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Authored by Sven Henrich via NorthmanTrader.com,

Nasdaq green for the year. What crisis? The Fed’s got this. Only took $2 trillion in balance sheet expansion in four weeks and all is well again.

Non. Sense.

Indeed I can show you just one chart that suggests, if history repeats, that this entire rally will make ways to new lows.

Before I do discuss this chart however appreciate this: The Fed is creating the largest asset price distortion known to man, totally decoupling prices from reality again. They already did so in the Fall of 2019 with their ill advised repo and balance sheet expansion program, but now have expanded their balance sheet by over $2 trillion in just 4 weeks:

For added historic context: The Federal Reserve has increased its balance sheet by $2.6 trillion since the August 2019 lows. That’s a near 70% increase in just 8 months representing 12% of US GDP. The Fed balance sheet expansion of $2 trillion in the past 4 weeks represents over 9% of US GDP.

Don’t anybody think or even try to tell me or anybody else that these monumental numbers do not have an impact on asset prices. Indeed the numbers are becoming so absurd and historically incomparable they lack any context to use to make adequate comparisons. I suspect not even the Fed has the slightest clue as to the side consequences they are unleashing here. All of this comes with zero rates sprinkled on top of it, as well as ongoing repo and of course the additional announced loan and rescue programs announced. Who can keep track of it all?

It’s a liquidity bonanza unlike any ever seen. Hence it’s no surprise that Wall Street is once again the following the Fed train:

Never forget. pic.twitter.com/FQQY6P5sHq

— Sven Henrich (@NorthmanTrader) April 14, 2020

That’s all you get from Wall Street these days. Chase the Fed in the belief the Fed will again remain in control, even though it had lost control for the harrowing weeks when the global stock market simply collapsed between February and March.

But nobody has learned their lesson. Not the Fed, not Wall Street and certainly not investors.
Nobody has learned a thing as the distortions that have led investors off the cliff are once again being  formed, but even more extreme this time around.

Consider the following:

US equity prices are once again valued at 132% market cap to GDP as the tech sector is again green on the year while the entire economic structure is collapsing around us.

Economic activity falling to levels worse than the 2009 crisis:

As is Q2 GDP, here the latest New York Fed Nowcast projecting a Q2 GDP of -7.8% likely to get worse with projections of -20% to -30% making the rounds:

Clothing sales anyone?

Everything is going vertical either to the upside or the downside and all of it represents they greatest economic shock in our lifetimes:

M1 money supply:

Commercial Loans:

But according to some none of this matters. Nothing matters. The Fed has our back hence we can justify this:

January 3rd 2020: “What if I told you that by April we’d have 22M unemployment claims, -20% GDP growth, -8% retail sales and over 35,000 Americans dead from a deadly virus and $NDX would still be green on the year?”

— Sven Henrich (@NorthmanTrader) April 17, 2020

Sure you get $AMZN to benefit from the entire retail sector being shut down and $NFLX benefitting from Americans sitting at home binge watching TV. But this does not an economy make.

Indeed the entire country on a federal, state and corporate level is needing bailouts. The entire country can’t sustain itself on its own 2 feet only a few weeks into a crisis:

Bailout nation.
It’s almost as if the entire system is broke and can’t function without artificial liquidity injections and debt based bailouts. https://t.co/0YKPBhmvDB

— Sven Henrich (@NorthmanTrader) April 18, 2020

And with this backdrop you want to justify a market valued at 132% market cap to GDP?

Surely you’re joking right? There are some that claim that markets are forward looking and see better things ahead. Nonsense. These markets saw nothing coming and ran right into disaster and now they’re simply jumping on the Fed liquidity train again, the very train that got them trapped in the first place.

No lesson has been learned. How do we know that? Because the very same mistakes are again repeated and driven to new and even more historic extremes.

Again the entire market is driven by a handful of stocks:

While the broader markets is again showing pronounced relative weakness:

Indeed most telling: Equal weight again is lagging massively:

While $SPX made it back to the October 2019 lows $XVG equal weight has barely moved in the last week and remains far below the October 2019 lows. The message? It’s again a market driven by just a handful of stocks. Which means we are again staring at a vastly distorted and dislocated market.

This is the best market $2 trillion in central bank intervention can buy. A distorted overvalued market completely disconnected from the fundamental picture.

Nasdaq green on the year. Those condemned to unemployment salute you:

No, all this is has the whiff of the last crisis except worse:

This crisis is following the same script as the last one 12 years ago:
The poor get poorer, the middle class shrinks, the big boys get bailed out and the bottom 90% gets settled with all the new record debt.
And then central bankers get “Hero” magazine covers.

— Sven Henrich (@NorthmanTrader) April 17, 2020

Screaming tech stocks in some cases making new all time highs, bailed out hedge funds with millions of Americans unemployed and standing in food bank lines.

What a planet. No, what’s happening here is the Fed creating another circus with money chasing again the same stocks they did during the bubble run of 2019 while ignoring the message of the broader market, yields and a historic collapse in fundamentals to boot, which brings me to just one chart:

The chart that says the lows are not in. The chart that says that the Fed’s hand won’t last the round. And it’s a simple technical chart, one that has shown us the roadmap already years ago.

Look closely:

What happened in 2000 and 2007? Markets topped and broke their uptrends and experienced a very steep correction from the upper monthly Bollinger band to below the lower monthly Bollinger band. In doing so S&P 500 futures broke below their monthly 20MA.

Guess what happened in both cases? $SPX rallied back toward the monthly 20MA and that was the end of the line. The bear market rally. The rally that brought optimism back, the rally that said the worst was over, the rally that said the sell-off was over, the rally that said that the lows were in. You know the very things we are hearing now.

And in 2007 and 2000 these 20MA tags then saw markets not only give up all the gains of the rally, but that’s when the real bear markets began and significant new lows were to come.

And guess what? On Friday, during monthly OPEX on the heels of the biggest central bank intervention known to man we hit precisely that 20MA fulfilling the very same script.

And look even closer:

That monthly 20MA coincides perfectly with the monthly 5 EMA another key MA offering confluence resistance. Coincidence?

Doubtful. This was a key technical tag.

But the month is not over. But what appears clear here is that how the month closes is critically important. If the Fed can maintain control and entice investors to keep chasing a fundamentally not justified multiple expansion then we should see price close above these two MAs by the end of April.

Should the Fed lose control and fundamentals will start dominating the price action then we should see the month close below these two MA’s. In 2000 and 2007 it was the month after the 20MA tags that the price action showed significant retraces. If we see a replay then May could shape  up to be a very difficult month for bulls.

Who will win out here? We can’t know yet. But we have a clearly defined technical line in the sand. The fundamental and valuation picture is clear: Markets are now again vastly overvalued here, but the Fed is again distorting the asset price valuation picture.

From our perch the bullish chart patterns outlined in $SPX (pattern 1, pattern 2) and $RUT have played out. Now a different set of signals is suggesting something else altogether may be shaping up. We will know more by month end whether bears are able to regain control, no doubt a tall order given the ungodly sums of liquidity thrown at these markets. Yet the Fed hardly can afford failure. Imagine losing control over a market after throwing in over $2 trillion in liquidity in just a month.

Investors have a choice to make: Believe they can chase a highly valued, internally vastly divergent market amid economic carnage in the hopes of the Fed retaining control or they can be aware that just one chart suggests an entirely historic script could play out, one that suggests not to chase, but rather take advantage of the current strength in markets and perhaps choose a different course of action.

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At the conclusion of a week that saw the already-tense relationship between the US and China further strained by reports of CPC-sanctioned skullduggery during the early days of the outbreak in Wuhan, President Trump decided to kick things up a notch during his Friday task force press briefing, where he said for the first time that if Beijing was “knowingly responsible” for unleashing the virus on the world, then it should face “consequences.”

Here’s the exact quote, courtesy of Reuters:

“It could have been stopped in China before it started and it wasn’t, and the whole world is suffering because of it,” Trump said.

“If it was a mistake, a mistake is a mistake. But if they were knowingly responsible, yeah, I mean, then sure there should be consequences,” Trump said. He did not elaborate on what actions the United States might take.

It’s not exactly the forceful accusation of culpability that Trump’s critics – including the Chinese – have made it out to be over the last 24 hours.

Let’s take a step back for those who haven’t been closely following the back-and-forth between Trump and Beijing: Trump triggered a torrent of criticism from the mainstream US and international press by revoking US funding for the WHO pending an investigation into a ‘coverup’ implying that the WHO helped China conceal the seriousness of the outbreak in Wuhan during its early days.

As far as the world knows, China didn’t officially notify the WHO and the rest of the international community about the outbreak until New Year’s Eve, 2019. Though during the weeks before, whispers about an outbreak emerged as 8 doctors from Wuhan tried to warn the public before being abruptly silenced by local police. Beijing has blamed this early suppression entirely on local officials and promised to “nail them to the pillar of shame for all of history.” However, local officials around the country have reportedly defended their actions by accusing Beijing of tying their hands.

And it wasn’t until late January – nearly two months after the outbreak began – that officials in China finally publicly acknowledged something they had known for at least a week: the virus was spreading between humans, and several health care workers had been infected. Though Beijing finally managed to get its arms around the outbreak, it took a herculean effort involving draconian crackdowns that simply wouldn’t be politically feasible in the west.

Then, earlier this week, Fox News reported that US intel suspects the virus may actually have leaked out of a Level 4 bio-safety lab in Wuhan – something we were de-platformed for saying a few months back –  not far from the wet market identified as the true source of origin. That kicked off a round of finger-pointing by the US and China, which had seemingly died down by the time Trump made his comment last night.

Now, as the SCMP reports, academics in Beijing are shrugging the comments off with tough talk, while President Xi and the Politburo likely seethe in secret at even the vaguest notion that China should be made to make restitution to the world for unleashing the virus – if that is indeed what happened.

Victor Gao, a vice-president of the Centre for China and Globalisation, a Beijing-based think-tank, said it was “not meaningful” to guess what Trump would do next, adding there was no justification for “Trump or whichever politician in the United States” to blame China.

“Actions of prejudice and bigotry will be as bad as the coronavirus itself,” Gao said. “It will come back to haunt them one day, one way or another”.

Global Times editor Hu Xijin, a prominent mouthpiece for Beijing, tweeted a cryptic criticism of Trump and the US response to the virus, snidely claiming that Americans are very “good tempered” for tolerating the weak response that has allowed tens of thousands of Americans to die.

President Trump couldn’t understand why China’s death toll is much lower than US’s. It’s because Chinese govt has adopted scientific&effective control measures.Loose political system of the US allows more than 4000 people die of pandemic every day. Americans are so good tempered.

— Hu Xijin 胡锡进 (@HuXijin_GT) April 19, 2020

But will the world ever know even an accurate approximation of how many died in Wuhan, not to mention the rest of the country? Whether we learn more about the early days of the outbreak, or not, could have a big influence on the US-China relationship from an economic and even military perspective in the weeks, months and years to come.

Authored by Michael Snyder via The Economic Collapse blog,

Fear of COVID-19 has unleashed economic chaos on a scale that has already surpassed anything that we witnessed during the last recession, and as you will see below, we are now being warned that “the worst is yet to come”. 

Many Americans are hoping that things can start to return to normal as the U.S. economy “reopens” in the weeks ahead, but the truth is that we are still in the very early chapters of this crisis.  In fact, it is being estimated that we are only one-tenth of the way through this pandemic, and by “flattening the curve” we have actually extended the economic pain.  You see, the truth is that most Americans are going to end up catching this virus one way or another.  All of the “shelter-in-place” orders have temporarily slowed down the spread of this coronavirus, but once they are lifted it is inevitable that we will see new waves of people becoming infected.  And if you think that a vaccine will be the golden ticket that gets us out of this mess, you might want to reconsider that belief, because there has never been a successful vaccine for any coronavirus.  Of course it is possible that scientists could come up with something this time around, but if the virus mutates significantly that could render any potential vaccine absolutely useless.

In the days ahead, there will be a tremendous amount of debate about the correct way to fight this virus, but meanwhile the U.S. economy will continue to deteriorate.

In fact, Reuters is reporting that economists are now projecting that the U.S. economy is contracting “at its sharpest pace since World War Two”…

The deepening economic slump was also amplified by other data on Thursday showing manufacturing activity in the mid-Atlantic region plunged to levels last seen in 1980 and homebuilding tumbling by the most in 36 years in March.

The reports followed dismal reports on Wednesday of a record drop in retail sales in March and the biggest decline in factory output since 1946. Economists are predicting the economy, which they believe is already in recession, contracted in the first quarter at its sharpest pace since World War Two.

Yesterday, I documented the fact that we are in the midst of the largest tsunami of job losses in U.S. history by a very wide margin.

In fact, we are absolutely obliterating the old records, and that truly puts us in unchartered territory.  And as bad as things have already gotten, one prominent expert told Reuters that “the worst is yet to come”…

Economists are estimating the economy contracted as much as 10.8% in the first quarter, which would be the steepest drop in gross domestic product since 1947. They say the massive fiscal package will likely provide little cushion for the economy.

“The economy is in a downward spiral where job losses beget job losses and the federal government emergency relief checks will not be enough to turn the tide,” said Chris Rupkey, chief economist at MUFG in New York. “The recovery is looking less V-shaped by the day as the deeper we fall, the harder it will be for the nation to climb back out of this deep hole the pandemic has dug for the economy. The worst is yet to come.”

As areas around the country start “reopening for business”, some of the jobs that were lost will come back.

But the truth is that millions of those jobs are gone permanently, and large numbers of the businesses that were closed down will never open again.

For the foreseeable future, a lot of Americans are going to avoid going to restaurants, bars, movie theaters, shopping malls and other businesses that require close human interaction.  One expert that was interviewed by the Los Angeles Times says that for the next few years we need to accept the fact that the world “will be totally different than what we are used to”…

“The world that we are going to live in for at least the next two to three years will be totally different than what we are used to,” said Sung Won Sohn, president of SS Economics and professor at Loyola Marymount University.

“Because of the psychological shock that we have experienced, we are going to be more cautious, and we will probably spend less and save more, and we will have fewer contacts with other individuals,” he said. “We are going to be suspicious about things, [such as] whether people we are meeting have the virus and will the economy fall back down again.”

The fear that this pandemic has created is going to be with us for a very long time, and it is going to cause enormous shifts in economic behavior even after the U.S. starts “reopening”.

In an environment like this, very few people are buying vehicles, the housing market is already imploding all over the nation, and retailers are having a very difficult time envisioning any sort of a positive future for their industry at this point.

But at least we will all be getting big, fat socialist bailout checks from the government, right?

Actually, they won’t be that big, and for most Americans the checks will only get them through about one month.

So once that money is gone, will the federal government send us another round of “universal basic income” checks?

Now that they have gone down this rabbit hole, the federal government is in danger of sparking civil unrest if they don’t keep the checks coming.  In fact, Jim Rickards is entirely convinced that large scale “social disorder” is on the way…

Looting, burglary and violence in the midst of a state of emergency are the shape of things to come.

The veneer of civilization is paper-thin and easily torn. Most people don’t realize how fragile it is. But they’re going to learn that lesson, I’m afraid.

Expect social disorder to get worse long before it gets better.

Unfortunately, Rickards is right on point, and I have also been warning about “great civil unrest” for a very long time.  The delicately balanced debt-fueled prosperity that we had been enjoying for so many years has now been shattered, and things are going to get really ugly in this country.

And this coronavirus pandemic is not going away any time soon.  Over the last 24 hours, the number of confirmed cases in the U.S. has jumped by more than 30,000 and the death toll has risen by more than 2,400 even though most of the nation is currently shut down.

Ending the lockdowns will give a boost to the economy, but it will also cause the virus to start spreading faster, and once that happens we could see another round of lockdowns.

In the end, our battle with COVID-19 will not be over until the virus has swept through most of the population, and we are not going to reach that point for quite a while.

We all know that one of Elon Musk’s favorite things to do is to opine on things he has no idea about while trying to sound smart. And this weekend we found out, surprisingly, that not only is Musk not a physicist and not an engineer, but he’s also not a doctor.

The internet was offered up a treat when a doctor interrupted an ongoing Twitter discussion Musk was having about health issues related to the coronavirus. 

While trying to defend the idea that doctors are rushing to put patients on intubation – which is an argument Musk was seemingly making to defend his half-assed gesture of sending hospitals BiPAP machines instead of ventilators – Musk at one point said it depended on patient “lung strength”.

One doctor immediately responded, tongue-in-cheek: “Please send tests for lung strength.”

It was that response that went viral and drew attention to Musk’s comments. So many people weighed in, in fact, that Musk actually deleted his Tweet, a rare move of acknowledging defeat from a guy that called someone else a “pedo” and then took them all the way through a trial. 

Needless to say, however, doctors on social media didn’t seem to enjoy Musk’s take:

Hi @elonmusk. Appreciate your interest!
What do you mean by “lung strength”? Diaphragm TF? Pocc? P0.1? Compliance?
What do you mean by “natural lung pressure”? PEEP? PEEPi? Pmus? Elastance? Chest wall or lung?
Not familiar with your terms.

COI: Anesthesiologist and Intensivist

— Vatsal Trivedi (@VatsalTrivediMD) April 17, 2020

A sad addition to the list of things that should never happen but are happening in #COVID19 times! @elonmusk giving advise on how to titrate PEEP! “Natural lung pressure” and “patient lung strength”? What in the actual f*** https://t.co/HQR1lSYqUg

— Snigdha Jain (@snigdhajain89) April 17, 2020

Thank you. And No. It’s noninvasive positive pressure ventilation. Nor is there such a thing as “lung strength” (he prob means the dynamic compliance which he clearly doesn’t understand- and why would he?). I don’t understand how to make electric cars, and google won’t fix that.

— Lara Christina Murphy MD (@DrLaraCMurphy) April 18, 2020

And others on social media went off too:

Elon Musk has started playing doctor and giving awful medicine takes and tech nerds are eating it up and this is…bad pic.twitter.com/6cdzFqU6XE

— your best friend (@SortaBad) April 17, 2020

“Patient Lung Strength” is a very real thing and not something some tech bro made up to sound smart pic.twitter.com/QKFw5f8o0h

— MarkLindsay MDPhD (@MarkELindsay) April 17, 2020

1/ I’m sad to learn Dr. @elonmusk deleted this tweet after his colleagues in the medical & epidemiological communities began asking that he share his insights & data. Please, give Dr. Musk some space; don’t let his important voice go quiet. cc: @virenkaul @mdornic @oliverdarcy pic.twitter.com/TIWcVGa7TZ

— Montanner Skeptic (@montana_skeptic) April 18, 2020

Seriously, deleting the tweet was the worst decision Musk could have made.

I read the tweet, made some jokes on here & to my wife & let it go.

Now I won’t let it go. I can’t let it go. I simply don’t have the lung strength. It’s beyond my natural lung pressure to let it go. pic.twitter.com/YSGVgsTNcT

— S & Pure 666 (@NickyTaleb) April 18, 2020

Good god man will you just let the doctors do their job with out adding your virtue signaling nonsense!

— Sub-Additive VaR (@blane9171) April 16, 2020

Musk’s penchant for spewing bullshit in fields which he has no qualifications or know-how is why we have widely covered videos by Thunderf00t on YouTube. The name “Thunderf00t” is the alias of Phil Mason, a British chemist and video blogger who has become well-known for posting YouTube videos that criticize, among other things, pseudoscience. 

He famously dismantled The Boring Company’s tunnel reveal in a scathing video at the end of 2018 and most recently poured cold water on Musk’s idea of a Roadster with rocket boosters.

But it’s been a while since an expert in a field stepped in and made Musk look foolish – that’s a task Musk has been performing well on his own, arguing with local officials over closing his factory, disregarding the global pandemic, insulting the frontline healthcare workers trying to save lives and trying to pass off $1,000 sleep apnea machines as $50,000 ventilators while demanding social media testimonials about how wonderful he is.

As these gems were unfolding, his brother and Tesla board member, Kimbal Musk, appeared to be bilking money from his restaurant staff. 

Just another day in the life of “Dr. Musk” – which was at one point trending on Twitter.

Authored by Derrick Broze via TheMindUnleashed.com,

On Monday, U.S. Attorney General William Barr, acting director of national intelligence Richard Grenell, and other senior officials called on a federal judge to prevent the disclosure of files related to the role of the government of Saudi Arabia in the September 11 attacks. The officials told the judge in the civil case that the release of the files would endanger national security.

The files are being sought by families of the 9/11 victims who have spent the last two decades attempting to uncover the truth about the attacks. The families filed a lawsuit in federal district court in New York in 2017 as part of their effort to uncover the role of the Saudi government. What is publicly known is that the alleged 9/11 hijackers had a relationship with Saudi government officials. As Pro Public reported, at the 2019 White House September 11 memorial, U.S. President Donald Trump promised the families he would help them uncover the truth about 9/11. He made similar promises while he was campaigning for president.

“He looked us in the eye on 9/11, he shook our hands in the White House and said, ‘I’m going to help you – it’s done’,” Brett Eagleson, a banker whose father was killed in the World Trade Center, told Pro Publica.

 “I think the 9/11 families have lost all hope that the president is going to step up and do the right thing. He’s too beholden to the Saudis.”

The Trump Administration stated that the national security threat was so great that even sharing the reasoning behind the request for secrecy could cause harm. According to Pro Publica, AG Barr told the court that public discussion of the issue “would reveal information that could cause the very harms my assertion of the state secrets privilege is intended to prevent.”

Pro Publica notes that four statements from FBI and Justice Department officials were also under seal and can not be seen by the public. Another five statements from FBI, Justice Department, and CIA officials were only seen by the judge and could not even be shared with the families’ lawyers. Steven Pounian, a lawyer for the families also suggested that “there must be some deep, dark secret that they’re still trying very hard to hide after almost 20 year,” and that it “might be a Saudi government secret.”

“But how can these be secrets that still need to be kept from the American people after all this time?”

– Steven Pounian, attorney for the 9/11 victims families

The call for secrecy was questioned by three Senators who asked the Justice Department’s inspector general to investigate why the FBI has refused to release information about Saudi connections. The information is being sought as part of a subpoena filed by the 9/11 families in 2018. Senators  Charles Grassley of Iowa, Charles Schumer of New York, and Richard Blumenthal of Connecticut questioned the FBI’s decision to keep the files classified.

“The September 11 attacks represent a singular and defining tragedy in the history of our Nation. Nearly 20 years later, the 9/11 families and the American public still have not received the full and transparent accounting of the potential sources of support for those attacks to which they are entitled,” the senators wrote to Justice Department Inspector General Michael Horowitz.

Barr stated that Justice Department guidelines set down by the Obama administration in 2009 prevented the government from asserting a state secrets claim as a method of concealing illegal behavior or embarrassing actions. Barr told the judge that he believed these guidelines had been met. Unfortunately, in the absence of any further information the American public is resigned to trusting Barr, Trump, and anonymous FBI and CIA agents.

Unfortunately, William Barr does not have a record of trustworthy actions. As far back as 1989 Barr discussed his belief that the FBI could legally abduct people in foreign countries without the consent of the foreign government. The opinion was revealed in a leaked legal memo authored by Barr while he was serving as the head of the Justice Department’s Office of Legal Counsel (OLC). Barr chose to withhold the full memo and asked the public to trust his conclusion.

In the weeks after 9/11, when the U.S. government began to seize powers to roundup foreign citizens, spy on Americans, and torture anyone accused of terrorism, Newsweek noted that Barr had played a role in paving the way for such actions:

“Now the Bush administration and Congress seemed primed to do just about anything to foil future attacks. Justice Department lawyers have been told to take a fresh look at “everything,” one official said. Perhaps the most startling idea under examination would be a new presidential order authorizing secret military tribunals to try accused terrorists. The idea first occurred to former attorney general William Barr after the bombing of Pan Am Flight 103 over Lockerbie, Scotland, in 1988. Barr, at the time chief of the Justice Department’s Office of Legal Counsel, got the idea after learning that his office was used during World War II to try—in secret—German saboteurs who were later hanged. The idea was rejected, but it’s being revived on the theory that terrorists are de facto military “combatants” who don’t deserve the full run of constitutional rights.”

More recently, Barr has been involved in perpetuating the myth that encryption is a tool that only terrorists and dangerous criminals use and launching an “orwellian pre-crime program.” In October 2019, MintPress News reported that Barr had recently laid the groundwork for this new program:

“Indeed, since becoming Attorney General under President Trump, Barr has spearheaded numerous efforts to this end, including pushing for a government backdoor into consumer apps or devices that utilize encryption and for a dramatic increase of long-standing yet controversial warrantless electronic surveillance programs.

On July 23rd, Barr gave the keynote address at the 2019 International Conference on Cyber Security (ICCS) and mainly focused on the need for consumer electronic products and applications that use encryption to offer a “backdoor” for the government, specifically law enforcement, in order to obtain access to encrypted communications as a matter of public safety.”

Barr would go on to issue a memorandum to all U.S. attorneys, law enforcement agencies, and high level Justice Department officials calling for the implementation of a new “national disruption and early engagement program” aimed at detecting potential mass shooters before they commit any crime. This memo called for the DOJ and FBI to “refine our ability to identify, assess and engage potential mass shooters before they strike.” Barr called for the pre-crime program to be implemented in early 2020.

The blocking of state secrets related to the September 11 attacks is just the latest in a long line of cover ups and corrupt practices by Attorney General William Barr.

We didn’t really need any more confirmations. In recent weeks, as the US economy came to a screeching halt because of the coronavirus pandemic, we have seen banks take over $20 billion in reserves  in anticipation of a looming default wave (a five-fold increase if not nearly enough based on historical precedent)…

… Moody’s predicting that as many as 30% of Americans with home loans – about 15 million households – could stop paying their mortgages if the U.S. economy remains closed through the summer or beyond…

… with the number of households that have already stopped paying their loans soaring by 1,496% in just six weeks…

… and even JPMorgan in the process of shutting down its entire net interest margin origination platform, by getting out of new loans and HELOCs and boosting the standards on new loans.

These are all clear signs that a wave of mass defaults has started and is about to break all across America as tens of millions of household suddenly lose their jobs, and yet with the Fed now openly buying investment grade and some junk bonds, there is a terminal disconnect between bond pricing (i.e., default probabilities) as a result of the Fed’s interventions, and the underlying cash flow dynamics. Alas, said dynamics are becoming dire especially for lower rated credits, i.e., those with the most debt, and according to Moody’s its list of distressed credit names, those rated B3 Negative and lower, soared to its highest tally ever – 311 companies – with Services, Oil & Gas, Gaming, and Restaurant sectors the largest contributors.

That tops a former peak of 291 companies, reached during the credit crisis of 2009 and the commodity-related downturn in April 2016. At 20.7% of the total rated spec-grade population, the list also shot up above its long-term average of 14.8%, and closing in on its all-time high of 26.1%. This spike is the result of the confluence of a coronavirus outbreak, plunging oil prices, and mounting recessionary conditions, which created severe and extensive credit shocks across many sectors, regions and markets, the effects of which are unprecedented. New companies added to the B3N list during the first three months of the year numbered 133, with 110 added in March alone. Speculative-grade companies with weak liquidity and poor refinancing profiles, that are also in the most-exposed sectors, dominated recent negative rating actions.

The last, and perhaps least, confirmation that the default endgame has arrived came from Goldman which late last week reported that the US default cycle has officially started, with the bank forecasting a 13% default rate, which while aggressive is well below Moody’s own forecast of slightly above 14% and on par with the financial crisis. Here is Moody’s comment on the coming default wave: “Our baseline default forecast is for the US spec-grade default rate to end 2020 at 13.4% and edge higher, to 14.4%, by the end of March 2021 — almost matching the peak of 14.7% recorded in 2009 during the credit crisis (see Exhibit 4). This forecast is underpinned by our expectations of a sharp downturn in the global economy during the first half of the year and of the US unemployment rate jumping to 8.7% in Q2 before easing to 6%-7% in the subsequent three quarters. In our baseline default forecast we further assumed US high-yield spreads will increase and remain elevated at recessionary levels in the next two quarters.”

Under Moody’s pessimistic scenario (red line), which assumes that the virus will persist into 2021 and create wider and deeper economic disruptions, the US default rate will rise to 17.7% a year from now. Ominously, Moody’s admits that the likelihood of its pessimistic  forecasts crystallizing is “higher than it would be in more benign cycles. This is because there is still a high degree of uncertainty around when the coronavirus pandemic will be contained, and how quickly economic activity will return to normal.”

Perhaps even more notably, Goldman is quick to pour cold water over speculation that the Fed’s actions may somehow ease the coming default wave, writing that “some observers have expressed optimism that the Fed’s recently-expanded policy actions may help ease the pressure on HY defaults. We disagree and continue to point to the severity of the economic downturn as a key driver of HY defaults. In our view, the Fed’s expanded policy actions will not translate into material fundamental improvement for the weak HY balance sheets”

Bank of America echoes this and writes that the Fed’s “bold, surprising” announcements “do nothing to address the ultimate credit risk – nonpayment, downgrades, and fallen angels, nor should they, and we thus remain comfortable with our existing views on expected default rates, which we estimate at 9% over the next 12mo.”  However, it will only rise from there as BofA continues to make the argument that “default rates are unlikely to reach their peak levels in the next 12mo, given their historical tendency to rise only gradually following a turn in a given credit cycle. Issuers generally have a runway to deal with maturities, revolver capacity to tap, covenants to waive, and levers to pull to preserve cash by cutting employment and capex.”

As a result, BofA is sticking with its 21% cumulative default rate in HY once the credit cycle turns… which it now has, because going back to Goldman, the vampire squid writes that “the recent news flow suggests the acceleration phase of the default cycle has officially began” and points out what we first reported last week that in Retail, J.C. Penney elected not to make its $12 million scheduled interest payment this week, and has entered a 30-day grace period, with a default now inevitable. At the same time, Neiman Marcus Group was downgraded by S&P to CCC-/Neg O, with the rating agency viewing a restructuring as “more certain in the near term.”

Other defaults included Frontier which also filed for Chapter 11 bankruptcy protection this week, while satellite provider Intelsat skipped its scheduled interest payment ($125 million). Finally, in Energy, offshore driller Diamond Offshore elected not to make its coupon interest payment.

And while Goldman remains “comfortable with our 13% trailing 12-month forecast, expecting financial distress will remain acute, especially for sectors impacted by the compound effect of social distancing and collapsing discretionary consumer spending” the question is just how much higher the real default rate end up being.

One day after Spanish PM Pedro Sanchez announced plans to extend what is about to become a strict, six-week-long countrywide lockdown until May 9, health authorities declared another drop in the rate of new COVID-19 cases and deaths, while also reporting an encouraging drop in patients in severe condition, suggesting that the country’s dramatic efforts have worked – even if doubts remain about the accuracy of the government’s figures.

Of particular concern to lawmakers, particularly members of the Spanish opposition, are the numbers of deaths that have occurred in nursing homes and other private facilities that are especially susceptible to the virus, and whether or not they are accurate, or even whether the government is deliberately trying to obscure the death toll to keep the mortality rate, an already outrageous 10%, from climbing even higher.

To be sure, many experts suspect these double-digit mortality rates seen in Spain, but also in other countries including Italy and the UK, are a sign that the virus is much more widespread than official tallies reflect. The countries with the most thorough testing – countries like Germany and South Korea – have kept their mortality rates at a fraction of 1%, which is certainly encouraging. In the US, the mortality rate has been pretty steady, though it ticked up to ~5% this week.

As the debate over accurate accounting rages in Spain, Sanchez asked parliament during a televised address last night to pass a plan to extend the lockdown but begin easing some of the more-strict measures like one requiring children to remain in the house. The PM hopes to have them playing outside again by the end of the month.

Now, to conveniently support his argument for why Parliament should support his plan, the health ministry has reported its lowest single-day death toll in a month.

Things were also looking fairly rosy in the UK, which reported another 596 hospital deaths, a drop of nearly 300 from yesterday’s tally.

As of 9am 19 April, 482,063 tests have concluded, with 21,626 tests on 18 April.

372,967 people have been tested of which 120,067 tested positive.

As of 5pm on 18 April, of those hospitalised in the UK who tested positive for coronavirus, 16,060 have sadly died. pic.twitter.com/sO9IRInBsu

— Department of Health and Social Care (@DHSCgovuk) April 19, 2020

Elsewhere, in Russia, President Vladimir Putin is being forced to reckon with the reality that SARS-CoV-2 has penetrated Russian society to a much deeper extent than had been previously believed. The rate with which new cases are being reported continued to accelerate on Sunday, as health officials counted 6,060 new cases over the past 24 hours, another record count. The 16% jump brought the country’s total to 42,853. Meanwhile, a total of 361 people have died from the virus. President Vladimir Putin has warned that the outbreak is not yet close to peaking, even after imposing a national lockdown last month.

“This year, [Easter] is being celebrated amid forced restrictions,” Putin said on Sunday, which is the traditional Easter celebration day for all Orthodox Christian churches, like the Greeks and the Russians, among others.

“These are essential in fighting the spread of the disease,” Putin said about the government’s lockdowns and social-distancing guidelines.

Signs of real progress in Europe and the US (not to mention South Korea and a handful of other countries that acted aggressively and achieved outstanding results) have helped ease the sense of terror brought about by a lingering uncertainty: As Gov Cuomo put it, America now knows for sure that these measures – social distancing and lockdowns – have been working to contain the virus.

The question now is ‘to what degree?’, and will we risk a serious relapse if America starts reopening in the next few weeks? However, with Japan enduring a sudden and surprisingly harsh resurgence, and even China doing its level-best to tamp down any reports of new clusters discovered since “the Great Reopening” began, more countries are starting to second-guess their decisions, and on Sunday, South Korea decided to extend its ‘social distancing’ campaigns – just in case.

News this morning about a Hormel-owned food processing plant shutting down are raising fears that, should the lockdown drag on for much longer inside the US, the tears at the social fabric might start to widen.

And as Trump’s critics continue to deride reports about the virus potentially having leaked from a bio-lab, Australia on Sunday called for an “independent, international inquiry” into the origins of the coronavirus in Wuhan, and officials even signaled that the country’s relationship with China – which has helped fuel Australia’s 3-decade economic boom, an expansion virtually unrivaled in modern times – “will change”. And it doesn’t sound likely that they’ll be changing for the better.

More alarming even than Russia and China, however, is Singapore. The city-state won plaudits for containing the coronavirus early on with strict contact-tracing protocols that required contacts to be identified within 2 hours. But for some inexplicable reason, the densely populated city saw its total case count grow by 160% over the past week, with officials reporting hundreds of new infections on Friday and over the weekend, a revelation that is simply staggering in light of the strict lockdown measures that the country is currently under. The country reported a jump of almost 1k new cases on Saturday, as we noted at the time, with most of the new cases tied to packed migrant-worker apartments that are basically like college dorms.

Authored by Tho Bishop via The Mises Institute,

[This is the preface for the Mises Institute’s new online book Anatomy of the Crash: The Financial Crisis of 2020.]

“End the Fed!” Three small words became one of the most improbable and powerful political chants in modern politics thanks to the presidential campaigns of Dr. Ron Paul. With the backdrop of a global financial crisis, the congressman from Texas was able to use the microphone of modern politics, forever changed by the internet and social media, to wake up a generation of Americans to the threat posed by central banks and fiat money. Ideological gatekeepers in Washington and the corporate press found themselves forced to recognize and attack a previously obscure school of economic thought that was now being talked about by college students, activists, and even the odd politician.

Of course, no such movements ever truly happen overnight. The seeds of the international Austrian revival were planted when Ludwig von Mises escaped World War II Europe and made a home for himself in America. With positions at New York University and the Foundation for Economic Education, Mises was able to develop a legion of followers in both academia and the public at large. Several students of his NYU seminar, such as Israel Kirzner, Hans Sennholz, and Ralph Raico, became important Austrian scholars in their own right. It was, however, Murray Rothbard who was perhaps Mises’s most significant mentee, with not only significant contributions to economics, history, and political philosophy, but popular writings aimed at energizing a grassroots Austro-libertarian movement far outside the restraints of the ivory tower.

Rothbard’s potent blend of serious scholarship and dynamic popularism became a model for the Mises Institute, which he helped found with Lew Rockwell in 1982. Since the beginning, the Institute has been both an incubator for new generations of Austrian scholars and a fount of education for the public at large.

Anyone who is familiar with the works of Mises, Rothbard, and the Austrian school understands how far removed they are from the progressive-dominated zeitgeist that has long controlled the most powerful microphones of the West. Although this carries with it the curse of limiting the influence that it could have with policymakers in government, it also means that it benefits from times when the public questions the very foundations of the institutions that it was indoctrinated to believe in.

2008 was such a time. Unfortunately, 2020 appears to be one as well.

The purpose of this collection is to highlight the important work of contemporary Austrian economists on the modern financial system. Although the mainstream financial press has been crediting American, European, and Chinese policymakers with upholding the global economy in the aftermath of 2008, Austrians have long been warning that these very same actions have only set the world up for a larger disaster. Promises in 2008 of the ease of normalizing monetary policy—such as by reducing balance sheets and phasing out market intervention—have been proven to be lies, just as Austrians warned.

While the government response to the coronavirus may serve as a catalyst for the next crisis, it is the irresponsible actions of central bankers, governments, and globalist institutions that will make the pain so much more intense. Worse still, the response will be led by individuals who are only versed in the same failed ideologies that brought us to where we are now.

The first section is a look back at major policy decisions that brought us to where we are now. One of the important aims of this collection is to highlight the truly global nature of these failings, not simply critiquing the actions of the Federal Reserve, but their colleagues at the European Central Bank, the Bank of Japan, and elsewhere. It is the coordinated attempt by central bankers around the world to try to bolster markets by hiding and mispricing underlying financial risk that has only served to escalate the fragility of the global economy.

This is followed by a look forward to what we might expect from policymakers as they are forced to respond. The combined fiscal and monetary response to the coronavirus and the government-imposed lockdown has highlighted the degree to which central bankers and modern governments feel completely unhampered by concerns about inflation or government debt. Every attempt will be made to prop up the financial bubbles they have created, and these actions will only compound the fundamental issues we face. Of course, as economic decision-makers become ever more drastic in their thought, we can expect them to resort more to using the full authoritarian powers of the modern state.

Lastly, the book looks at placing the ideas of the Austrian school within the context of the modern world.  Although questions of underlying ideology may be dismissed by “practical” individuals who pride themselves on being “independent thinkers,” Mises understood the degree to which our intellectual environment directly guides policy and institutional frameworks. In the aftermath of the challenging times that may be ahead, the only way to build a stronger, more prosperous, and more stable future will be with an ideological revolution.

I hope that you will find this collection of articles enlightening, even if the ramifications of their content mean difficulty in the short term.

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