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The last time a couple of local cops stumbled on a freezer truck packed with dozens of dead bodies, it became an international news story and object of lurid fascination for millions around the world.

But during the age of COVID-19, it’s just another quickly forgotten headline amid a global crisis that has produced a surfeit of misery and suffering. If Internet-surfing consumers weren’t inured to photos of dead bodies already, after seeing thousands of morbid photos out of China, Europe, you probably are now.

The latest disturbing headline comes from the outerboroughs of NYC, where a funeral home in Brooklyn was apparently busted for illegally storing bodies in a freezer truck after being absolutely swamped with deaths related to COVID-19. According to Sky News, roughly 50 bodies were found stored in ice trucks rented by a funeral director at the Andrew T Cleckley funeral home on Utica Ave. in South Brooklyn’s Flatlands neighborhood.

The corpses were discovered after passers-by (New Yorkers presumably scurrying out to pick up their daily food and booze) complained about the smells and leaks.

Here’s the kicker: The funeral home was apparently in violation of no laws. It was cited for “failing to control the odours”, and the police moved on.

Instead, the home ordered an even larger refrigerated truck and all the bodies were transferred into it later that day by workers at the home clad in protective gear.

As Steven Mnuchin previewed last week when he said he’s considering an additional lending facility for troubled U.S. energy companies, at 10am on Thursday the Fed – which is now joined at the hip with the Treasury – announced that it is expanding the scope and eligibility for the Main Street Lending Program which was developed “as part of its broad effort to support the economy” and “to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic.”

Specifically, the central bank said businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms which were for companies with up to 10,000 employees and $2.5 billion in revenue, doubling the revenue limit from previous guidelines and raising the employee limit by 5,000.

The maximum loan size would be limited to 4x adjusted 2019 EBITDA while the minimum loan size was lowered to $500,000 from $1 million.

The Fed also added a third loan option for companies was higher debt. Under the new loan option, lenders would retain a 15% share on loans that when added to existing debt do not exceed 6x EBITDA. This compares to the existing loan options where lenders retain a 5% share on loans, but have different features.

Under all of the loan options, lenders will be able to apply their industry-specific expertise and underwriting standards to best measure a borrower’s income. All the loans will have a 2-4 years term and pay interest at a rather high Libor+3% rate (on the flipside, there are no covenants).

In total, three loan options—termed new, priority, and expanded—will be available for businesses. The chart below summarizes the different loan options.

It wasn’t immediately clear if the adjustments on the Fed facility are meant to make it easier for energy companies to access the Fed’s loans. Previously, the Fed’s reading of its emergency lending authority has been that it doesn’t permit the central bank to erect a facility to support a specific industry.

The unspoken message here is that with every passing day, the Fed is expanding its various bailout programs suggesting that demand for Fed backstops is far greater than expected, which then also means that the economic damage is much broader than the Fed anticipated just weeks ago.

Authored by Charles Hugh Smith via OfTwoMinds blog,

And so we’ve reached the precarious state of disunion in which the only thing the warring elites can agree upon is that the Federal Reserve should rescue their private wealth, regardless of cost or consequences.

America’s divides are proliferating and deepening by the day. The key political and economic divides predate the pandemic, but the pandemic is acting as a catalyst, creating new divides and exacerbating existing ones.

Let’s start with the politicization and subsequent polarization of re-opening the economy. In a reasonably sane, coherent society, this issue would be subject to common sense debates about risks, trade-offs, policies, responses to new data, etc.

But American society is neither sane nor coherent, so what should be a non-partisan debate was immediately politicized, to the absurd extreme that “progressives” must favor continuing strict lockdowns lest they be accused of being “conservative.”

The erosion of middle ground and the disappearance of de-politicized policy debates is a clear sign that a society is doomed to disintegration not just of the social order but the political and economic orders.

Author Peter Turchin has described the disintegrative stage in his book Ages of Discord, in which he modeled a Political Stress Index comprised in part of these three dynamics:

1. Stagnating real wages due to oversupply of labor.

2. Overproduction of parasitic elites.

3. Deterioration of central state finances.

The pandemic has catalyzed the oversupply of labor and the deterioration of central state finances, and illuminated America’s vast overproduction of parasitic elites, most of whom feed off various cartels and monopolies or the financial system, which has been saved yet again from gravity by the super-wealthy’s most important protector, the Federal Reserve.

The pandemic has created new divides that highlight existing extremes of inequality. Those Americans in poor health and in jobs that cannot be performed at home are at greater risk than healthy Americans who can work at home.

Those Americans whose regular pay was considerably less than unemployment plus the federal bonus have zero financial motivation to return to work, while overpaid parasitic elites are getting paychecks even if they’re performing little or no work.

The top 10% who own 90% of all assets are breathing a sigh of relief that the Federal Reserve printed up a couple of trillion dollars to save the stock market from a well-deserved collapse, while the bottom 80% who own a tiny slice of America’s wealth are not directly impacted by the market’s swoon or recovery.

The top 10% has financial reserves to smooth out any disruptions arising from the pandemic and policy responses, while the majority of the bottom 80% have few if any reserves or resources to tap.

Meanwhile, the splintering of America’s failing elites has been amplified by the pandemic. The moral decay of the elites is as visible as their insatiable greed. The two are of course intimately connected: once the morals of the ruling Elites degrade, what’s mine is mine and what’s yours is mine, too.

I’ve previously covered two other key characteristics of an empire in terminal decline: complacency and intellectual sclerosis, what I have termed a failure of imagination. We can see both complacency and intellectual sclerosis in the elites’ response to the pandemic.

Michael Grant described these causes of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.

This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.

This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all.

And so we’ve reached the precarious state of disunion in which the only thing the warring elites can agree upon is that the Federal Reserve should rescue their private wealth, regardless of cost or consequences. America is doomed, not because its citizenry is incapable of adaptation, but because its ruling, warring elites are incapable of surrendering any of their wealth, power or control, or allowing anything to threaten their precious cartels and monopolies, starting of course with the key controlling monopoly, the Federal Reserve.

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My recent books:

Audiobook edition now available:
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

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After the season’s first heatwave last weekend and tens of thousands, if not hundreds of thousands of people flocked to beaches in Southern California, ignoring social distancing rules, Gov. Gavin Newsom is expected to close all state beaches and parks starting Friday, according to a memo first seen by CNN.

“We wanted to give all of our members a heads up about this in order to provide time for you to plan for any situations you might expect as a result, knowing each community has its own dynamics,” the memo reads.

The closure could be announced as soon as Thursday, and state park officials, along with local law enforcement, will support efforts to close the sites, the memo adds.

The memo comes as overcrowded beaches were seen in Orange County and Ventura County last weekend as residents poured onto the coast looking for relief from the heatwave.

On Monday, Newsom blasted beachgoers:

“This virus doesn’t take the weekends off. This virus doesn’t go home. We have to manage and augment our behavior,” he said. “The only thing that will set us back is people stopping practicing physical distancing.”

At one point, estimates showed at least 90,000 beachgoers flocked to Newport Beach in Orange County.

Photos of the coast crowds have circulated social media who appear to be breaking social distancing rules.

Newport Beach appears to be pretty crowded, as Southern California is hit by a heat wave. https://t.co/abDlBmkZo0 pic.twitter.com/1DDSjvPhT5

— NBC Los Angeles (@NBCLA) April 25, 2020

The memo comes as the state is preparing to reopen the economy in phases. Newsom said the state is now in the first stage, as opening retail businesses and schools could be “weeks away.”

As confirmed cases top one million with more than 60,000 deaths across the country, President Trump is quickly trying to reopen the economy amid threats a second coronavirus could be lurking around the corner.

Authored by Steve Watson via Summit News,

The communist Chinese government was painfully aware that bio-labs including the Wuhan Institute of Virology, where it is thought the coronavirus could have originated, were in desperate need of safety upgrades to prevent accidental leaks.

An article in Asian Review notes that Chinese President Xi Jinping has been discussing the need for “biosafety” improvements for the past year.

“Beijing had been preparing biosecurity law, but not fast enough,” the report notes, adding that “China has been preparing for it carefully for quite a long time, conscious of how the country was perceived overseas.”

The report goes on to explain that France, a country instrumental in the construction of the lab, found a significant flaw in the framework for ensuring the safety of virus research in China.

“China wanted to catch up with advanced countries in biotech research as soon as possible. To that end, it needed to establish related laws on par with those in countries like France, the U.S. and Germany.” the report continues.

A report was received by the Chinese parliament last October, detailing 8 points where safety needed to be upgraded:

1) The prevention and control of major emerging infectious diseases, animal and plant epidemics.

2) Research, development and application of biotechnology.

3) Ensuring biosecurity in laboratories.

4) Ensuring the security of China’s biological resources and human genetic resources.

5) Preventing the invasion of alien species and protect biodiversity.

6) Dealing with microbial drug resistance.

7) Preventing bioterrorism attacks.

8) Defending against the threat of biological weapons.

The report notes that “the measures were not introduced in time for China to prevent the Wuhan outbreak. Instead, information was initially covered up and China’s first steps were delayed.”

In February, when it was clear that the outbreak was spreading, “Xi urged top leaders to enhance the country’s governance capacity for biosafety and to enact “a biosecurity law” at the earliest possible date,” according to the report.

This only enhanced the suspicions of those who believe the virus leaked from the lab.

Since that time, China has denied the US access to the Wuhan lab, according to US Secretary of State, Mike Pompeo. The facility has come under increased scrutiny after it was revealed that the US government under the Obama administration funded research there for a number of years.

In addition, a world renowned Russian microbiologist claimed last week that the novel coronavirus responsible for the COVID-19 pandemic was the result of Wuhan scientists doing “absolutely crazy things” in their lab.

Furthermore, a University of Texas Medical Branch lab director who visited the Wuhan institute in 2017 says that it would be foolish to dismiss the idea that the coronavirus escaped from the facility, and that “Accidents happen” in such labs.

Footage from inside the lab, broadcast in 2018, showing scientists working on coronavirus in bats, has increased scrutiny on the lab even further.

This morning, European energy giant Royal Dutch Shell made history when it became the first supermajor to cut its dividend for the first time since the second world war as the coronavirus pandemic cut quarterly earnings in half and forced the oil major to slash spending in order to preserve liquidity. The board of Shell said it had decided to reduce the quarterly dividend to 16 cents per share from 47 cents.

“Shareholder returns are a fundamental part of Shell’s financial framework,” Chad Holliday, chair of the board of Royal Dutch Shell, said in a statement.

“However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the Board believes that maintaining the current level of shareholder distributions is not prudent.”

According to the FT, the cut in the payout by two-thirds is part of a “reset” of the Anglo-Dutch group’s dividend policy and not a short-term measure, amid concerns about economic growth as well as questions over future oil prices in a world that shifts towards cleaner fuels.

Net income adjusted for cost of supply, the company’s preferred profit measure, dropped to $2.9bn in the three months to March 31. This compared with $5.3bn in the same period the previous year and analysts’ estimates of $2.3bn.

The company is taking the first steps of a “fundamental shift for Shell over the next 30 years”, CEO Ben van Beurden told reporters on Thursday, “balancing short-term needs with long-term goals” to become a net-zero emissions business by 2050. “Today is a very difficult day for the company,” said van Beurden. “But it is the prudent thing to do . . . We absolutely want to preserve the financial resilience of the company even though we have no idea what could happen.”

van Beurden described energy market conditions through the first three months of the year as “extremely challenging.”

“Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell,” he added.

Shell warned that the situation would be even “more severe” in the second quarter, with oil prices at the start of the year likely to be a “high point” for 2020. Brent crude, the international benchmark, is trading around $24 a barrel having hit an 18-year low last week. “We don’t expect a recovery in demand in the medium term,” Mr van Beurden added.

Alongside the cut to its dividend, Shell announced it would not continue with the next tranche of its share buyback program. Since the launch of the program, the oil major said it had bought back almost $16 billion in shares for cancellation.

“On the face of it, the dividend cut and cancellation of share buybacks may be seen by some shareholders as a negative move in the short term,” David Barclay, senior investment manager at Brewin Dolphin, said in an email.

Energy consumption worldwide could drop 6% in 2020, the International Energy Agency said on Thursday, equivalent to India’s total annual demand. van Beurden said it was “hard to say” if oil demand would ever return to previous highs.

Shell was already under pressure before the coronavirus outbreak with weaker refining and chemical margins and challenging economic conditions forcing the company to slow shareholder distributions and re-evaluate debt reduction targets. Since then, in response to the pandemic, Shell has said it will suspend its share buyback program altogether and announced that capital expenditure would fall to $20bn or less this year, from initial plans for $25bn. It also said its operating costs would decline by $3bn-$4bn.

The current environment stands in stark contrast to last year, when Shell’s cash bonanza prompted it to say that oil prices above $60 a barrel could enable the company to distribute at least $125bn to shareholders in the form of dividends and buybacks over the next five years.

The CEO said that pledge was “against a totally different backdrop”, adding that Shell was preparing for a deep and protracted downturn. Not cutting the dividend would have left Shell “without options” to reposition the company for the future. The annual payout will fall from almost $15bn to just over $5bn, freeing up $10bn of capital.

Commenting on the move, Tom Ellacott at Wood Mackenzie said: “A permanent dividend reset could also accelerate the strategic pivot [from Big Oil] to ‘Big Energy’ through the reinvestment of more retained earnings in the youthful zero-carbon energy sector.”

Richard Buxton, head of UK equities at Merian Global Investors, who counts Shell among his top 20 holdings, said he was “absolutely delighted” at the cut, adding: “We could not square the circle of investing in the energy transition, managing long-term reserves and their ultimate decline with over-distribution.”

Until now, oil companies – especially dividend aristocrats – had largely pulled on a series of financial levers, also including bond issuance and securing new credit lines, to safeguard their dividends. Yet analysts said these measures were not enough to offset the hit to cash flows. This week BP maintained its dividend despite a 66 per cent drop in first-quarter profits but said it would review the shareholder distributions in the second quarter. However, last week, Norway’s Equinor became the first oil major to cut its dividend this earnings season. It raised concern that other energy giants may follow suit.

Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Oil companies have been in crisis mode as lower energy prices and a collapse in demand for fuels and chemicals puts intense pressure on their finances, with severe lockdowns and travel bans in place across much of the world.
 

For the fifth day in a row, gold has been clubbed like a baby seal on heavy volume in the pre-US-equity-market-open…

Over 15,000 contracts were pushed through in those few minutes with 8,500 on the downside (around $1.5 billion notional)

Silver is also getting hit…

Notably, Bitcoin has soared higher in the last few days, playing catch up to gold from the “sell everything” move in March…

As a reminder, as BofA recently noted, The Fed can’t print gold (or Bitcoin).