Chesapeake the capital necessary to fund its operations during the Court-supervised Chapter 11 reorganization proceedings.

To summarize: Chesapeake which enters bankruptcy with just over $9.5 billion in debt…

… will eliminate about $7 billion of it, and emerge with a $2.5 billion exit financing, consisting of a new $1.75 billion revolving credit facility and a new $750 million term loan. Additionally, according to the RSA, the Company has the support of its term loan lenders and secured note holders to backstop a $600 million rights offering upon exit.

Doug Lawler, Chesapeake’s President and Chief Executive Officer, stated, “We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths. By eliminating approximately $7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence. With these demonstrated strengths, and the benefit of an appropriately sized capital structure, Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise.”

Lawler concluded, “Over the last several years, our dedicated employees have transformed Chesapeake’s business — improving capital efficiency and operational performance, eliminating costs, reducing debt and diversifying our portfolio. Despite having removed over $20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business.”

In addition to leverage, Lawler also removed all the equity value, because with $7 billion in senior debt destroyed, there is no question here: the common stock has no value and will almost certainly be delisted immediately to avoid any potential “misunderstandings” should an army of 10-year-old veteran Robinhood traders decided to ramp it up by a few hundred percent.

And speaking of the company’s stock and daytrading activity, it is as if 216,915 Robinhood traders suddenly cried out in terror and were suddenly silenced.

Why? Because according to RobinTrack, some 216,915 users who held on to the stock as of April 14, and whose number has certainly surged in recent days after the stock soared as high as $84.75 on June 8 during the peak of the retail euphoria boom that sent bankrupt Hertz stock also soaring and inspired Jefferies to read this blog and come up with the now-failed attempt to sell worthless stock to Robinhooders.

That said, in a market as insanely broken as this one, it is certainly possible that CHK stock which the company admits is worth about a negative $7 billion, could surge tomorrow… just because.

* * *

Finally, some corporate history courtesy of Bloomberg:

About a decade ago, Chesapeake was a $37.5 billion giant led by the late Aubrey McClendon, a colorful and outspoken advocate for the natural gas industry, who died on March 2, 2016 in what appeared to be a suicide. It was at the forefront of the fracking revolution that transformed the U.S. oil and gas industry by setting off a scramble for previously untapped shale reserves. The company cut eye-popping checks to Fort Worth businesses and residents as inducements to drill on their land in the Barnett Shale of North Texas, America’s first shale field to hit the big time.

Those heady days didn’t last. U.S. natural gas slumped after the financial crisis as the frackers overwhelmed demand, and prices still haven’t revisited their previous highs. Investors soured on Chesapeake, which by that point wasn’t only debt-laden but saddled with a real estate empire that included shopping centers, a church, and a grocery store. McClendon was ousted in 2013 and was killed in an auto accident three years later.

In subsequent years, management sought to compensate for the decline in its gas fortunes by shifting into oil exploration as fracking turned the U.S. into the world’s largest producer of crude as well as a major exporter. However, any optimism about that strategy evaporated with oil’s recent price collapse amid the Covid-19 pandemic.

Lawler took over Chesapeake in 2013 with an aim of reducing its debt load that was larger than Exxon Mobil Corp.’s, a company 29 times Chesapeake’s market value at the time. He had counted on capital spending cuts and asset sales to cover debt obligations. The company was in talks last year with Jerry Jones, the billionaire Dallas Cowboys owner, about a $1 billion sale of shale assets, but no deal resulted.

In May, Lawler was forced to discard his company’s full-year outlook and write down the value of $8.5 billion in assets as energy demand tumbled amid the Covid-19 lockdown. By then, the producer’s market value had dropped to less than $200 million.

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Toyota, Volkswagen And Daimler: Here Are The Corporate Bonds The Fed Is Buying The Most

Toyota, Volkswagen And Daimler: Here Are The Corporate Bonds The Fed Is Buying The Most

Tyler Durden

Sun, 06/28/2020 – 17:00

Two weeks ago the Fed sparked a mini market rally after it again announced that it would buy corporate bonds (not just ETFs), something it had said it would do three months prior yet which either the algos or the Robinhooders never quite grasped and which sent stocks soaring, even though it wasn’t actual news.

That said, there was some actual news in the Fed’s announcement.

Recall that initially, the Fed’s Secondary Market Corporate Credit Facility, or SMCCF was structured to hold two types of investments, “Eligible Individual Corporate Bonds” and “Eligible ETFs”. On Monday, June 15, the Fed introduced a third category: “Eligible Broad Market Index Bonds”. This new category allows the Fed to immediately begin buying individual corporate bonds in much larger volume than previously anticipated (for more read “The Fed’s $250 Billion Debt-Buying “Index” Loophole“).

And while it remains unclear just how static the index is or will be, on Sunday the Fed finally unveiled the constituents of said Index of “Eligible Broad Market” bonds: it consists of 794 names ranging from auto giants Toyota, Volkswagen and Daimler at the top, all the way through Valspar, Washington Gas Light and Westside Intermodal. This is what the Fed said:

The Broad Market Index is intended generally to track the composition of the broad, diversified universe of secondary market bonds that meet the criteria specified in the Term Sheet for Eligible Broad Market Index Bonds, subject to generally applicable issuer-level caps specified by the Term Sheet. It will be recalculated at least every 4-5 weeks, and the list of bonds that are eligible for purchase will be refreshed more frequently to add or remove those bonds that newly meet or no longer meet the eligibility requirements. The Broad Market Index will be published roughly once a month.

The top 30 constituents by index weight are shown below:

Source: New York Fed

Of note: just 6 names comprise 10% of the entire index, and as noted above, these are led by Toyota, Volkswagen, Daimler – all of which are foreign companies and thus will beg the question how do purchases of foreign corporate bonds help the American middle class.

Additionally, the Fed is buying a lot of AT&T, Apple And Verizon. While these are at least US companies, the next question is how does the Fed purchasing Apple bonds, and enabling the company to fund even more buybacks, help Main Street America?

As Bloomberg further observes, “of the $207 million of purchases made on the first day of buying, about 21% were of debt issued by firms in the consumer non-cyclical sector, while 15% were of consumer cyclical debt and 10% were of technology debt.”

And something else rather interesting: junk-rated issues comprised 3.6% of the securities acquired. Surely purchases of junk bonds will help the US no longer be a banana republic, whose disappearing middle class is now on par with that of China, Turkey and Russia.

Separately, the Fed also listed which banks were most active in selling bonds to the Fed: the list is below, and is headed by Morgan Stanley, BofA, RBC and Barclays – 4 banks of which 2 are foreign.

Source: New York Fed

Still, it’s good to know that besides the companies directly benefiting from the Fed artificially propping up their bond prices which thereby become even further disconnected from fundamentals, at least a handful of other – both US and foreign – companies benefit from the US taxpayer’s generosity. Of course, here we arbitrarily assume that the Fed is an institution that operates on behalf of US taxpayers, even though by now everyone knows that the Fed is a private institution, owned by a handful of commercial banks, as the Bank of England was so kind enough to remind us last year.

Source: Based on de Kock (1965), Rossouw (2018) and information from central banks’ websites

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