Will COVID-19 End The Fed?

Will COVID-19 End The Fed?

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

September 17, 2019 was a significant day in American economic history. On that day, the New York Federal Reserve began emergency cash infusions into the repurchasing (repo) market. This is the market banks use to make short-term loans to each other. The New York Fed acted after interest rates in the repo market rose to almost 10 percent, well above the Fed’s target rate.

The New York Fed claimed its intervention was a temporary measure, but it has not stopped pumping money into the repo market since September. Also, the Federal Reserve has been expanding its balance sheet since September. Investment advisor Michael Pento called the balance sheet expansion quantitative easing (QE) “on steroids.”

I mention these interventions to show that the Fed was taking extraordinary measures to prop up the economy months before anyone in China showed the first symptoms of coronavirus.

Now the Fed is using the historic stock market downturn and the (hopefully) temporary closure of businesses in the coronavirus panic to dramatically increase its interventions in the economy. Not only has the Fed increased the amount it is pumping into the repo market, it is purchasing unlimited amounts of Treasury securities and mortgage-backed securities. This was welcome news to Congress and the president, as it came as they were working on setting up trillions of dollars in spending in coronavirus aid/economic stimulus bills.

This month the Fed announced it would start purchasing municipal bonds, thus ensuring the state and local government debt bubble will keep growing for a few more months.

The Fed has also created three new loan facilities to provide hundreds of billions of dollars in credit to businesses. Federal Reserve Chairman Jerome Powell has stated that the Fed will lend out as much as it takes to revive the economy.

The Fed is also reducing interest rates to zero. We likely already have negative real interest rates because of inflation. Negative real interest rates are a tax on savings and thus lead to a lack of private funds available for investment, giving the Fed another excuse to expand its lending activities.

The Fed’s actions may appear to mitigate some of the damage of the coronavirus panic. However, by flooding the economy with new money, expanding asset purchases, and facilitating Congress and the president’s spending sprees, the Fed is exacerbating America’s long-term economic problems.

The Federal Reserve is unlikely to end these emergency measures after the government declares it is safe to resume normal life. Consumers, businesses, and (especially) the federal government are so addicted to low interest rates, quantitative easing, and other Federal Reserve interventions that any effort by the Fed to allow rates to rise or to stop creating new money will cause a severe recession.

Eventually the Federal Reserve-created consumer, business, and government debt bubbles will explode, leading to a major crisis that will dwarf the current coronavirus shutdown. The silver lining is that this next crisis could finally demolish the Keynesian welfare-warfare state and the fiat money system.

The Federal Reserve’s unprecedented interventions in the marketplace make it more urgent than ever that Congress pass, and President Trump sign, the Audit the Fed bill. This would finally allow the American people to learn the truth about the Fed’s conduct of monetary policy. Audit the Fed is a step toward restoring health to our economic system by ending the fiat money pandemic that facilitates the welfare-warfare state and the unstable, debt-based economy.


Tyler Durden

Mon, 03/30/2020 – 16:45

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The Singapore location app that could elect a President

One of the keys to slowing a pandemic is to trace infections: Find one person who’s infected. Identify, test, and quarantine all his contacts. Then trace, test, and quarantine his contacts’ contacts. Repeat until you run out of potential victims. This is pretty much the strategy followed during the current coronavirus outbreak by countries such as Singapore, South Korea and Taiwan. All three were faster off the mark than the U.S. or Europe, largely because their experience with SARS and MERS was so traumatic that they built the legal framework and the muscle memory to act quickly in the next outbreak.

The U.S. didn’t take this approach, and it was particularly hampered by botched testing at the Centers for Disease Control and Prevention and the Food and Drug Administration, from which we still haven’t completely recovered. Tests are becoming available much faster now, but widespread testing and tracing may not be feasible in places that have been hit hard, such as New York and New Jersey. In those states, more than 30 percent of the people tested have already been infected. But there are other states, such as New Mexico or Minnesota, where testing has been growing fast and infection rates are low enough that tracking infections looks like a feasible strategy. With the caveat that these numbers are undoubtedly distorted by who gets tested and how results get reported, there are still striking differences in the results among states, according to statistics compiled by the Covid Tracking Project and adjusted per capita by Buzzfeed:

State

Tests per 100,000 population

% found infected

New York

736.2

30.6

New Jersey

283.2

34.8

Washington

736.5

7.1

Minnesota

266

2.8

New Mexico

460

2.0

For places like Minnesota, New Mexico and even Washington, President Trump may have been right when he suggested that some parts of the country could use a strategy other than lockdowns to fight the virus. If so, the best alternative will be aggressive testing and contact tracing.

The countries that did contact tracing the most effectively relied in part on technology—phone location tracking, in particular. They’ve used the location services already built into mobile phones to find others who’ve been close to those who test positive. Privacy and civil liberties advocates hate the idea in principle, but they know no one values the privacy of their location history more highly than they value the lives of their loved ones. Rather than argue directly against phone tracking, privacy advocates such as Susan Landau have instead fallen back on a couple of practical objections.

First, they argue, we don’t have enough tests to imitate Asia. Really? I know the press is full of stories about U.S. testing shortages, and there are indeed supply bottlenecks in everything from protective gear to reagents. But a Trump-loathing press has every incentive to dwell on testing shortages as an emblem of administration errors at the start of the outbreak. In fact, testing capability in the U.S. is rising dramatically. Nationwide, testing has risen from a risible level—less than a thousand in early March—to 894,000 as of March 28. And new testing capabilities are coming online fast. The test-shortage argument may have been correct relatively recently, but if it still has merit, it won’t for long.

Indeed, we may soon have enough tests for some governors to mandate South Korean-style tracking and tracing. In fact, South Korea dodged disaster with a testing rate that isn’t any higher than New York’s or Washington’s today (around 730 per 100,000). Even more remarkable, Japan and Vietnam flattened their infection curves with percapita testing rates that are even lowerwell under 40 per 100,000.

To get a tracking program in place, we’ll need to use phone data; the alternatives are too slow and rely too much on fallible memories. Which brings us to the privacy advocates’ second argument: that phone location technology won’t do the job.

They have a point. Routine cell-sector data might identify a phone’s location within a few blocks—not exactly a fine tool for measuring the risk for infection. While triangulation and other tricks can improve that resolution substantially, it usually can’t say what floor of a large building the customer was on, and in many cases, such fine-grained resolution isn’t routinely collected. GPS signals are great if the user is outside, but not inside.

What public health officials need is a tool that will tell them who the phone’s owner has been close to—really close, like six feet or less. Luckily, the Singapore government has developed an app that does exactly that—and it’s open sourcing the software for the world. The app, called TraceTogether, uses Bluetooth to find nearby phones the way it finds our car audio or wireless earbuds.

The basic idea is simple: If two people who’ve downloaded the app come within six feet of each other and stay there for half an hour, their phones exchange unique identifiers and each phone logs the contact in encrypted memory. It remains encrypted unless one of them turns up positive for the virus. If that happens, public health officials ask for the phone’s contact log, translate the unique identifiers into phone numbers, and quickly call everyone who came within electronic range of the infected person. There are plenty of privacy safeguards built in: The logs never leave the user’s phone without his or her consent, and other users can’t learn anything about the people around them from the identifier.

In short, the app addresses most of the practical and privacy objections that American privacy advocates have put forward. It could be a game changer for states like Minnesota and New Mexico that already have strong testing programs and haven’t yet been swamped by the virus. They should be acting now, talking to Singapore officials and mobilizing local tech talent to adapt the tool and construct the back-end processes needed to get a state version off the ground.

For the app to work, it needs to be installed on a lot of phones. Some people will install it without much prompting. Who wouldn’t want to be called if they’ve unknowingly crossed paths with a coronavirus carrier? And many of us would be glad to have a log of our contacts if we test positive, instead of trying to reconstruct contacts from memory.

But asking people to download an app means delays and gaps in coverage, especially when some privacy advocates are dragging their feet, claiming as we’ve seen that the technology won’t work or arguing that it should wait until a regulatory regime has been enacted. To jump-start the program, governors should ask Apple and Google to auto-download the app to every phone in their states, along with a message explaining why users should activate it.

Actually, the governors probably don’t need to ask. Some 40 states have adopted one version or another of a model public health emergency law promulgated after 9/11. The law gives governors explicit authority to issue orders seizing “materials and facilities as may be reasonable and necessary to respond to the public health emergency.” Those facilities expressly include “communication devices,” and there’s no good reason to exclude the Android and Apple app stores from the authority.

In fact, if push comes to shove, the governors likely have authority to require that residents of their states activate the app. The law grants individual states the  emergency authority to conduct “any diagnostic or investigative analyses necessary to prevent the spread of disease.” And, since Apple and Android know which apps we’ve activated, they could be ordered to identify those who haven’t registered for contact tracing. The federal law prohibiting disclosure of subscriber information to governments without a subpoena contains an express exception for “an emergency involving danger of death or serious physical injury to any person.”

In short, a forward-leaning approach to high-tech contact tracing is feasible. It could save many lives and get the economy back on track much faster. It’s time for governors in less affected states to do this.

If more incentive is needed, there’s one more thing. There’s a good chance that the governor who makes this work will end up running for president on the strength of that performance in four years. And perhaps even sooner.

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Parents, Let the Coronavirus Quarantine Be an Excuse To Give Kids Some Free Time

Not to be a Free-Range Pollyanna, but one possible (small) upside to this world-wide pandemic could be that kids become more independent—and less anxious—if we let them use their time differently.

Bear with me, and with research psychologist and fellow Let Grow co-founder, Dr. Peter Gray.

Gray points out that over the past generation or so, kids have been losing their “internal locus of control,” the feeling of being in control of their lives. Obviously, when you don’t feel in control of your life, you are more likely to feel depressed and anxious. And in fact, childhood anxiety levels have been shooting up long before the virus hit. Almost one in three adolescents has an anxiety disorder.

That may have to do with the fact that childhood free time has been evaporating, thanks to the belief that kids left unsupervised are in danger of being hurt physically, emotionally, or educationally. This is true across the economic spectrum and, increasingly, across the world: The idea that kids need intensive adult supervision and structure to succeed, from their first baby movement classes (as if they wouldn’t otherwise wiggle) to the extracurricular arms race.

But with the world in the throes of a deadly virus, and school and after-school activities canceled everywhere, there’s nothing official for kids to do. It’s like they have been thrown back into a 1953 summer (except with Tik-Tok). This is an opportunity.

Yes, yes, obviously now their parents are closer than ever. Nonetheless, this period we’re in is very different from the typical school/lacrosse/tutoring/homework/reading log days. Now the parents are busy, the day is long, and lots of time is up for grabs.

I’m hearing about kids making up games, digging holes (very popular), drawing, making videos, talking to their friends online, playing outside, playing video games (obviously), sleeping more (that’s great!), cooking, and even organizing their rooms. That’s the power of boredom mixed with free time. Instead of being marionettes, the kids are figuring out who they are and what they like to do.

At Let Grow, we had been promoting almost this same idea (minus the deadly pandemic). One of our main school initiatives is the Let Grow Project. (Here’s a video.) Basically, the project is a take-home assignment where kids are told, “Go home and do something that you feel ready to do but haven’t done yet—and do it on your own.” The idea was to get parents to back off and let their kids go ride their bikes, walk to school, babysit, or almost anything else. The point is to remind both generations that kids are capable.

The amazing thing was that the more kids started to do things on their own—even something as simple as making lunch—the more their anxiety went down. This video of 7th graders who completed the project is pretty remarkable. The kids all admit to having been exceedingly anxious: One girl said that before she started doing things on her own, she had grown so nervous that she could barely even talk to anyone. But being forced into a little independence literally gave her back her voice. Another kid was too scared to walk to school until the project. After that, at about age 13, walking to school became normal.

Parents gain confidence too. There’s nothing like seeing your kid do something you thought you had to do for them.

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Hey FDA! There’s a Massive Blood Shortage. Let Gay and Bisexual Men Give Blood Already.

There’s been a steady stream of roadblocks facing the U.S. as it seeks to curb the spread of COVID-19, but perhaps none quite as absurd as the hindrances posed by the Food and Drug Administration (FDA). Its stringent regulations are, in theory, meant to protect the public, but its rules sometimes get in the way when people most need help.

The American Red Cross recently declared an “urgent” shortage of blood donations with thousands of blood drives canceled due to the COVID-19 outbreak. Yet the FDA still prohibits men who have sex with men (MSM) from donating if they don’t abstain from that behavior for at least a year—a regulation that makes little sense nowadays.

While the rule is antiquated, its implementation in December 2015 was actually seen as a step up; the FDA previously enforced a lifetime ban on blood donations from MSM. That caution certainly made sense in the early 1980s, when the AIDS crisis was scientifically confusing and testing had not yet advanced far enough to screen for HIV antibodies. But now it’s 2020, and medical capabilities have advanced quite a bit: Every donation, whether it comes from a gay man or not, is tested for a full range of potential diseases, including syphilis, hepatitis, human T-lymphotropic virus, and, yes, HIV.

So why the ban?

People who have been newly infected with HIV may initially test negative for the virus. But current methods can find those antibodies within nine to 11 days after infection, making the yearlong deferral period confusing.

“At this time, FDA’s recommendations regarding blood donor deferral for men who have sex with men have not changed, but we are actively considering the situation as the outbreak progresses,” a spokesperson for the agency tells Reason.

Their website notes that, in 2010, the HHS Advisory Committee for Blood Safety and Availability decided the lifetime ban was “suboptimal.” After years of studies, the group concluded that one year of MSM celibacy was appropriate to deter risk, though that figure might have less to do with data and much more to do with mirroring the same arbitrary yearlong deferral periods instituted by several countries abroad. 

“The selection of a donation deferral time period of 12-months is not based in science but appears to be modeled after other countries’ choices and fears,” wrote the American Public Health Association in June 2015.

Indeed, the one-size-fits-all policy perpetuates a fundamental and unscientific misconception around gay men, their sex lives, and how HIV is spread. Though it’s true that MSM are more likely to contract HIV than heterosexual males, the FDA’s current process does not penalize straight males or females who engage in risky practices. A gay male who hasn’t had any sexual contact in six months will be barred from donating blood, while a man who has had casual sex with multiple partners over the last year or month or week will sail through screening.

Taking that into account, the FDA should depart from its arbitrary risk assessment process in favor of one that actually assesses risk properly.

Consider the process in Italy, which, in 2001, enshrined a procedure that analyzes factors on an individual basis instead of establishing blanket bans based on orientation. A no-risk result receives no deferral, a risk result receives four months, and a high-risk result is turned away indefinitely.

A similar system in the U.S. would likewise open doors for other donor groups who are arbitrarily and unscientifically prohibited from donating, including anyone who has ever had sex for money or anyone who has ever injected drugs that were not prescribed to them. Both groups receive lifetime deferrals, regardless of testing capabilities that screen for hepatitis and HIV.

Citing increased demand for donors, several senatorsincluding erstwhile Democratic presidential candidate Amy Klobuchar (D–Minn.) and current contender Sen. Bernie Sanders (I–Vt.)are asking the FDA to contemplate changing their process. “In light of this shortage, we urge you to swiftly update blood donor deferral policies in favor of ones that are grounded in science, are based on individual risk factors, do not unfairly single out one group of individuals, and allow all healthy Americans to donate,” they wrote.

Paramount to this discussion is the safety of the blood supply—endangering that is certainly not worth sparing any one group’s hurt feelings. Calls to remove deferrals entirely for those who may be risk-prone make little sense. But current testing capabilities do support relaxing MSM to a three-month deferral rate, which may even increase compliance among individuals who would otherwise lie in the face of ridiculous waiting periods. Those who remain skeptical of this proposal can look to the U.K., which instituted a three-month deferral for those individuals and saw no increase in HIV-infected blood.

“FDA is aware there has been a significant reduction in blood and plasma donations around the country,” a spokesperson said. “The agency is working with the blood banking and source plasma industries to encourage healthy people who wish to help to donate blood. People who donate blood are like those people working in a critical infrastructure industry.”

That’s true. But many gay men are perfectly healthy. I’d venture to say that large numbers would be interested in helping reduce these shortages during this crisis, should they be subject to an evaluation process driven by science, not stereotype.

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Hey FDA! There’s a Massive Blood Shortage. Let Gay and Bisexual Men Give Blood Already.

There’s been a steady stream of roadblocks facing the U.S. as it seeks to curb the spread of COVID-19, but perhaps none quite as absurd as the hindrances posed by the Food and Drug Administration (FDA). Its stringent regulations are, in theory, meant to protect the public, but its rules sometimes get in the way when people most need help.

The American Red Cross recently declared an “urgent” shortage of blood donations with thousands of blood drives canceled due to the COVID-19 outbreak. Yet the FDA still prohibits men who have sex with men (MSM) from donating if they don’t abstain from that behavior for at least a year—a regulation that makes little sense nowadays.

While the rule is antiquated, its implementation in December 2015 was actually seen as a step up; the FDA previously enforced a lifetime ban on blood donations from MSM. That caution certainly made sense in the early 1980s, when the AIDS crisis was scientifically confusing and testing had not yet advanced far enough to screen for HIV antibodies. But now it’s 2020, and medical capabilities have advanced quite a bit: Every donation, whether it comes from a gay man or not, is tested for a full range of potential diseases, including syphilis, hepatitis, human T-lymphotropic virus, and, yes, HIV.

So why the ban?

People who have been newly infected with HIV may initially test negative for the virus. But current methods can find those antibodies within nine to 11 days after infection, making the yearlong deferral period confusing.

“At this time, FDA’s recommendations regarding blood donor deferral for men who have sex with men have not changed, but we are actively considering the situation as the outbreak progresses,” a spokesperson for the agency tells Reason.

Their website notes that, in 2010, the HHS Advisory Committee for Blood Safety and Availability decided the lifetime ban was “suboptimal.” After years of studies, the group concluded that one year of MSM celibacy was appropriate to deter risk, though that figure might have less to do with data and much more to do with mirroring the same arbitrary yearlong deferral periods instituted by several countries abroad. 

“The selection of a donation deferral time period of 12-months is not based in science but appears to be modeled after other countries’ choices and fears,” wrote the American Public Health Association in June 2015.

Indeed, the one-size-fits-all policy perpetuates a fundamental and unscientific misconception around gay men, their sex lives, and how HIV is spread. Though it’s true that MSM are more likely to contract HIV than heterosexual males, the FDA’s current process does not penalize straight males or females who engage in risky practices. A gay male who hasn’t had any sexual contact in six months will be barred from donating blood, while a man who has had casual sex with multiple partners over the last year or month or week will sail through screening.

Taking that into account, the FDA should depart from its arbitrary risk assessment process in favor of one that actually assesses risk properly.

Consider the process in Italy, which, in 2001, enshrined a procedure that analyzes factors on an individual basis instead of establishing blanket bans based on orientation. A no-risk result receives no deferral, a risk result receives four months, and a high-risk result is turned away indefinitely.

A similar system in the U.S. would likewise open doors for other donor groups who are arbitrarily and unscientifically prohibited from donating, including anyone who has ever had sex for money or anyone who has ever injected drugs that were not prescribed to them. Both groups receive lifetime deferrals, regardless of testing capabilities that screen for hepatitis and HIV.

Citing increased demand for donors, several senatorsincluding Democratic presidential candidate Amy Klobuchar (D–Minn.) and current contender Sen. Bernie Sanders (I–Vt.)are asking the FDA to contemplate changing their process. “In light of this shortage, we urge you to swiftly update blood donor deferral policies in favor of ones that are grounded in science, are based on individual risk factors, do not unfairly single out one group of individuals, and allow all healthy Americans to donate,” they wrote.

Paramount to this discussion is the safety of the blood supply—endangering that is certainly not worth sparing any one group’s hurt feelings. Calls to remove deferrals entirely for those who may be risk-prone make little sense. But current testing capabilities do support relaxing MSM to a three-month deferral rate, which may even increase compliance among individuals who would otherwise lie in the face of ridiculous waiting periods. Those who remain skeptical of this proposal can look to the U.K., which instituted a three-month deferral for those individuals and saw no increase in HIV-infected blood.

“FDA is aware there has been a significant reduction in blood and plasma donations around the country,” a spokesperson said. “The agency is working with the blood banking and source plasma industries to encourage healthy people who wish to help to donate blood. People who donate blood are like those people working in a critical infrastructure industry.”

That’s true. But many gay men are perfectly healthy. I’d venture to say that large numbers would be interested in helping reduce these shortages during this crisis, should they be subject to an evaluation process driven by science, not stereotype.

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FDA Approves Emergency Use of Hydroxychloroquine and Chloroquine to Treat COVID-19

Anecdotal evidence has suggested that the anti-malaria drugs chloroquine and hydroxychloroquine may be effective therapies for the coronavirus infections that are the cause of COVID-19. (Other data have questioned their efficacy as COVID-19 therapies.) President Donald Trump touted chloroquine as a treatment for the disease during a press conference on March 19. At that same press conference, Food and Drug Administration (FDA) Commissioner Stephen Hahn observed, “That’s a drug that the president has directed us to take a closer look at as to whether an expanded use approach to that could be done and to actually see if that benefits patients.”

The agency has evidently taken a closer look and has issued an emergency use authorization (EUA) for both compounds as experimental treatments for COVID-19. The EUA notes:

Based on the totality of scientific evidence available to FDA, it is reasonable to believe that chloroquine phosphate and hydroxychloroquine sulfate may be effective in treating COVID-19, and that, when used under the conditions described in this authorization, the known and potential benefits of chloroquine phosphate and hydroxychloroquine sulfate when used to treat COVID-19 outweigh the known and potential risks of such products.

Health care providers are authorized to use the compounds to treat hospitalized adolescent and adult COVID-19 patients weighing more than 110 pounds for whom no clinical trial is available or feasible. The recommended treatment regimen for hydroxychloroquine is 800 milligrams on the first day followed by 400 milligrams daily for four to seven days of total treatment based on clinical evaluation. The recommended treatment using chloroquine is 1 gram of the compound on day one, followed by 500 milligrams daily for four to seven days of total treatment based on clinical evaluation.

Health care providers must watch for side effects and are required to report how their patients fare to the FDA.

Ongoing clinical trials along with these EUA treatments should fairly quickly determine whether these compounds will work against the disease. Let’s hope they do.

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DOJ Investigates Lawmakers Over Claims Of Insider Trading

DOJ Investigates Lawmakers Over Claims Of Insider Trading

The DOJ is investiating whether lawmakers used information obtained during confidential coronavirus briefings to liquidate stocks ahead of the largest market sell-off in decades, according to the Wall Street Journal.

Included in the probe is Sen. Richard Burr (R-NC), who sits on two committees that received in-depth briefings on the hyper-virulent disease which started in a wet market located in Wuhan, China (900 feet from a biolab experimenting with bat coronavirus).

Burr sold shares of companies worth as much as $1.7 million, according to the report, saving he and his wife at least $250,000 in losses based on their March 19 close.

The lawmaker has said he based those decisions on public information, including CNBC’s reports out of Asia at the time, and asked the Senate ethics panel to review his trading. An attorney for Mr. Burr, Alice Fisher, said Mr. Burr would cooperate in the Senate review “as well as any other appropriate inquiry.” –Wall Street Journal

“Senator Burr welcomes a thorough review of the facts in this matter, which will establish that his actions were appropriate,” said Fisher.

On March 20, Fox News‘ Tucker Carlson noted that the senator had sold “more than a million dolars in stock in mid-February after learning how devastating the Chinese coronavirus could be.”

“He had inside information about what could happen to our country – which is now happening – but he didn’t  warn the public. He didn’t give a prime time address. He didn’t go on television to sound the alarm. He didn’t even disavow an op-ed he’d written just ten days before claiming America was ‘better prepared than ever for coronavirus.”

Instead what did he  do? He dumped his shares in hotel so he wouldn’t lose money. And then he stayed silent.

Now maybe there’s an honest explanation for what he did. If there is, he should share it with the rest of us immediately. Otherwise, he must resign from the Senate and face prosecution for insider trading. There is no greater moral crime than betraying your country in a crisis, and that appears to be what happened.”  -Tucker Carlson

In response, Burr said he relied “solely on public news reports” before selling shares. 

Others who have come under fire for stock sales include Rep Sens. Kelly Loeffler (R-Ga.), James Inhofe (R-Okla.) and Dianne Feinstein (D-Calif.)


Tyler Durden

Mon, 03/30/2020 – 16:25

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Stocks Bid Into Month-End Despite Americans’ Unprecedented Scramble For Cash

Stocks Bid Into Month-End Despite Americans’ Unprecedented Scramble For Cash

Amid an ever-escalating guess at the size of pension fund re-allocations funds (latest we saw was $150 billion) into month-end, both bonds and stocks were bid early on today, but as the day wore on, bonds weakened as stocks gained (driven by record IG issuance-driven rate-locks)…

Source: Bloomberg

But while some are rebalancing into stocks, the scramble for cash among average Americans has almost never been more panicky

Source: Bloomberg

Just as notably, crude oil prices crashed to multi-decade lows today, completely decoupling from stocks (correlation crashed)…

Source: Bloomberg

The question is – how long will the bounce last? If it’s month-end, then 2008 is still in play…

Source: Bloomberg

Maybe it’s better not to play…

And most of all, some context shows that today’s ramp merely unwinds the carnage from the last 30 minutes of Friday… (note this was a 1300 points rally off overnight lows)

S&P and Nasdaq managed to erase that late-day plunge…(Note the Dow ended perfectly unch from Friday highs)

Breadth was very weak with declining volume dominating advancing volume for most of the day…

Source: Bloomberg

The Dow pushed back above the Dec 2008 lows today…

Source: Bloomberg

Defensives outpeformed cyclicals today…

Source: Bloomberg

US IG credit has dramatically outperformed Europe since The Fed promise to start buying…

Source: Bloomberg

Treasuries were bid overnight but selling pressure accelerated as the US day session wore on (month-end rebalance and record IG issuance-driven rate-locks – U.S. companies borrowed a record $109 billion, which was met with $550 billion of demand, in what one dealer called a “food fight” for new bonds, according to Bloomberg)

Source: Bloomberg

Intraday, 10Y Yields fell back to a 59bps handle before the US session sell-off…

Source: Bloomberg

Mission Accomplished for The Fed as Agency MBS dislocations have corrected…

Source: Bloomberg

The Dollar Index managed gains today (the first in 5 days and best in 7 days)…

Source: Bloomberg

Cryptos rallied today but were unable to erase the losses from the weekend…

Source: Bloomberg

Commodities were all lower today led by crude’s carnage…

Source: Bloomberg

WTI broke down to $19.27 at its lows (before bouncing back above $20.00 on the settle)…

And finally, as the oil market struggles with an unprecedented hit to demand caused by the coronavirus, its main measure of supply and demand is screaming that a historic glut is emerging.

Source: Bloomberg

As Bloomberg details, Brent crude futures for May are now trading at an incredible $13.30 a barrel discount to November prices, a deeper and more bearish super-contango than the market saw even in the depths of the 2008-09 global financial crisis. Consultants say that, as things currently stand, the world is just a few months from running out of places to stash crude.

And we note that the ‘Virus Fear’-trade started to pick up again today…

Source: Bloomberg


Tyler Durden

Mon, 03/30/2020 – 16:01

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FDA Approves Emergency Use of Hydroxychloroquine and Chloroquine to Treat COVID-19

Anecdotal evidence has suggested that the anti-malaria drugs chloroquine and hydroxychloroquine may be effective therapies for the coronavirus infections that are the cause of COVID-19. (Other data have questioned their efficacy as COVID-19 therapies.) President Donald Trump touted chloroquine as a treatment for the disease during a press conference on March 19. At that same press conference, Food and Drug Administration (FDA) Commissioner Stephen Hahn observed, “That’s a drug that the president has directed us to take a closer look at as to whether an expanded use approach to that could be done and to actually see if that benefits patients.”

The agency has evidently taken a closer look and has issued an emergency use authorization (EUA) for both compounds as experimental treatments for COVID-19. The EUA notes:

Based on the totality of scientific evidence available to FDA, it is reasonable to believe that chloroquine phosphate and hydroxychloroquine sulfate may be effective in treating COVID-19, and that, when used under the conditions described in this authorization, the known and potential benefits of chloroquine phosphate and hydroxychloroquine sulfate when used to treat COVID-19 outweigh the known and potential risks of such products.

Health care providers are authorized to use the compounds to treat hospitalized adolescent and adult COVID-19 patients weighing more than 110 pounds for whom no clinical trial is available or feasible. The recommended treatment regimen for hydroxychloroquine is 800 milligrams on the first day followed by 400 milligrams daily for four to seven days of total treatment based on clinical evaluation. The recommended treatment using chloroquine is 1 gram of the compound on day one, followed by 500 milligrams daily for four to seven days of total treatment based on clinical evaluation.

Health care providers must watch for side effects and are required to report how their patients fare to the FDA.

Ongoing clinical trials along with these EUA treatments should fairly quickly determine whether these compounds will work against the disease. Let’s hope they do.

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Texas Or Canada: Where Will Oil Hit $0 First

Texas Or Canada: Where Will Oil Hit $0 First

Looking at the future of oil prices, Goldman was downright apocalyptic in its short-term forecast, when in a note published this morning, the bank’s chief commodity strategist Jeffrey Currie speculated that as the current production glut “shock” cripples the crude transportation networks, “a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas.” To wit:

The global economy is a complex physical system with physical frictions, and energy sits near the top of that complexity. It is impossible to shut down that much demand without large and persistent ramifications to supply. The one thing that separates energy from other commodities is that it must be contained within its production infrastructure, which for oil includes pipelines, ships, terminals, storage facilities, refineries, and distribution networks. All of which have relatively small and limited spare capacity. We estimate that the world has around a billion barrels of spare storage capacity, but much of that will never be accessed as the velocity of the current shock will breach crude transportation networks first, which we are already seeing evidence of around the world. Indeed, given the cost of shutting down a well, a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas.

A quick look at two of the most popular landlocked oil producing areas demonstrate that Goldman is precisely right, and as the following chart shows, as of this moment Texas Midland WTI was trading at just baove $10/barrell, while the price of oil produced in the notoriously landlocked Western Canada, as represented by Canada Western Selected index, was just above $4 per barrel, or a little more than what a gallon of gas costs in California.

Looking at the chart above, when it comes to the dash for zero (and negative prices), Canada will take the gold, but Texas won’t be too far behind.

There was some good news: waterborne crudes are unlikely to suffer a similar price implosion. Again, Goldman explains why:

Waterborne crudes like Brent will be far more insulated, staying near cash costs of $20/bbl with temporary spikes below. Brent is priced on an island in the North Sea, 500 meters from the water, where tanker storage is accessible.

In contrast, WTI is landlocked and 500 miles from the water. This illustrates an important point. Shut-ins will be not be based upon where wells sit on the cost curve but rather on logistics and access. High-cost waterborne crude oil that can reach a ship (storage we have historically never ran out of), are better positioned than landlocked pipeline crude oil sitting behind thousands of miles of pipe, like the crude oils in the US, Russia and Canada. In 1998, when surpluses last breached storage capacity, it was these landlocked crude oils that were the hardest hit.

So while markets like WTI, particularly WTI Midland, or Canada’s WCS can go negative, Brent is likely to stay near cash costs of $20/bbl. Ultimately, the market never hits nameplate capacity, as other bottlenecks are also at play. During 2008 and also in this crisis, dollar funding and credit constraints that prevent oil owners from accessing storage and transportation capacity also played a role. We believe that the Fed’s actions last week alleviate some of this risk, but oil itself creates dollar liquidity given its importance in global trade and setting the price of other traded goods and another sharp drop in oil prices could create additional dollar shortages.

In other words, with most of US WTI production landlocked, while Russia and Saudi Arabia all within easy access to seaborne transit, Putin and MBS are at this very moment sharing a big toast via Zoom, and laughing at the wasteland that US shale will be in just a few weeks.


Tyler Durden

Mon, 03/30/2020 – 15:50

via ZeroHedge News https://ift.tt/2ydHyi6 Tyler Durden